Property Matters – State land acquisition

Recent concerns over the State’s land acquisition process, especially in relation to the Curepe Interchange project, have virtually coincided with the appointment on 12th January 2018 of the first Board for the Office of Procurement Regulation (OPR).

The $222M contract for this project was awarded in August 2017 to China Railway Construction Corporation (CRCC) by National infrastructure Development Co. (NIDCO). NIDCO is one of the implementing agencies for the Ministry of Works and Transport, which is headed by Senator Rohan Sinanan. Twenty-Two parcels of private land have to be acquired to build this interchange between the Churchill-Roosevelt Highway and the Southern Main Road. That includes a part of the disused Kay-Donna Drive-Inn Cinema, which is at the south-western corner of that intersection.

Minister Sinanan has confirmed his part-ownership of the Kay-Donna property, which, together with the long-standing problems within the State’s land acquisition process, have given ground to the sceptics. In my view Minister Sinanan’s position is a direct conflict of interest, if ever I saw one. That said, it is not an irremediable conflict, indeed it must be remedied, since we ought not to either halt this project or delude ourselves to think that recusal is some kind of cure for this Executive Proximity.

This situation is a learning opportunity to re-establish some proper standards of transparency and accountability in the land acquisition process and for the OPR to issue strong regulations to assure best practices for the future. This article will outline the key issues in State land acquisitions and propose a best practice approach which could ease some of the legitimate concerns arising in relation to the conflicted situation of Minister Sinanan.

The State can acquire property in two main ways –

1. Private Treaty – which is the negotiation process used for normal, open-market purchases;
2. Compulsory Purchase – the Land Acquisition Act 1994 (LAA) allows the State to acquire private property for a public purpose without the owner’s agreement.

Almost all landowners would prefer to have their property purchased by the State via Private Treaty since that guarantees more prompt payment (usually) and allows them more room to bargain for higher prices.

The compulsory purchase option does not allow the landowner any choice so it is often used together with the private treaty approach. That means that the State will survey the properties and publish acquisition notices before entering private treaty negotiations. Those private treaty negotiations therefore take place ‘under the shadow of compulsion‘. That twin-track approach usually results in better results for the State, which translates into lower prices for landowners. But that is based on international research, here in T&T the arrangement works differently, with most landowners obtaining higher prices than would obtain under the compulsory approach.

The two main objections from private landowners to the compulsory purchase approach are –

1. No compensation for unauthorised or illegal subdivisions or works – That means landowners can only be compensated for authorised works which have the proper planning approval. The limitation period which applies to enforcement action does not dilute those provisions of the LAA:
2. Delayed payment – There is really a serious issue with delayed payments for approved claims under the LAA, as several of my clients could attest. There are provisions for payment of interest at 6% on the sums owed – it used to be at the generous rate of 9% up until October 2016. In addition S.22 allows a claimant to receive up to 80% of the sums offered by the State in advance of settling the final payment. That benefits both sides since the landowner can get a lumpsum to start locating an alternative property and the State can greatly reduce its interest payments on delayed compensation. That set of arrangements have collapsed as claims for advance payments are neither acknowledged or processed, again, in relation to my clients. Perhaps the shortage of money is the problem.

The main objection from the State to the compulsory purchase approach is that the private treaty approach is supposedly more efficient. I contest that notion, as we see time and again that private landowners are able to extract sums way in excess of what would be payable under the compulsory approach. Just think of Eden Gardens, in which the compulsory approach would have allowed the State to lawfully acquire that property for $35M, yet the HDC paid $175M. Or better yet, the more recent citations by Minister Sinanan in relation to the Point Fortin Highway and so on.

These are the three main changes to address the concerns arising with respect to Minister Sinanan at the Curepe Interchange project land acquisition, which ought to become part of best practice going forward –

1. 1. 1. Two Valuations – The main change that needs to happen is that in every case in which the State is acquiring private property for a public purpose, there needs to be two valuations prepared to show the professional advice in respect of the two options. In no circumstances must landowners be rewarded for lawbreaking, either false taxation declarations (as at Eden Gardens) or unauthorised development. The lower of the two prices is all that should be paid. The days of excess are over;
      2. The Acquisition Plan – The professional valuers working for the State compile an acquisition plan showing all the property to be acquired and details of the ones for which terms had been agreed. That plan allowed one to see the full picture and made for more informed, succinct negotiations. Indeed, they were the acme of transparency. For whatever reason, the Valuation Division of the Ministry of Finance has not released any of those Acquisition Plans for at least the last 15 years – I am writing as a practitioner here. It is very important that those plans be issued once again for the sake of transparency, especially in this series of transactions. With today’s GIS and CAD technology, those plans are easier to prepare than before;
      3. Rustication – The said Minister Sinanan made serious allegations against certain professionals in the Valuation Division and the Institute of Surveyors of T&T called for the Ministry to make formal reports against those persons. I support those calls for action as those persons need to be formally reported to the police, their professional bodies (both local and international) and their insurers.

Finally, the OPR will have responsibility to oversee these transactions in Public Money and I therefore strongly recommend that these proposals be embedded into the Regulations for the new Public Procurement System.