Compensation for Road Works / Construction that Affects Business Operations

I recently went to the public open day walkthrough of the completed initial stage of the City Rail Link (CRL) tunnels. In my opinion, it's a very impressive feat of engineering and good for the future growth of the city.

The day was of particular interest to me because of my involvement in the project as the lawyer representing a number of landowners along the route adversely impacted by the works. Our clients were affected in several different ways. Some lost their homes, and others had to relocate their businesses to make way for the construction of the rail tunnels and surface stations.

The compensation negotiations with Auckland Transport (AT) were often highly stressful for our clients, and compensation outcomes were hard-fought and hard-earned.

The clients that had land taken, leases terminated, and businesses relocated were in some respects better off than those left behind. In particular, I am thinking of the business owners in Albert Street, Karangahape Road, and Symonds Street. Here, the CRL's construction works have the potential to cause severe, continued disruption to business operations due to loss of customer access, visibility, parking, and shading.

As with compensation regimes in other countries, the Public Works Act 1981 offers little in the way of meaningful compensation for these owners.

Section 63 of the Act states that:

"(1) Where substantial injurious affection to a person's land is caused by the construction (but not the maintenance or operation) of a public work… … … and there would be a right of action at common law in respect of the injurious affection… … … the Crown or Local Authority shall compensate the person to such extent as the injurious affection warrants."

This Section 63 right of compensation is seldom used. Indeed, there is very little, if any, judicial interpretation of how it should be used and applied.

I recall assisting landowners on the CRL route back in 2014 who had businesses (both landlords and tenants) close to planned railway stations. Those businesses faced three to five years of disruption, with car parks likely to be required for construction equipment and use as operational headquarters. In addition, three to five years of disruption to pedestrian and vehicular traffic have potentially reduced the desirability of their business sites as a destination for customers. In other parts of New Zealand, valuable retirement village developments end up adjacent to 110 kph expressways, and apartment blocks are threatened by flyovers constructed metres from their residential accommodation.

Back in 2014, all AC and AT were prepared to consider regarding the CRL was some targeted rates relief.

At that time, one business owner told me they had been forced to relocate without compensation when AC did some relatively minor stormwater drainage works in Vulcan Lane in the CBD. Imagine then (came the comment) what the loss of business would be resulting from a four-billion-dollar railway project. The proof of this can be seen in the drop-off in business for commercial operations in the Albert Street area.

Very late in the process, the Government has stepped in by proposing ex gratia hardship payments for some Albert Street businesses most severely impacted by the works. There is serious doubt that this last-minute offer of funds will be enough to adequately compensate for loss.

The time is overdue for a major overhaul of the Public Works Act to make it fairer and easier for compensation to be sought and awarded to the people left behind, not just the taxpayers who have land expropriated by the government agency for the public work.

If you have concerns about the impact of a public project on your property or business, do not hesitate to contact me at any time on 021 485 557.