University ofQueensland Law Journal Vol. 10, No.1 29

Betterment For Worsenment: The English 1909 Act andIts Progeny

Donald G. Hagman*

A. Introduction and History

In 1909 the English adopted the Housing, Town Planning, etc. Act 1909.1

It contained a provision for recapturing increases (betterment) in land valuedue to adoption of a planning scheme and for paying compensation fordecreases (worsenment) in land value due to the scheme. It is the closesthistoric parallel to the basic notion of this project that windfalls (betterment)should be recaptured so as to permit compensation for wipeouts (worsenment).Both concepts were subsequently adopted in planning legislation in Australia,Canada and New Zealand.

The 1909 Act is an intellectual relative of an obscure2 American practice,zoning by special assessment financed eminent domain, discussed in Chapter23, and of transferable development rights, a newly invented techniquedescribed in Chapter 24. All three are both windfall recapture and wipeoutmitigation techniques.

This chapter discusses betterment recapture first and worsenment mitigationsecond, with observations drawn after each discussion and observations of bothat the end.

* Professor of Law, UCLA Law School, U.S.A.Author's note: This article is one of a series to be published in book form by the AmericanSociety of Planning Officials. The book, Windfalls for Wipeouts? Land Value Gains andLosses from Planning and a Catalog of Methods for Redistributing Them, is the mostextensive examination of the problem of windfalls (betterment) and wipeouts (worsenment)ever conducted, as it examines the matter in depth in Australia, Canada, England, NewZealand and the United States. The book covers windfalls and wipeouts from all publicactivities, not those just stemming from planning controls. The project was financed by theOffice of the Assistant Secretary for Policy Development and Research, United StatesDepartment of Housing and Urban Development, as a Comprehensive Research andDemonstration Project under Section 701 (b) of the Housing Act of 1954, as amended. Theviews expressed in this article are those of the author, views with which the Departmentneither necessarily agrees nor disagrees.

This article, which traces the history of a compensation and betterment scheme basedon English town planning legislation passed in 1909 and exported to Australia, Canada andNew Zealand is one of three mechanisms described in the book which address concurrentlyboth mitigation of wipeouts and recapture of windfalls. Nine other chapters of the bookeach deal with a windfall recapture device and four other chapters each deal with a wipeoutmitigation device. Three chapters deal with the economics of windfall recapture and wipeoutmitigation, three with theory and rationale and one with model windfall recapture, wipeoutmitigation schemes.

1. 9 Edw. 7, c. 44.2. Compare D. Hefferon, The British Land Commission and the Betterment Levy, at 2.2.7

(undated, mimeo., 1973):"The [English] Planning Act of 1909 was enacted approximately at the same time as

the first zoning by-law in New York City, and immediately prior to the enactment of enablinglegislation and zoning by-laws in a number of major urban centres in the United States.By contrast, in the United States, the compensation-betterment problem which wasparamount to the mind of the draftsman of the British statute, was ignored. Losses andincrements both were left to be where they fell by the enactment of a zoning by-law."

30

B. Betterment Recapture

D.G.HAGMAN

1. Early History

The history of the concept of recapture of betterment is partially containedin the chapters on land gains and on special assessments.3 The concepts ofland gains, land betterment and land as receiving a benefit specially assessablecannot be precisely distinguished now, let alone in the early days. Thus, whileUthwatt4 identified a 16625 law as the first recapture of betterment statute,Haar is skeptical that the 1662 Act's recapture provisions were that broad:

The Uthwatt Committee was able (by broad construction, it must be admitted) totrace the attempt [to recapture betterment] back as early as 1662.6

It was until 18957 that an Act clearly sought to recapture increases in landvalues, distinguishing it from the typical special assessment which seeks torecapture the cost of a project up to the benefits received. But the 1895 Actwas only used to recapture increases from a particular public project:

Betterment, on the other hand, might be defined in its technical sense, to meanany increase in the value of land (including the buildings thereon) arising fromcentral [national or state] or local government action, whether positive, e.g., by theexecution of public works or improvements, or negative, e.g., by the imposition ofrestrictions on other land.The term is not, however, generally understood to include enhancement in the valueof property arising from general community influences, such as the growth of urbanpopulations.8

2. 1909 Act and its Evolution in England

The bill which ultimately became the 1909 Act originally provided forrecapture of the entire increase in value caused by a planning scheme withpayment due when the scheme was adopted. A town planning scheme wasexpected to have a very powerful influence over development indeed. Translatedinto American-English, it was both a master plan and its implementationdevices-zoning control (including provisions for termination of nonconforminguses), subdivision control, designation of lands for public facilities and forgovernmental purchase.9

There were objections to 100 percent recapture. The argument was asfollows. Previous betterment recaptured flowed from a particular governmentproject. Betterment under a planning scheme may result from future indicatedgovernment expenditure, but it also results from non-governmental, marketreactions to the scheme. Rather than limit recapture to increases in land valuecaused by government expenditure, and purely as a compromise, the increaserecaptured was limited to 50 percent.

The betterment recapture provision was brief:

Where, by the making of any town planning scheme, any property is increased in

3. Chapters 21 and 13 respectively.4. Expert Committee on Compensation and Betterment, Final Report 107, Cmd. 6386 (1942),

hereinafter cited as Uthwatt.5. Act 13 & 14 Chas. II, c. 2.6. C. Haar, Land Planning in a Free Society, 95-96, (1952).7. London County Council (Tower Bridge Southern Approach) Act, 1895.8. Uthwatt, 105.9. See the 1909 Act particularly ss.54( 1), (2), 57( 1), 60( 1), Sch. 4.

Betterment for Worsenment 31

value, the responsible authority, if they make a claim for the purpose within thetime (if any) limited by the scheme (not being less than three months after thedate when notice of the approval of the scheme is first published in the mannerprescribed by regulations made by the Local Government Board), shall be entitledto recover from any person whose property is so increased in value one-half of theamount of that increase. 1O

The Town Planning Act 1925 consolidated previous town planning legislationbut made no significant changes in the betterment recapture provision. II

The betterment provisions were amended in 1932.12 On the coming intooperation (i.e. taking effect) of any provision contained in a scheme or theexecution of work under a scheme, the local authority could claim bettermentup to 75 percent of the increase within 12 months of the operation or execution.This was a compromise, some arguing for 100 percent recapture on theoreticalgrounds, others objecting that would destroy all incentive. Objections to anincrease from 50 percent were answered by observations that assessors wouldlikely underassess betterment in any event. Except where the landowner wasrequesting payment for worsenment, the claim for betterment could be deferredby the landowner until property was transferred, at which time payment wasdue with interest. The local authority could make a new claim for bettermentupon a disposition or change of use of property within 14 years. After 14years a statute of limitations came into effect, and betterment could no longerbe claimed.

During the 14 year period, a change of agricultural use to anotheragricultural use or a change in utility use would not result in a claim forpayment of betterment, but a disposition of those types of property would.Sums previously paid, donations of property to public use, or the provisionof works by the landowner were offsettable from the claim. Betterment couldbe paid on instalments, for up to thirty years, with interest. Disposition wasdefined to include leases of three or more years. Minor changes in use didnot constitute an event on which betterment could be claimed.

Betterment recapture of the kind provided under English law from 1909was eliminated from English law as of July 1, 1948. 13

3. Australia

The states of Queensland and South Australia do not have 1909 Act-basedlegislation for recapturing betterment:4 New South Wales, Tasmania, Victoriaand Western Australia do have such provisions. The New South Waleslegislation is of greatest interest because New South Wales is the most populousstate, the legislation on betterment is detailed, and it was not adopted until1945,15 well after the English had concluded that the 1909 type scheme forbetterment recapture was not workable.

10. The statute also provided:(4) Any question as to whether any property is ... increased in value ... shall bedetermined by ... arbitration ... unless the parties agree on some other method ofdetermination.

Actually, because of another statute, more than the 50 percent of increase in land valueswas recaptured. Under the Finance (1909-10) Act, 1910 (see chapter 21) 20 percent ofany increase was to be recovered for the national government. The 50 percent bettermentlevy went to the local planning authority.

11. 15 Geo. 5, c. 16, s.10(3).12. Town and Country Planning Act 1932, s.21.13. Town and Country Planning Act 1947, s.113(2).14. A. Fogg, Australian Town Planning Law, 514, (1974), hereinafter Fogg.15. Act No. 21, 1945, s.3(b).

32 D.G.HAGMAN

a. New South Wales

Comprehensive town planning came to New South Wales in 1945 with theinsertion of a new Part XII A in the Local Government Act concerning townplanning schemes. It drew heavily upon the 1932 English planning act, theUthwatt Report and the New Zealand Planning ACt. 16 A government explana­tion of the day opined that land values increase for two reasons. First, increasescan occur on a change in the use of the land, which change might be causedby government:

[U]nder Town and Regional Planning measures, the land upon which such changestakes place will be determined by public policy which may often not coincide withthe individual desires of owners. Thus, it may be necessary to restrict furtherdevelopment around some of the large towns by providing for a "green belt" andpreserving the land for pastoral or agricultural use. In consequence, developmentmay take place beyond the "green belt" and new townships and villages may beestablished in areas previously considered rural. 17

Second, a planning scheme may cause increases in land values even wherethe use is unchanged:

For instance, when an existing town grows (and its growth may be due to publicplanning policy) the value of existing shop sites may increase enormously.18

The government explanation continues by arguing that the greater part of"these" increases in value should accrue to the public purse. It provides tworeasons. The first is that "it is intended that fair compensation shall be paid... to persons whose estates or interest in the land have been injuriouslyaffected by restrictions placed on the use of the land." But "unless the valueof that compensation is collected whenever it reappears upon the release ofthe land from the restriction, it will accrue to persons to whom it does notrightfully belong."19 The second reason for recapture is that "it would clearlybe inequitable as between owners of land if some were substantially preventedfrom making an undue profit out of their land and others, merely becausetheir land had been selected as the most appropriate for development, wereenabled to recapture benefit."20

The levy rate in New South Wales was 80 percent of the increase. The20 percent margin was left for three reasons.21 First, an incentive todevelopment by private owners remained. The government hoped thereby toavoid having to condemn land and publicly market it for development purposesthemselves. Second, the government believed the margin would serve as a set­off against that portion of enhanced value collected by the land tax.22 Third,the government thought it would provide a margin to protect against valuationerrors.

