When the Commonwealth acquires or disposes of interests in land, two main pieces of regulation govern those transactions: the Lands Acquisition Act 1989 (Cth) and Commonwealth Property Disposal Policy (CPDP). Following the review of the Act, the Minister for Finance has now released an updated CPDP which implements recommendation 12, so the Policy now allows for land swaps between governments and expands the exceptions for off-market sales.
Review of the Lands Acquisition Act
In January 2020, the Finance Minister announced the Review of the Lands Acquisition Act, aimed at ensuring the Act reflected community expectations and best practice. The Review’s report, released in August 2021, made 16 recommendations for reforms to legislation, policy and administrative practices.
CPDP – at the time of review
Under the CPDP, the general policy is that surplus property must be sold on the open market at full market value unless otherwise agreed by the Finance Minister.
Off-market sales were permitted under the CPDP with the Finance Minister’s approval where:
- Former owner: there is a former owner (as defined in section 121 of the Act), the owner must be given the right of first refusal at full market value;
- Government: there is a sale to a State, Territory or local Government that protects other Commonwealth property interests, enables policy initiatives that could not be achieved through an open market sale or optimises broader government outcomes; and
- Corporate Commonwealth Entity: there is a sale of property to a Corporate Commonwealth Entity.
Improving the Lands Acquisition Act
After considering stakeholder feedback, the Review found that key issues in relation to disposal of land by the Commonwealth were:
- Land swaps: where an off-market sale by the Commonwealth and an acquisition by a State, Territory or Local Government occurs simultaneously this is known as a “land swap”. However, the CPDP does not treat the disposal and acquisition as a single transaction which increases burdensome administrative processes and leads to inefficient transactions;
- Off-market disposals: stakeholders recommended expanding the circumstances in which off-market sales are permitted to include a disposal to a State, Territory or Local Government (including a land swap) and a disposal of land for which no competitive sale market exists; and
- Affordable housing: the CPDP requires Commonwealth entities to include affordable housing initiatives in the sale of land which is suitable for housing. Stakeholders recommended that additional guidance be included in the CPDP in relation to the definition of affordable housing and the extent to which affordable housing initiatives should be pursued when State, Territory and Local Governments are not interested in the initiative.
To improve efficiency and value for money, it said, the CPDP should be amended so that:
- Land swaps: the Commonwealth is permitted to undertake land swaps with State, Territory or Local Governments; and
- Off-market disposals: off-market disposals are permitted:
- at an agreed value to State, Territory or Local Government; and
- at fair market value to a private individual or organisation where there is no competitive market.
Updates to Commonwealth Property Disposal Policy
- The CPDP now allows for land swaps and acknowledges that it may involve swapping a high-value property with a low-value property in circumstances where the low value property is strategically important to the Commonwealth.
- The CPDP provides that before commencing negotiations the relevant Commonwealth entity should obtain support from the relevant portfolio Minister and the Finance Minister.
Off-market sales exceptions have been expanded to include:
- residential property under a long-term tenancy arrangement may be sold to the tenant at a fair market value in circumstances where that property is the tenant’s principal place of residence; and
- land may be sold to an individual or organisation at fair market value in circumstances where the land has been assessed as having no competitive market (ie. where the land is landlocked, in a rural or remote area or unable to be sold on the open market).
A definition of “affordable housing” has been included which provides that:
- “affordable housing” refers to housing that is suitable for purchase or rent by very low to moderate income households; and
- housing is considered to be affordable where a household is able to meet their living and housing expenses without being in housing stress, with housing stress being defined as where a household spends more than 30% of its gross income on housing expenses and its total income is in the lowest 40% of all households.
As the Government accepted all 16 recommendations of the Review in full, these updates to the CPDP will be part of a broader suite of changes to legislation and policy relating to Commonwealth property acquisition and disposal including the Lands Acquisition Act and the Commonwealth Property Management Framework.