Compulsory Purchase – the end of equivalence?
Over the weekend the Government published the outcome of its Compulsory Purchase – Compensation Reforms consultation, concluding that new primary legislation will be prepared to facilitate the removal or limitation ‘hope value’ from the assessment of compensation paid for the acquisition of land.
Such fundamental changes to the underlying principle of equivalence may initially grab headlines, but proposed changes are to be limited to very specific circumstances with the finer detail to be set out in the coming months. It will be necessary for relevant acquiring authorities to apply for a specific direction as part of their CPO application process that will allow the special assessment of hope value.
New legislation will limit powers to ‘certain public sector acquiring authorities such as local authorities, Homes England, Development Corporations and Greater London Authority’ and for specific schemes involving:
- affordable (including social) housing,
- education provision,
- health facilities.
Where eligible acquiring authorities wish to seek a direction from the Secretary of State they will be required to:
(a) provide evidence to demonstrate the payment of compensation without hope value would be justified in the public interest,
(b) make their request at the same time as the making of the CPO i.e. when the CPO is submitted for confirmation, and
(c) when serving statutory notices on qualifying persons under section 12(1)(a) of the Acquisition of Land Act 1981, give notice of their intention to seek a direction.
The confirmation of a CPO including a direction by the Secretary of State will not prevent landowners from claiming compensation for planning permissions which are in force on the relevant valuation date.
Affected Landowners will be able to:
(a) claim compensation for other heads of claim associated with the compulsory purchase of their land i.e. disturbance, loss payments and severance/injurious affection,
(b) make objections to, and request inquiries into, a CPO which includes a direction;
(c) submit an application to the High Court to challenge the confirmation of a CPO which includes a direction; and
(d) claim reasonable costs incurred in associated with objecting to a CPO which includes a direction.
The government will consider what other safeguarding mechanisms could be implemented to ensure the use of directions deliver the intended outcomes. Such mechanisms could include allowing landowners to apply to the Secretary of State for additional compensation where an acquiring authority does not deliver its scheme in accordance with the purpose behind the making of the direction.
The government will provide guidance on:
(i) how directions may be applied for including the requirement for landowners to be notified of the making of a direction and for them to be able to make objections;
(ii) what an acquiring authority ought to be able to demonstrate to justify a direction, such as: (a) how a scheme will deliver public benefits, and (b) how the removal of hope value from compensation is justified in the public interest;
(iii) what is meant by ‘in the public interest’ and ‘public interest test’;
(iv) clarifying the distinction between net profit from the sale of land and Gross Development Value including the figure which must be included in evidence supporting a direction and the removal of hope value; and
(v) how it would not be proportionate in the government’s view for a direction removing hope to assist the profits of a private sector development partner.
In practise such directions are likely to be few and far between and the cost and practicalities of implementing them may outweigh any beneficial savings. However, for any landowners who might be potentially affected it will be important to engage fully and robustly to ensure they will lose their fundamental ability to claim the true market value of their assets that may be acquired by compulsion.