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INTRODUCTION:
As infrastructure in NSW continues to be built whether it be the WestConnex or light rail developments or some other project that sees landowners served notice that their land is being compulsory acquired, business owners should be aware of what they are entitled to (whether they own the land or not).
As a business valuer and small business accountant, it's important that every possible income and expense item is considered to ensure that the maximum amount of compensation is obtained.
Figure 1: Progress as population grows will see more and more small business owners affected.
1. Compensation Where a business is affected
Under the Land Acquisition (Just Terms Compensation) Act 1991, where the acquired land is used by a business, compensation is available as a loss attributable to disturbance.
It will assessed on the basis of:
- relocating the business; or
- extinguishing the business.
When determining which basis, you need to work out which one is the most relevant.
For example, if you have a business that is in area that could be easily relocated, then relocating will be the basis used. If it is in a very specific location where it is paramount to the business's success (e.g. an 'auto alley' for a car yard or waterfront property say for a cafe), then extinguishment will be more likely to be selected and a small business valuation required.
2. Relocating the business
When assessing compensation due to relocation, all reasonable costs should be considered such as:
- loss of profits during relocation and re-establishment period;
- advertising costs;
- advising costs of the relocation;
- storage costs for equipment;
- fitout specific to the business;
- stock losses.
Figure 2: Could your business end up being compulsory acquired? Photo courtesy Lara Scolari Gallery Balmain
3. extinguishing the business
When a business is compensated under the extinguishment basis, the amount is determined on the market value of the business based on a walk in walk out basis.
Only those business valuers Sydney that have skills and experience in business valuations can assess this type of compensation.
CONCLUSION:
Should you have a business that is going to be affected by a compulsory acquisition, make sure you get proper advice from an experienced law firm and business valuer. Generally, these costs will be covered by the government.
Failure to do so could see you miss out on an enormous amount of money and put your business at an enormous disadvantage in terms of cash flow, profits and even survival.
