Compulsory Purchase and Compensation

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1 Compulsory Purchase and Compensation Standard Note: SN/SC/1149 Last updated: 24 September 2010 Author: Christopher Barclay Science and Environment Section For all individual cases, constituents are strongly advised to consult a lawyer. The Library can give a general account of the law but cannot give legal advice in individual cases. It is most important that constituents do not lose out on some compensation because of Library briefing based on incomplete knowledge or understanding of the case. Where an objection to a compulsory purchase order is made by an owner, lessee or occupier and is not withdrawn, then, unless satisfied that the objection is exclusively related to compensation, the confirming authority must use the written representation procedure or arrange for either a public inquiry or a hearing before an inspector appointed by the Minister. The Planning and Compulsory Purchase Act 2004 made it easier for local authorities to purchase land compulsorily. Appeals relating to compensation are treated separately. They are heard by the Lands Tribunal. Compensation is paid at the open market value of the property, as if there were a willing seller. Extra homes loss payments are also made. The term blight has a technical meaning. When land is going to be purchased compulsorily, the price of the property might fall as a result of nearby development. To avoid losing out on compensation, the owner can issue a blight notice to force the acquiring authority to go ahead with the purchase. The authority can appeal against a blight notice. Compensation may be payable for a reduction in value of land caused by the use of certain public works. This compensation is based upon the depreciation caused by physical factors: noise, vibration, smell, fumes, smoke, artificial light and the discharge onto land of any solid or liquid substance. Compensation is not available for a loss of view. This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. It should not be relied upon as being up to date; the law or policies may have changed since it was last updated; and it should not be relied upon as legal or professional advice or as a substitute for it. A suitably qualified professional should be consulted if specific advice or information is required. This information is provided subject to our general terms and conditions which are available online or may be provided on request in hard copy. Authors are available to discuss the content of this briefing with Members and their staff, but not with the general public.

2 Contents 1 Right of appeal against a compulsory purchase order 2 2 The legal basis for fair compensation in UK law 2 3 Compensation when land is not taken 3 4 European law 3 5 Home loss payments in UK law 4 6 Justification for compulsory purchase 4 7 The position after the 2004 Act 5 8 Blight notices 6 9 The 2005 statement rejecting any further major reform 7 1 Right of appeal against a compulsory purchase order Compulsory purchase powers exist in many different pieces of legislation. They are often specialised, for example powers to acquire land for the construction of an airport. The rights of appeal, and the consequent procedures, do not depend on the choice of legislation. They are laid down in the Acquisition of Land Act 1981, which applies in all compulsory purchase cases. Appeals are covered by s.13a. Where an objection to a compulsory purchase order is made by an owner, lessee or occupier and is not withdrawn, then, unless satisfied that the objection is exclusively related to compensation, the confirming authority must use the written representation procedure or arrange for either a public inquiry or a hearing before an inspector appointed by the Minister. Objections relating to compensation are treated differently, with a right of appeal to the Lands Tribunal. 2 The legal basis for fair compensation in UK law Compensation is paid at open market value of the property, as if there were a willing seller. Anyone dissatisfied with the amount of compensation offered can appeal to the Lands Tribunal. In addition, there may be extra compensation when a home is compulsorily purchased (see section 5 below). Compulsory purchase procedure in the UK is covered by the Acquisition of Land Act 1981, as amended, although the compulsory purchase powers come in many different Acts. That Act refers back to the Land Compensation Act 1961 for assessment of compensation. Section 5 of the 1961 Act gives five rules for assessing compensation: (1) No allowance shall be made on account of the acquisition being compulsory: (2) The value of the land shall, subject as hereinafter provided, be taken to be the amount which the land if sold on the open market by a willing seller might be expected to realise: 2

3 (3) The special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers, or for which there is no market apart from the requirements of any authority possessing compulsory powers: (4) Where the value of the land is increased by reason of the use thereof or of any premises thereon in a manner which could be restrained by any court, or is contrary to law, or is detrimental to the health of the occupants of the premises or to the public health, the amount of that increase shall not be taken into account: (5) Where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the Lands Tribunal is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement: (6) The provisions of rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land. In practice, of course, there are immense complications. In cases where the owner is not offered what he considers adequate compensation, there is a right of appeal to the Lands Tribunal. The Lands Tribunal was established by the Lands Tribunal Act 1949 to determine questions of disputed compensation arising out of the compulsory acquisition of land; to decide rating appeals; to exercise jurisdiction under section 84 of the Law of Property Act 1925 (discharge and modification of restrictive covenants); and to act as arbitrator under references by consent. The Tribunal s jurisdiction is exercised in England and Wales. The Tribunal consists of a President who must have been a judge or a barrister and other Members who must be either lawyers or persons experienced in the valuation of land. Further information is available on their website The jurisdiction of the Lands Tribunal was transferred into the Lands Chamber of the Upper Tribunal from 1 June 2009, in line with an overall review of the tribunal system. The Lands Tribunal name has been retained for the time being. 1 3 Compensation when land is not taken In certain limited circumstances, compensation is payable for disturbance, even though the land is not acquired compulsorily. The reply to a PQ in March 2006 summed up the position: Yvette Cooper: Under Part 1 of the Land Compensation Act 1973, compensation may be payable for a reduction in value of land caused by the use of certain public works. This compensation is based upon the depreciation caused by physical factors: noise, vibration, smell, fumes, smoke, artificial light and the discharge onto land of any solid or liquid substance. Compensation is not available for a loss of view. 2 4 European law The relevant European law is not the law of the European Union, but the European Convention on Human Rights. One of the problems that the European Convention on Human Rights aimed to tackle was the expropriation of Jewish-owned assets by the Nazi 1 2 Delegated Legislation Committee Deb 28 April 2009 cc3-8 HC Deb 9 March 2006 c1758w 3

