12 May 2017 NSW Government response to the “NSW Department of Finance, Services and Innovation Redress for Central Register of Restrictions Errors” report by Professor Allan Fels AO and Professor David Cousins AM. Executive Summary The CRR is an information service that the Government makes available to prospective property purchasers in NSW. Throughout 2014 to 2016, due to informal and poor processes, incorrect information was provided in response to CRR enquiries relating to the New M5 and proposed F6 projects. As soon as this error was identified, the Government advised the people who purchased properties after receiving incorrect information (Property Owners) and apologised for the error. An independent investigation into the incident was conducted and the report is available at www.finance.nsw.gov.au. To advise on compensation options for Property Owners the Government appointed consumer experts, Professors Allan Fels AO and Professor David Cousins AM. Professors Fels and Cousins submitted the ‘NSW Department of Finance, Services and Innovation Redress for Central Register of Restrictions Errors report’ (Independent Report) to the Government for consideration in March 2017. The Government has considered the Independent Report and accepts the majority of recommendations. The Government’s response and approach to implementing each of the recommendations is outlined in this document. The NSW Government would like to thank Professor Allan Fels AO and Professor David Cousins AM for their consideration of this matter and independent advice. Background Overview of the CRR process The CRR was established in 2009 and is a database that holds records of government agencies’ and utilities’ potential and actual interests in land which may be required for public infrastructure in the future. For example, when Roads and Maritime Services (RMS) are planning a new road, they provide Land and Property Information (LPI) with a file that flags properties within the broad area of investigation for the new road. Prospective property purchasers usually engage a solicitor or conveyancer to act on their behalf. Solicitors and conveyancers may conduct a search of the CRR via an information broker to help inform a potential property purchase. However, a CRR search is not compulsory. CRR search results indicate whether a government agency or utility may have an interest in a property. If a ‘positive’ interest is indicated, a solicitor or conveyancer then obtains the specific details directly from the relevant agency. A ‘positive’ interest covers a range of scenarios including:  the subject property was previously flagged in relation to a prior project that has since been progressed and the property is no longer required;  the subject property is included in a broad area of investigation for a project which may or may not result in any impact to the property in future;  the subject property is on land identified as likely required for a future project; 1 

the subject property is adjacent to land required for a future project or may be impacted temporarily by construction works; the subject property is required to be acquired in whole or in part, or land beneath the property is required, for a future project where the route is known and defined. LPI maintains the CRR on behalf of participating organisations who periodically submit data. CRR searches are not available directly from LPI, but through an information broker, who are contracted to LPI to provide this service. The CRR Error In late October 2016, the Government was made aware that information relating to RMS interests in parcels of land relating to the proposed F6 project were not correctly uploaded to the CRR during the period 27 June to 24 October 2016. LPI subsequently conducted an audit of all files received from RMS back to 2009 when the current system was established. This audit found that one additional file, relating to RMS interests for the New M5, was not correctly uploaded to the CRR on 18 September 2014. Due to the 2014 and 2016 errors, 952 certificates relating to RMS interests were issued incorrectly in response to CRR searches, relating to 582 unique properties. Communications Since the Government became aware of this issue in late October 2016, the priority has been to contact involved Property Owners and ensure they have the information and support required. Since that time:  A team was established, working with the Customer Service Commissioner, to ensure that all owners of involved properties have been informed. Involved Property Owners have, where possible, been contacted in person by Government representatives. Where contacting owners in person was not possible, owners have been contacted via letter.  The Department of Finance, Services and Innovation (DFSI), LPI and RMS have also been working together to assist Property Owners, or concerned residents, with their queries and any information relating to a potential interest in their property.  LPI has contacted all solicitors and conveyancers acting for Property Owners to advise them of the error. Independent Investigation ‐ December 2016 On 28 October 2016 the Government commissioned an independent investigation into the cause of the CRR error and the actions needed to prevent it from happening again. The investigation by PwC found the error occurred because the process for uploading files from RMS into the CRR has, since its establishment in 2009, been informal, inconsistent and lacking in governance and review mechanisms. The investigation also found that no changes to LPI staff in 2014 or 2016 impacted the incident. In December 2016, the Government released the investigation reports in full and they are available at www.finance.nsw.gov.au. 2 Independent advice from Professors Fels and Cousins Noting that the circumstances of the CRR errors are unique, the former Minister for Finance, Services and Property, the Hon Dominic Perrottet MP, asked Professors Fels and Cousins to advise the Government on compensation options for Property Owners. Professors Fels and Cousins provided their recommendations on compensation for the Property Owners involved in the CRR error. The