The explanation concludes with an example of how the betterment provisionswere supposed to work:

16. Cabinet Minutes, Nov. 13, 1944, in Town and Country Planning Act, Amendment Act,1945, New South Wales (1945) (Volume kept on file by the Department of LocalGovernment, Sydney, New South Wales). Hereafter cited as Cabinet minutes.

17. Cabinet minutes, at 43.18. Id., at 44.19. Ibid.20. Ibid.21. Id., at 44-45.22. See Chapter 18 for a discussion of the land tax.

Betterment for Worsenment 33

Thus an owner of rural land given a permit to use his land for housing would pay80% of the difference between its housing value and its former value. An ownerallowed to redevelop a housing site for shops would pay 80% of the differencebetween its shop-site value and its housing-site value. A shop owner the value ofwhose shop site were increased as the result of development of the locality providedfor by a planning scheme would pay 80% of the difference between the increasedvalue of the shop-site and its former value.23

In Parliament, Mr. Cahill, Minister of Local Government argued in favorof the betterment tax "because it is contended that the increase in the valueof the land has been brought about by the actions of the representative ofthe community in replanning the area."24Mr. Cahill was asked how the taxable increase in value would be determined.His clarifying remark was not precise:

Land which today is worth a £ a foot in three or four years time because of buildinghaving taken place in the locality, may have considerably increased in value. TheDepartment [of the Valuer General] will follow precisely the same procedure thatis adopted today. . . 25

The proposal became the town and country planning amending legislation of1945, which was incorporated into the Local Government Act, 1919.26

Several features of the statute are noteworthy. A planning scheme (muchlike an English 1909-1932 Act town planning scheme) did not have to containbetterment recapture provisions-the matter was optional. The betterment wasthat flowing from the time of the coming into operation of any provision ofthe scheme, but there was a five year statute of limitations for recapturingbetterment from the time the scheme came into operation. The scheme couldcome into operation prior to the time one of its provisions came into operation. 27

If a development permission was given under the scheme or any public workswere completed under the scheme, betterment flowing from such acts couldalso be recaptured, but a twelve month statute of limitations applied. TheValuer-General (property tax assessor) did the determination of the increasesin value. The machinery for appeals in property tax valuation cases was utilizedfor review of the betterment recapture. If betterment was offset againstcompensation required for worsenment, it could not be recaptured again. Therecapture could be up to 80 percent and the betterment could be paid overa period of years and collected through the property tax system.

The first planning scheme prepared under the 1945 Act pursuant to theLocal Government (Amendment) Act, 1951,28 did not contain provisions forbetterment recapture,29 except by way of set-off from claims for injurious

23. Cabinet minutes, at 45.24. Parliamentary Debates, Hansard No. 33, 13 February, 1945, at 1775.25. Parliamentary Debates, Hansard No. 32, 13 February 1945, at 1720-21. It was apparently

anticipated that betterment might not fund compensation:It is possible that the proceeds of the betterment charge will meet the cost ofcompensation, but that will take time to work itself out. It is proposed, therefore, thatlocal authorities shall meet the costs of the land acquisition and compensation by raisingloans repayable over a period of years ...Parliamentary Debates, Hansard No. 33, 13 February, 1945, at 1771-72.

26. s.342 AF.27. A plan comes into operation when a state minister approves it and gives notice thereof.

Local Government Act, 1919, as amended, s.342K(2).28. This Act adopted a planning scheme for the County of Cumberland, the Sydney metropolitan

area.29. R. Collier, Compensation and the Cumberland Plan, 26, (1952).

34 D.G.HAGMAN

affection (worsenment). A possible reason was that the State and theCommonwealth were expected to share the cost of implementing the plan.When that did not happen, the scope of the plan was cut back.30 Only £200,000was budgeted to pay claims for injurious affection (worsenment).31 If thepurpose of recapture was to fund compensation, such modest expectations ofneed hardly made recapture worthwhile.

b. Tasmania

Tasmania has a detailed betterment recapture statute.32 It provides theopportunity for recapturing betterment when land value is increased by thesealing of, the operation of any provision of, or the carrying out of any workunder, a planning scheme. Notice of an intent to claim betterment must beprovided within one year and notice of the amount must be given within fiveyears. The betterment recaptured is '~half of so much of the difference betweenthe current value of the land and the initial valuation of it as is attributableto the [sealing, operation, carrying out] ..." The initial valuation is the valueassuming no planning scheme was in existence or contemplated. Because thedefinition of initial value excludes increases caused by contemplated plans, therecapture includes increases in value occurring prior to the coming intooperation of the scheme. Betterment is ordinarily payable in twenty yearinstalments which can be extended in cases of hardship. Provisions includerecapturing from tenants as well as but not from fee owners. Bettermentrecaptured is earmarked to pay claims for compensation.

c. Victoria

The Town and Country Planning Act 1961, State of Victoria, Australia,also provides simply that a planning scheme can contain:

[P]rovisions for ascertaining whether and by what amount (if any) the value ofany land is increased by the planning scheme, the levying of a betterment rate forthe recovery of one-half of such amount 33

d. Western Australia

Western Australia's betterment recapture provision dates back to 1928.34

It is a modest provision allowing recapture of one-half of the increase resultingfrom "the expenditure of money ... in the making and carrying out of anytown planning scheme ..."35 Perhaps the intent is that recapture is possibleonly for increments flowing from public works. The provision thus resemblesa special assessment,36 but with recapture not limited to cost.

30. Town and Country Planning Act, Amendment Act, 1951, New South Wales (1945) (Volumekept on file by the Department of Local Government, Sydney, New South Wales.) in CabinetMinutes, November 7, 1949; Minister Cahill's Second Reading Speech, at 6.

31. Infra., at 18.32. Local Government Act, 1962, ss.738-39. "Betterment is currently theoretically capable of

recapture under Sections 738 and 739 of the Tasmanian Local Government Act, 1972. BySchedule I of the new [Tasmania Planning and Development Bill 1974] these sections areto be repealed and apparently nothing is to replace them." Letter Alan Fogg to DonaldHagman, Nov. 8, 1975. The Bill was not enacted into law. It has been replaced by a billof the same name dated 1975. The new bill does not repeal Sections 738 and 739.

33. The Town and Country Planning Act 1961, Victoria No. 6849, Sch. 3( 13).34. Fogg, supra, at 519.35. Town Planning & Development Act, 1928-1972, s.11 (2).36. Compare Chapter 13.

Betterment for Worsenment 35

4. New Zealand

New Zealand provisions for betterment recapture were in Section 30 of theTown Planning Act 1926, New Zealand's first comprehensive planning act.Similar to the Tasmanian provision, the betterment recaptured was earmarkedto provide payment for worsenment. Betterment recapture was eliminated inthe Town and Country Planning Act 1953, now the basic New Zealand Act.

5. Canada

Betterment recapture in Canada dates from 1912 when New Brunswick37

adopted its first comprehensive town planning act. Section 5 (3) provided asfollows:

Where, by the making of any town planning scheme, any property is increased invalue, the responsible authority, if they make a claim for the purpose within thetime (if any) limited by the scheme (not being less than three months after thedate when notice of approval of the scheme is first published in the manner prescribedby regulations made by the Government), shall be entitled to recover from any personwhose property is so increased in value one-half of the amount of that increase.

Alberta followed suit in 1913.38 By 1914, the Canadian Commission ofConservation was five years 01d,39 and it had prepared a draft Town PlanningAct for Canada.

The draft act was the basis for a discussion at the National Conferenceon City Planning held in Toronto in May of 1914. The National Conferencewas primarily an American organization, but it held its sixth annual meetingin Toronto. Several Americans were there including planning law pioneersAlfred Bettman and Frank Williams. Section 1(3) of the draft act40 containedprovisions for betterment recapture, obviously based on the New BrunswickAct, Section 5(3), which was in turn obviously based on the English 1909Act.

At one point in the discussion, Mr. C.H. Mitchell of Toronto asked:

how the local board may best arrive at the increment in land value due to andarising out of any town planning scheme which has been put forward ... I wouldparticularly like, sir.. to hear from any members from the United States who careto give us their views on the possible process by which that increment can be arrivedat, and then having once arrived at it, how best the money can be obtained fromthe people, the owners who are affected-particularly so in the case of owners whoare poor people, who cannot supply the necessary amount which is in the natureof a tax. I would refer particularly to the case of small holders whose land hasincreased in value four, six or even ten times within a few years.41

But the record of the proceedings includes no American response to theinquiry.42 Why anyone would think the Americans had any competency torespond is not clear. Could Mr. Mitchell have known of the Kansas Citybetterment recapture scheme invented in 1893 ?43

37. The Town Planning Act, S.N.B. 1912, c. 19. s.5(3) covered betterment.38. The Town Planning Act, S. Alt. 1913, c. 18. s.5(3) covered betterment.39. Constituted under The Conservation Act, 8-9 Edward VII, Chap. 27, 1909.40. The draft act is reprinted in Commission of Conservation, Canada, Sixth Annual Report

247 (1915), hereafter Annual Report.41. Annual Report at 272.42. No record of an American response is included either in the Report of the Commission

on Conservation or in Proceedings of the Sixth National Conference on City Planning (1914).The proceedings also reproduce the Canadian draft act.

43. See Chapter 23.

36 D.G.HAGMAN

Thereafter, betterment recapture provIsIons were adopted as part of theplanning laws in Nova Scotia,44 Manitoba,45 and Saskatchewan.46 NeitherOntario, Quebec nor British Columbia adopted such legislation.47 In 1975 theManitoba planning act was comprehensively revised. Changed mininlally andkept in the law were provisions for betterment recapture reaching across theocean and back for 66 years.48 But they were recognized as a survivinganachronism and were repealed in 1976 in clean-up legislation.

