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Compulsory acquisition of private property

Compulsory acquisition of private property has potentially significant implications for individuals, who are thereby deprived of the benefits obtainable from ownership without their consent. Compulsory acquisition gives rise to a high risk of unfairness to the property owner.

There is a strong presumption in our legal system that when legislation expropriates real property, it will compensate the owners. The presumption originates from clause 29 of the Magna Carta that protects the right to justice. This presumption is also reflected in Part 5 of the Public Works Act 1981, which provides that where land is compulsorily acquired for public works, compensation in the form of the land's market value is to be paid to the owner.

Question 4.1

4.1.  Does this Bill contain any provisions that could result in the compulsory acquisition of private property? [YES/NO]

What matters are covered by the question?

“Compulsory acquisition” describes the way in which property is taken. A compulsory acquisition involves the transfer of all of the owner's property rights to the person or body compulsorily acquiring the property. The former owner is left with no rights to the property.

“Property” is a broad term and its ordinary meaning includes both real and personal property, tangible and intangible property, and any estate or interest in property.

“Private” includes individuals, legal persons or groups of such individuals or legal persons who are not public in the sense that they are not part of the government or state. Therefore, “private property” will exclude property owned by the Crown, Government departments or statutory bodies where surplus assets would be returned to the Crown if the body was abolished or wound up (for example, SOEs, Crown-owned entities, local authority trading enterprises, schools, polytechnics and universities).

A compulsory acquisition can be contrasted with a regulatory taking. A regulatory taking affects some of the owner's property rights but still leaves the owner with some rights to their property. For example, the Freshwater Fish Farming Regulations (Amendment No.3) 1983 prohibited the sale or removal of live marron from a fish farm unless in the possession of a Crown employee. The Regulations were a 'regulatory taking' as they prevented the owner exercising their right to sell their property but not a compulsory acquisition for the purposes of this Question 4.1 as the owner retained full ownership and control of the marron.

A compulsory acquisition does not include penalties such as forfeiture or the seizure of property as part of a criminal investigation. Any such issues should be disclosed in Question 3.4(a) in relation to consultation with the Ministry of Justice on penalties or when considering the consistency of a Bill with the New Zealand Bill or Rights Act 1990 (see, for example, Question 3.3 and section 21 of the New Zealand Bill or Rights Act 1990 relating to the right to be free from unreasonable search and seizure).

The following types of provisions could result in the compulsory acquisition of private property:

  • a power to transfer shares in a company from one person to another;
  • a power to direct the Registrar-General of Land to transfer land from one person to another; or
  • a power to acquire fishing quota from an owner.

The following would not be a compulsory acquisition of private property:

  • a ban on logging trees, as the trees are not compulsorily acquired but the owner is simply prevented from logging them;
  • conferral on a lessor of a right of first refusal on any sale of the lease by the lessee, as the change to the terms of the lease is not a compulsory acquisition of the lease (see, for example, the Maori Reserved Land Amendment Act 1997); or
  • the surrender of property pursuant to a condition on a subdivision consent, as the developer has the option of not proceeding with the subdivision.

What is the nature of the further information sought?

If the answer is YES, please:

  • identify the provision(s) that will or could result in the compulsory acquisition;
  • explain why provision for compulsory acquisition is necessary; and
  • identify and explain the nature of any features that will mitigate the potential adverse effects of the compulsory acquisition.

When explaining why the compulsory acquisition is necessary you should explain why this method was considered preferable to the alternatives that were considered. For example, was a more limited takings provision confined to particular ownership rights a feasible option? If so, explain why compulsory acquisition was considered preferable.

The most important mitigating feature is probably to explain whether compensation will be payable and, if so, how compensation will be calculated and the process for the owner to claim compensation. Other mitigating features could include the very narrow or limited application of the compulsory acquisition provisions, or that the compulsory acquisition may not be unexpected if it has been foreshadowed for some time or contemplated in contractual arrangements between the parties.

Further information that would be helpful to include (but is not required):

  • the procedure that will be followed to compulsorily acquire the property;
  • the nature and extent of property expected to be compulsorily acquired; and
  • the possible adverse consequences of the compulsory acquisition for owners of property and third parties.

If the answer is NO, no further information is required.

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