Commonwealth Property Disposal Policy

The Commonwealth Property Disposal Policy and webpage have been updated to reflect the publication of ‘A Guide to Commonwealth Property Disposals’. This Guide can be found under Tools and templates in the right hand menu. Amendments have also been made to paragraph 35 of the Commonwealth Property Disposal Policy to refer to the Guide as an additional source of information for entities.

Introduction

1. The Commonwealth Property Disposal Policy (CPDP) should be read in conjunction with Part X of the Lands Acquisition Act 1989(LAA), the Ownership and Disposals section of RMG 500 - Commonwealth Property Management Framework (CPMF) and the Disposal section of RMG 501 - Lands Acquisition Act Framework (LAA Framework).
2. The LAA provides the legal basis for the disposal of an interest in property by Commonwealth entities.
3. The LAA applies to all non-corporate Commonwealth entities (NCEs) and corporate Commonwealth entities (CCEs), except for those entities exempt from the LAA by the Lands Acquisition Regulations 2017 or their enabling legislation. Entities must follow their legal obligations under the LAA and are responsible for ensuring compliance.
4. The Finance Minister has delegated the power to dispose of property to officials within entities (see the LAA Delegations). It is a condition of the exercise of a delegated power that a delegate must have prior regard to the CPDP. This includes seeking approval from the Finance Minister where required.
5. Commonwealth entities have an obligation under the Public Governance, Performance and Accountability Act 2013 to use and manage the property it holds (as a form of public resource) in an efficient, effective, economical and ethical manner.

General policy

6. Surplus Commonwealth property must be sold on the open market at full market value, unless agreed otherwise by the Finance Minister.

Surplus property criteria

7. The CPMF requires that Commonwealth property should only be held where ownership:
   1. demonstrably contributes to government service delivery outcomes; and
   2. represents value for money.

The criteria and requirements for ownership of surplus property are outlined below.

Contribution to government service delivery outcomes

8. To demonstrate that ownership of the property contributes to government service delivery outcomes, the property must meet one or more of the following criteria:
   1. a direct relationship between ownership and the core business of the entity
   2. a ‘public purpose’ associated with ownership. Refer to the LAA for the definition of ‘public purpose’
   3. the property is a strategic landholding for future Commonwealth use or development, such as retaining land for use in a future infrastructure project or for defence purposes
   4. the property possesses a unique non-financial quality such that a change of ownership would cause detriment to the operations of the entity. Examples include certain special purpose buildings or land for environmental offsets.

Value for money

9. To demonstrate value for money, the property must meet one or more of the following criteria:
   1. retention will result in material financial benefit, such as where targeted value uplift strategies would result in a better financial outcome for the Commonwealth than divestment
   2. the function which the property supports could not be performed elsewhere at a lower cost without impacting negatively on service delivery
   3. the land is of low value with limited alternative use and/or high disposal costs due to its characteristics, such as contamination
   4. the protection of land values (such as for national parks) would make it unsuitable for divestment.

Property Disposal Clearing House

10. The CPMF requires NCEs to provide notification to other Commonwealth entities of surplus property suitable for disposal through the Clearing House.
11. The Clearing House Mechanism is managed by the Department of Finance (Finance) and provides a framework for entities to identify surplus Commonwealth properties and determine if other Commonwealth entities have an alternative efficient government use for the property.
12. The Clearing House Mechanism does not apply to:
    1. properties with no marketable value (e.g. minor parcels of land resulting from subdivision of land or post-road infrastructure upgrades); or
    2. properties with previous owner rights under the Lands Acquisition Act 1989 or through contractual terms.
13. Requests to join the Clearing House should be sent to divestments@finance.gov.au. 

Disposal of Commonwealth property

14. Property that is considered suitable for disposal should be progressed for divestment at the earliest reasonable opportunity. In determining whether a property is suitable for disposal, entities should take into account relevant considerations in respect of native title claims and agreement-making (including if land may be of possible use in a native title settlement), and Indigenous, environmental, heritage and contamination matters. Entities should seek specialist advice where appropriate.
    1. For assistance with native title issues, entities should contact the Attorney-General’s Department via native.title@ag.gov.au. 
    2. For assistance with other Indigenous matters, entities should contact the National Indigenous Australians Agency via EnvironmentPolicy@niaa.gov.au.
    3. For assistance with environmental, heritage and contamination matters, entities should contact the Department of Climate Change, Energy, the Environment and Water via epbc.referrals@dcceew.gov.au.

Alternative use proposals

15. Alternative use proposals apply only to property managed by an NCE. External parties such as other levels of government and members of the public can propose alternative uses for Commonwealth property.
16. The process is administered by Finance, however, the decision as to whether a property is surplus is the responsibility of the entity which owns the property.
17. The NCE which manages the property will consider:
    1. whether the property is essential for government service delivery outcomes
    2. feasibility and value for money of the proposal to the Commonwealth
    3. benefits to the economy, community and/or environment from the proposed use
    4. alignment of the proposal with government policy
    5. other relevant factors, including possible consequences of the nature and content of the proposal, such as special community interest, or probable heritage or environmental significance.
18. Any disposals of property as a result of an alternative use proposal must be consistent with the requirements of the CPDP.
19. Further guidance on the process for managing alternative use proposals can be found on the Finance website.

