Just terms compensation in NSW: a practical framework

Compulsory acquisition is not an ordinary sale. An acquiring authority obtains land or an interest in land through a statutory process, and compensation is assessed under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act).

Market value is usually central, but it is not the whole inquiry. The interest acquired, the acquisition date, the use of the land and the effect on any retained land can all shape the result. A claim may also include properly evidenced professional, relocation and other disturbance costs.

The framework is exacting. It does not yield an estimate for a particular property without the acquisition documents and evidence relevant to each statutory head.

Start with the interest that has been acquired

Section 37 of the Just Terms Act gives an owner of an interest that is divested, extinguished or diminished by an acquisition notice a right to compensation under Part 3.

The word “interest” matters. Depending on the facts, the claimant may be a registered owner, lessee, mortgagee, easement holder or another person with a legal or equitable interest in the acquired land. Different interests are valued separately. Their terms and duration can limit what the acquisition has taken.

There is also an aggregate constraint. Section 56(2) provides that, when market value is assessed for a number of former owners, the sum of the market values of their interests “must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition”.

The first practical task is therefore to identify:

• the land and precise interest described in the acquisition notice
• every person or entity claiming an affected interest
• the documents creating or evidencing each interest
• the date of acquisition, which is the valuation date for several heads of compensation
• any land retained by the claimant and its relationship to the acquired land

The statutory compensation heads

Section 54 requires an amount that, having regard to the relevant matters in Part 3, will justly compensate the person for the acquisition. Section 55 then confines the assessment to six matters:

1. Market value. Section 56 uses the willing but not anxious buyer and seller test and requires specified effects of the public purpose to be disregarded. Its reinstatement basis is confined to the conditions stated in the section.
2. Special value. Section 57 concerns the financial value, additional to market value, of an advantage incidental to the claimant’s use of the land.
3. Severance. Section 58 addresses a reduction in the market value of the claimant’s other land caused by its severance from the acquired land.
4. Disturbance. Section 59 identifies specified legal, valuation, relocation, stamp duty, mortgage and other financial costs. Each item has its own conditions and limits.
5. Disadvantage resulting from relocation. Section 60 concerns non-financial disadvantage caused by the need to relocate a principal place of residence. It is distinct from financial relocation costs and subject to a statutory maximum that is indexed each year under Schedule 1A. See disadvantage resulting from relocation.
6. Effect on adjoining or severed land. Section 55(f) requires regard to an increase or decrease in the value of the claimant’s other adjoining or severed land caused by carrying out, or proposing to carry out, the public purpose.

The list is exhaustive. A claim may be capable of characterisation under more than one provision, but the statutory scheme does not permit the same compensation to be awarded twice. That distinction was explained by Basten JA in Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41 at [50]–[52]. Macfarlan JA agreed at [72]. Payne JA agreed subject to a possible qualification about overlap between the heads: [73]–[74]. Sackville AJA and Preston CJ of LEC gave separate reasons. Correctly identifying the statutory basis for each claimed amount is therefore as important as quantifying it.

Market value is assessed at the acquisition date

Market value is not necessarily the authority’s offer, a recent rating valuation or the price of a preferred replacement property. It is a statutory valuation of the acquired interest at the acquisition date.

The analysis commonly considers comparable sales, planning controls, the physical characteristics of the land, lawful existing use and any sufficiently established development potential. In Barkat v Roads and Maritime Services [2019] NSWCA 240, Emmett AJA said that market value is determined on the basis of the land’s highest and best use, being its most profitable potential use: [20]. The land is valued in its existing condition with all its potentialities treated as potentialities: [21]. Leeming JA agreed at [1] and Simpson AJA at [94]. Section 56 also requires specified effects of the public purpose to be separated from the value of the land. The exercise can require planning, valuation and engineering evidence rather than assumption.

Where only part of a property is acquired, valuation evidence may need to address the acquired land and the retained land before and after acquisition. Access, configuration, services, development capacity and operational effects may be relevant, but each claimed effect must be connected to a section 55 head.

Disturbance must be proved item by item

Disturbance is not a general allowance for disruption. Section 59 defines particular categories and repeatedly uses the requirement that costs be reasonably incurred.

Legal costs and qualified valuation fees incurred in connection with the compulsory acquisition may fall within paragraphs (a) and (b). Relocation, replacement-property duty and mortgage costs are dealt with separately in paragraphs (c) to (e), including specific exclusions and caps. The residual paragraph (f) is confined to other financial costs relating to the actual use of the land that are a direct and natural consequence of the acquisition.

The practical consequence is that a claimant should record each item separately. A total estimate without invoices, calculations or a causal explanation may not establish the statutory test.

For a focused discussion, see legal and valuation costs under the Just Terms Act and disturbance loss in compulsory acquisition.

Underground acquisitions may displace the ordinary rules

Subsurface acquisitions need to be checked against the instrument authorising the project and any special compensation provision.

The ordinary minimum negotiation rule in section 10A of the Just Terms Act does not apply to a proposal to acquire Crown land, an easement or right to use land under the surface for constructing or maintaining works, or a stratum under the surface for constructing a tunnel. That exclusion concerns the negotiation framework in the linked provision. It does not, by itself, determine whether compensation is payable.

