East West Link – How Much Will Residents Be Compensated?

By Peter Sarmas on 8 Aug 2013
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Concerned residents of Melbourne’s inner north who are likely to be affected by the proposed East-West Link tollway are looking to find out what exactly they are entitled to. Earlier this month, more than 350 property owners from Collingwood and surrounding areas were informed by the State Government that their properties are likely to be affected by the East West Link which will connect the Eastern Freeway to the northern and western suburbs, with 92 of those properties expected to be compulsorily acquired and bulldozed.

While the State Government maintains that they have minimised the number of homes to be compulsory acquired and ensure most of the new road is tunnelled underground, many residents have criticized their lack of consultation with the community on the matter, and believe they will not receive adequate compensation or fair value for the acquisition of their properties.

According to CEO of WBP Property Greville Pabst, in cases of compulsory acquisition the government is required to award the homeowner a “suitable level of compensation [in] which the owner is in the same financial position before and after the acquisition”. He explains that the owner of the property is “entitled to the full market value of the asset”, as well as any relocation and legal costs.

Despite promises from Premier Denis Napthine and Roads Minister Terry Mulder claiming that homeowners will be paid out the full market value before the freeway announcement as well as compensation to cover moving costs and stamp duty fees, it has been reported by the Herald Sun that more than half of the residents likely to be affected have sought legal advice in regards to compensation.

Mr Pabst recommends this to all affected, advising that property owners subject to compulsory acquisition “should obtain independent legal and valuation advice to ensure that they have the information and necessary documentation to support their negotiation with the government body regarding the final compensation figure”.

With the widespread level of dissatisfaction with the way the government’s lack of consultation with the community prior to the announcement, it can be expected that some residents may also seek solation, the compensation for non-financial disadvantage resulting from the compulsory acquisition. Mr Pabst explains that in some cases solation may be awarded to the homeowner due to “emotional inconvenience”.

“The maximum solatium granted to a single individual for any single acquisition is an extra 10 per cent of the market value of the acquired part or whole of the asset,” he said. But it is rare that this amount is awarded, with a more common outcome closer to the 5 per cent mark.

Of all property owners who are set to be affected by the East West Link, it appears those who stand to lose their home to compulsory acquisition may be the lucky ones. Those who instead are likely to have freeways surrounding their property or tunnels running underneath, reducing the value of their property, do not stand to gain any financial compensation whatsoever.

“Unfortunately, laws do not support those inadvertently affected by a government’s compulsory acquisitions,” said Mr Pabst. These properties may potentially be “affected by noise and air pollution, obstruction of views and privacy due to large off-ramps and traffic congestion. In this instance, because the affected properties were not acquired they are not subject to the same benefits of compensation.”

About the Author

Peter Sarmas is a Certified Property Investment Advisor (PIAA) and Vendor/Buyer Advocate. Before becoming the founder of Street News, Peter completed a Degree in Applied Science (Chemistry) and a Graduate Diploma in Property Valuations (Hons). Peter believes property investing is a major and potentially risky undertaking. In his view, everyone should have an independent person acting on their behalf when seeking property investment advice.

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