Inside Track: Local Government - In the media, Practice and courts, Cases and Legislation

• Published date: 03 December 2020
• Law Firm: Holding Redlich
• Author: Ms Lisa Cody

Council's obligations to land transactions

When transacting freehold land owned by a council, whether it be granting a lease or selling land, various statutory obligations must be complied with by the council. In addition to the statutory processes and procedures that must be complied with, there are also policy and guidelines that a council is required to comply with when transacting land.

Under section 14(1) of the Local Government Act 2020 (Vic), a council is capable of acquiring, holding, dealing with or disposing of property to perform its functions and exercising its powers. However, the statutory processes applicable to a sale or lease of freehold land are principally contained within the Local Government Act 1989 (Vic) (LGA) (in particular within Part 9).

If the relevant land has the status of a public road, there may be additional processes and procedures that need to be complied with. This article relates to the transacting of freehold land owned by a council, other than land that has the status of a road.

Section 189 of the LGA sets out the obligations of the council if it sells or exchanges land. These obligations include:

• ensuring that the public notice of intention to sell the land is given at least four weeks prior to selling the land
• obtaining a valuation from a valuer with the qualifications or experience under the Valuation of Land Act 1960 (Vic), which is made not more than six months prior to the sale or exchange of land.

It should be noted, however, that in the current COVID-19 period, it has been our experience that valuers have been reducing the currency period of their valuation. Accordingly, notwithstanding a valuation is obtained six months prior to the proposed transaction, the currency of the valuation may have expired due to limitations by the valuer in the valuation. In the course of negotiating a transaction, it may be necessary to obtain various updates of a valuation prior to an exchange.

Under section 189(3) of the LGA, a person has a right to make submissions on a proposed sale or exchange and the procedures of section 223 of the LGA apply to the submission process.

Under section 190 of the LGA, a council's power to lease land to any person is limited to leases for a term of 50 years.

A council is required to publish a public notice of a proposed lease at least four weeks before the lease is entered into if the lease falls into the following categories:

• the lease is for a term of a year or more and the rent for any period of the lease is $50,000 or more or the current market rental value of the land is $50,000 or more
• the lease is for a term of 10 years or more; or
• the lease is to be a building or improving lease.

Under section 190 (3) of the LGA, where a public notice of a lease is required, a person has a right to make submissions in relation to the proposed lease and the procedures in section 223 of the LGA apply to the submission process.

Under section 191 of the LGA, there is an exemption from the requirement to comply with the procedures and requirements set out in section 189 and 190 of the LGA in relation to the transfer, exchange or lease of land with or without consideration to:

• the Crown
• a Minister
• any public body
• trustees appointed under any Act when the land is to be held on trust for public or municipal purposes
• a public hospital or other hospital carried on by an association or society otherwise than for profit or gain to the members of the association or organisation.

A public body is defined in the LGA as:

"any government department or municipal council or body established for a public purpose by an Act of Parliament of Victoria, any other State or Territory of the Commonwealth, or the Commonwealth."

As a result of the exemption under section 191 of the LGA, land transactions with a number of Victorian State Government departments, authorities or entities will not require compliance with the requirements of section 189 or section 190 of the LGA. However, those government departments, authorities or entities will have a number of statutory and policy procedures to comply with before acquiring land or entering into a lease which will include Valuer General approval and may require Victorian Government Land Monitor approvals.

Councils may still decide to follow the processes in section 189 or 190 of the LGA notwithstanding the exemption.

In addition to the statutory requirements, there are policy and guidelines that are required to be adhered to by councils.

One such guideline is the Local Government Best Practice Guideline for the Sale, Exchange and Transfer of Land 2009 (Guideline) which was prepared jointly by Local Government Victoria, the Victorian Government Land Monitor and the Department of Planning and Community Development (now the Department of Environment Water and Planning). The Guideline can be found here.

The Guideline sets out various principles that are to be complied with by a council in relation to the exchange or transfer of land, including:

• sales should be conducted through a public process in the interests of probity, public accountability and transparency
• the sales, exchanges and transfers should be in the best interests of the community and provide the best financial and non-financial results for the community
• sales, transfers and exchanges should generally occur at not less than market value
• before the land is offered for sale, it is appropriately zoned to achieve the highest possible sale price
• consideration needs to be given to whether the land is contaminated and the implication for the council.

In addition, each council will have its own published policy and guidelines for land sales and acquisitions.

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