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by B. L. Ariyatillake

Land is a scarce resource and a factor of production. For any physical development to take place there should be land as the priority requirement. There are many proposed infrastructure development in the pipeline now in Sri Lanka. These include the three expressways, electricity schemes in addition to the many road widening that are taking place with the ever increasing infrastructure development and public undertakings. As a result the subject of Land acquisition by the State has become important.

By land acquisition we mean the legal and administrative procedure for the acquisition of lands in private ownership by the state for the sole purpose of community use under the Land Acquisition Act of 1950.

There are other forms of expropriation of lands by the state. For example vesting under the Land Reform Law and the ceiling on Housing Property Law. The scope, procedure and mode of compensation laid down in these Acts are quite different to the provisions found in the Land Acquisition Act. Basis of assessment of compensation vary vastly from Act to Act. The general public is confused. There should be a uniform basis for all expropriation, vesting, acquisition or compulsory purchase of land by the state.

This uniformity should be especially so in the mode of assessment of compensation. The need today is a complete overall of the entire Land Acquisition Act to meet the present day requirements and the need to acquire private lands. Comprehensive and robust reforms are required.

Component

Land is the main component of immovable property. The legal and technical definition of land include buildings and other structures and machinery permanently standing on the land as well. Therefore acquisition of land includes buildings, but does not include movables.

Land acquisition is a necessary social evil. State has no option but to acquire private lands for purposes of road widening, schools, hospitals and the like. Apart from these there are massive schemes for re-settlement, irrigation works, hydro projects and other schemes. These are community needs and purchasing land in the open Market cannot be envisaged. The needs of the community outweigh the needs of the private land owner. Hence compulsory Acquisition of Land by the State.

The history of land acquisition legislature in Sri Lanka dates back to 1876. The enactment was the Land Acquisition Ordinance of 1876. This Ordinance was later replaced by the Land Acquisition Act No. 5 of 1950. This Act remains even upto today the main piece of legislature on Land Acquisition by the State.

Interference

Of course several amendments have been done since 1950. But those are all minor amendments done from time to time meet financial difficulties of the State. The present Land Acquisition Act, as is the case in many Acts in this country is modelled on parallel Acts of UK the term used in UK Acts for acquisition is compulsory purchase. Sri Lanka Act is more than 50 years old and no comprehensive revision of the principles and practice have taken place since then.

Land Acquisition is an interference with the individual's right to private ownership. The right to private ownership of land is inherent in our Constitution. In the draft National Land Use Policy it is stated" the State will encourage private ownership of land". Therefore when private land is appropriated by the state out of need, it should be done with the minimum infringement of the private individual's rights and with due respect to the owner. The state and its servants should not take non-compromising attitudes in dealing with land owners. In many instances acquiring officers could discuss tactfully matters with the land owners at the very start.

There are three broad steps in land acquisition procedure.

1. Selection of site

2. Determination of title

3. Assessment of compensation and payment

There is another aspect which is increasingly becoming complicated and important these days. It is the problem of re-settling and rehousing of those affected by the acquisition. This is not even touched by the present Land Acquisition Act. In a sense the present Land Acquisition Act is ferocious in that the State can take over lands overnight, throw out the occupants to the road and pay compensation later, ignoring the human aspect of the acquisition. Any reforms to the Act should deal with re-settlement of those affected by the Acquisition.

Solution

A possible solution is compensation based on "reasonable reinstatement cost" where deemed necessary. At the moment religious places are valued on this basis. However such a method should be adopted only in cases where there is genuine interest by the claimants to get themselves re-located and re-settled in similar surroundings and in equivalent dwellings.

Land Acquisition for public purposes is a need and a must. There is no other alternative. The only possible option is purchase by negotiation and agreement. But in a country like Sri Lanka, where the people are much attached to their lands sentimentally and where many do not consider land as a commercial commodity this is not practicable. However the agony of land acquisition could much be reduced if the authorities could act wisely and with due regard to the sufferings of those affected.

Selection of the site may sometimes be flexible but very often it is rigid. In instances of road widening, new roads and expressways where feasibility studies have been done, there is no alternative but to acquire the required lands. But in other instances like acquisitions for cemeteries, new housing schemes, village expansions, factories etc, there is some sort of flexibility in selecting the site. In these cases authorities should adhere to the principles of least disturbances to people going to be affected, minimum compensation liability to state, damage to balance land owners, existing productivity of the lands etc. Also availability of state land for the purpose should be explored. There should not be a case of going for the lands owned by a particular individual.

Land acquisition is a quasi-judicial process. It involves both administrative and judicial functions. The present Land Acquisition Act is coherent and rational. Summary of the proceedings required to be taken under the Act, when a land acquired is as follows:

(1) The Minister decides a land is required for a public purpose. Acquiring Officer who is the Government Agent or the Divisional Secretary of the area publishes a notice to this effect.