Affordable housing outcomes

20. The sale of land suitable for housing should include affordable housing initiatives, such as inclusionary zoning, where practical. Entities should work with state, territory and local governments to encourage planning measures that will promote an appropriate proportion of affordable housing at sites where residential development is feasible.
    1. Entities should also have regard to state, territory and local government planning legislation, instruments and associated housing strategies for information on affordable housing action at other levels of government.
21. The structure and conditions of all disposals of land suitable for housing are subject to the approval of the Finance Minister, and will be informed by Whole-of-Australian-Government (WoAG) considerations.
22. ‘Affordable housing’ refers to housing that is suitable for purchase or rent by very low to moderate income households¹. Housing can be considered affordable where households are able to meet their basic living costs and housing expenses without being considered in ‘housing stress’ (a household is defined as being in ‘housing stress’ when it pays more than 30% of its gross income in housing costs and its income is amongst the lowest 40% of all households²)³.
23. For further assistance regarding Commonwealth affordable housing policies, entities should contact the Department of Social Services via HousingPolicy@dss.gov.au.

Off-market sales

Overview

24. Off-market sales are those made direct to a purchaser, usually at market value, without the property having first been offered for sale on the open market.
25. Concessional sales are off-market sales concluded at a purchase price below market value (paragraphs 28-29 refer).
26. Proposals for off-market sales, including concessional sales, require the approval (with limited exceptions) of the Finance Minister and relevant portfolio Minister, and should be referred to Finance for discussion in the first instance (paragraph 30 refers). 

Off-market sales

27. An off-market sale, negotiated at market value, may be appropriate where:
    1. Former owner: if there is a former owner, as defined under section 121 of the LAA, the owner is to be given the right of first refusal at full market value
    2. Legal obligation: there is a legal obligation to sell to a specific individual or organisation, for example, as provided in a contract
    3. Government-to-government transactions: if the sale is to a state, territory or local government and would:
       • protect other Commonwealth property interests; or
       • facilitate Commonwealth or cooperative policy initiatives that could not otherwise be achieved through an open market sale; or
       • optimise broader government outcomes including economic or social outcomes, such as increasing housing supply.
    4. Transactions to CCEs: sale of a property to a corporate Commonwealth entity is in the Commonwealth’s interests.
    5. Properties under a long-term tenancy as a principal place of residence: where a residential property has been continually leased to the same individual as their principal place of residence for a long-term period. Entities may dispose of the property to the tenant at a fair market value as certified by an independent valuer.
    6. No market for the property: in limited circumstances, where the land has been assessed by an expert as having no competitive market, it may be sold to a private individual or organisation at fair market value as certified by an independent valuer.
       • Generally, a property will only be considered as having no competitive market where it is landlocked, located in a rural/remote area and/or unable to be sold on the open market due to its physical features.

Concessional sales

28. Concessional sales are off-market sales concluded at a purchase price below market value. Concessional sales may be appropriate in some circumstances, such as to another level of government where it facilitates or optimises broader government outcomes. Refer to paragraph 30 for details associated with approvals.
29. Concessional sale contracts should include security of purpose conditions that secure the future land purpose as the basis of seeking approval of a concessional sale. The inclusion of security of purpose conditions may be a requirement of the Finance Minister’s approval for a concessional sale.
    1. Standard contract clauses which impose the security of purpose conditions and provide sanctions for the breaching these conditions are available from Finance upon request.
    2. Entities must consult Finance before making, or agreeing in-principle with the purchaser, any change to the terms of the security of purpose conditions.

Approvals

30. Except for the limited instances where an off-market sale can be approved under delegation by the Department of Finance (for example, disposals under a legal obligation or for minor transport and other infrastructure), all off-market sales must be referred to the Finance Minister for approval.
    1. Commonwealth entities must not enter into any sale negotiations with potential purchasers, or discussions that might give rise to commercial obligations, before the Finance Minister’s approval for an off-market sale (whether on concessional terms or not) has been obtained. In some circumstances, it may be appropriate to seek in-principle approval from the Finance Minister for a proposed disposal to allow negotiations between parties to commence.
    2. In the first instance, any proposal for an off-market disposal of Commonwealth property should be referred to Finance (via LAA@finance.gov.au) for discussion, and to the relevant portfolio Minister for consideration.

Land swaps

31. Land swaps are where an off-market sale and acquisition occur simultaneously between the Commonwealth and a state, territory or local government.
32. Land swaps support shared government policy outcomes or policy objectives and may involve swapping a higher value property for a lower value property due to the strategic significance of the lower value property in Commonwealth policy outcomes.
33. Land swaps should have the support of both the relevant portfolio Minister and Finance Minister before commencing sales negotiations with potential purchasers. In some circumstances, it may be appropriate to seek in-principle approval from the Finance Minister for a proposed disposal to allow negotiations between parties to commence.
34. In the first instance, where a land swap is being considered, entities should contact Finance via LAA@finance.gov.au to discuss as soon as practicable. 

Further information

35.  For further information or questions on the CPDP, please refer to ‘A Guide to Commonwealth Property Disposals’ in the related resources section or contact Finance via LAA@finance.gov.au.