UK: HS2 - The Compensation Conundrum

Last Updated: 15 January 2019
Article by Iain Johnston

The recent BBC Panorama programme on HS2 highlighted significant concerns that the project is over budget and that defective measures have been used in calculating the costs of the acquisition of the land needed for the project and compensation claims.

Allied to this issue is the fact that surveyors and lawyers acting for landowners/businesses seeking to negotiate compensation claims with HS2 suspect that to save money HS2 is deliberately operating a practice of delaying negotiations on early agreements and adopting a strategy that will frustrate or postpone legitimate compensation claims for many years. 

The law on Compulsory Purchase is complex and opaque.  However, there is a guiding principle known as one of "equivalence".  This means that regarding compensation a landowner or business should be placed in a position in which they do not lose out financially on the forced acquisition of their land or business. Equally the landowner or business should not benefit financially from the acquisition.

However, experience demonstrates that landowners and businesses, more often than not, come out of the compulsory purchase process feeling bruised, ill-treated and short changed. 

In practise, a landowner will employ an experienced compulsory purchase surveyor to value his compensation claim.  The acquiring authority, here HS2, will also employ a surveyor to assess the landowners claim.  Experience demonstrates, time after time, that the aim for the acquiring authority appears to be to keep compensation to the bare minimum.  The aim does not appear to be to pay the landowner or business a fair compensation. 

Do not be fooled by the statement that HS2 will pay up to 90% of the compensation on a claim at an early stage in the compulsory purchase process.  This is 90% of HS2's valuation of the property! More often than not there is a significant financial difference in the valuations.  The Euston Estates example referred to in the Panorama programme is a very clear and large scale example of this position.

What then does a landowner or a business do if HS2 is not prepared to negotiate and to offer fair compensation that generally meets the assessment of the value of the land and other losses?

The only realistic course of action is to make a Reference to the Upper Chamber of the Lands Tribunal and let the court assess the correct valuation.  However, you would only contemplate such a course of action if you have relatively deep pockets and you had taken clear and strong professional advice on the merits of your claim before proceeding.  If you win, then you would have your legitimate professional costs repaid as part of the compensation claim.  However, the danger would be that if you lost you would typically have to pay the other side's reasonable professional costs. 

Another financial concern that has arisen in recent months is the use of temporary possession powers in Schedule 16 of the 2017 Act.  HS2 appear to be using this power to generally acquire much of the land it needs to construct the project.  Unfortunately for landowner's, the use of this mechanism ultimately delays the right of the landowner or business to submit a full compensation claim for the loss of the relevant land and related costs.  It appears clear from talking to a number of land agents in the Midlands that HS2 is using this power so that compensation claims from a whole host of landowners and businesses are "kicked down the road" for a number of years.

If you are a farmer and you are losing a large amount of your farm to HS2, you may want to be able to pursue and obtain compensation for the loss of your land at an early stage so that you can look to financing the acquisition of replacement land.  The use of temporary possession powers to a large extent frustrates this process. A number of our clients are very frustrated and aggrieved as a result of this process. 

Frustration and stress are also being experienced by companies whose land and premises are being compulsorily purchased by HS2.  Companies seeking to relocate their business premises are having problems finding suitable premises and financing the relocation.  We are aware of a number of businesses having great difficulty in agreeing terms with HS2 that would enable them to relocate their business and to save jobs.

Ultimately compulsory purchase, as the words suggest, is a forced/statutory acquisition by the Government of land in the public interest.  Up and down the route of HS2 there are large numbers of stressed and aggrieved owners.  It would be a positive step if Government would take steps to reform compulsory purchase laws and to soften the bitter pill of acquisition.  Steps should also be taken to speed up and resolve negotiations on an acquisition in a more positive and, dare I say, sympathetic manner, so that the act of forced acquisition does not damage a whole section of the community for a generation.

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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