(2) Investigations are made as to the suitability of the land.

(3) Minister makes a decision and all owners are informed. The grama sevaka provides the names of the owners as far as he is aware.

(4) Owners have a right to make objections to the acquisition.

(5) After inquiry and in case the Minister decides to proceed with the Acquisition, a declaration is made in the Gazette.

(6) Surveyor General prepares the plan for the land to be taken. (7) Notice is published calling upon the owners to substantiate their ownership and to submit claims for compensation before a specified date. (8) Acquiring Officer holds an inquiry into title and claims. (9) Acquiring Officer's decision on ownership. If there is a dispute as to title he refers the matter to District Court.

(10) The Acquiring Officer makes his award of compensation.

(11) An aggrieved claimant, as to the quantum of compensation, can appeal to the Land Acquisition Board of Review within three weeks.

(12) A further appeal is possible to Court of Appeal on matters of law.

(13) The land is normally taken over by the state only after these proceedings are completed.

(14) However, there is provision in law for the state to take possession of land after the initial notices. This can only be done on grounds of urgency.

This process could be completed within six months if officers act expeditiously and efficiently. During the past many officers have sat to evolve modalities for expediting acquisitions. But without success.

Serious

Inordinate delay and official lethargy in finalising land acquisition proceedings is one of the main grouses of those affected by acquisitions. This is a very serious matter. Sometimes it takes more than ten years for a claimant to get his compensation. If compensation is to be meaningful it should be adequate and prompt.

Theoretically the present Act is not deficient in this respect. The fault lies with the officers who administer the Act. In all departments bureaucratic lethargy is the order of the day. Acquiring officers are no exception to this. When one considers the matters involved in an acquisition, there are no short cuts. With the existing complicated land title and tenure system, required compulsory statutory notice periods, sky high claims by claimants, problems of tenants and statutory tenancies, the process cannot be completed in less than six months at the earliest.

A payment of advance compensation to owners has been suggested in some quarters. Even this is not possible because it involves the statutory determination of title and the quantum of compensation. A payment to a wrong person or an overpayment will result in surcharges on the officers responsible. Compensation should be adequate and prompt. This should be the main guiding factor and the concern of the state who acquires the land and the officers who operate the Act.

Adequate does not mean an over payment of compensation. It should be sufficient to put the person who has been depossessed of his land, value wise in the same economic position as he was earlier or in other words paid the monetary equivalent of the lands taken.

Therefore the only fair and reasonable basis for compensation that one could think of is market value. Quite rightly the basis of compensation in the present Act is "Open Market Value" of the land acquired. Market value has been defined in the Act to be the amount which the land might be expected to have realised if sold by a willing seller in the open market as a separate entity on the date of publication of Section 7 in respect of that

Acquisition.

However, let us examine how the principle of market value has been eroded by the very definition of market value and subsequent provisions in the same Act. The definition states "if sold in the market as a separate entity".

This dilution of market value is sometimes referred to as 'entity principle'. Authorities select what they want in the shape and size they want and not in the way the owners want them to acquire their lands. It is seldom that an owner's whole land is taken.

Acquisition for road widening and new roads are many. For road widenings and new roads what are wanted and acquired are invariably strips of lands causing much damage to buildings. New roads causes severance to lands of owners.

When assessment of these strips and odd shaped lots are done by state officers, the entity principle is applied to the detriment of the land owners. The arguments is that these strips and odd shaped lots will have a highly depressed value in the open market.

Definition

State officers are not to be blamed for such low assessments as no one can expect them not to adhere to the law. Acquisitions for road widenings are many. The present definition of market value causes much injustice to land owners whose lands are required for road widening.

The definition states the value date should be the date of publication of notice under Section 7 of the Land Acquisition Act. Section 7 is the public notice calling claims to title and compensation. The owner is deprived of his land as at the date of Section 38 which is the date of vesting the land in the State. These two dates may vary widely.

It is logical and realistic to have the date of valuation as the date on which the owner is deprived of the possession of the land namely the date of Section 38 notice. Any reforms to the law should take into account this need.

The definition of market value in the Land Acquisition Act cannot cope with the many strips of lands required to be acquired for road expansions. The definition of market value should be amended to take into account "that where the corpus acquired becomes unmarketable or lessens the marketability, it should be valued in relation to a regular site at that location".

It is relevant to mention here the textbook case on entity principle namely the Vajira Road Acquisition 1946 where a long strip acquired for widening Vajira Road was given a nominal valuation of Rs. 5. This case went upto the Privy Council. The Privy Council upheld this value. In cases where people are affected very adversely, a possible solution is compensation based on "reasonable reinstallment cost where deemed necessary".

