Compulsory purchase orders (CPOs) enable various bodies in the UK and Ireland to legally secure rights over land or property, or obtain land or property outright, without the consent of the owner.

A CPO can be enforced if a proposed development is for the overall public benefit. A typical example is when a Highways Authority needs to build part of a motorway over land and the current owner of the land does not want to sell it. In the same way, a town council that wishes to improve a town centre, can issue compulsory purchase orders where private owners refuse to sell, or are only prepared to sell for a price which the council considers excessive.

Many property owners (who are involuntary participants in the CPO process) argue that they do not receive adequate compensation, and that compensation is not paid out early enough, if at all. At present, the only form of recourse available to property owners who feel settlement offers are unfair is to refer their cases to the Upper Tribunal of the Lands Chamber. The expensive and formal nature of this process frequently deters those with smaller claims from using it. Some parties feel they are left with no option but to accept a substandard outcome.

Searching for an alternative method

RICS professionals who work in the specialist field of Compulsory Purchase (CP) are so concerned about this state-of-affairs, they have invited the RICS Dispute Resolution Service to explore alternative methods of dispute resolution (ADR) for resolving CP disputes.

The starting point for RICS was the fact that when a CPO dispute is referred to the Upper Tribunal, it will normally be expected that the parties have explored ADR prior to making an application to the court. If a party unreasonably refuses to engage in ADR, the Tribunal could penalise them when it decides who pays for the costs of the legal proceedings.

A draft ADR mechanism has been developed by ADR experts at RICS with technical advice and support from RICS members and lawyers who work in the CPO sector. The objective has been to design a viable, cost-effective ADR option that resolves disputes at an early stage and is particularly well suited to lower value and less complicated cases. It should be quick, cost-effective and give parties confidence that the resolution of their dispute will be facilitated by someone who is impartial and has immense subject matter expertise.

Understanding the market

RICS’ draft ADR mechanism has recently been put out to a consultation, which closed on 21 September.

One key aim of the consultation is to get a firm grasp of the level of demand for a bespoke ADR option. Thus far, responses to the RICS consultation have indicated a real need for ADR in the light of the fact that projects such as HS2 and Heathrow Airport, and anticipated regulatory developments in the telecoms sector, will likely lead to increased numbers of CPOs.

Whilst various forms of non-binding ADR are already available, acquiring bodies, such as town councils, have typically been reluctant to use them. In some cases, this is because they are concerned with the time and costs incurred in the ADR process when there may be no compulsion to accept the result, or they are not confident that the points of contention will be assessed to their satisfaction. This reticence has been fed by the absence, until now, of a procedure tailored specifically for CP disputes, which addresses the unique priorities of both property owners and acquiring bodies.

Parties, particularly members of the public who are not experienced in dispute resolution, can be confused by the differences between ADR methodologies such as arbitration, expert determination, mediation, etc. In some cases, mutual distrust between parties and/or a big difference in relative bargaining positions results in parties failing to agree on an ADR method. Some ADR methods, which are presently available to those in the CPO/valuation sector are, or are seen to be, predisposed to one of the parties, e.g. where one party has unilateral decision rights to choose whether a dispute is suitable for an ADR procedure, or who will be appointed as dispute resolver.

RICS’ experience in developing and managing ADR services in other sectors, reveals that the more ADR options parties have, the less likely both sides will agree on which one to use. RICS’ objective is to provide an impartial and effective ADR method which lends itself specifically to resolving CPO disputes.

The success of an ADR service for CPO disputes depends on the credibility of third party dispute resolvers who are appointed to make impartial decisions or recommendations. Experience and expertise in CPO must be the primary qualifications for Independent Evaluators.

Next steps

RICS proposes to train CPO experts to discharge the ADR process. The training will include sessions on:

  • Managing the parties and timetables
  • Understanding their roles and duties to parties
  • Understanding and dealing with conflicts of interest
  • Managing and weighing evidence and submissions from parties
  • Writing fully reasoned and cogent reports

Ultimately, the objective of the RICS ADR mechanism is to prevent disputes from ending up in the Upper Tribunal. It is anticipated that fully reasoned reports, by impartial and highly qualified subject matter experts, will give parties a clear sense of how their disputes will pan out if they were to be referred to the Tribunal, thereby resolving the matter early and with agreement from both sides.

The impartial experts appointed to help resolve disputes will provide parties with detailed explanations for their recommendations. The recommendations will be non-binding. However, it is envisaged that the reports, which contain logical and compelling reasons by dependable and impartial CPO experts, will inform parties of the likely result that would be achieved if they pursued their disputes through to the Upper Tribunal.

Based on RICS’s observations over many decades in other sectors, these clear and cogent reasons will, it is envisaged, be sufficiently compelling in themselves that parties will be ready to accept them, thus resolving their dispute at an early stage. Moreover, it is expected that parties to disputes referred to ADR will frequently consent to be bound by the impartial report.

Subject to the results of the consultation, RICS will commit to promoting the ADR option to key people and organisations and ensure that, over time, it gains a reputation for efficient and balanced evaluations of compensation at reasonable cost. This is key to the success of the ADR proposal.

The consultation process has already raised awareness of the ADR proposals, and there is increasing anticipation in the market that the service proposed by RICS will be available soon.

For now, people are encouraged to respond to the consultation. Suggestions for improvements to the form and content of the ADR proposals are welcome.