UK: Proposed Changes to the Compulsory Purchase Regime

Last Updated: 20 November 2002
Article by Ian Ginbey

Introduction

In December 2001, the Government published its consultation document "Compulsory Purchase and Compensation: delivering a fundamental change" as part of its proposals to review the compulsory purchase regime. This has now been followed by the publication in July 2002 of a draft Circular entitled" Compulsory Purchase Orders". The draft Circular has been issued for public consultation until 31 October 2002. Simultaneously, the Government's policy response, "Compulsory Purchase Powers, Procedures and Compensation: The Way Forward" has been published.

Ultimately, the Circular will replace the extant advice in DOE Circular 14/94 albeit it is designed to address a wider range of issues. Enabling legislation will also follow to facilitate delivery of the Government's response. This ongoing work is being addressed by the Law Commission.

The Government's Response

The Government recognises that the present system of compulsory purchase is lengthy and cumbersome, and proposes (in summary) the following changes:-

1. The planning basis for a compulsory purchase order ("CPO") as set out in Section 226 of the Town and Country Planning Act 1990 ("the Act") will be replaced by a wider power. A local planning authority will be empowered to compulsorily acquire land for the purpose of carrying out development, re-development or improvement which it considers will be for the economic, social and/or environmental benefit of its area. Hence, it will no longer be necessary to demonstrate that the land is "required" (see our comments below).

2. An acquiring authority itself will be able to confirm an unopposed CPO.

3. The asset being acquired will be valued on the date on which the authority enter and take possession.

4. New consolidated Inquiry Procedure Rules will be published.

5. All those with an interest in land (including short term tenants for a month or less) will be treated as a statutory objector with a right to be heard at a public inquiry.

6. A general scheme for "loss" payments will be devised to run in parallel with existing home loss payment arrangements. Although the detail is as yet undecided, it is suggested that the new scheme could take the form of a basic loss payment for each owner, based on a percentage of the value of his interest in the property subject to a maximum cap.

7. Revised time limits for CPOs will be introduced. The overall period within which an acquiring authority has to complete the process following confirmation of a CPO will be reduced from 6 years to 3 years. A maximum of 18 months will be permitted between confirmation and service of a notice to treat (or a general vesting declaration). A notice to treat will only remain effective for a further 18 months.

8. The period between service of a notice of entry and physically taking possession will be increased from 14 days to 2 months. If the authority has not then taken possession within one month of the expiry of the 2 month period then the notice will cease to have effect and no further notice can be served.

9. The Ryde's Scale for determining surveyors fees will be revoked, and surveyors will be reimbursed in full in line with other professional advisers.

10. The current Crichel Down Rules (i.e. that compulsorily acquired property which has become surplus shall be offered back to the original owner) will be revised and the subject of a separate consultation exercise in due course.

There are further initiatives which the Government had originally considered but have now dropped including (i) the imposition of a time limit for submitting compensation claims and (ii) referrals to the Lands Tribunal.

These proposed new measures are designed to ensure that CPOs are properly made and expedited, and this approach is also reflected in the draft Circular. We distil the principal points emerging, many of which should be read in the context of the Government's response above, and proposed amending legislation which will follow completion of the work by the Law Commission.

Grounds for making a CPO

The draft guidance reiterates the principle that a CPO should only be made where there is a compelling case in the public interest. It has, of course, assumed even greater significance with the advent into the UK legal system of the European Convention on Human Rights by virtue of the Human Rights Act 1998. Inevitably, the Secretary of State must balance the intentions of the acquiring authority with the grievances of those whose land is to be expropriated. Acquiring authorities will be unable to justify confirmation of a CPO if it cannot present a clear case as to either how the land is to be used, or that the resources are unlikely to be available to deliver the proposal within a reasonable timescale.

Allied to this, the financial viability of a scheme is critical, and will be taken into account by the Secretary of State. Acquiring authorities can expect to have to demonstrate that the proposed compulsory acquisition will be completed within the statutory period following confirmation of the CPO. For most schemes, securing planning permission will be a key factor.

CPO for Planning Purposes

Section 226 of the Act (soon to be replaced) is commonly used as a justification for a CPO which is required for planning purposes. Either because (in broad terms) land is required to secure the carrying out of development or for a purpose which is necessary to achieve in the interests of the proper planning of the area.

Hence, an acquiring authority must presently demonstrate that the land to be taken is genuinely "required"; the Courts have held that "required" must mean more than "desirable". However, provided that without a CPO the purpose for which the land is required is unlikely to be achieved, acquiring authorities should not be expected to demonstrate they have used all other available powers before resorting to compulsory purchase.

In justifying the CPO, there must be a degree of certainty that the intended scheme will proceed for example by reference to an extant planning permission. However, the draft circular states, a planning permission is not seen by the Secretary of State as an essential requirement to be fulfilled before submitting a CPO for confirmation. It might be possible, for example, to make a CPO in parallel with seeking planning permission. Albeit, this will mean that the authority making the CPO will have to accept the possibility (and the associated risk) that the CPO could be rejected while planning permission is granted.

The Secretary of State will need to be reassured that there is a reasonable prospect the scheme will proceed; and a general indication of funding intentions will be necessary to demonstrate the financial viability of the scheme. The greater the uncertainty of that viability, the more compelling the other grounds for undertaking a compulsory purchase will have to be.

Preparing a CPO

Before commencing a compulsory purchase, acquiring authorities are urged to seek to acquire land by private treaty wherever possible and practicable. Quite often, given the length of time it takes to process a CPO it should be possible to carry out informal negotiations with landowners to run parallel with the CPO preparation.

