A number of changes have been made to improve the operation of compulsory purchase (CPO) powers in recent years. The Neighbourhood Planning Bill (NP Bill) (published 7 September) is taking forward a number of proposed changes following consultations earlier this year.

Most of the further changes require primary legislation and unless stated otherwise below the NP Bill clauses apply to England and Wales. The NP Bill has now been debated in Committee and the dates for the House of Commons Report stage and Third reading are imminent.

A summary of the proposed changes is below. A number of issues have been raised in the Public Bill Committee which clarify the intention behind the new provisions and detail the reasoning for the changes.

More authorities to bring forward CPOs for joint purposes

Currently only principal local authorities are capable of promoting a joint CPO (on cross-boundary sites) under the Local Government Act 1972 with other authorities.

The Government is keen to increase housing development on surplus or underused public sector land. The NP Bill therefore contains provisions to confer similar powers on the Greater London Authority (GLA) and Transport for London (TfL) to work together.

Gavin Barwell the Minister for Housing and Planning explained in Committee that the provisions will allow the GLA and TfL to use their existing powers more by enabling them to promote joint compulsory purchase orders, or allowing one to acquire the land on behalf of the other. This will speed up the process by removing the current need for two CPOs for a comprehensive redevelopment scheme in London.

Primary legislation is required to implement the change and detailed provisions are set out in Part 2 of the NP Bill. These provisions obviously only apply to England.

Note that the Government is giving further consideration whether the proposal may be extended in the future to new combined authorities with mayors where similar bodies and powers exist.

Making provision for temporary possession

It is acknowledged that all acquiring authorities may need to use land on a temporary basis e.g. to store materials needed for the development which is the subject of the CPO. However, CPOs only allow for the permanent acquisition of land or the acquisition of permanent new rights. The provisions for temporary possession are available in Transport and Works Act Orders and Development Consent Orders.

The NP Bill Part 2, Chapter 1 contains the provisions which, when implemented, will provide a mechanism to:

  • give all bodies with CPO powers the power to temporarily use land for the purposes of delivering their scheme
  • provide that the basis for compensation is clearly defined and also how it should be paid.

Overall the provisions were welcomed, but the debate in Committee called for clarification in relation to a number of issues.

It was argued that there should be a prohibition against seeking temporary and permanent freehold powers over the same part of a freehold interest. It was noted that when faced with compulsory acquisition and possession is initially taken temporarily but which ultimately may become permanent, great uncertainty is created. For example, while the introduction of advance payments by the bill was welcomed in this context, it was noted that currently there is no strict time for when compensation is paid and when it is paid it is on a temporary basis. This it was anticipated would cause a problem for relocation or for funding a business move. It was noted that it should be possible to have temporary occupation and permanent acquisition of new rights over the same land and that there was no issue with this.

It was also suggested that the time period which would limit temporary possession on service of a counter notice should be reduced to 3 years from 6 years for the reason that a 6 year period of dispossession was in practical effect akin to permanent dispossession. The Minister set out the purpose of the provisions in some detail. He stated that the Government considered that 6 years strikes the right balance and the view that restricting the temporary possession period may limit the usefulness of the power as it may drive acquiring authorities down the route of compulsory acquisition in certain circumstances where that would be unnecessary. In this context he referred to the Thames Tideway tunnel case in which the maximum length of temporary possession is 8 years. Stating that the Government would keep the time limit under review the Minister also noted that the regulation-making power offered a mechanism for future changes if appropriate.

The practical issues with the interrelationships between different tenures in land, how to deal with an occupier of land when that land is taken temporarily, and what to do if buildings have to be demolished were also identified as in need of further clarification.

Clearer way to identify market value

The Minister spent some time on these proposed changes in Committee. He began by referring to the core principle of the compulsory purchase process is that compensation is offered at market value in the absence of the scheme underlying the CPO. Any increase or decrease in land values arising from the scheme is therefore disregarded for the purposes of assessing compensation. This he said was not altered by the Bill.

Successive case law has sought to clarify the basis upon which the land valuation in these circumstances is calculated, based around the principle of a 'no scheme world'. The basic premise is that valuation of the land being compulsorily purchased should disregard any land value uplift or decrease that is caused by the proposed scheme. The legislation provides that the project underlying the CPO is assumed to have been cancelled on the valuation date (the date of entry and taking possession of the land, if not agreed earlier).

Practitioners are now familiar with the technique of assuming a cancellation date for the underlying project. The no scheme world principle has, however, been interpreted in a number of complex and often contradictory ways in case law. This has made it very difficult to establish the basis for calculating market value in some cases. This can cause significant delays and uncertainty in the determination of compensation and may require a reference to the Upper Tribunal.

The NP Bill contains provisions to establish the principle of the ‘no scheme world' in the valuation process by codifying it in statute and to provide a clearer definition of what constitutes ‘the scheme’ in this context.

Regeneration scheme facilitated by transport improvements 

When a regeneration scheme is facilitated by transport improvements paid for by the public sector, land values will rise locally. Because the transport project will be pre-existing and so not form part of the no-scheme world for the regeneration project, this means that the compensation for land required for regeneration may have been inflated by the transport investment.

