UK: Consultation On Phase One Compensation

Last Updated: 30 September 2013
Article by Alexander Hallatt

On 12 September 2013 the Government launched a new consultation on the discretionary property compensation scheme that will operate in respect of Phase One of the HS2 scheme. This re-run of the consultation concerning the scheme follows the findings of the judicial review decision, announced on 15 March 2013, which found that the original consultation process into the scheme was illegal.

The Government characterises the proposed compensation scheme as similar to the Phase One scheme which was consulted upon previously. However, there are a number of new ideas identified in the consultation document including property bond, and sale and rent back options. The proposed compensation schemes are as follows:

Express Purchase

Owners of properties in the Safeguarding Zone (generally 60m either side of the centre line of the track), will be able to serve a blight notice on the Secretary of State.  The usual requirement that a property must be needed for the construction or operation of the railway before a blight notice is successful does not apply to the Governments proposed scheme. Additionally, it would not be necessary for a property owner to prove reasonable endeavours to sell a property in order to receive compensation for blight. If the Secretary of State agrees to buy a property in response to a blight notice the compensation will include the full un-blighted value of the property plus the reasonable costs of moving house and a Home Loss Payment (10% of the property's value up to a maximum of Ł47,000).

Sale and Rent Back

This proposal would be available to owner-occupiers of homes that would need to be demolished to construct and operate HS2. Upon the sale of the property they would be entitled to remain as tenants of the property. The availability would be subject to a "value for money test". For instance, it may not be available in the event that a home needs substantial expenditure to bring it up to minimum legal letting requirements (given that the home will eventually be demolished anyway). If an owner takes advantage of sale and rent back they would still be entitled to the the Home Loss Payment (upon sale of the property) and to moving costs upon moving out of the property.

Rural Support Zone

There are proposals for a new rural support zone which would apply to properties up to a certain distance outside the Safeguarding Zone (but not those within the Safeguarding Zone). This new zone would not apply in Greater London, or beyond Water Orton on the approach to Birmingham. The two options being proposed by the Government for assistance in this zone are as follows:

Voluntary Purchase Scheme

Applicable to properties within 120m of the centre of the track, owner-occupiers would be able to ask the Secretary of State to purchase their property for its un-blighted value. However, the additional compensation elements that are due under the express purchase scheme would not be available.

Property Bond

Applicable to properties within a yet to be defined distance of the centre of the track, an inflation-linked bond reflecting an agreed value for the property would be issued to owner-occupiers. If the owner wishes to sell the property and redeem the bond, the Government would guarantee to buy the bond back if the property does not sell for a price equivalent to or exceeding the value of the bond.

Long-Term Hardship Scheme

This scheme will be available to those that suffer genuine hardship because they cannot sell their homes due to HS2, but who do not qualify for any of the other schemes. There is no applicable distance limit from the centre of the track but owners will have to demonstrate that they have publicly marketed their homes for at least six months prior to their application to prove that they cannot be sold for within 15% of their un-blighted, open market value. Other criteria will also need to be met, including a demonstration that the applicant would suffer hardship as a result of not being able to sell their property.

It is inevitable that there will be property owners who would not benefit explicity from any of the other compensation proposals and who would need to rely on the Long Term Hardship Scheme. Due to the greater degree of discretion involved in assessing claims under the Long Term Hardship Scheme many of these property owners will not be content with the current compensation proposals and will say that they do not go far enough. The Government has a difficult balancing act of trying to compensate as many genuinely affected property owners as possible while keeping the cost to the taxpayer (which is already the subject of frenzied debate) as low as possible. It remains to be seen whether the depth of feeling in the response to this consultation result in any changes in the Government's proposals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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