Overview
Compulsory acquisition is the statutory mechanism by which a Victorian State Department or other authority acquires an interest in land for a public purpose, including for transport, drainage, schools, utilities, precinct delivery and other enabling infrastructure. In Victoria, the principal framework governing both the acquisition process and the assessment and payment of compensation is the Land Acquisition and Compensation Act 1986 (Vic) (LAC Act).
Designated large State (or Big Build) projects may also be governed by the Major Transport Projects Facilitation Act 2009, which introduces another layer of framework for designated projects. This includes, for example, additional powers for project areas including reservations which might not otherwise be simply located on typical cadastral mapping software.
For developers and sophisticated landowners, the critical point is that compulsory acquisition is rarely confined to ‘what is taken’. Partial acquisitions, easements, construction interfaces, access constraints and programme impacts can materially change the commercial outcomes for a project, even where the acquired footprint is small. The most effective outcomes usually depend on early strategy, disciplined evidence collection, and a clear understanding of what the LAC Act does (and does not) compensate.
This page outlines how compulsory acquisition typically unfolds in Victoria, the main heads of compensation under the LAC Act, and the recurring issues that arise for development land and complex sites. For designated projects under the Major Transport Projects Facilitation Act 2009, compensation measures are still largely (although not completely) referred back to the LAC Act.
Acquisition powers and the role of the ‘special Act’
The LAC Act provides the procedure and compensation code, but it does not itself grant an authority a free-standing power to acquire. The acquisition power is typically found in the authority’s enabling legislation or a project-specific statute, commonly referred to in the LAC Act as a ‘special Act’.
In practice, acquisition risk is often flagged early through planning instruments, particularly a Public Acquisition Overlay (PAO), which reserves land for a public purpose and signals that acquisition is intended. That planning context can matter commercially even before formal acquisition steps commence.
The compulsory acquisition pathway under the LAC Act
1. Notice of Intention to Acquire
Subject to limited exceptions, an authority commences the formal process by serving a Notice of Intention to Acquire (NOITA) on relevant interest holders. The NOITA is also recorded on title through the Registrar of Titles, which has obvious implications for transactions, funding and due diligence.
A NOITA is not open-ended. If the authority does not acquire an interest within six months, the NOITA lapses, subject to extension by written agreement.
From a developer’s perspective, this “notice period” is often the commercial window in which to test alignment between the authority’s acquisition requirements and the project’s staging, approvals pathway, and delivery constraints. It is also the final period in which parties may explore negotiated acquisition terms and outcomes, albeit unlikely in practice.
2. Notice of Acquisition and vesting
An authority acquires an interest in land by publishing a Notice of Acquisition in the Victoria Government Gazette. Publication is the vesting event. From that date, the acquired interest vests in the authority without transfer or conveyance, and the authority becomes owner of the acquired interest even if compensation has not yet been agreed or paid.
The LAC Act also addresses the effect of acquisition on mortgages and other encumbrances, and preserves certain public utility rights unless they are specifically acquired.
3. Possession and occupation
Vesting is distinct from physical possession. The LAC Act requires the authority to endeavour to agree terms of possession with the owner or occupier.
Where land is used as a principal place of residence or business, the authority generally cannot take possession until three months after the date of acquisition, except in defined circumstances or by agreement. The authority may enter after giving seven days’ written notice of its intention to take possession.
For development land, possession issues commonly arise in partial acquisitions where construction programmes, site access, safety systems, and contractor sequencing require tailored arrangements, particularly where the “retained land” remains active for ongoing works.
The right to compensation
A person whose interest is divested or diminished through acquisition has a statutory right to compensation.
Compensation is not only for registered proprietors. Depending on the interest acquired and the circumstances, claimants can include mortgagees, lessees and others with recognised interests, and some costs may arise in respect of occupation and relocation.
The initial offer and the response process
After a Notice of Acquisition is published, the authority must make an initial offer of compensation to each claimant in writing.
The offer must be a fair and reasonable estimate of the compensation payable, and it must be accompanied by a certificate of valuation and an explanatory statement addressing any difference between the valuation and the sum offered, together with a statement of the claimant’s principal rights and obligations.
The claimant then has the right to accept or reject (in full or in part) the initial offer of compensation based on its own obtain professional advice.
Heads of compensation under the LAC Act
The LAC Act sets out the heads of compensation and the general principles that govern assessment. In developer and investment contexts, the key heads commonly engaged are market value (including partial acquisition methodology), severance (injurious affection to retained land), disturbance, and professional expenses.
Market value
Market value is defined by statute and is assessed at the relevant date.
Where only part of a landholding (or part of an interest) is acquired, market value is frequently assessed on a “before and after” basis, capturing the diminution between the market value of the interest before acquisition and after acquisition. This approach is often central to partial acquisitions because it captures the value of what is taken and the value impacts on what remains in a single assessment.
The LAC Act requires certain matters to be disregarded in assessing compensation, including project-related increases or decreases in value attributable to the proposed acquisition or the carrying out of the public purpose.
