In a recent decision, the High Court has settled a controversy that it generated 14 years ago through the split judgments in the Temwood case.
The High Court upheld the Western Australian Planning Commission's appeal that injurious affection compensation for a planning scheme reservation is not available to subsequent purchasers.
Under the Planning and Development Act 2005 (WA), any person whose land is injuriously affected by the making or amendment of a planning scheme is entitled to obtain compensation from the responsible authority. No compensation is payable until:
- the land is first sold following the date of reservation; or
- a development application for that land is refused or granted subject to unacceptable conditions.
Compensation is payable only once.
The Planning Act refers separately to compensation being received by the person who was the owner of the land at the date of reservation, and the owner of the land when a development application is made.
In Western Australian Planning Commission v Southregal Pty Ltd [2017] HCA 7, the High Court considered whether the owner at the date of the development application could be a subsequent purchaser. By a 4:1 majority, the High Court found that once land is sold following its reservation, only the original owner could claim compensation.
Why the High Court agreed with the Planning Commission
The respondents contended that (as compensation had not been paid to the original owners) compensation was payable to them as the land owners impacted by development applications being refused.
The majority, in agreeing with the Planning Commission, said:
- A subsequent purchaser does not fall within the description of a person whose land is affected "by the making" of a planning scheme.
- Purchasers are aware of the scheme provisions at the time of purchase and are therefore not at the same disadvantage as the original owner.
- Compensation for the value reducing effect of the reservation would have been available to the previous owner at the point of sale.
Factoring injurious affection compensation into your future developments
As the law currently stands in Western Australia, prospective purchasers of land in Western Australia will not be entitled to compensation for any land they acquire that has been reserved for a public purpose. Being alert to this and reflecting any reduced development potential into the purchase price is critical.
The potential for legislative change remains, although it's unlikely given that the High Court has resolved the controversy in the State's favour, and (as the High Court noted) the controversy could have been, but was not previously been clarified by the WA Parliament.
It's still unclear, however, if compensation can be claimed, in respect of a development application, by a subsequent owner who obtained title through inheritance.
If you intend to develop reserved land, our Environment and Planning team can help assess any entitlement to claim compensation.