Section 62 separately restricts compensation for specified subsurface easements or rights and for land under the surface acquired for a tunnel. For underground rail facilities, clause 2(2) of Schedule 6B to the Transport Administration Act 1988 (NSW) expressly disapplies section 62(2), but not section 62(1). Clause 2(1) provides:

“If land under the surface is compulsorily acquired under the Land Acquisition (Just Terms Compensation) Act 1991 for the purpose of underground rail facilities, compensation is not payable under that Act unless—

(a) the surface of the overlying soil is disturbed, or

(b) the support of that surface is destroyed or injuriously affected by the construction of those facilities, or

(c) any mines or underground working in or adjacent to the land are thereby rendered unworkable or are injuriously affected.”

In Sydney Metro v Expandamesh Pty Ltd [2023] NSWCA 200, the NSW Court of Appeal did not establish a universal millimetre threshold. The result turned on findings that the subsidence was 1.5 millimetres or modestly more, imperceptible to occupants and caused no damage to the buildings, and on the experts’ agreement that it had no adverse effect on existing or possible future use of the land: [8].

In their joint reasons, Leeming JA and Griffiths AJA held that “disturbed” does not extend to an effect that is “objectively trivial and of no practical significance”: [62]. Whether an effect is non-trivial “will depend upon the particular factual context”: [64]. Simpson AJA agreed with the orders and, subject to her separate reasons, with the joint reasons: [91]–[96].

As at 30 September 2026, clause 2(1) of Schedule 6B still reads as it did when the Court considered it. Because the outcome depended on those facts, the measured movement in Expandamesh is not a universal rule. Satisfying clause 2(1) removes that statutory bar; it does not establish entitlement under every other applicable provision or prove a particular amount.

From compensation notice to Court objection

After compulsory acquisition, section 42(1) provides:

“An authority of the State which has compulsorily acquired land under this Act must, within 45 days after the publication of the acquisition notice, give the former owners of the land written notice of the compulsory acquisition, their entitlement to compensation and the amount of compensation offered (as determined by the Valuer-General).”

The qualifications in section 42(4)–(6) are:

“(4) The Minister may extend the period of 45 days within which the compensation notice is required to be given (but not by more than 60 days) if the Minister is satisfied that it is necessary to do so to enable a valuation to be made of any interest in the land concerned.

(5) An authority of the State is not excused from the requirement to give a compensation notice because the period during which the notice is required to be given has expired or because the former owner has not lodged a claim for compensation.

(6) However, the authority of the State may delay giving a compensation notice if a number of persons claim competing interests in the land concerned.”

Section 66(1) provides:

“A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State.”

The right to object belongs to a person who has claimed compensation. A compensation notice can arrive before any claim has been made: the Valuer-General may determine the offer even though no claim has been made (section 41(2)), and the authority must give the notice even if no claim has been lodged (section 42(5)). A claim is lodged with the acquiring authority or the Valuer-General, in the prescribed or approved form, under section 39. Check early that a claim has been lodged for every affected interest.

The notice must contain the particulars required by section 43. A person may accept the offer under section 44. If the person neither accepts nor objects within 90 days after receiving the notice, section 45 deems the offer accepted, subject to any later objection that the Court is permitted to hear.

Section 66(3) provides:

“A person who does not lodge an objection within the 90-day period and who is taken to have accepted the offer of compensation under section 45 may nevertheless lodge an objection under this section, but the Land and Environment Court is not to hear and dispose of the person’s claim for compensation unless satisfied that there is good cause for the person’s failure to lodge the objection within that period.”

That is a good-cause exception, not an extension available on request. The notice, receipt date and filing deadline should be checked immediately. How an objection is prepared is set out on our valuation and compensation objections page.

Under section 66(2), if an objection is duly lodged, the Land and Environment Court “is to hear and dispose of the person’s claim for compensation”. The proceeding is in Class 3 under section 19(e) of the Land and Environment Court Act 1979 (NSW). It is not an appeal confined to choosing between the statutory offer and the amount claimed. In Barkat at [19], Emmett AJA explained that the Court acts as a judicial valuer, is not confined to accepting either party’s case and may use the evidence to make its own assessment of compensation (Leeming JA agreeing at [1]; Simpson AJA at [94]).

The Act is under government review

The NSW Government has been reviewing the Just Terms Act and whole-of-government acquisition processes. The Department of Planning, Housing and Infrastructure’s land acquisition review page (last updated 19 November 2025) says final recommendations are expected to be considered by Government in 2026. As at 30 September 2026, the Act’s page on the NSW legislation website lists no amendment awaiting commencement and no Bill to amend it. This article describes the law in force on that date.

Organise the evidence from the first acquisition contact

Preserve a dated record from the first acquisition contact: every notice and offer; title and interest documents; plans of the acquired and retained land; valuation, planning and property-use evidence; and the records supporting each professional, relocation, business or finance cost. A chronology should link each claimed amount or retained-land effect to the acquisition.

The evidence should do more than show that money was spent. It should identify the statutory head, explain the connection to the acquisition and allow reasonableness to be assessed.

On receiving acquisition material, identify the exact land and interest, diarise every notice date, preserve the property’s condition and use, and check whether a project-specific Act changes the ordinary framework. A live schedule of claimed amounts and supporting documents will expose gaps while they can still be addressed.

Compensation is evidence-led. Early classification of the interest, the statutory heads and the supporting material makes the later valuation and negotiation process more disciplined.