So, what do you do if you wake up one morning to find a notice sitting on your doormat announcing that your property is under threat of compulsory purchase?

The answer depends on what is being acquired, how and why it is being acquired, the impact of the acquisition on your land and/or business and what stage the compulsory purchase process has reached.

Your home is your castle, isn’t it?

It is worth starting with a reminder that private property rights in the UK are jealously guarded by a combination of the Human Rights Act 1998 (the HRA) and the European Convention on Human Rights. Together, these prohibit the compulsory acquisition of private property “except in the public interest and subject to the conditions provided for by law.”

Nonetheless, there have always been circumstances where public authorities and certain bodies, that are responsible for what are traditionally regarded as ‘public’ services (e.g. privatised utilities) need to acquire land or rights over land in order to perform their functions and are unable to negotiate a purchase. Over the years, a broad range of powers have evolved. At one end is the general power of compulsory acquisition which applies wherever a local authority has a power to negotiate the purchase of any land (now contained at s. 121 of the Local Government Act 1972) (the General Power). At the other end are powers used by specific authorities, in particular circumstances, which are subject to specific controls. Section 226 of the Town and Country Planning Act 1990 is a typical example, and enables a local authority to acquire land which it “thinks … will facilitate the carrying out of development” but only if that development will contribute to the social, economic or environmental well-being of its area.

To ensure that acquiring authorities (AAs) are not using the General Power to avoid the statutory controls on various specific powers, government guidance insists that where a relevant specific power exists, it is always used in preference to the General Power.

In addition, government policy is that compulsory purchase powers should only be used where there is a “compelling case in the public interest” and as a last resort, i.e. where negotiations have failed. The ‘compelling public interest’ test requires the public interest in the underlying project to outweigh the interests of affected land owners (which will normally be a question of reasonable judgment usually by the Secretary of State). As part of this, there must be no obstacles to delivering the underlying project, e.g. funding for the project has been secured as well as any other necessary authorisations, such as planning permission. The ‘last resort’ requirement is less strictly applied, and the Government accepts that, for timetabling reasons, it is sensible for acquiring authorities to run a compulsory acquisition process (which can often take 18 months or more) in parallel with negotiations with affected land owners.

Any objections an affected land owner raises should, therefore, be aimed at compliance with the relevant statutory tests, and should attack the AA’s public interest case.

How does this process work?

The most common form of compulsory acquisition is a stand alone compulsory purchase order (a CPO) which is often used to facilitate town centre regeneration or highway widening schemes.

CPOs generally involve three broad stages:

  • securing relevant authorisations, assembling a list of land interests to be acquired, preparing the CPO/the CPO case and submitting it to the Secretary of State for confirmation
  • considering any objection to a CPO at a public inquiry and confirming or refusing the CPO
  • (assuming the CPO is confirmed) exercising the CPO to acquire land and compensating the affected landowners.

A land owner who is affected by a proposed CPO will be notified of each of these stages, and can raise objections to the principle of the CPO at stages 1 and 2. The first intimation of an impending CPO will often be a notice from the AA asking for details of who owns or occupies the relevant land. The AA is also required to notify affected land owners of its intention to submit the CPO to the Secretary of State for confirmation. That notice must include a deadline for submission of objections to the Secretary of State and the AA’s ‘Statement of Reasons’ which explains its ‘compelling public interest’ case. As long as the objections are about more than just compensation, the Secretary of State must hold a public inquiry at which objectors will be invited to present their case to an inspector.

Once the CPO has reached stage 3, the only recourse for disgruntled landowners is to judicially review the decision to confirm the CPO. Any judicial review will need to be started within six weeks of the date the affected land owner is formally notified that the CPO has been confirmed, and the grounds of challenge are effectively limited to pointing out legal flaws in the process or in the decision.

Judicial reviews are expensive and (in the absence of an obvious mistake) a high risk strategy. Generally, it is better to raise objections during stages 1 and 2 of the process rather than relying purely on legal challenges during stage 3.

What is the impact of a CPO?

CPOs will often acquire not only the land on which a scheme is to be built, but also extinguish any third party rights that could obstruct the scheme (such as rights to light and rights of way). They may also include temporary rights over neighbouring land, for example rights to swing a crane, rights of access and rights to erect a construction compound for the duration of the project.

All of this can have a range of adverse impacts on affected land owners. Most commonly, an owner may be ejected from its land altogether. But even if only part of the land is affected or if only rights over land are acquired, this can have significant adverse impacts on the value of the retained land and on any businesses that operate from it.

While an affected land owner will be entitled to compensation for any loss they suffer as a result of the CPO, disputes about the level of compensation are common. This often means that compensation is paid several years after the loss was incurred. In the meantime, the affected land owner will often be carrying costs which it can ill afford.

A preferable solution is to negotiate a compromise arrangement with the acquiring authority. At best, this could mean that the owner’s land is removed from the order; more commonly the owner is looking to reduce the area of acquired land or the scope of the acquired rights. It may also be possible to delay or fix the timing of the acquisition so that it better accommodates business or relocation needs, and/or to agree the amount and/or timing of compensation payments.

AAs are initially often reluctant to limit their options under the CPO. However, they are ‘on the hook’ for compensation, and should be interested in any solution which will manage their financial exposure (including the associated cost of the negotiations and delay caused to delivery of the project).

More importantly, a compromise arrangement will often be attractive to an AA if it enables them to head off a well-founded ‘in principle’ objection from the landowner. Although it is rare for a CPO proposal to be defeated altogether by a single objection, a number of informed objections to the authority’s public interest case, from a number of affected owners, risks ‘swamping’ the authority’s case at the inquiry. Hence, AAs will normally be open to sensible compromise offers from affected owners who have submitted strong objections to the CPO.

Compensation

Ultimately, a dispossessed land owner is always entitled to compensation. This is a notoriously complicated area. In simple terms, the package is made up of the following elements:

  1. the open market value of the acquired interest (ignoring any effect on its value as a result of the CPO scheme itself)
  2. any loss in value of any retained land
  3. any related costs incurred by the land owner as a result of being displaced (e.g. loss of business, relocation costs and the costs of professional advisors such a surveyors).

The valuation date is generally the date that the land is acquired, and the compensation is paid after the value is agreed post-acquisition.

Disputes about the amount of compensation are usually resolved by negotiation between surveyors. If they cannot be resolved, either party can refer the dispute to the Upper Tribunal of the Lands Chamber for a binding decision. The process is similar to going to court, adds to the delays and is expensive, with the losing party likely to end up paying the costs of the winning party. Moreover, the Upper Chamber has a reputation for reaching conservative assessments. Hence it takes a brave claimant to force a claim to the Upper Tribunal.

Conclusions

The autumn budget has announced a renewed push for infrastructure and housing, and CPO is likely to be part of many of these projects, with potentially severe impacts on landowners. The key to protecting your interests is to understand what is being proposed, and its potential impacts on you. While it is unusual to defeat a well prepared CPO proposal, the owners of affected business premises, in particular, should be aiming to raise strong objections early in the process in order to build a platform from which you can negotiate a better outcome.