The draft guidance strongly urges acquiring authorities to offer to third parties full access to alternative dispute resolution ("ADR"). This commonly involves a suitablyqualified independent third party to act as mediator on any dispute. It is speedy and relatively informal. Acquiring authorities are urged to consider ADR throughout the whole process. The draft guidance also sets out additional steps which acquiring authorities might consider during the preparatory stage of a CPO:-

  • to provide detailed information about the CPO process;
  • to appoint a case manager as a point of contact; and
  • to enter into informal contracts with third parties so as to guarantee a minimum level of compensation to be paid if the acquisition proceeds.

Acquiring authorities are urged to avoid delay. The draft guidance is clear this means that the authority should be in a position to make, advertise and submit a fully documented CPO immediately after having resolved to make it. In practice, this is likely to require a significant amount of work to be carried out in advance of referring the matter to committee for a resolution to make a CPO.

Where an authority has any doubts, particularly as to technical points, concerning the proposed CPO it is possible to submit a draft CPO to the relevant Secretary of State for technical examination. While any response from the Secretary of State will be without prejudice, it can be a useful mechanism to iron out any potential flaws in the CPO. Naturally, any response from the Secretary of State will be confined to the technical consideration of the CPO, with no assessment of its merits.

All statutory objectors have a right to be heard at a public inquiry. However, authorities are encouraged to continue any negotiations with objectors (both statutory and non-statutory) even after submitting a CPO for confirmation. This should include having regard to the possibility of ADR.

If objections cannot be resolved, then a public inquiry is likely to be held. The draft guidance suggests that an inquiry will commonly be held around three to four months after submission of the CPO for confirmation. Once an inquiry date is fixed, it will not be changed in the absence of exceptional reasons for example all outstanding objections from statutory objectors have been withdrawn.

Acquiring authorities should also bear in mind the possibility of conjoining with a CPO inquiry any concurrent inquiries; for example, this might include an inquiry to objections into a proposed road closure order. This is quite common in the context of large development schemes.

While the Secretary of State has the power to modify any CPO, such powers are rarely used and, even when they are, cannot be used to re-write CPOs extensively. Significant matters, such as the substitution of a different statutory purpose for which the CPO has been made, cannot be a matter for modification. It would require a new CPO to be made and submitted for confirmation.

Implementing the CPO

The period from confirmation of a CPO until the passing of ownership can be lengthy; a notice to treat need only be served within three years of confirmation, and there then follows a further three years during which the notice to treat remains effective. Third parties, whose land is affected by the CPO, can therefore sometimes face a wait of up to six years before they know for certain that their property will be acquired.

The draft guidance recognises that this can be unsatisfactory for third parties and, therefore, urges acquiring authorities to keep affected third parties fully informed about the process as well as the likely timetable. Allied to this, acquiring authorities are advised to open the possibility of earlier acquisition by agreement where requested by a third party.

It is possible to simultaneously serve both a notice to treat and a notice of entry; in the case of the latter, this provides a third party with no less than 14 days' notice of the authority's intention to gain entry. Acquiring authorities are urged, in the draft circular, to adopt a timetable for entry of premises which is more sympathetic to the needs of those who are being dispossessed having regard to steps which they need to take to vacate their properties.

As an alternative to a notice to treat, an acquiring authority might prefer to adopt the general vesting declaration procedure. In this way, an authority can secure title to the land without first having been satisfied as to title or having to settle the amount of compensation. Such a declaration may be made for any part or all of the land included in the CPO; however, it will not be effective against interests in respect of which notice to treat has already been served, minor tenancies, or long tenancies which are about to expire.

Authorities are advised to execute a general vesting declaration within three years of the CPO becoming operative.

Compensation

The compensation which is payable upon compulsory acquisition should represent the value of the land which comprises:-

  • open market value i.e. the amount which the land might be expected to realise if sold on the open market by a willing seller;
  • severance and/or injurious affection; and
  • disturbance and other losses not directly based on the value of the land.

Where the open market value cannot be ascertained or (even when combined with compensation for disturbance) it would be insufficient to enable the third party to relocate his activity, then compensation is payable on the basis of equivalent reinstatement. In the absence of agreement between the parties as to open market value, it is left for determination by the Lands Tribunal.

In relation to a general vesting declaration, compensation (and interest) is assessed as at and from the vesting date. However, where a notice to treat is served, the valuation date is either the date on which the acquiring authority takes possession (i.e. the date of entry) or, if earlier, the date on which compensation is agreed by the parties (or determined by the Lands Tribunal).

If an acquiring authority takes possession before compensation has been agreed, it is obliged to make an advance payment on account of any compensation which is due. The amount which must be paid is 90% of the acquiring authority's estimate of the compensation due or, if the amount of compensation has been agreed, 90% of that figure. The advance payment must be paid within three months of the claimant's written request. The draft guidance is clear that authorities should adopt a responsible approach towards making such payment, have regard both to timing and quantum, so as to provide claimants with sufficient liquidity to ensure satisfactory relocation. Acquiring authorities should also consider the possibility of making earlier payment where justified to enable claimants to proceed with reinstatement, and alleviate any obvious hardship for third parties.

Summary

It is quite clear that the proposed new guidance, and the Government's response, are designed to ensure that acquiring authorities are cognisant of the need to expedite the compulsory purchase process, whilst balancing the interests and needs of affected landowners. This is a welcome move, since it is generally acknowledged by practitioners that the present system is archaic and overly complex, and quite often acts as a deterrent to early delivery of detailed development schemes. In practice, we suspect material change is unlikely until the Government has formally implemented its proposals in the guise of primary legislation.

This article is intended to raise your awareness of certain issues (as at September 2002) under the laws of England and Wales, and is not intended to be comprehensive or a substitute for proper advice which should always be taken for particular queries.

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