4 government with little or no compensation. This is covered by the Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms. Article 1 Protection of property Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. That provision would prevent a compulsory purchase without compensation or otherwise out of line with normal rules. 5 Home loss payments in UK law An ODPM booklet explains the basis of home loss payments: Amount of Home-Loss Payment 2.67 If you are the owner of a freehold or a lease with at least three years unexpired you are entitled to 10% of the market value of your interest, subject to a maximum payment of 34,000 and a minimum payment of 3,400. Any other claimant is entitled to a flat rate of 3, Where two or more people are entitled to make a claim for a home-loss payment in respect of the same interest (such as a husband and wife who are joint owneroccupiers or joint tenants who share the same home) the payment is divided equally between claimants. ( ) 2.70 The acquiring authority must make the payment on or before the latest of: the date of displacement; or three months from the date of the claim; or the date on which the market value of the interest (upon which the payment is based) was agreed or determined. 3 Other types of loss payments may be made where home loss payments do not apply. 6 Justification for compulsory purchase Constituents sometimes wonder whether the local authority is really entitled to purchase their property compulsorily for a redevelopment project. Local authorities have fairly wide powers for compulsory purchase, so one can normally assume that they do have the power to do what they intend. The Town and Country Planning Act 1990 s.226 (as amended by The Planning and Compulsory Purchase Act 2004 s.99) gives local authorities broad powers to acquire land compulsorily and is commonly used. The main part reads: (1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area 3 ODPM, Compulsory Purchase and Compensation: Compensation to Residential Owners and Occupiers,

5 (a) if the authority think that the acquisition will facilitate the carrying out of development, re-development or improvement on or in relation to the land; (b) which is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated. (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re-development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) the promotion or improvement of the economic well-being of their area; (b) the promotion or improvement of the social well-being of their area; (c) the promotion or improvement of the environmental well-being of their area. Major infrastructure projects often involve some compulsory purchase. The Planning Act 2008 introduced a new category called development consent for major infrastructure projects of national importance. The idea is to remove the need for several different consents under different legislation for a single project. Development consent would be granted by the Infrastructure Planning Commission (IPC), a new independent body of experts who would hear the evidence and decide the application. Development consent will be given in the form of an order which may also confer upon developers certain rights for the purposes of facilitating the project. These rights may include the compulsory acquisition of land where there is a compelling case in the public interest. 4 The IPC has been open for applications since March 2010, but the Coalition government is committed to abolishing it, probably in April The position after the 2004 Act An article in October 2005 noted how the compulsory purchase process had become more user friendly, as a result of the Planning and Compulsory Purchase Act 2004, with increased compensation encouraging landowners to accept the purchase. In theory, councils can now justify orders for a variety of development projects that promote the well-being of their areas. Under the old regime, all CPOs had to be approved by the Secretary of State. Now they can be fast-tracked without the ministerial rubber stamp if they raise no objections. However, some practitioners feared that the Act had made the process more time consuming: We are required to identify freehold, household and short-term interests in the CPO and we have to do a separate table of restrictive covenants. Consequently there is an increase in the number of people we must notify of the order. That means more work. 5 In October 2006, the Minister summed up some benefits from the Act: Mr. Weir: To ask the Secretary of State for Communities and Local Government what steps she is taking to reduce the time taken to process compulsory purchase orders referred to her Department by local authorities. Yvette Cooper: The Planning and Compulsory Purchase Act 2004 included a number of provisions to assist in the more rapid processing of compulsory purchase orders 4 5 Planning Act 2008 sections Order reforms fail to deliver, Planning, 28 October