The Newfoundland act is unique and originated in the Slum Clearance Act,1952, s.29. Amended in 1966, it provides that where "land is developed .. forhousing ... and any land in or adjacent to the area ... is by reason of thedevelopment increased in value the Minister may make an assessment onthe land so increased in value [w] here none of the improvements in respectof which the land was assessed is being used for the benefit of that land, theMinister [may defer payment] ... "50 The statute is likely based on theassumption that if new housing goes in an area that adjoining areas will beincreased in value because infrastructure will be put in which will be availableto the surrounding land.

6. Observations and Lessons Learned

a. Collections and Benefits51

Perhaps the greatest failing of the 1909 Act and progeny was that verylittle betterment was recovered. In England some £1,500 was recovered in onecase; £150 was recaptured in another case for the stopping up of a footpathin 1932; £1,100 was claimed for betterment by reason of construction of anew street under a scheme. That latter case went to court because the landfrom which betterment was claimed was not within the scheme, but the courtheld that not to make any difference.52

In Australia, only four schemes in New South Wales provided for bettermentrecapture and no betterment has ever been recovered.53 No betterment wasever recovered under the Tasmanian Act.54 "No 'betterment' was ever collected

" in New Zealand.55 While Milner indicates there is no record of any

44. The Town Planning Act, S.N.S. 1915, c. 3. Section 13(5) provided for recapture ofbetterment. The Town Planning Act, S.N .S. 1912, c. 6 had provided for compensation forworsenment but not for recovery of betterment.

45. The Town Planning Act, S. Man. 1916, c. 114, s.18(4) provided for betterment recapture.46. The Town Planning and Rural Development Act, S. Sask. 1917, Sess. 2, c. 70. s.20 provided

for betterment recapture.47. D. Hefferon, The British Land Commission and the Betterment Levy, at 1.2.4., (undated,

mimeo, 1973). British Columbia expressly provided that no compensation would be paideither.

48. Manitoba Planning Act, 1975, ss.88(6)-(II).49. S.M. 1976, C. 51, s.35.50. Housing Act, 1966, No. 87, s.24.51. This critique of the English law is based in part on Ministry of Works and Buildings,

Memorandum on Betterment (1942), paragraphs 121, 127, 151-53 prepared for Uthwatt.It was a confidential document not widely available. The critique in Uthwatt is found inparagraphs 289-93.

52. R. v. Webster, ex parte Young (1932) 51 T.L.R. 201. These cases are cited in theMemorandum Par. 149. Compare discussions infra on indirect worsenment. See also Chapters11 and 12 on indirect damage.

53. M. Wilcox, The Law of Land Development in New South Wales, 297, (1967).54. Fogg, supra, at 519.55. K. Robinson, Law of Town and Country Planning, 6, (1968).

Betterment for Worsenment 37

betterment ever having been recovered in Canada under 1909 Act typeprovisions, there was some recapture under the Newfoundland Act.56

There were arguably some indirect "collections" which flowed from theEnglish Act. Some property owners who made claims for worsenment were"persuaded" to withdraw claims when local authorities threatened to collectbetterment. And some property owners who were reluctant to sell propertyto government were intimidated by betterment recapture threats to be more"reasonable". On the whole, however, it must be admitted that bettermentrecapture failed throughout CANZE to yield revenue.

b. Reasons for Failure

One reason for the failure to capture betterment in England was that fewplanning schemes were adopted. In 1942, when Uthwatt reported, the onlystatistics on 1932 Act experience were in the Report for 1937-8 of the Ministryof Health. Only 25 schemes were in operation under the 1932 Act and 16of those had not yet been in operation a year so that the planning authoritytime for filing claims for betterment had not yet expired. 57

Many of the 1909 Act progeny made the right to recapture bettermentoptional, so local governments did not even authorize themselves to collectit. But the bottom line was simply that the need to recapture bettermentresulting from planning did not arouse the public conscience. The public senseof grievance over non-recapture was minimal.

A mistake on the part of the planners may have been responsible for thefailure to recapture betterment. Once betterment was charged for a scheme,it could not be charged again. Therefore, some planners may have waited untilthe full flowering of their planning work of art unfolded so as to maximizethe betterment recapture. Trouble was, the flowering never came.

Landowners resisted betterment recapture. Once a statute of limitations wasimposed on recovering betterment, of course, the landowner had every incentiveto resist-just a bit longer, and then keep the betterment. And according tothe Memorandum prepared for Uthwatt, landowners resisted betterment

56. J. Milner, Community Planning, 105, (1963).The ... [Newfoundland] assessment powers were used but once. The occasion of using

them was in connection with a Federal/Provincial land assembly project in St. John's,undertaken in the early fifties. There were a number of houses existing within the landdeveloped. Many of these houses were unserviced or only partially serviced, and in theunserviced situation were on lots of a size much larger than would be needed once serviceswere installed. The latter owners, if assessments were not made, would have enjoyed a windfallprofit.

When the assessments were made there was a good deal of public controversy ... Theoriginal provision made it necessary to calculate the assessments as if the private ownersenjoyed all the services ... a position which proved to be impossible to sustain as somepeople already had one or more of the improvements ... Because the first assessments weremade under the inflexible formula contained in the earlier Act, and also because there wasno provision for registration in the original legislation, (innocent purchasers had no noticeof the liens created by the assessments) the assessments were in very bad odour.

Ultimately, reductions were made and liens registered following amendment to the Act,but a good deal of damage had been done so that it was very difficult to enforce collections.The larger part of the moneys were paid as lots were sold by private owners, as ownersconnected to services, and as estates were settled ...Letter J. Seymour, Corp. Sec., Newfoundland & Labrador Housing Corp. to M. McCandless,Legal Consultant, Manitoba Dept. of Community Affairs, Mar. 31, 1976.

57. The Memorandum Par. 149 so states. But the mere adoption of the plan was not the pointfrom which the claim period ran.

38 D.G.HAGMAN

recapture when it stemmed from amorphous planning schemes rather than fromspecific projects. And many opposed the betterment levy on the ground thatit was a property tax. 58

Uthwatt concluded that the 1932 Act betterment recapture scheme wasunworkable because of the difficulty of proving the increase in value camefrom a planning scheme and of calculating that increase. Doubts as to whetherthe plan increased value tended to be resolved in favor of the landowner.Further, while the increase in value was calculated from the date the schemeor one of its provisions creating betterment took effect, it was well known thatvalues often rose in anticipation of the scheme. Therefore, much of the valuewas not recapturable because the statute indicated it must be due to the"coming into operation" of a provision in the scheme.

In Australia, the experience with valuation was similar. In New South Wales

[t]he Valuer-General took the view that, although increases in value could be shown,factors other than those referred to ... were operative in leading to that increase,e.g., inflation and the carrying out of public works by statutory authorities apartfrom works under the scheme. He was not able to separate such increases in valueinto their various components. In particular he could not fix the increase in valueattributable to the scheme and so could not comply with the statutory injunction.59

In Victoria, similar problems arose. 60 In New Zealand "the difficulties ofcalculation and collection were such that it was felt wiser to ... " abandonbetterment recapture.61

At least in Australia, and to a degree in New Zealand, the acceptance ofEnglish planning law was tempered by review before adoption. The Canadianprovinces, however, jumped on the bandwagon early, most provinces slavishlyimporting and adopting the English 1909 Act before World War I. The climesin Canada and England, however, were different. The nonuse of the bettermentrecapture provisions is not surprising, for little English planning law took holdin Canada in any operational sense.

58. The Memorandum, however, pointed out the differences. While rates (property taxes) increaseon particular parcels which increase in value, that does not add to governmental fisc. Rather,the burden on other property goes down. Second, the increase in property taxes does notrecapture and is not intended to recapture the increases in value. Property taxes are basedon assessable wealth not on increases in wealth. Thus, if property worth $100 in one yearand subject to a $2 property tax increased to $200 in the next year, the property tax wouldonly increase $2, whereas the betterment would be $100. Finally, property taxes increasewhatever the source of the increase in value. A landowner might build a house on propertyand increase its value subject to a property tax.

59. L. Hort, An Introduction to Land Development Contribution Law and Practice in lVew SouthWales, 2-3 (1972), citing Pullen, "The Betterment Levy", A.P.LJ., April 1968, at 43.

60. Valuation is always a fruitful source of argument even when it is only the establishmentof the market value of a property. Valuation for betterment rating purposes offers manymore possibilities for argument. The valuer who is called upon to make a valuation forbetterment rating purposes is placed in a position of considerable difficulty. What he hasto ascertain is the amount (if any) by which the value of the land has been increased bythe planning scheme. His enquiry, therefore, must not merely be whether the value of theland has in fact increased, but what has caused that increased value. In most cases thatincreased value will have resulted from the combination of a variety of factors. The planningscheme may be expected to be one of these factors; and some of its effects upon valuationwill have been direct, whilst others will have been indirect. To expect the valuer to sift boththe direct and the indirect planning scheme factors from his conglomeration of factors isto expect the impossible. K. Gifford, The Victorian Town Planning Handbook, 327, (4thed. 1973).

6). Robinson, supra, note 55, at 6.

Betterment for Worsenment 39

c. Suggestions for Improvement

Suggestions for improvement of the betterment levy were made to Uthwatt.They included recommendations that (1) statutory undertakers (public utili­ties) be denied favored treatment, (2) that increases in annual rental valuesrather than capital values be the base for the betterment levy, (3) that localauthorities be able to acquire properties not being utilized by owners who wereattempting to wait out the betterment recapture time period, and (4) that theincrease of value should be measured from the date of decision to preparea plan, not its coming into operation. Others suggested that bettermentrecapture be limited to producing funds sufficient to payoff claims forworsenment from owners within the scheme. Still others suggested thatbetterment be determined on a zoned basis rather than by individualproperties.62

Of course, betterment recapture might be made to work if the public couldbe persuaded that it was desirable. But so far as one can discern, there isno more desire nowadays to recapture betterment than there ever has been,except perhaps as a source of funds for compensation for wipeouts. But atleast the concept might be useful to offset claims for damages. Consider anexample.

