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Long overdue reform of the compulsory purchase system

Last year the government consulted on reforms to the compulsory purchase system. These changes are making their way through Parliament in the form of the Housing and Planning Bill. 

Last week, the government launched another consultation setting out proposals for more reform of the system. These include the introduction of a penal rate of interest for acquiring authorities to encourage them to make prompt payments to those from whom land is acquired.

In this article we highlight the key proposals for change.

A clearer way to identify market value

It is long established that the valuation of land being compulsorily acquired should disregard any uplift or decrease that is caused by the proposed scheme. However, there is a lack of clarity about how this should be done. It is, therefore, proposed that the valuation process should be defined in primary legislation.

The Law Commission, back in 2003, proposed that a new rule should be introduced which will supersede the current "no-scheme" or "Pointe Gourde" rule. The consultation asks for views on whether this new rule (known as Rule 13) should be adopted. Full details of Rule 13 can be found in the consultation document but the basic principles are:

  • A new definition of "statutory project" with disputes determined by the Lands Chamber;
  • On the valuation date, it shall be assumed that the statutory project has been cancelled;
  • The cancellation date is the date on which the compulsory purchase order notices were issued;
  • All previous rules, whether statutory or in case law, shall no longer apply.

It is also suggested that, in some cases, it will be appropriate for specific transport infrastructure projects to be disregarded when assessing land value. This is to deal with the situation where a transport project has been funded by the public, and land values in the vicinity have been increased by the improved transport links. If the transport project is not disregarded when assessing the value of the land being acquired, the public will end up paying twice – once in funding the transport project and then again in funding a higher acquisition price for the land being compulsorily purchased.

Mayoral development corporations

Where you are dealing with a new town or urban development corporation, the whole of the designated new town or urban development area, and all development in those areas, is disregarded for the purposes of assessing compensation for compulsory purchase orders (CPOs). The consultation proposes extending this to mayoral development corporations. The aim is to make compensation negotiations clearer and faster, and, consequently, cheaper.

How much compensation is payable to occupiers?

The consultation sets out a number of proposals for change in relation to the way in which occupiers of land are compensated:

  • Align section 20 of the Compulsory Purchase Act 1965 with section 37 of the Land Compensation Act 1973. This would result in those with an interest in land arising from a minor tenancy having account taken of the period for which the land might reasonably be expected to have been available for the purpose of their trade or business.
  • Amend the current rules setting out how loss payments are allocated to owners and occupiers to reflect the fact that occupiers suffer most in a CPO situation. The consultation suggests that the maximum sum that owners should receive is £25,000, whilst occupiers could receive up to £75,000. The actual sum that could be received will depend upon the value of the market interest.

Penal interest rates

There is currently no incentive for acquiring authorities to make a prompt payment of compensation following a CPO. The consultation suggests that this injustice should be addressed, and proposes a penal interest rate of 8% above base rate.

Statutory blight

Currently an owner-occupier of a property which is blighted by a proposed development can submit a blight notice requiring that the land be acquired at open market value. However, they can only do this if the rateable value of the property is below £38.400. It is suggested that this unfairly prejudices those in high value areas. The consultation proposes that the value should be increased in Greater London and also asks whether higher rates should apply in other areas.

Joint CPOs

The consultation proposes giving the Greater London Authority and Transport for London the ability to promote a joint CPO for transport and regeneration purposes on one site. This would mean that, for a development scheme which also involves improved transport infrastructure, two CPOs would no longer be required. It is suggested that this proposal may also be appropriate for new combined authorities with mayors.

Temporary possession

It is common for acquiring authorities to require land on a temporary basis during a CPO. This may be to provide access to the CPO land, or for the storage of materials needed for the development. Although there is already power to use land temporarily, the scope of these powers is not clear and can lead to inconsistency in approach. Issues concerning compensation can also arise. The consultation, therefore, proposes giving all bodies with CPO powers the same power to temporarily enter and use land for the purpose of delivering a scheme.

Publishing notice of a CPO

The date that the notice confirming the CPO is published in the press is the date that the order becomes operative. It is also the start of the six week challenge period, and the start of the three year period within which the CPO powers must be exercised. Some acquiring authorities delay in publishing the notice and, therefore, delay the commencement of these time periods. To address this, the consultation proposes that there should be a statutory time period (six weeks is suggested) within which the notice should be published.

Have your say

If implemented, acquiring authorities will have to alter some of their procedures for dealing with CPOs. Most significant for them, perhaps, will be the introduction of a penal interest rate. It will no longer be possible to delay in making a compensation payment without there being financial consequences.

Contributor: Alexandra Holsgrove Jones 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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