6 including the power for acquiring authorities to be allowed to confirm their own orders if they are unopposed and certain other criteria are fulfilled; a power for all types of compulsory purchase orders to be confirmed in stages where appropriate so that progress can be made on one part of a scheme despite there being reasons why the order cannot yet be confirmed in respect of another part of the order land. The Act also enabled the introduction of written representations procedure for dealing with objections to compulsory purchase orders as a quicker alternative to holding a public inquiry. 6 8 Blight notices The term blight has a technical meaning in law relating to compulsory purchase. When a property is acquired compulsorily, compensation is payable at the market value. When agreement has been reached for the development to go ahead, some properties may be bought before others. Later properties might have a lower market value as a result of the development. Therefore they would be liable to receive lower compensation. In certain circumstances, property owners can issue a blight notice, requiring the compulsory purchase to go ahead so that they receive compensation at the full rate. A textbook on compulsory purchase summarises: The circumstances are when the owner can show that, as a result of proposals by the authority which would involve their purchase of the land in the future, he cannot currently sell his interest except at a substantially depreciated price. The provisions are based on the principle that the public proposal must have a fair degree of certainty 7 The definition of blighted land comes in schedule 13 of the Town and Country Planning Act 1990 as amended, particularly by the Planning and Compulsory Purchase Act 2004 (schedule 6). It includes land identified in a development plan for relevant public functions, even if the development plan has been submitted to the Secretary of State for independent examination, but not yet finally approved. The key part of schedule 18 is as follows: "1A Land which is identified for the purposes of relevant public functions by a development plan document for the area in which the land is situated. Notes (1) Relevant public functions are- (a) the functions of a government department, local authority, National Park authority or statutory undertakers; (b) the establishment or running by a public telecommunications operator of a telecommunication system. (2) For the purposes of this paragraph a development plan document is- (a) a development plan document which is adopted or approved for the purposes of Part 2 of the Planning and Compulsory Purchase Act 2004 (in this paragraph, the 2004 Act); (b) a revision of such a document in pursuance of section 26 of the 2004 Act which is adopted or approved for the purposes of Part 2 of the 2004 Act; (c) a development plan document which has been submitted to the Secretary of State for independent examination under section 20(1) of the 2004 Act; 6 7 HC Deb 9 October 2006 cc360-1w Boynton s Guide to Compulsory Purchase and Compensation (7 th ed) p126 6

7 (d) a revision of a development plan document in pursuance of section 26 of the 2004 Act if the document has been submitted to the Secretary of State for independent examination under section 20(1) of that Act. (3) But Note (2)(c) and (d) does not apply if the document is withdrawn under section 22 of the 2004 Act at any time after it has been submitted for independent examination. (4) In Note (2)(c) and (d) the submission of a development plan document to the Secretary of State for independent examination is to be taken to include the holding of an independent examination by the Secretary of State under section 21 or section 27 of the 2004 Act." Other categories included in schedule 13 of the 1990 Act are: new towns and development areas; clearance and renewal areas; land identified in a development plan for highways; land authorised by a special enactment to be compulsorily acquired. Even if a landowner issues a blight notice, the public authority can issue a counter notice. One ground for a counter notice is that they do not intend to acquire that land compulsorily. 9 The 2005 statement rejecting any further major reform The Planning and Compulsory Purchase Act 2004 introduced some minor reforms to the compulsory purchase system but it was drafted before the final conclusions of the Law Commission review of compulsory purchase law. On 15 December 2005 the ODPM made it clear that no further changes to primary legislation were envisaged: The Minister for Housing and Planning (Yvette Cooper): The Deputy Prime Minister has today placed copies of his response to the Law Commission's report: "Towards a Compulsory Purchase Code" in both Libraries of the House and has also placed the response on the ODPM website The Commission presented their report to Parliament in two parts: on Compensation (Law Com No 286) in December 2003 and on Procedures (Law Com No 291) in December In 2000 the Compulsory Purchase Policy Review Advisory Group (CPPRAG) had recommended changing the compulsory purchase of land powers, procedures and compensation arrangements. The most pressing changes were put in the Planning and Compulsory Purchase Act 2004 and included strengthening local authority powers to acquire land for the creation of sustainable communities as well as making the compensation fairer to those losing their land. CPPRAG also proposed the Government should work with the Law Commission on how to replace the whole of the current raft of statute and case law on compulsory purchase and compensation by a single statute expressed in modern language. ODPM and its predecessor Departments (DETR and DTLR), along with the Welsh Assembly Government, have been working on this with the Commission since Although the Commission's recommendations identify a basic framework for reforming the structure of the law, they do not set out the detailed provisions needed to ensure fairness to those affected, as well as speed and simplicity. The ever-evolving complexity of the statute and case law has shown that these aims cannot always easily be reconciled. As the Law Commission have demonstrated, there are no quick and easy solutions and moving towards a simpler and more readily accessible set of laws would still require substantial further work. 7

8 The Government would like to have a single simple compulsory purchase code expressed in modern English. But finding further legislative time for these needs to be balanced against the Government's many other priorities. Given the changes providing immediate and tangible improvements were in the 2004 Act, implementing the Law Commission's proposals is not a practicable proposition for the foreseeable future. The Government considers it more important to maintain a stable legislative framework providing certainty both for acquiring authorities and for those whose properties may need to be acquired. This should encourage acquiring authorities to exercise their compulsory purchase powers wherever this makes sense in the public interest to further their wider policy objectives. 8 8 HC Deb 15 December 2005 c162ws 8