In Aaron v. City of Los Angeles,63 landowners recovered for damages totheir properties caused by the presence of noisy jets. They recovered eventhough the presence of the airport might have actually increased the valueof their properties. For example, assume a parcel is worth $10,000. An airportis built in the area and the parcel thereby enjoys betterment resulting in avalue of $20,000. But because the airport becomes a noisy jetport, the valueis depreciated to $18,000. The parcel owner is paid $2,000 by the governmentbecause of the noise even though, but for the airport, the property would stillbe worth $10,000. If betterment was offset against worsenment, the City ofLos Angeles in this case would have saved $2,000. It can hardly be claimedthat it would be unjust to deny the landowner this $2,000 payment forworsenment since he was "given" $8,000 of betterment.

Perhaps the difficulty with the 1909 Act was that betterment recapture wasnot made mandatory. Recapturing increases is no more popular than any kindof tax and local governments, given the option, simply decided not to pursuelevying the tax. There was also the problem of realization. "Realization" meansthat the landowner has a cash flow or the opportunity for a cash flow at thetime the betterment charge is due. Realization minimizes hardship. Sincerealization is seldom actually present even in the case of special assessments,the charge is made a lien on the property and the landowner is given a periodof time to payoff the assessment. The 1909 Act and its progeny used a similartechnique and others, such as permitting deferment until a sale or change ofuse.

Perhaps the reason why such provisions work in the case of specialassessments is tied to the problem of measurement. The special assessmentproceeds on the theory it is recovery of cost, up to the benefit received froma particular public work. The exact amount of benefit received is not alwaysclear, but at least the assessee has a. tangible improvement to contemplate.

62. Uthwatt rejected recommendations for improvement and came up with a different scheme.See Chapter 19.

63. 40 Cal. App. 3d 471, 115 Cal. Rptr. 162 (1974). Compare Chapter lIon CanadianAeronautics Act.

40 D.G.HAGMAN

Further, the special assessment usually does not seek to measure the exactincrease in value which is complicated by the fact that the increase occuresin anticipation of a betterment triggering act. In a special assessment, it isonly necessary to determine whether the benefit received equals or exceedsthe assessment of apportioned cost.

The measurement problem was also complicated by inability to clearly statethat e.g. a rezoning caused the increase. At best it just unleashed othereconomic forces, without which no change in value would take place. Forexample, the rezoning of property in the boondocks from residential tocommercial would likely not change values at all.

The solution to the measurement problems is perhaps to consider thebetterment to include all increases in value other than those due to inflationor to the efforts of the landowner. The adoption of the planning scheme, itsimplementation by regulation, or its implementation by public works, need notbe regarded as a tax triggering event. Rather, the appraiser (or assessor) needmerely observe periodically (e.g. annually) that property increased in value,subtract the portion caused by inflation and by the owner (both of whichmeasurements are difficult enough) and regard the rest of the increase asunearned, recapturing part of it for the community.

The rate of recapture is another issue. All existing 1909 Act and progenymodels used between 50 and 80 percent. If all increases (other than inflationaryor owner caused) were recaptured, the rate might justifiably be less.

Both for purposes of assessment and for purposes of collection, it does seembest to tie increase recapture into the property tax system. The 1909 Act andprogeny models do so, and there is no evidence that such a tie-in is undesirable.Special assessments are now frequently also collected through the propertytax system.

c. Worsenment Mitigation

1. England

a. 1909 Act

. In addition to recapture of betterment, England's 1909 comprehensiveplanning law also dealt with compensation for regulation, providing that "Anyperson whose property is injuriously affected by the making of a town planningscheme shall ... be entitled to obtain compensation in respect thereof fromthe responsible authority."64 Restating the statute in modern American English,the 1909 Act provided that compensation was payable for depreciation inproperty values caused by adoption of a land use control such as zoning bya local government. Compensation was the general rule. Non-liability was theexception.

No compensation was payable for property damaged by a plan where thedamage resulted to something started (e.g. the construction of a building) afterthe local government applied to the national government for permission toprepare a scheme.65 But if expenditure to comply with the scheme was renderedabortive by revocation of a scheme, compensation was payable.66 On the otherhand, if the damage could have resulted from enforcement of a by-law (aregulation under another ordinance, rather than flowing from a planningscheme), no compensation was payable.67

64. s.58( 1).65. s.58(2).66. s.58(6).67. s.59(1).

Betterment for Worsenment 41

If the planning scheme included a provision regarded as "reasonable" tosecure "the amenity of the area" such as "space about buildings or limit thenumber of buildings to be erected, or prescribe the height or character orbuildings," the injurious affection was not compensable. These provisions aresometimes called the good neighbor provisions. A later law made good neighborrestrictions non-compensable regardless of whether for amenity or for otherpurposes.68 Restated in American terms, if a regulation had reasonable yardrequirements or reasonable limits on heights, there was no compensation. The1909 Act also provided that if compensation was payable under some otheract, an owner of injuriously affected property could neither recover twice norcould recovery be for more than permitted under the other act.69

b. Judicial Interpretation

Mr. Ellis owned some property on High Street between a police station,60 feet to the north and a store to the south. The police station was sevenfeet further forward than the store. Shortly after the city council decided toprepare a planning scheme, Ellis contracted with a builder for 16 stores andhouses. Plans showed them located on a building line drawn south from thepolice station. Permission to build them was denied based on various statutes,by-laws and regulations and because the proposed planning scheme showeda building line extending from the front of the store on the south.

The state ultimately approved the planning scheme with the proposedbuilding line shown under a heading "space about buildings including buildinglines," and Ellis claimed full compensation for injurious affection under the1909 Act. In Re Ellis and the Ruislip-Northwood Urban District Council,70the only reported case on the 1909 act type worsenment provisions, the firstjudge concluded that Ellis was entitled to some compensation. The councilargued that since another statute authorized by-laws "with respect to thesufficiency of the space about buildings to secure a free circulation of air, andwith respect to the ventilation of buildings," the building line could have beenimposed under that Act, therefore, no compensation was due. The court heldthe 1875 Act did not authorize such a line and that a building line was nota matter of spaces about buildings.

The judge held, however, that an 1888 Act was a partial defense. That Actprovided that a building could not be built "beyond the front main wall ofthe house or building on either side thereof in the same street." That linebeing west of the planning scheme line as to part of the Ellis property,compensation could not be paid for the injurious affection to that part. Toillustrate:

hne used by1ftr- __E~~ ~~

buoldlngi;;;;;~de8-plannongscheme STORE

'------T-----+----J

Nocompensat,onfor

;~J::~~=n~fectlon

___ bUlld,nghneunderPOLICE plann,ngscheme

STATION

A second judge, noting the planning scheme did not reserve the seven footstrip for proposed street purposes, believed that building lines and set back

68. Housing, Town Planning, etc. Act, 1919, 9 & 10 Geo. 5, c. 35, Sch. 3.69. s.59(3).70. [1920] 1 K.B. 243.

42 D.G.HAGMAN

lines and the like could be imposed for amenity purposes and that theexemption from compensation for space about buildings applied where thatspace was obtained by such lines. A third judge's opinion noted that a goodpart of Ellis' land would not be buildable if conlpliance with the seven footbuilding line was required. The land in places was only 23 feet deep.

The court found that Ellis was entitled to compensation for the injuriousaffection to his land, except in so far as it was caused by the line establisl)edunder the 1888 Act.

The opinion is of interest as a window on early twentieth century attitudestoward compensatory regulation. First, note the remedy was to pay compensa­tion, not to invalidate the regulation. Second, it is interesting to learn thereasons for excluding compensation for good neighbor restrictions. The firstjudge indicated Parliament so provided:

either [because] . . . the advantages resulting to the property from the provisionsof the scheme are considered to equal or outweigh the injury complained of; orpossibly [because] ... a man ought not to be allowed compensation for doing inreference to his property what, apart from compensation, he ought to do voluntarily.

The first reason in American theory is known as the reciprocal benefit theory,namely, each must suffer some for the good of all, of which each is a part.The second appears to be some kind of good manners, amenity, hence goodneighbor reason.

Third, note that since the city had not used the precisely right tool outof its kit of by-laws, 1909 Act or other act powers, it was found liable. Imaginethe impact of the decision on planning scheme-making governments which,previously worried about the risk of liability, now had a case which encouragedadditional scheme-making caution.

