Compulsory acquisition - "interest in land" expanded to include VPAs

When land is acquired for a public purpose by an acquiring authority in NSW, those with an "interest in land" are entitled to compensation. The process by which land is acquired, and the definition of "interest in land", are contained in the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). The definitions relevantly provide:

interest in land means—

• (a) a legal or equitable estate or interest in the land, or
• (b) an easement, right, charge, power or privilege over, or in connection with, the land.

land includes any interest in land.

An interest in land typically includes the owner of the freehold, a lessee, a beneficiary of an easement and a mortgagee (amongst others).

A Voluntary Planning Agreement (VPA) is an agreement between a consent authority (typically the relevant local council or the Minister for Planning) in which "the developer is required to dedicate land free of cost, pay a monetary contribution, or provide any other material public benefit, or any combination of them, to be used for or applied towards a public purpose". A VPA is required to be registered on the title of the land it effects.

A recent decision of the Supreme Court of NSW in City of Parramatta Council v Transport for NSW [2026] NSWSC 294 represents the first time in which a Court has determined that a council's interest (in this case, City of Parramatta Council) which holds a VPA constitutes an interest in land, thereby giving right to compensation under the provisions of the Just Terms Act.

Brief background

In November 2021, Council, the owner of land and a developer entered into a VPA in respect of land on Hill Road, Wentworth Park (Parent Parcel). The VPA provided that parts of the Parent Parcel would be dedicated or transferred to Council, and certain works would be carried out on the balance of the Parent Parcel for Council's benefit. The VPA was subsequently registered on title.

On 24 May 2024, Transport for NSW (TfNSW) compulsorily acquired land, including the Parent Parcel. Council made a claim for compensation. TfNSW made a submission to the Valuer General of NSW that Council did not own an interest in land. The Valuer General agreed, and the claim for compensation was rejected on the basis that Council did not hold an interest in the Parent Parcel.

The decision

Justice Campbell of the Supreme Court of NSW agreed with one of TfNSW's key arguments, that simply registering a VPA (which is an agreement between parties) does not create a proprietary interest in land. His Honour said that whether "the rights under a planning agreement are in rem [i.e. a proprietary right] or in personam [i.e. a personal right] requires an analysis of the actual rights conferred by the VPA under section 7.4 of the EPA."

In this case, the relevant right was that Council had the right to the transfer of part of the Parent Parcel by dedication, after the fulfilment of certain conditions. Based on this alone, it appears that Campbell J concluded that it is "a right in the land itself, even if contingent".

Further, TfNSW argued that as the right is not "alienable" (being a central tenet of what constitutes an interest in land, in accordance with the decision in Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] NSWCA 73). Justice Campbell held:

...However, merely because an interest is not assignable in gross does not necessarily mean it is not capable of alienation. Assignment clauses in contracts are frequently drafted to limit assignment to members of a particular class. This statutory interest is no different. There would be, to my mind, nothing stopping the Council from assigning their right to another public authority. The fact that the size of the class of potential assignees is small is not relevant to the question that it can be assigned and therefore is capable of alienation. In any event as a species of property created by statute it is not essential that the general law attributes of property are present.

As a result, the Court found that Council owned an "interest in land" for the purpose of the Just Terms Act, as a result of being a party to the VPA. The matter will now be referred to the Valuer General for it to value the Council's interest in the land.

Implications

The implications for landowners, acquiring authorities, and the Valuer General are significant. While it will be a matter for consideration of the terms of each VPA, subject to the decision being disturbed on appeal:

1. an acquiring authority must now issue a Proposed Acquisition Notice (PAN) to any public authority which is a party to a VPA registered on land proposed to be acquired; and
2. public authorities may be entitled to compensation when land subject to a VPA is compulsorily acquired.

The question of what compensation might be payable in respect of the acquisition of the VPA remains to be seen.

If you would like to know more or discuss with our experts, reach out to our Environment & Planning team.