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December
1999 |
John Sheehan |
Past approaches to loss of value This is the ninth article in a series by John Sheehan* (right) dealing with valuation and native title issues EARLIER articles in LRQ in this series have considered the evolving contrast between Indigenous values and anglo-Australian concepts of value. However, it is not generally acknowledged that the question of the value of property rights adversely affected by public works has been the subject of extensive inquiry in land and valuation law and practice for many years. These historic inquiries may have relevance to native title. When surface or sub-surface property rights may be affected by public works, there is sometimes a statutory bar in the states against any claims for compensation by the affected owners, and hence, an unresolved question remains as to whether such property rights actually experience adverse affects in value. It is generally accepted that the value of property rights is comprised of a complex interaction of physical and perceptual issues, the sum of which represents the value attributed to the owner. Importantly, the concept of the value of property rights has been developed by the courts over the past two centuries (at least), and represents an attempt by society to gain a sensitivity to the market for property rights, and hence any values derived therefrom. However, compensation for the impairment or diminution of property rights arises in land and valuation law and practice as a dichotomy. First, that owners ought not to suffer the full loss of any use restrictions, and second that such restrictions should not give cause for compensation beyond the usual rights arising from the broad range of public controls over private property rights. Interestingly, community perceptions are that losses can occur in the value of property rights when impacted upon by adjacent or nearby public works, yet there is great reluctance by legislatures to recognise these understandings. Surprisingly, these holistic notions of property values have had an extended gestation which can be traced back to 19th century cases and earlier, which provide an indication that the courts recognised that the losses experienced by the holders of property rights could be greater than the market value of such rights. (There is also the negative compensation concept known as betterment, which is not discussed in this article). Parallel with this sometimes perfunctory recognition by the courts of the multifarious nature of value, the slow emergence of town planning controls in the early 20th century heralded a growing public recognition that value could also be diminished solely by regulation. In their classic 1945 work on post-war reconstruction in the United Kingdom, town planners Elizabeth and Gilbert McAllister describe how in 1937, the Restriction of Ribbon Development Act (UK) could completely prevent property rights being exercised 'without payment of compensation by the strict application of the temporary restriction of general development'. These views, supported by respected town planning academics such as Professor Gordon Stephenson in the post-war era, had wide currency, and reflected an emerging recognition of the impact of regulation and public works on the value of property rights. However in Australia, the issue of value impacts arising from public regulation or works was probably first comprehensively considered in 1978 in the Victorian Report of Committee of Inquiry into Town Planning Compensation, which canvassed the devising of methodologies to assess compensation arising from such blights on property rights. While the proposals were never proceeded with, they do provide an epistemological basis for dealing with the question of a causal link. Importantly, the committee stated that as regards non-physical factors, these are notoriously difficult to evaluate and measure. If there is to be an innovation in this field of compensation, it should be in an area where in the interests of both the claimant and the authority, some objective measurement and even calculation are possible. (Report of Committee of Inquiry into Town Planning Compensation, 1978 p33) The committee concluded that very few common law countries have been able to devise an acceptable compensation methodology for non-physical factors, primarily due to the difficulty of defining the edge of the ripple of value loss. This remains the position in Australia twenty-one years later. Also as stated earlier, there remains a deep-seated reluctance by the legislatures to recognise that detriments in the value of property rights can occur when they are not compulsorily acquired, but merely regulated, or affected by adjacent or nearby public works. The 1978 committee's report also considered the differing value impact of various public works, and it was clearly anticipated that such activities could differentially diminish the objective attributes, utilities or advantages enjoyed by a holder of property rights. From the standpoint of native title, it is obvious that these early efforts to distill a methodology for the assessment of compensation arising from the impact of regulation or public works upon property rights, may yet bear fruit in an unexpected manner. The losses suffered by the holders of native title could be said to be somewhat analogous to those losses identified in these early attempts to recognise the holistic notion of the value of property rights. It may well be that compensation for Indigenous property rights and interests arising from native title may not need to be recast afresh. *John Sheehan is the native title spokesman for the Australian Property Institute (formerly the Australian Institute of Valuers and Land Economists), and member, Land Tribunal (Queensland)
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