Fourth, the case mentions some bargaining that went on so that Ellis wouldnot object to the plan which needed state approval. One can well imaginemany times where an English local authority entirely deleted a provisioncausing injurious affection because the landowner threatened to object to theplanning scheme.

c. The 1925 Act

The 1909 Act provisions on compensation remained virtually unchangedthrough their consolidation in The Town Planning Act, 1925.71 The majorchange (in the Housing, etc. Act, 1923, s.20) was that if an award ofcompensation was made, the local authority had the option of changing theplanning scheme.

d. The 1932 Act

The Town and Country Planning Act, 193272 the basic act until 1947, wasa comprehensive revision of English planning law. Compensation for injuriousaffection was provided for "the coming into operation of any provisioncontained in a scheme, or by the execution of any work under a scheme."The first provision might have restricted liability somewhat. While before, theinjurious affection flowed from the plan itself, it was now the coming intooperation of one of its provisions that triggered compensation. The "execution

71. 15 Geo. 5, c. 16. Sections 10-11 contained the compensation provisions.72. 22 & 23 Geo. 5, c. 48. Sections 18-24 dealt with compensation

Betterment for Worsenment 43

of any work under a scheme" provIsIon, however, may have increased thepossibility of obtaining recovery. Compensation was also made available fordamage to a business resulting from the injurious affection to property occupiedby a business. Compensation was also available if a building of historic orarchitectural interest was injuriously affected by a preservation order madeduring the preparation of a scheme.73 If a scheme was so enforced that propertywhich constitued a preexisting lawful nonconforming use was thereby damaged,compensation was payable.74

Previously, only injurious affection flowing from the scheme triggeredcompensation. Under the 1932 Act, in awarding compensation for schemecaused injurious affection, if the landowner had been denied permission todevelop property during the preparation of the scheme, and the denial wasupheld by the state on appeal, compensation was paid for the additionalinjurious affection caused by the denia1. 75 Compensation was not payable ifan action taken prohibited advertising. 76

The only other major change was that the exclusions from compensationwere not automatic. Rather, the planning scheme had to state what wasexcluded. But the list was expanded so that no compensation had to be paidfor imposing temporary restrictions on development, prohibiting buildingpermanently because of danger to health or because excessive expenditure forinfrastructure would be required, prohibiting uses because of damage to healthor serious detriment to the neighborhood, restricting use of buildings, regu­lating walls, fences, or hedges near bends or roads, limiting the access to roads,imposing a building line on vacant property, or requiring offstreet loading andunloading of business or industrial property users. If the planning schemecontained one of those exclusions of compensation, the state on review hadto find it proper, reasonable and expedient, having regard to local circum­stances, the nature, situation and existing development of the land andneighboring land and the interests of all persons. Heap warned that stateapproval for exclusion of compensation in a scheme could by no means beregarded as certain.77

The 1932 Act also provided for compensation in three situations before theplan took effect. One, already mentioned, was for the injurious affection ofpreservation orders. Second, if a decision to prepare a plan was revoked anda person was injuriously affected because of denial of a permission to developduring the interim or permission was conditioned and the person appealed thedecision and was not given relief, compensation would be payable.78 Similarlyif a developer complied with any conditions imposed during the plan prepara­tion stage and the expenditure was rendered abortive by the decision not toprepare a plan, compensation was payable.

Third, if permission was conditioned and the condition upheld on appeal,the conditions were imposed in anticipation of the reservation of land for apublic purpose or the execution of the works under the scheme, the developercomplied with the conditions, and the reservation or works did not appear onthe plan, damages were recoverable. 79

73. SS. 17, 18( 1)(a).74. ss.13, 18(1 )(b), 20(2).75. s.18(2).76. s.47(7).77. D. Heap, Town and Country Planning Law, 91, (1938).78. s.6(5).79. s.10(7).

44 D.G.HAGMAN

Many of the situations providing for compensation are continued in currentEnglish law. See Chapter 12.

2. Australia

a. Introduction

The English compensable regulation system was abandoned in England in1947, but by that time it had been adopted in most of the Australian states.

b. New South Wales

1. Compensable Regulation Adopted When comprehensive town planningfirst came to New South Wales, the Local Government Town and CountryPlanning Amendment Act, 194580 also contained provisions for compensation,81based largely on the 1932 English Act and the New Zealand Planning Act,which in turn had been based on the English model.

The legislative debates and cabinet minutes of the time include a recordremarkably thin and superficial on financial implications. It does suggest thatthe act's proponents felt compensation provisions would generously safeguardlandowner interests. For example, Mr. Cahill, the Minister for Local Govern­ment, stated that "where a person's land is injuriously affected the planningauthority has the right to compensate him".82 Mr. Cahill also stated, "I thinkthat it will be found ... that any person who is injuriously affected by theoperation of a scheme under the measure will have the right to compensation."83

As finally adopted,84 an important addition was that no compensation waspaid for provisions in a scheme prohibiting or restricting the use of land unlessthe applicant established that some specified use of the land which wasprohibited or restricted by the prescribed scheme was practicable immediatelybefore the prescribed scheme came into operation and that there was at thattime a demand for such use.85

2. The County of Cumberland Planning Scheme Under a special provision,86the region around Sydney, New South Wales was made subject to interim(i.e. pending adoption of the plan) control as of July 12, 1946. A proposedscheme was submitted in 1948. The scheme budgeted over £15,000,000 foracquisitions. But only £200,000 was budgeted for compensation for injuriousaffection due to "zoning" regulations. £250,000 was budgeted for removal ofnonconforming uses.

On June 27,1951, assent was given to the Local Government (Amendment)Act 1951,87 whereupon the County of Cumberland Planning Scheme Ordinanceassumed the force of law. To play it safe, many property owners filed claims.All told, some 10,000 claims for £375 million were filed. 88 Many of these claims

80. No. 21, now Local Government Act, 1919. See note 16, supra.81. s.342A et seq.82. Parliamentary Debates, Hansard No. 32, 13 February, 1945.83. Ibid.84. New South Wales, Local Government Act, 1919 as amended by the Local Government

(Amendment) Act, 1945, adding ss.342AC to 342AE.85. Id., s.2(d).86. Local Government Act, 1919, s.342AA, as amended 1945.87. No. 18. It is not normal for a plan to come into effect by statute, but the Cumberland

plan took effect in that manner. A. Fogg, Australian Town Planning Law, 12 (1974).88. Cumberland County Council Annual Report, 2, (1954). Cf K. Gifford, The Victorian Town

Planning Handbook, 360, (4th ed., 1973):It repeatedly happens that planning authorities receive compensation claims that are

Betterment for Worsenment 45

were for property to be acquired and many were spurious.Ronald Collier, a Sydney valuer, wrote89 about securing compensation under

the Cumberland scheme. The following, taken from his book are examplesof some of the subtleties he anticipated:1. No compensation could be requested for revocation of permits, because the

1951 Act did not provide for revocation of permits.2. The Cumberland scheme made inconsistent private restrictive covenants

ineffective, which would give rise to a claim for compensation at the timethe restriction was made ineffective and for further compensation when ause inconsistent with the restriction was made, e.g. an industrial use in anarea previously restricted to single family use. If the zoning was changedso as to no longer be inconsistent, the restrictive covenant would revive.

3. Exemptions might occur under other laws.(a) Compensation might not be payable for restrictions on commercial and

industrial uses because earlier law90 had precluded the erection ofcommercial and industrial uses in residential districts. Similarly, earlierlaw had provided for fixing building lines, fixing the number of housesto the acre and setting minimum areas and frontages.

(b) Diversion of traffic was not compensable.(c) Earlier law on densities limited minimum lot sizes to one acre; a

limitation of five acres would rank for compensation.(d) While earlier powers existed to fix building lines from public places or

public reserves, Collier opined that authority to fix building lines alongbodies of water was an additional restriction and that compensationwould be payable.

(e) The planning scheme also permitted the Governor by proclamation toprohibit erection of buildings within a certain distance of county or mainroads (restrictions on ribbon development). These prohibitions wentbeyond powers provided in earlier road acts, so compensation might bepayable.

4. Prohibitions might arise.(a) Generally speaking, the restrictions on space about buildings would rank

for compensation if they constituted prohibitions.(b) Where the planning scheme reserved areas for park or recreational use

and prevented its use, the reservation would constitute a prohibition sothat compensation would be payable.

5. As to greenbelts, Collier identified an ageless and typical problem:

The difficulty in which the County Council is placed should be understood. Likeall planning authorities which desire to create green belts, that which they reallydesire to lay down is a restriction that the land must be used only for agriculture,but restrictions upon the use of land as apart from buildings are a matter forcompensation ... Therefore planning authorities tend to resort to the procedure

plainly disproportionate to the loss or damage in respect of which compensation is beingclaimed. The draftsman of a compensation claim all too frequently appears to proceedupon the basis that the notice of claim can be treated very much as a letter and that,provided an excessively large amount is claimed, a proper amount will always berecoverable. In one case a compensation claim was lodged on behalf of the owner ofa small house. The only detriment being suffered was the minor loss of land involvedin the splaying of a corner, and the house itself was not affected in any way. Nevertheless,an amount of £32,850 was claimed; allegedly on the basis of 'disturbance and trafficnuisance at the rate of £3 daily for 30 years.'

89. R. Collier, Compensation and the County of Cumberland Plan (1952).90. Local Government Act, 1919, s.309.91. Collier, supra, at 51-52. See Chapters 11 and 12 for further discussion of this problem.

46 D.G.HAGMAN

of zoning the land at five acres to the house in the County of Cumberland, or upto even 100 acres to the house as was done in England. But, as before statedcompensation, ordinarily, will not be avoided. 91

6. The "practicable immediately" requirements would not prevent compensa­tion where a tenant had possession and was protected from termination bythe owner so that the owner could not effectuate a project.

7. Many of the limitations on compensation did not apply to injurious affectionto trades-for example, if a trade was damaged by a provision proscribingspace about buildings, compensation could be awarded.

8. If compensation was payable, the amount payable was the differencebetween the market value at the time of the coming into operation of aprovision of the scheme or the execution of the work or the prohibitionor restriction and the market value if none of those things had happened,as the case may be.92

3. The Courts Emasculate the Compensation Provisions Whatever hopeslandowners had for compensation for regulation and whatever the New SouthWales government had in mind, the courts were not sympathetic:

There are only three reported claims for compensation for injurious affection: all,for different reasons, failed. They are Bingham v. Cumberland County Council(1954) 20 L.G.R. (N.S.W.) [1], Whittle v. Cumberland County Council (1955)20 L.G.R. (N.S.W.) 272; Baker v. Cumberland County Council (1956) 1 L.G.R.A.321. It is understood that in fact these have been the only claims determined bya court.93

The plaintiff in Bingham failed because it was concluded that benefits receivedoffset damages. In Whittle the claimant lost because of a failure to file a claimon time. Both dealt with restrictions looking forward to acquisition, the subjectof Chapter 11. Baker, however, dealt with a mere regulation, the subject ofChapter 12.

The property of the plaintiff landowner in Baker consisted of 3 acresimproved with a cottage residence. Its use was restricted by the planningscheme to green belt purposes. As a result, buildings could not be erectedor used for the purpose of dwelling-houses without consent. The landownerclaimed that prior to the application of the planning scheme, it would havebeen practicable to use the property for such development and claimed £650in compensation.