Independent Report is available at www.finance.nsw.gov.au. Submissions To inform the process, the Government offered the opportunity for affected Property Owners to provide submissions for the consideration of Professors Fels and Cousins. The submission process was not compulsory. There were 51 submissions received, which is slightly less than 10% of the Property Owners who were contacted by the Government and advised of the error. Professors Fels and Cousins note that “not everyone affected by the CRR errors provided a submission in response to the invitation for them to do so. They should not be penalised in any way on this account.” The Government supports this position. NSW Government Response The NSW Government has considered the recommendations and advice provided in the Independent Report. The Independent Report recommends a hierarchy of compensation payments for the Property Owners involved in the CRR error. The Government has considered each recommendation in line with existing legislation and practice and has accepted the majority of recommendations, as outlined in this document. In accordance with the recommendations, the Government will offer compensation to Property Owners who received incorrect information due to the New M5 and proposed F6 project files not being uploaded to the CRR at the time of their search. Compensation will be offered on a per property basis. If there are multiple Property Owners for the one property, the total compensation offer will be divided by the number of owners. It should be noted that the compensation is for a very specific set of circumstances. Compensation is being offered to eligible Property Owners as a redress for the CRR error only. The compensation is not being provided under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) and is not linked in any way to the process of compulsory acquisitions. The recommendations and the Government response and process for implementation are outlined below. The Treasury Managed Fund (TMF) will manage the compensation process and have a contract with GIO to administer claims. 3 Recommendation 1 Professors Fels and Cousins recommend $500 Compensation for errors when persons affected did not acquire the properties concerned. The Government does not accept this recommendation. The Government will not offer compensation to prospective property purchasers who conducted a CRR search and received an incorrect response, but did not proceed to purchase the property. This recommendation is outside the scope for the Independent Report which defined eligible Property Owners as those who had:  Performed a CRR search and received an incorrect response;  Purchased the property; and  Currently own the property. The Government has already provided a refund for the cost of the search, via information brokers, to these individuals. Recommendation 2a Professors Fels and Cousins recommend $5,000 compensation for errors when properties were purchased, but only a minor detriment and level of uncertainty was experienced. The Government accepts this recommendation and will offer $5,000 compensation per property, to the Property Owners who received incorrect information relating to the New M5 Project, caused by the 2014 error. Planning for the New M5 has substantially progressed and there is no uncertainty for Property Owners who received incorrect information relating to this road project. Additionally, any reasonable legal fees incurred by Property Owners in responding to the CRR error to date or in providing documentation required to support compensation claims will be reimbursed, where evidence of costs is provided. This does not extend to any conveyancing costs incurred as part of the property purchase. DFSI will contact Property Owners to advise that the compensation is being offered. To be eligible, Property Owners must:  Have performed a CRR search and received an incorrect response in relation to the New M5 RMS project between 18 September 2014 to 11 November 2016;  Have purchased the property (for monetary value);  Currently own the property; and  Provide supporting documentation to prove eligibility including: o proof of property purchase such as a copy of the certificate of title; or local council and water rate notices; or a land tax assessment; or copy of the front page of sale contract for the property and letter from solicitor confirming settlement and o the CRR certificate.  Claim compensation within 12 months of the date of publication of the Government Response on 12 May 2017. 4 Recommendation 2b and 2c Professors Fels and Cousins recommend $30,000 Compensation for errors when properties were purchased and loss of amenity and/or uncertainty experienced. The Government accepts this recommendation. $30,000 compensation per property will be offered to Property Owners who purchased a property after receiving inaccurate information due to the 2016 CRR error, relating to the proposed F6 project. Due to the early planning stage of the proposed F6 project, Property Owners who are in the broad area of investigation will be eligible for this category of compensation due to the ongoing uncertainty of whether or not their property will be affected by the project. Additionally, any reasonable legal fees incurred by Property Owners in responding to the CRR error to date or in providing documentation required to support compensation claims will be reimbursed, where evidence of reasonable costs is provided. This does not extend to any conveyancing costs incurred as part of the property purchase. DFSI will contact Property Owners to advise that the compensation is being offered. To be eligible, Property Owners must:  Have Performed a CRR search and received an incorrect response in relation to the proposed F6 RMS project from 27 June 2016 to 24 October 2016.  Have purchased the property (for monetary value);  Currently own the property; and  Be able to provide supporting documentation to prove eligibility including: o proof of property purchase such as a copy of the certificate of title; or local council and water rate notices; or a land tax assessment; or copy of the front page of sale contract for the property and letter from solicitor confirming settlement and o the CRR certificate.  