In major projects, this is commonly described as an “unaffected value” approach: valuation is undertaken on the basis of the land’s value without the project being delivered.
For acquired land that was capable of development, the analysis becomes more in-depth as the hypothetical development scenario is often explored in understanding and assessing compensation.
Loss attributable to severance
Severance impacts address the effect of the acquisition on the remaining land and other interests of the claimant used in conjunction with the acquired land. While this commonly relates to contiguous land, it is not always the case.,
On development sites, severance issues can include loss of developable area, compromised layouts, changes to approvals strategy, increased project costs, and additional works required to make the retained land functional. The retained land analysis often requires integrated input from valuers, civil engineers, surveyors and planning experts, particularly where the acquisition alters the “highest and best use” of the land or its deliverability.
Loss attributable to disturbance
Disturbance is a significant head of claim in commercial matters. It captures pecuniary loss suffered as the natural, direct and reasonable consequence of the acquisition, which may include relocation costs, business disruption, and other proved financial impacts.
For developers, disturbance is often where project-specific costs sit, including redesign, re-approval costs, contractor delay impacts and interface costs, but it must be approached carefully. Disturbance claims are evidence intensive and are commonly challenged on causation, reasonableness and proof.
Another common disturbance claim may relate to acquiring a replacement property or holding costs.
Professional expenses
Legal, valuation and other professional expenses necessarily incurred because of the acquisition are commonly recoverable.
In complex acquisitions, those expenses can extend beyond legal and valuation inputs and may include technical support required to substantiate severance and disturbance impacts, provided it is necessary, reasonable and appropriately linked to the acquisition issues.
Advances and interest
Where the initial offer is $5,000 or more, a claimant can require an advance of compensation equal to the amount offered (subject to the statutory settings).
Interest on unpaid compensation is also addressed by the LAC Act, including the mechanism for determining the rate of interest.
For developer clients, the advance and interest regime can be relevant to cash flow, debt covenants and the ability to fund replacement works or re-sequenced delivery.
Disputed claims and determination
If compensation cannot be resolved, the LAC Act provides for disputed claim determination through VCAT or the Supreme Court of Victoria (depending on the amount in dispute and the procedural pathway).
if the amount in dispute is more than $400,000, a party can apply to either VCAT or the Supreme Court; if $400,000 or less, the application is confined to VCAT.
Forum selection, expert evidence management, and the framing of valuation methodology can materially influence outcomes, particularly in partial acquisitions where the interaction between market value, severance and disturbance requires careful structuring to avoid double counting or evidentiary gaps.
Developer-focused issues that commonly require targeted advice
Partial acquisitions that compromise approvals and delivery
Where an acquisition affects access, drainage, road interface, or staging, the question is often not “what is the square metres taken”, but “what is the commercial consequence for the retained land”. This includes whether the retained land is still capable of the intended outcome within a reasonable timeframe and cost.
Easements and corridor acquisitions
Many acquisitions are of easements rather than freehold. While the interest acquired may appear limited, the effect on development design can be disproportionate, including constraints on built form, earthworks, and servicing corridors.
Transaction and funding impacts
A NOITA recorded on title can affect settlement conditions, finance approval and valuation assumptions. Development transactions often require an integrated approach across acquisition strategy, contract risk allocation and lender interface, particularly where acquisition timing is uncertain or staged.
Planning impacts
A project that is known for a significant period can often determine planning outcomes for a particular site. This can include factors such as exclusion from the growth area boundary and different zoning outcomes.
Timing and evidence discipline
The LAC Act is procedural. Timeframes, prescribed forms, and the content of notices matter. In commercial claims, evidence discipline from the outset is essential, including:
- baseline site and operational documentation
- records of design changes and approval implications
- cost tracking tied to acquisition causation
- expert instructions that align with the statutory heads of claim
Growth Areas Infrastructure Contribution (GAIC)
GAIC legislation has been amended to create a potential significant impact, including cash flow concern, for landowner and developers with land that is compulsorily acquired within the Urban Growth Zone in a planning scheme. There are some exceptions which may apply and, if not, consideration should be to additional heads of compensation, such as project funding.
Best Hooper Lawyers’ experience
Best Hooper Lawyers’ Property Team advises developers, landowners and investors across the full lifecycle of compulsory acquisition matters in Victoria, from early strategic assessment (including public acquisition overlays and pre-acquisition strategy) through to compensation negotiation, expert coordination, and disputed claim proceedings where required. Our experience includes complex partial acquisitions, easement and corridor matters, and acquisition interfaces that materially affect development yield, staging and delivery.
In our experience, it is imperative to obtain Best Hooper’s legal advice as soon as a land owner or other interested person becomes aware of a project that may impact the property.
Best Hooper has the largest, experienced and most active claimant-focused compulsory acquisition team in Victoria.
General information only
This page is general information only and is not legal advice. It is not intended to be relied on as a substitute for obtaining advice specific to your circumstances, project or transaction. Laws, policies and regulator practices can change, and the application of the law depends on the particular facts.
