Planning blight, fair compensation and the P&E Amendment Act: what landowners need to know now

Why this case matters for landowners

The recent Barrett judgment clarifies how compensation is assessed when a planning reservation constrains development. Most importantly for landowners and claimants, the Court explained where the legal onus lies and how uncertainty in the “before and after” valuation is resolved. The result materially strengthens the position of affected landowners whose land is burdened by long-term planning reservations in establishing what that land would reasonably have been worth in an unaffected world.

What happened

The claimant (Barrett) owned development land partly reserved for future transport infrastructure under a Public Acquisition Overlay (PAO). Council refused a subdivision permit because of that reservation. Barrett in turn sought compensation under the Planning and Environment Act 1987 (Vic) (P&E Act) for financial loss arising from the ‘planning blight’ caused by the reservation.

The acquiring authority (Authority) failed to respond to the claim within the statutory timeframe and initially offered $0 in compensation. The claimant referred his claim to the Supreme Court in June 2023, initially claiming $31.31m, later reduced to $28.275m.

Shortly before trial, the Authority accepted that compensation was payable and the sole issue in dispute was quantum. At this time, the Authority made an amended offer of $18.65m.

The Court ultimately awarded compensation of $27.925m – largely in line with Barrett’s valuation, save for a modest deduction for land within a narrow “paper road”.

What the Court decided – key findings

Onus of proof

The claimant bears a legal onus only to establish the right to compensation – that is, financial loss as the ‘natural, direct and reasonable consequence’ of the reservation and the occurrence of the statutory trigger. Beyond that threshold, there is no legal onus on either party regarding the factual assumptions that drive quantum. The Court determines the counterfactual on the balance of probabilities and, where genuine doubt or obscurity remains, resolves that doubt in favour of the landowner. In practice, this means that once entitlement is established, an authority cannot depress value by insisting the claimant disprove speculative or pessimistic scenarios.

Development readiness and cultural heritage

Applying that approach, the Court accepted that in the unaffected scenario the land should be treated as development-ready for residential subdivision. It rejected the Authority’s contention that lengthy cultural heritage processes would defer development, and declined to treat the owner’s failure to obtain a new, site-wide cultural heritage plan as breaking the chain of causation. The statutory scheme does not require owners to take additional steps merely to “perfect” hypothetical assumptions for valuation purposes.

No set-off for enhancement of other land

The Authority argued that other land owned by Barrett had increased in value and should offset compensation. The Court held that the Part 5 scheme focuses on the loss to the reserved land alone, and contains no mechanism to net off gains on separate parcels. Any such enhancement can be addressed if those parcels are themselves later acquired.

Paper road adjustment

The only significant deduction arose because a sliver of land within a proposed road reserve was not owned by Barrett. The Court excluded that area from the developable yield and made a corresponding downward adjustment.

Outcome

The Court assessed financial loss in a figure broadly consistent with Barrett’s position, confirming that the reservation’s impact on development potential was the ‘natural, direct and reasonable cause of the loss’.

What this case means for landowners

The Barrett decision confirms that compensation for planning blight must be assessed realistically and fairly and that affected owners are entitled to be made whole.

Long‑term reservations expose authorities to major compensation liability.

Barrett confirms that:

• once a PAO is applied, a landowner’s right to compensation is triggered under section 98 of the P&E Act, regardless of whether a Notice of Acquisition is issued; and
• acquiring authorities cannot defer acquisition without consequence.

Key takeaways from the Barrett decision are:

• Compensation rights arise on reservation, not acquisition – meaning you do not need to wait for a compulsory acquisition notice before claiming.
• Extended or stalled infrastructure projects carry genuine financial risk for authorities — and corresponding opportunity for affected owners to pursue meaningful compensation.
• Long-term planning blight is recognised as a compensable outcome of the planning system – it is not merely theoretical.

‘Planning blight’ compensation is not token or nominal.

The Court rejected the idea that compensation may be nominal or reduced to zero simply because land had not yet been acquired. Instead, compensation must reflect the real economic impact of the reservation.

The Court confirmed that:

• Compensation is assessed by reference to the value of the land as if the PAO did not exist (the “before” value).
• Valuation must reflect the land’s true planning potential, based on realistic development outcomes within current planning constraints.
• Planning constraints created by the overlay itself cannot be relied upon to suppress value and reduce compensation.

Courts will favour realistic planning, valuations and substance over artificial technicalities.

In practical terms, the Court favoured the landowner’s position by examining the real planning and market context of the property, rather than entertaining hypothetical or speculative valuations advanced by the authority.

Importantly for owners and developers with multiple holdings, compensation cannot be offset by reference to other landholdings. Any increase or decrease in value of adjoining or separate parcels cannot be leveraged to reduce a claim on the reserved land.

Clear message to authorities regarding Zero-Dollar offers.

The Court was highly critical of the Authority’s initial zero‑dollar compensation offer. This sends a strong message that authorities must engage early and reasonably when compensation rights arise, and that landowners should not be deterred by low or nil opening positions from an acquiring authority.

Planning Amendment (Better Decisions Made Faster) Act – implications for future “planning blight” claims

Recent changes made under the Planning Amendment (Better Decisions Made Faster) Act (P&E Amendment Act) will significantly change the compensation regime relating to planning blight claims. These changes come into effect on 1 September 2026.

• Key changes include:
  • changes to the circumstances in which a claim can be made; and
  • changes to how the Land Acquisition and Compensation Act 1986 (Vic) applies to claims.
• Relevantly to planning blight claims, the P&E Amendment Act introduces an actual financial loss standard; zoning-based valuation and exclusion of claims for prohibited uses.
• In Barrett, the Court confirmed that compensation for planning blight must be assessed by reference to a realistic and evidence-based ‘before’ scenario – that is, how the planning framework would have operated but for the reservation. However, Barrett took this further by valuing the realistic development potential of the land achievable under the existing planning zone. Despite the subdivision not being approved or in existence, the Court held it was a lawfully available and credible planning possibility.
• By contrast, the changes introduced under the P&E Amendment Act significantly narrow the application of the realistic ‘before’ scenario. Under the P&E Amendment Act, compensation will need to be tied to actual financial loss that can be clearly demonstrated when evaluating the property in real time, not what might have occurred in an ideal planning scenario. In other words, compensation will only be assessed on the actual development applied for under the planning permit application made to trigger the statutory entitlement to make a planning blight claim.
• The P&E Amendment Act changes also mean that land value must be assessed by reference to the land’s current zoning, not by assessing future rezoning that may never occur. This means that if a proposed use or development is prohibited under the planning scheme, no compensation will be payable for a refused permit. This places greater importance on ensuring land is appropriately rezoned through planning scheme amendments, particularly where current zoning is restrictive.

Key takeaway for landowners and developers

While compensation remains available in respect of planning blight claims, the changes under the P&E Amendment Act mean that landowners and developers must act promptly, rely on realistic planning scenarios, and be prepared to clearly demonstrate actual financial loss. If your land is affected by a PAO or other planning reservation, you should review your position now. Early engagement with specialist planning and compensation advisors will be critical to protecting your interests and maximising your claim.

If you have site-specific queries or wish to discuss how these changes affect your position, please contact Andrea Towson, Partner.

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Authored by: 

Andrea Towson, Partner
Laura Kilpatrick, Graduate