Claim compensation within 12 months of the date of publication of the Government Response on 12 May 2017. Recommendation 2d Owner option to have the property purchased Professors Fels and Cousins state; “where Property Owners consider they are or will be severely impacted by road projects not properly disclosed to them by the CRR, they should, as an alternative to receiving the $30,000 compensation payment, be given the option of having their properties purchased by the government authority. This includes also instances where tunnels impinge on the sub‐strata of land titles.” The Government partially accepts this recommendation. Property Owners who received an incorrect response in relation to the proposed F6 project (recommendation 2b and 2c) and can prove they have suffered significant detriment and/or ongoing uncertainty will have a choice of:  $30,000 compensation payment per property; or  Voluntary purchase of the affected property by the Government in accordance with the terms recommended by Professor Fels and Cousins as follows: 5 “The sale price should be the original purchase price paid by the owner plus $75,000. Stamp duty, legal, conveyancing and lenders mortgage insurance costs paid on the property should, in addition, be paid by the Government.” As recommended in the Independent Report, the price offered to purchase the property will be the original purchase price paid by the owner, plus $75,000. Stamp duty, reasonable legal, conveyancing and lenders mortgage insurance costs paid on the property will also be reimbursed by the Government, where evidence of reasonable costs is provided. DFSI will directly contact Property Owners to begin the claims process. Should a Property Owner indicate that they wish to volunteer to have their property purchased, this will be managed on a case by case basis. To be eligible to have the property purchased, Property Owners must:  Have received an incorrect CRR response relating to the proposed F6 RMS project and therefore be eligible for the $30,000 compensation;  Be able to demonstrate significant detriment and/or ongoing uncertainty;  Be able to provide supporting documentation to prove costs incurred as part of their property purchase; and  Claim compensation within 12 months of the date of publication of the Government response on 12 May 2017. This option is only available to those Property Owners who are within the area of investigation for the proposed F6 project and meet the eligibility criteria for compensation. The Government does not accept the recommendation that owners of properties where only a sub‐
stratum acquisition is required should be eligible for this option. This is because there is no significant detriment, loss of amenity or ongoing uncertainty for these Property Owners. It should be noted that the option for Property Owners to have their property purchased relates to the CRR error, and that the Just Terms Act is not applicable in this situation. Recommendation on Compulsory acquisition Compulsory purchase of property If any property purchased by a Property Owner on the basis of inaccurate CRR information is later compulsorily acquired, the terms of the Just Terms Act will apply. Professors Fels and Cousins consider that the maximum payment for disadvantage for relocation under the Act should apply in these cases. Under the Just Terms Act, compensation for relocation (solatium) is not payable to businesses or commercial (rented) properties – that is, this will only apply to those Property Owners where the property is the owner’s principal place of residence. The Government accepts this recommendation. DFSI will work with RMS to monitor this as planning for the F6 project progresses. 6 Implementation of Recommendations DFSI will lead the implementation of the recommendations on behalf of the NSW Government. The Independent Report notes that the Government should; ‘aim to move quickly on settling compensation payments’. The Government acknowledges that this may be a difficult time for Property Owners and will work with them to resolve the situation as quickly as possible. A high level timetable for the implementation of the recommendations is listed below. Action Period May 2017. Release of Independent Report and Government Response. $5,000 or $30,000 payment Property Owners advised of compensation 1‐3 weeks after the release of the process by letter. Independent Report and Government Response on 12 May 2017. The claims process is open for 12 months from Claims process begins. Property Owners date of the Government response on 12 May asked to submit claim and provide 2017. documentation required to assess compensation. Payment of compensation. Within 4 weeks after documentation is provided and claim is approved. Voluntary re‐sale of properties To be managed by Government on a case As required. by case basis. Enhanced regulatory arrangements for Land and Property Information The NSW Government recently announced a 35 year concession with the private sector to run the titling and registry services operations of LPI (the Operator). In the new model, there is a contractual requirement for the Operator to report to the regulatory body, the Office of the Registrar General, on a monthly basis confirming that any CRR files received have been correctly uploaded and are providing correct responses to enquiries on the CRR database. This enhanced reporting will provide greater certainty for Government, and prospective property purchasers who conduct a CRR search, that the information they receive is up to date. The new regulator has other strong statutory powers that don’t exist in other jurisdictions to ensure the Operator is delivering an accurate and timely CRR service. For example, comprehensive audit powers and the capacity to undertake ad hoc reviews and spot checks of the Operator’s performance. Under the new contractual agreement between the NSW Government and the Operator, the State can impose financial penalties on the Operator if they do not perform required services, such as uploading information correctly to the CRR. 7