At the moment religious places are valued on this basis. However such methods should be adopted only in cases where there is genuine interest by the claimants to get themselves re-located and re-settled in similar surroundings and in equivalent dwellings. This definition of market value is more or less the same found in many Land Acquisition Acts in countries of the Commonwealth. Also many courts here and abroad have elaborated on this definition as to how this market value has to be estimated.

There are no road widenings without damaging buildings. In Sri Lanka the type of development that has taken place over the years along roads is ribbon. People have built on both sides of the road. As a result when a road is widened there is heavy damage to buildings on either side.

When buildings are partially damaged the owner is compelled to demolish the remaining parts as well and rebuild anew if he owns balance land. How much is paid to compensate this damage? The Act says the quantum should not exceed twenty per cent of the market value of the portion acquired. This assessment is in no way realistic. It creates anomalous assessments.

Claimants do not understand the legal jargon or are concerned with the niceties of the law especially when they have to pay for it. Government officers get the blame for iniquitous assessments. Since nowadays many acquisitions are for road widenings the law should be changed for owners to get compensated for the actual damage caused.

There is no way other than assessing the actual damage caused to their properties. In some instances what is damaged are old front sections of buildings and dilapidated parapet walls and not new constructions. The assessment could be done with a depreciating factor according to age, physical condition and obsolence of the damaged buildings. An assessment based on the market value of something else and limited to a percentage of that will not solve this problem. State officers do not consider the adequacy of compensation. They stick to the letter of the law.

When roads are widened and developed there is always betterment. By betterment we mean the increase in land values due to such infrastructure at state expense. This is a totally unearned capital gain by land owners. There is provision in the present Land Acquisition Act to recoup this betterment from those who gain and whose lands have been acquired.

A deduction is made upto a limit of twenty per cent of the market value of the portion ac-quired. This is fair and reasonable as they benefit from the road widening. However as ag-ainst there is the argument that land owners whose lands are not acquired too benefit from the road widening and there is no recoupment from them.

In the series of acquisition for a road widening many business premises too are affected. Sometimes business owners have to close down their businesses or else shift them to new premises. The Act provides them relief in this connection by adding a sum not exceeding three times the average net profits earned by them as shown by their books of accounts. However this is claimable only by owners who have carried a business of their own in the premises acquired. This relief is not a complete solution. Most business are carried on rented out premises. Neither the owners nor the tenants of rented out premises are entitled to compensation under "loss of business".

Business

Even in the case of owner occupied business, the businessman will invariably be a small trader who does not keep 'books of accounts'. He fails to get any relief. Where large business are involved the appraisal of the quantum of 'loss of business' becomes difficult as the Act refers only to business carried on "the premises acquired". In the circumstances very few get qualified to claim compensation under this proviso.

When premises coming within the purview of Rent Laws are acquired, the evaluation of compensation pose many problems. Tenants who occupy premises on monthly rents have no legal interest in the premises they occupy. For a tenant to have a legal interest, the tenancy should be a leasehold one where the lessee has the right to occupy the premises for a specified period. Rent control tenants are monthly tenants enjoying statutory tenancy protection.

They have no legal interest in the property they occupy. The Land Acquisition Act specifically excludes them as 'persons interested'. When such premises are acquired under the present law the tenants have no claim to any compensation. But they lose their premises and suffer the same way as owners. When such premises are appraised for compensation the owner-claimants get depressed assessments for the reason that rent control premises in the Open Market fetch very low prices as compared to owner occupied premises where vacant possession is available to a purchaser.

Gap

When two similar adjoining premises, one owner occupied and the other rent controlled, are acquired, there is a vast gap between the two assessments. In order to avoid this prima facie discrimination and to alleviate the problem of the tenant, it is desirable to make the tenant an interested party, value the premises on the basis of vacant possession on the assumption that both tenant and owner join to give vacant possession to the state. The compensation so assessed could be apportioned in an equitable manner between the owner and tenant. It was mentioned earlier that if compensation is to be meaningful, payment should be prompt.

Claimants

The present law makes provision for forthwith payment to certain categories of claimants. All claimants should be treated alike. Provisions should be made to tender compensation with the awards of the Acquiring Officers. Excuses such as non receipt of monies from institutions for whom the land is acquired are not acceptable. Acquiring officers should see that money is available for payment when they start acquisition proceedings. Payment of interest in lieu of delayed payment is no solution to this. The subject of Land Acquisition comes with the purview of the Ministry of Lands. It is urgent and desirable that the new Minister takes immediate steps to revise the law and make Land Acquisition painless to land owners and equitable and fair both to subject and the state.

(The writer is a former Chief Valuer and a past President of the Institute of Valuers of Sri Lanka)

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