Compulsory acquisition of sub-stratum land: when is compensation payable?

With increased development of underground infrastructure in Victoria, Queensland, Western Australia and New South Wales, the operation of compensation regimes for the compulsory acquisition of underground, or ‘sub-stratum’ land is presently the subject of considerable focus.  

Generally, traditional compulsory acquisition of land entitles an owner of an interest in that land to some form of compensation. However, a separate set of rules can apply to the acquisition of sub-stratum land and, depending on the jurisdiction and the facts of the acquisition, may result in no compensation or limited compensation being payable by an acquiring authority.  

As a consequence, sub-stratum acquisitions of land present unique challenges for owners whose interests below the surface are acquired, and possibly impacted.

The compensation position in relation to sub-stratum acquisition varies in each state and territory.  

In WA, as a general rule, without surface disturbance or support to the surface being destroyed, owners of interests in land are statute barred from seeking compensation for sub-stratum land acquisitions.

Unless a further category of acquisition impacts apply (e.g. a mine, spring, reservoir or dam are injuriously affected), the Land Administration Act 1997 (WA) operates to prohibit seeking compensation for sub-stratum compensation.

In Queensland, there is a prevailing view that sub-stratum acquisitions have negligible impacts. However, in rare instances it may be argued underground projects (such as tunnel projects) do cause concern from a future development potential perspective.

For example, sub-stratum acquisitions may place considerable constraints on land with significant residential, commercial or industrial development potential due to structural support issues. The development of a basement car park in such a setting, or particular excavation or construction methods needed to deal with site constraints, could become unviable where a tunnel is built beneath the land.

This will depend on the facts of each acquisition but, unlike in other jurisdictions, the Acquisition of Land Act 1967 (Qld) does not expressly limit a landowner’s right to seek compensation for the acquisition of sub-stratum land.

For acquisitions of land in Victoria, many titles simply do not extend below a depth of 15 metres, which means the land is not acquired in the first place. Generally, common law dictates that land titles created before 1891 are unlimited in depth, and land ownership extends from the surface level to the ‘centre of the earth’.  

However, for land titles issued after 1891 ownership is limited to only 15 metres below ground. Importantly, for tunnel-boring purposes, the acquiring authority usually seeks to acquire land below 15 metres. Because of this, the acquisition of sub-stratum land might be less obtrusive to landowners compared to above ground acquisitions.  

The process is less straightforward when it comes to determining compensation for substratum acquisitions, with any entitlement dependant on an actual impact on land value being established. Generally the acquiring authority’s position is that there is no real loss to properties impacted by sub-stratum acquisitions, however this important issue has not yet been litigated or clarified by the courts.  

In NSW, the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) and Transport Administration Act 1988 (NSW) expressly regulate compensation for the compulsory acquisition of substratum interests in land.

Under these Acts, a land owner’s entitlement to compensation for tunnel and rail infrastructure facility acquisitions does not arise until it can be established that the surface of the overlying soil is disturbed, or the support of that surface is destroyed or injuriously affected by the construction of the relevant public infrastructure.

It is not yet clear in NSW whether these circumstances capture detrimental impacts on the development potential of the land above an acquired stratum or are limited to impacts on the overlying land in its present condition.  

Current litigation before the NSW Land and Environment Court concerning sub-stratum acquisitions for the Sydney Metro project is expected to clarify this important issue which has significant consequences for the quantum of compensation payable. 

It is easy to imagine that as infrastructure project delivery continues in urban areas, sub-stratum acquisitions in Australia will become a more frequent reality. This is expected to lead to increased pressure to revisit existing legislative and policy positions on the application of compensation regimes in each jurisdiction or, at the very least, a significant increase in and refinement of the jurisprudence on the existing regimes as they apply to these types of acquisitions.

Proponents of projects and landowners will need to deal with these acquisitions as they arise, on a case by case basis, with careful consideration of statutory constraints and reliance on expert advice where required.

As this is an evolving area of law, advice should be sought by affected land owners and acquiring authorities on the implications of sub-stratum acquisitions where there is a real potential for a detrimental impact on above-ground land uses.