The County of Cumberland argued that compensation was not payable for"zoning" (i.e. Chapter 12 matters) as distinguished from "reservation," (i.e.Chapter 11 matters). The judge disagreed, but focused on the good neighborexception. The statute provided that:

Compensation shall not be payable in the following cases:- ... (c) where an estateor interest in land is affected by any provision of the prescribed scheme whichprescribes the space about buildings or limits the number of buildings to be erected,or prescribes the height, bulk, floor space, use, design external appearance, orcharacter of building . . . 94

The judge held that the restriction prescribed the "use" of buildings. Newbuildings in the green belt could not be erected or used for the purpose ofdwelling-houses without consent. The restriction also prescribed the "charac­ter" of buildings.

92. Local Government Act, 1919, s.342AC(4).93. M. Wilcox, The Law of Land Development in New South Wales, 278, (1967).94. Local Government Act, 1919, s.342AC(2).

Betterment for Worsenment 47

A prescription of the 'character' of buildings is ... one which prescribes the nature,or sort, of buildings, in respects other than those of 'height', etc. which are specificallyenumerated. For example ... a provision that ... houses, churches, and schoolsmay be erected, but shops and factories shall not, would be a prescription of the'character' of buildings.95

While Cabinet minutes indicated that the authors of the language felt thatthe use and character of buildings provision had a rather narrower meaning,namely to allow decisions on building applications (building permits) withoutdrawing compensation, the court had in effect held zoning non-compensableunless it prohibited a use of land in some way unrelated to any buildings.

These three cases were sufficient to convince landowners and lawyers thatthe courts would interpret the compensation provisions very narrowly. It alsobecame widely understood at the time that if a case ever arose wherecompensation in substantial amount was payable, the legislature would act toclose off that right.96

Parliament removed any remaining doubt about when compensation wouldbe payable for zoning with a 1963 amendment to the planning act whichexcluded compensation for injurious affection flowing from any schemeprovision which specifies "the purposes for which land may be used or whichprohibits, restricts, or regulates the use of land ... "97 Cabinet minutes explainthat this amendment was intended to "state in clearer terms that compensationshall not be payable for zoning of land for any purpose other than a publicpurpose (this conforms with the judgement of the Land and Valuation Courtin the case of Baker v. Cumberland County Council) nor for a restrictionwhich could be lawfully imposed (other than on a planning scheme) withoutincurring any liability."98

c. Victoria

In 1944, comprehensive planning legislation was first enacted in Victoria,the second most populous Australian state. Just as in New South Wales, theexpectation apparently was that most injurious affection from interim develop­ment controls or planning schemes would be compensable:

Parliament embraced in general the view that substantially all depreciation resultingfrom planning limitation should be made the subject of compensation ... 99

except for matters which could have been covered previously by local by-laws.In the Town and Country Planning Act, 1954, however, while

the superficial form of the legislation was not changed ... the real emphasis waschanged completely ... Compensation was now provided for any loss or damagesuffered Loss or damage may indeed prove to be less extensive than "prejudicialaffection" [T]here was a complete destruction of all compensation payable under... interim contro1. 1OO

95. Baker, supra, at 331.96. Based on conversation with Mr. F. Podson, Under Secretary, Department of Local

Government, Sydney, New South Wales.97. Local Government Act, 1919, s.342AC(h), added by Act No. 59, 1963, s.72.98. Local Government (Town and Country Planning) Amendment Act, 1962. (Volume kept on

file by the Department of Local Government, Sydney, New South Wales), (Hereinafter citedas Amendment Act 1962).

99. Phillips, "Compensation and Planning in Victoria", 2 Melbourne U.L. Rev. 331, 344 (1960).100. [d., 345.

48 D.G.HAGMAN

The present Town and Country Planning legislation lOl still begins with abroad provision for compensation:

Subject to this Act compensation shall be payable ... for loss or damage sufferedby or as a result of the operation of any interim development order or of any planningscheme under this Act . . . 102

But the exceptions are such that compensation is not available as of rightnow in very many situations. While one commentator indicates that localauthorities could not be generous and pay compensation even if they wishedto because they "have no general power to pay compensation,"lo3 the law doesprovide that permits can contain compensation provisions!04

Compensation is payable in the following situations:1. A local authority makes an error in its certificate indicating the permitted

use of property, which error leads to loss or damage by reason of operationof an interim development order or planning scheme. 105

2. The revocation of a permit to the extent that such revocation leads todamage from expenditures or liability therefor rendered abortive. I06

3. An authority forbids the continuance of a non-conforming use or requiresthe removal or substantial alteration of buildings or works lawfully inexistence before the planning scheme takes effect. 107

Commentator Gifford also believes that "the inclusion in planning schemesof provisions requiring the provision of service roads, the provision of parkingareas in certain cases, and certain tree-planting could not . . . have beenachieved under the zoning by-laws; and ... so, provisio.ns of this nature attractcompensation."108

As distinguished from the English 1909 Act as interpreted by the Ellis caselO9

if the damage flowed from a provision which "could have been validly includedin anyllO other law, and if no compensation was payable under that other law,no compensation would be payable for damages from an interim developmentorder or a planning scheme.

In those rare instances when compensation can be obtained, the compensa­tion payable is the difference between the value of the land as affected bythe interim development order or the planning scheme and the value of theland as not so affected. III

Perhaps Victoria is ready to move in the direction of more compensation.In a January 28, 1976 speech, the Minister for Planning indicated he wouldpursue the establishment of an inquiry on compensation, since "it is neitherfair, nor just nor equitable for individuals to bear the burden of planning forthe community as a whole by restrictions which benefit others but adverselyaffect their own values or the right to conduct business."1l2

101. The Town and Country Planning Act, 1961, No. 6849, incorporating amendments up toAct. No. 8380, reprinted June ]5, ]973.

102. Id., s.41 (1).103. K. Gifford, The Victorian Town Planning Handbook, 352, (4th ed. 1973), (hereinafter

Gifford).104. Town and Country Planning Act, 1961, s.42(1)(a).]05. Id., s.38(2).106. Id., s.24(5).107. Id., s.42(1)(c).108. Gifford, at 357.)09. Supra at 20.1]0. Town and Country Planning Act, 196], s.42(3). In the Ellis case, compensation was not

available if the property actually was restricted by another non-compensable law.] II. Id., s.42(6).112. The Age, Jan. 26, 1976.

Betterment for Worsenment 49

d. Queensland

Queensland is the third most populous Australian state. Its first com­prehensive planning legislation dates back to 1934113 and was based on theEnglish 1909-32 Act model. The legislation was basically revised in 1966, atwhich time compensation provisions were largely based on the 1945 New SouthWales legislation which, in turn, had been based on the English 1932 Act.Brisbane, Queensland's largest city, has had special town planning legislationapplicable to it since 1952,114 but the compensation provisions are basicallysimilar to those in the 1966 statute. lIS

The Brisbane Town Plan took effect on December 21, 1965. Among othereffects, landowners of nine properties used for business purposes were therebyplaced in a residential zone. The effect of being put in such a zone was thatno more than 75 percent of their lots could be covered with buildings. Claimsfor compensation of $211,898 were filed with the city council and the solicitorfor the council sought an outside legal opinion as to the validity of the claims.The opinion116 primarily considered that part of the City of Brisbane TownPlanning Act, Section 14(1), which excludes compensation for good neighborrestrictions. It concluded that the restriction on the amount of a lot that couldbe covered by buildings only indirectly prescribed the space about buildingsor prescribed floor space, design etc. Such a restriction did not do so explicitlyand directly; therefore compensation was recoverable.

Compensation might be excluded, however, if the buildings on the propertyhad previously been legal nonconforming buildings. Since they could not beexpanded without consent, compensation could be excluded because Section14(l)(d) of the Brisbane Act provided that compensation was not paid unlessthe claimant established a legal right to do the plan prohibited act immediatelybefore the plan came into effect.

Further, evidence might show no loss. If consent to expand was previouslyrequired, it might not have been granted. The claimant would have to provethat consent would likely have been given prior to the plan but not after it.And if the right to expand was taken away, there might be no damages because,for example, if a lot was small, set back (space about buildings) or floor spacerequirements could also preclude any expansion to more than 75 percent ofsite coverage. Thus, the claimant might not be able to prove any damagesflowing from the 75 percent requirement over and above that resulting fromrestrictions for which compensation was not available.

Queensland may be about ready to junk its; compensation provision. 117

e. Western Australia

Western Australia also inherited the English system. A 1951 Report118 noted

113. City of Mackay and Other Town Planning Schemes Approval Act of 1934.114. Now City of Brisbane Town Planning Acts, 1964 to 1976. Sections 13-17 contain the

compensation provisions.115. Local Government Act, 1935, as amended. Section 33 contains the compensation provisions.116. Re: Eagers Retail Pty. Ltd. and Others, Apr. 15, 1970.117. The "Minister's Advisory Committee [has recommended] that ... private zonings be not

compensated; and that the South Australian approach of compensating for loss or damagearising from a reservation be adopted." Letter from Alan Fogg to Donald Hagman, Nov.8, 1975. [Editorial note: By contrast with the recommendation State Parliament has movedto grant explicit rights to compensation for private down-zonings in restricted circumstances,see City of Brisbane Town Planning Act and Another Act Amendment Act, 1977.]

118. Honorary Royal Commission on Town Planning and Development Act Amendment Bill,Report 8 (1951).

50 D.G.HAGMAN

that "a satisfactory and workable solution to the joint problem of compensationand betterment is of the utmost importance if any real planning andimplementation are to be achieved." A 1955 Report 119 became the basis forthe first town planning scheme in Western Australia. Where a regulationprohibited all beneficial uses, such as in an open space zone, the Reportrecommended that the land be publicly acquired, and that the plan show theproperty as being reserved rather than as zoned.

A recent publication l20 of the Perth Town Planning Department describesplanning in Western Australia to the lay reader. Its provisions oncompensation l21 for mere regulation summarizes the current provisions l22 in away which suggests compensation is available for mere regulation only wherea legal nonconforming use is damaged.

f Other States

Tasmania has provisions for compensation based on the English model notunlike those in the other states. 123 South Australia stands alone. There is notrace of the English model in the South Australia statutes, and no compensationis paid for mere regulation.