The Minister stated in Committee that the provisions would extend the definition of the scheme to include relevant transport projects where they have facilitated the regeneration or redevelopment scheme that is the subject of the compulsory purchase. The Minister said: "This is a complicated area of the law, so let me try to make it as clear as possible. What that means is that the land will be valued without the uplift caused by the public investment in the transport project."

The Minister stated that an acquiring authority would not be able to come along to a piece of land that had been improved by a transport project 20 or 30 years ago, when no mention of this redevelopment happened, and use this legislation to try to drive down the price of compensation. The Minister acknowledged that extending the definition of the scheme in this way will mean that some claimants receive less compensation than might otherwise have been the case. He referred to a number of 'safeguards' to ensure that the provision is proportionate and fair to all:

  • The prospect of regeneration or redevelopment must have been included in the initial published justification for the relevant transport project
  • The instrument authorising the compulsory acquisition must have been made or prepared in draft on, or after, the day on which this provision comes into force
  • The regeneration or redevelopment scheme must be in the vicinity of the relevant transport project
  • The relevant transport project must be open for use no earlier than 5 years after this provision comes into force - they must not be existing schemes
  • Any compulsory purchase for regeneration or redevelopment must be authorised within 5 years of the relevant transport project first coming into use
  • If the owner acquired the land after plans for the relevant transport project were announced, but before 8 September 2016 - the date the Government announced the proposal - the underlying scheme will not be treated as though it included the relevant transport project.

The Government's rationale for the provisions is that it would like to ensure that the public (rather than private interests) benefits from increases in land values arising from investment in transport infrastructure. It is seeking to ensure that claimant's do not benefit from uplifts in compensation arising from certain transport projects. The Minister confirmed that a dispute as to what is to be taken to be the scheme, in the context of the widening of the scheme, was not excluded from being referred to the Upper Tribunal to determine the level of compensation.

Defining 'no scheme' world for MDCs

For new towns and urban development corporations (UDCs) the whole area designated as the new town or UDC and all the development in those areas, that takes place after designation, is disregarded for the purposes of assessing compensation for CPOs. This means that the compensation for subsequent CPOs in those areas is assessed on the same basis as the first order, in other words it is not influenced by the development undertaken in earlier phases.

The NP Bill will put Mayoral Development Corporations (MDCs) (both in London and where a combined authority has a Mayor) on the same legal footing as new towns and UDCs. This is achieved by adding MDCs to the table in Schedule 1 to the Land Compensation Act 1961. This means that all development within these areas after designation forms part of the scheme to be disregarded. This has the effect that the value of later acquisitions within a new town area or mayoral development area will not be influenced by earlier developments within that area.

Occupier's disturbance compensation reviewed

Persons in lawful possession of, but without any further interest in, land to be compulsorily acquired (licensees) are entitled to disturbance payments for being displaced, under section 37 of the Land Compensation Act 1973. The payment covers removal expenses and, where the person is carrying on a trade or business on the land, the loss sustained by reason of the disturbance of the trade or business consequent on having to quit the land. In calculating this loss it is expressly provided for that regard should be had to the period for which the land might reasonably have been expected to be available for the purpose of the claimant's trade or business.

Provision for compensation where the interest in the land to be acquired is through a minor tenancy is made by section 20 of the Compulsory Purchase Act 1965. Case law (Bishopsgate Space Management v London Underground [2004] 2 EGLR 175) has held that for these purposes it should be assumed that the landlord terminates the tenant’s interest at the first available opportunity following notice to treat, whether that would happen in practice or not. The effect of this assumption is to severely reduce the occupier’s entitlement to compensation.

The difference between the current provisions results in unfairness. The NP Bill seeks to remove that anomaly by bringing the compensation entitlement for businesses with minor or unprotected tenancies into line with the more generous compensation payable to licensees. In calculating the compensation due to those with an interest in the land arising from minor tenancies and unprotected tenancies, the Bill provides that account is taken of the period for which the land occupied by the tenant might reasonably have been expected to be available for the purpose of his trade or business.

Blight

The current CPO system compensates owner-occupiers of properties or businesses that are affected by statutory blight from proposed development to require the acquiring authority to purchase their property on compulsory purchase terms. There are around 20 different forms of statutory blight (set out in Schedule 13 to the Town and Country Planning Act 1990), including allocation for statutory purposes in a development plan, safeguarding, designation as an urban development area and inclusion in a CPO.

The Bill's proposed consequential amendments add land subject to temporary possession to the categories of blighted land.

A claimant can submit a blight notice requiring the scheme promoter to acquire their property at open market value (excluding the impact of the blight). The acquiring authority can either accept the notice or challenge it through the Lands Chamber of the Upper Tribunal.

Currently, there is a rateable value limit of £34,800 before owner-occupiers of non-residential and non-agricultural properties are able to submit a blight notice. In essence this only applies to business premises. It is acknowledged that few properties within London fall within the rateable value limit owing to property being consistently more expensive in the capital.

The Government will raise the rateable value limit to allow more businesses to serve blight notices in Greater London with a lower limit (similar to the existing) for the rest of the Country. This proposal will require secondary legislation, to be in place for the next revaluation date on 1 April 2017. The Government is also assessing if the proposal will additionally require primary legislation.