3. New Zealand

The current New Zealand statute124 has compensation provisions125 that retainthe English 1909-32 Act pedigree. This discussion is based on the currentstatute.

The general rule is that compensation is payable for injurious affectionresulting from the operation of any district planning scheme or of any refusalof a permit on the ground that development would be detrimental to the planin preparation. The amount of compensation paid is equal to what would bepaid if the restrictions imposed were a taking of a corresponding interest.Consequently, if the restriction is only temporary, the damages paid are onlyfor the temporary taking of the interest. The claim is against the unit ofgovernment which requires the restriction, not against the plan-makinggovernment.

As distinguished from some Australian and English provisions, compensationis excluded if the restriction "could have been made and enforced withoutliability" under some other act. The other restriction need not actually havebeen made. Good neighbor restrictions are not compensable. No compensation

119. G. Stephenson & J. Hepburn, Plan for the Metropolitan Region: Perth and Fremantle,Western Australia, (1955).

120. Town Planning Department, Why We Are Here: A Town Planning Guide, (1974).121. ld., 41-46.122. Town Planning and Development Act, 1928-1972, ss. 11, 12, as approved for reprint, March

8, 1973. The Metropolitan Region Town Planning Scheme Act, 1959, 1970, ss. 36-37,approved for reprint Feb. 26, 1973, incorporates the compensation provisions of the previousact by reference.

123. "Tasmania has produced a Planning and Development Bill, 1974 ... Sections 43, 44 and45 deal with compensation for injurious affection ... All in all sections 43-45 seem to bean uneasy attempt to posit [and retain 1909 Act type compensation, plus current Englishcompensation provisions, see Chapter 12 on the English planning permission system.] I cannotsay I am impressed." Letter from Alan Fogg to Donald Hagman, Nov. 8, 1975.

124. Town and Country Planning Act 1953 (with amendments to 1 January 1973) 3 New ZealandStatutes 2669 (1972).

125. Ss. 44-45.

Betterment for Worsenment 51

is paid for things done in contravention of a scheme or in contravention ofany interim-permit-while-planning provision. As distinguished from Australianpractice, no compensation is payable merely because the district scheme showsa proposed highway, a widening of a street or the closing of a highway, orany proposed public reserve or open space!26

The no compensation for good neighbor and highway-public reserve-openspace provisions (s.44(5» may conflict with another part of the statute. Theother part (s.44(6» provides that if land is zoned for particular uses and theowner objects and appeals and shows that the zoning prevents a preexistinguse which is not nuisance-like, or precludes a change to a use which wouldneither detract from neighborhood amenities or require an uneconomicextension of public service, nor cause uneconomic strip subdivision or com­mercial or industrial development along highways, then compensation ispayable. 127 However, compensation is not payable if a change of use is precludedand the proposed use would not be "suitable." Since s.44(6) applies "notwith­standing anything in subsection 5," the conflict may be resolved in favor ofcompensation.

If compensation is paid and the restriction is later removed or lapses, thelandowner must return any compensation paid under the assumption of a longerapplication of the restriction. As with the English and some Australian statutes,if a claim is made, the local authority can change the scheme so as to avoidcompensation. It must pay the landowner's costs and any expenditures renderednugatory that were reasonably incurred as a result of the scheme or permitrefusal.

There has been one significant mere regulation case interpreting the NewZealand statute. In Allison v. Piako County l28 the landowner claimedcompensation of £1,000 because of the county's refusal to approve a subdivisioncreating four small lots on an existing road out of a larger parcel. The reasonfor the refusa' was that the property was zoned for rural uses. Under Section44(3), "compensation is payable in respect of zoning." However, Section44(6)(b) (iii) provides that compensation "regulating the use of buildings orland" is payable only if the refusal deprives a use where the use would not"cause an extension that is not in the economic interests of the region or localityof the subdivision into lots ... along existing highways." The court referredto that provision as an anti-ribbon development or anti-urban sprawl provision,violation of which is prima facie undesirable and uneconomic. Therefore,compensation was denied.

4. Canada

As indicated in the betterment discussion, many Canadian provinces adoptedthe English 1909 Act model.

126. However, under such circumstances, a landowner do~s have power to require purchase ofhis property, s.47A.

127. This provision in ef1"ect seems to say that compensation can be paid where there is no realgood reason for the restriction on use, e.g. nobody would be hurt by a change. Too oftenonce a restriction is ilnposed, which may just have happened, and not in any way be requiredin the public interest, the local authority begins to believe that it was done for an importantpublic purpose. It therefore resists any change and makes up reasons why the existing schemeis essential. The New Zealand statute suggests that where the local authority is obstreperouslywed to a grand planning design for its own sake, it can stick to it only if it pays for theprivilege.

128. (1957) N.Z.L.R., 1214.

52 D.G.HAGMAN

All provinces eventually abolished the compensation provinces exceptManitoba which revised the provision, made it incomprehensible but retainedit in a basic revision of its planning law in 1975}29 On June 11,1976, however,the last vestiges of the compensation and betterment provisions surviving inCanada were wiped from the statute books. 130

5. Observations and Lessons Learned

a. Compensation for Worsenment: Success or Failure

If the success of the 1909 Act and its progeny provisions for compensationhad to be judged in terms of the amount of compensation actually paid, theworsenment provisions must be regarded as failures. Moreover, it is clear thatboth the courts by interpretation and the legislatures by amendment havenarrowed rather than broadened the provisions over the years.

Why did the provisions fail to actually result in payment? There are manyreasons-( 1) in the courts, compensation for restrictions was novel and hencenarrowly construed, this attitude abetted by (2) fear that payments in eventhe obvious situations would be precedent for much broader recovery. Inaddition, there was (3) failure to recapture betterment so no money was"available" to fund worsenment payments, (4) few adoptions of planningschemes calling for compensation payments, (5) absence of damage in thosedays when plans were weak and growth was good, (6) enormity of proceduralhurdles that must be overcome in order to win an inadequate and uncertainvictory, the lines between compensation and non-compensation not beingclearly defined, (7) use by governments of non-compensatory alternatives, (8)the fact that in Australia, Canada and New Zealand the provisions wereimports not related to the needs of a sparsely populated landscape, and (9)the requirements of full compensation in the face of the "floating value"problem. 131

b. Inhibition

1. In General: As in America,132 the provIsIons for worsenment elsewherein CANZEUS were alleged to be inhibitory133 of planning and controls. Yetproof of the inhibitory effect is weak.

In England, for a variety of reasons having nothing to do with compensationrequirements, few plans were adopted. 134 There is not much evidence of

129. Planning Act, 1975, SSe 88(1)-(14). "The inconsistency between subsections 88(1) and 88(14)of The Planning Act is more than apparent ... The previous Planning Act's provisions forcompensation and betterment were moribund, in that no one in fact was making either claim... the old provisions were deleted in ... early drafts ... It was only upon instructionsfrom Cabinet that Section 88 was inserted, and it has not been proclaimed pending furtherstudy." Letter Mike McCandless to Donald Hagman, Jan. 28, 1976.

130. S. Man., C. 51, s.35 repealing s.88 of the Planning Act. If property is zoned for public use,compensation might be available. See Chapter 11, at 24, 38.

131. See Chapter 12.132. See Chapter 12.133. Report of the Royal Commission on the Distribution of the Industrial Population, 1940

(Barlow Report), Cmnd. 6153, at Par. 248; J. Cullingworth, Town and Country Planningin England and Wales, 23, (3d ed. 1971); Parker, "The History of Compensation andBetterment Since 1900," in Land Values, 60-62, (P. Hall, ed. 1965); A. Telling & F. Layfield,Applications for Planning Payments, 6, (1955).

134. Ministry of Town and Country Planning, Town and Country Planning 1943-1951, Cmd.8204, at 4 (1951).

Betterment for Worsenment 53

significant worsenment payments having been made. The Ellis case was theonly reported English case on the matter, the absence of cases suggesting nosubstantial number of worsenment claims. In Canada, the provisions weredeadletters from the start. Milner135 could find no evidence that any compensa­tion was ever paid.

Read loudly and clearly by a complaining landowner's lawyer, the openingsections of the compensation statutes in many of the Australian states are broadenough to be inhibiting. And there is evidence from Perth and Brisbane thatplanners are inhibited. But as Fogg136 notes, while compensation has been abogey bedevilling planning since its inception, the provisions amount to a deceit.Despite the scare thrown into planners by the claims in New South Wales,the compensation provisions have been emasculated in Australia by the courtsand legislatures.

Yet planners in Australia have almost as pathological a fear of the provisionsas those in America have of invalidations and more recently of inversecondemnation actions. Perhaps these minimal risks are magnified to excusetimidity.

The pathology is also obvious in New Zealand. While payment is requiredin only a narrow range of circumstances,137 planners tend to act as ifcompensation was widely payable. Interviewees in New Zealand suggested anumber of reasons for this phenomenon:(a) Many planners, particularly in small rural communities, are simply poorly

informed about the law.(b) Some more sophisticated planners recognize that the law is somewhat

ambiguous. Accordingly, they fear a judicial interpretation that might runagainst planning interests. As a result, when a landowner comes along whoseems likely to claim compensation, the planning authority accommodates.

(c) Other planners in local councils regard compensation as an ethical issue.Whether or not the law actually requires it, they feel bound not to imposestringent regulations. In a number of communities, compensation reportedlyhas been paid as a matter of morality.

2. Funding for Worsenment by Area Benefited: It appears to be recognizedthat if the benefit of a restriction is supra local, restrictions are inhibited ifthe local government imposing the restriction must pay the worsenment.Therefore, the worsenment should be paid by the area benefiting from therestriction.

135. J. Milner, Community Planning: A Casebook on Law and Administration, 105, (1963).136. The critique of the Australian provisions are based in part on R. Else-Mitchell, Legal

Constraints on Planning, Address to the 13th Congress of the Royal Australian PlanningInstitute at Melbourne, Aug. 30, 1973; A. Fogg, Australian Town Planning Law, (1974);K. Gifford, The Victorian Town Planning Handbook, (4th ed. 1973); Phillips, "Compensationand Planning in Victoria", 2 Melbourne V.L. Rev. 331, (1960); M. Wilcox, The Law ofLand Development in New South Wales, (1967). Further citation is not generally included.

137. In observing why a plaintiff landowner sued for compensation under the Public WorksAmendment Act rather than under the Town and Country Planning Act, the judge inManukau City v. Minister of Works, 5 N.Z.T.P.A. 65, 70 (1973) observed: 4411 was saidthat for all practical purposes the compensation provisions of s.44 are largely .illusory, somuch so that known cases of recovery of compensation under that section are difficult todiscover."

54 D.G.HAGMAN

c. The Unsatisfactory Line Between Compensable and Non-compensableRegulations

1. In general: The Uthwatt Committee138 reviewed the compensation forplanning provisions under the English 1932 Act. 139 It noted that since nocompensation was payable for density limits, but was payable for forbiddingbuilding altogether, density limitations were being drafted to in effect precludedevelopment. It also noted the inconsistency of compensating for the newerplanning restrictions but not the older road restrictions.

Noting the either full or no compensation character of the compensation,the Committee believed it would be desirable to permit partial compensationto be paid. That was ultimately not recommended, however, because of theburdensome duties exercising such discretion would impose on the nationalgovernment.

Rather than have a list of restrictions which the plan could exclude fromcompensation, to be approved on review by the national government afterconsidering local circumstances, Uthwatt recommended that local authoritiesbe given general power to exclude compensation. It also recommended thatthe approval on review be based on regard for national as well as localcircumstances.

The Australian commentators are in general agreement that the present linebetween compensable and noncompensable restrictions does not eliminateunfairness. For example, if a property owner is entitled to damages, benefitsreceived from the planning scheme can be offset against the damages in somecases even where the benefit from the planning scheme is to property ownedelsewhere by the damaged owner}40 On the other hand, no benefits arerecaptured from owners not damaged at all, so their benefits are enjoyed infull. Of course, a solution would be to recover benefits in both cases.

Another unfairness is that damages from draft schemes are not compensable;only those from final schemes can be recovered. Further, since compensationis unavailable for property damaged by indirect effects of plans it is betterfor a property owner to be damaged by a direct restriction than by an indirectrestriction. Yet the amount of damage could be the same in both cases.

The same direct, indirect fairness problems arise with respect to theAustralian provisions which require the payment of compensation for injuriesto businesses as well as to property. A business directly affected by a mereregulation in a planning scheme may suffer a compensable loss. Indirect lossesare not compensable.

Finally, just as in America, some restrictions in Australia can be imposedeither under subdivision or under zoning authority. Yet restrictions undersubdivision control are not compensable. Only restrictions imposed underzoning-like provisions are compensable because they were compensable underthe 1932 Act type system imported from England.

Most New Zealand authorities interviewed in connection with this chapteragreed that the compensation section in New Zealand's Planning Act iscomplicated, uncertain and clearly requires payment in only a narrow rangeof circumstances.

In general, the main lesson to be learned from the attempts in CANZEUS

138. Ministry of Works and Planning, Expert Committee on Compensation and Betterment, FinalReport, Cmd. No. 6386 (1942).

139. Id., at 92-103.140. See Chapter 10 for benefit offset in American eminent domain law.

Betterment for Worsenment 55

to specify by statute when restrictions are compensable and when they arenot is that the statutes have failed to draw lines regarded as workable andfair. One might be tempted, then, to conclude either that all should becompensable in full, or that none should be, or that partial compensation shouldbe paid in all cases.

Phillips, for example, after flailing at length at the obfuscation of theVictoria statutes which attempt to distinguish compensable from noncom­pensable situations indicates:

The conclusion ... is ... that the true character of legal prohibitions and restrictionson user depends upon the degree of severity of the law in question from the pointof view of the property owner. This is an empirical solution extremely characteristicof modern American law and courts invoking a measurement of facts andconsequences and rejecting conceptual analysis. 141

In short, Phillips regards the American practice of determining the validityof land use controls on the basis of whether, on balance, the regulation "takestoo much" as being more workable than the Victorian compensatory regulationstatute. Perhaps that American pragmatic balancing approach is better thanany specification by statute approach.

2. Nonconforming Uses: Uthwatt's main recommendation l42 was that govern­ment be given the power to amortize legal nonconforming uses and be ridof them in that way rather than giving them perpetual existence or payingcompensation if terminated. That recommendation was not adopted andamortization is still not practiced in England. For that matter, amortizationis not available in Australia, Canada or New Zealand either, so there is anirrationality in compensation-restrictions on legal nonconforming uses resultin compensation, restrictions on potential uses do not.

Fogg believes that Australia should adopt amortization of nonconforminguse provisions. Gifford, ignoring the monopoly site value often temporarilyconferred by designating a use nonconforming, complains of the hardship fromsuch a designation because the market for the property is considerablyrestricted. Wilcox, who probably subscribes to a "place for everything andeverything in its place" theory, which animates those upset by nonconformities,bemoans the fact that betterment recapture has not occurred so that thereare no funds to unravel the chaos of the past. In New Zealand, compensationfor nonconforming uses does not arise because local authorities have noauthority to restrict them.

Amortization of nonconforming uses in a reasonable period of time ispossible in America without constituting a taking. 143 In so far as that isdesirable, it is one of the few areas of planning law in which America is moreadvanced than elsewhere in CANZEUS. As with the last subsection, aconclusion might be that it is not the type of restriction or what is restrictedthat should lead to compensation. Rather, the test should be the degree ofrestriction.

d. The Line Between Acquisitory and Mere Regulations

This chapter pas some reference to the problem raised in more detail byChapters 11 and 12: is compensation to be paid for acquisitory regulation but

141. Supra note 136, at 343.142. Uthwatt Report, at 97-101.143. D. Hagman, Urban Planning and Land Development Control Law, s.88, (1976).

56 D.G.HAGMAN

not for mere regulation? The line between the two situations appears to betheoretically satisfactory, that is, zoning for public acquisition is regarded asin principle different than mere regulation. The problem is to keep the zoninggovernments honest so that they do zone for public use when acquisition istheir intention. There is considerable evidence in Australia that they do notzone. Rather, they use mere regulations to avoid the need for compensation.

e. The Difference Between Zoning and a Permit System and Compensation

Consider this proposition: The United States is a rather densely populatedcountry with a maturing economy and has a zoning system. It is thereforein much the same status as was England in 1909-1946 and if it is to applythe English practice, the United States should adopt 1909 Act type compensa­tion provisions.

Next consider this proposition: While it is true that the United States isdensely populated and mature, the zoning system is rapidly and de facto beingabandoned for a permit system, just as it was de facto abandoned in Englandprior to 1947 and explicitly so after 1947. Therefore, the English compensationprovisions outlined in Chapter 12 are the most appropriate model.

The point is that whether the United States is perceived basically to havea zoning system or a permit system makes a difference in importing models,including models for compensation. I explain. Under a zoning system, thelandowner has a right to use the property as zoned. Assume a parcel witha highest and best use as industrial. If it is downzoned, say from industrialto agricultural use, the difference value can be relatively easily calculated.

Suppose, however, there is a permit system. Under a permit system, thereis no right to use property for any particular purpose. Before the applicationfor the permit, there may be no damages because for all one knows, a permitfor a factory use may be granted upon application. Therefore, it is necessaryto seek a permit in order to find out if there are any damages. Suppose thepermit is not granted. One may still know very little. All one may know isthat the factory was rejected this time, but perhaps not tomorrow, or perhapsthat it was too big, or too high, or that perhaps a different kind of factorywould be acceptable, or that a similarly high and best use of the propertyfor commercial purposes might be approved. In short, until there has beena series of rejections of applications, for a variety of uses which make it clear,e.g. that the planning authority will permit no use but agriculture for theindefinite future, it may be almost impossible to prove damages. 144

D. Betterment for Worsenment

The 1909 Act is surely the closest historical precedent for the dominantthought behind windfalls for wipeouts, namely, that windfalls should berecaptured at least in part, to fund wipeout mitigation, at least in part. Thischapter considers the success of betterment recapture and worsenment mitiga­tion separately. Considered separately, both ideas were busts. Consideredtogether, betterment for worsenment was a bust.

144. J. Costonis & R. DeVoy, The Puerto Rico Plan: Environmental Protection ThroughDevelopment Rights Transfer, 15-16, (1975), conclude that under a permit system thedamages should be the difference between the restriction as it exists and what is determinedto be the reasonable beneficial use of the property. Compare the English approach in Chapter12 providing for governmental purchase when no reasonable beneficial use remains.

Betterment for Worsenment 57

Whether society would be interested in adopting and implementing a 1909type Act modified to eliminate its technical defects is open to doubt. It isinteresting to note that the quantum increase these days in the harshness ofregulation which has led to pleas for compensation in America had a parallelin 1909. Then, too, compensation was provided because land use control wasperceived to be a harsh new regulation. Then, too, it was thought only fairthat if worsenment was to be mitigated, it should be paid by recapturing fromthose who earned betterment.

It all seems so logical and fair. But the 1909 Act failed, perhaps becausethere was no will to recapture betterment and that led to a failure tocompensate. The experience suggests a dilemma. Neither windfalls will berecaptured nor wipeouts mitigated unless both steps are taken at the sametime. Yet, while political forces for recapturing windfalls are strong andpolitical forces for mitigating wipeouts are strong, neither is strong enoughto pull off their own goal by way of implemented legislation. On the otherhand, both groups lose interest if both issues are addressed simultaneously.

Logic and fairness may not be enough to provide a sufficient constituencyfor the idea. If that is so, at least the recounting of the 1909 Act experienceis useful so that those animated by logic and fairness do not expend a lotof energy attempting an impossible political dream.