Growth and Infrastructure Bill

Memorandum submitted by Compulsory Purchase Association (GIB 44)

1 Introduction

1.1 This document is submitted to the Public Bill Committee considering the Growth and Infrastructure Bill on behalf of the Compulsory Purchase Association (CPA). The Association’s objective is to work for the public benefit in relation to compulsory purchase and compensation in all its forms. This includes promoting the highest professional standards amongst practitioners at all levels and participating in debate as to matters of current interest in compulsory purchase and compensation. The CPA has some 500 members practising in this field, including surveyors, lawyers, accountants, planners and officers of public authorities. This consultation response has been formulated following discussions within the National Committee of the CPA. Our comments are set out below.

Summary

1.2 The CPA has comments on the Bill but also has additional points it believes would assist the growth agenda if included in the Bill. It supports the proposals at Clauses 3
(Compulsory purchase inquiries: costs); 19 (Special parliamentary procedure in cases under the Planning Act 2008) and has observations on clause 21 of the Bill (Bringing business and commercial projects within Planning Act 2008 regime).

1.3 CPA also make further suggestions for reform to be included in the Bill. These are:

1.3.1 Acceptance of Applications made under Planning Act 2008;

1.3.2 Loss Payments – Land Compensation Act 1973 (as amended by the Planning and Compulsory Purchase Act 2004);

1.3.3 Advance Payments of Compensation – Land Compensation Act 1973; and

1.3.4 Reverse Notice to Treat – a new proposal to reduce the harm caused to landowners by uncertainty as to whether or not compulsory acquisition is to take place.

2 Comments on the Bill

2.1 The Bill principally touches on compulsory purchase issues at draft clause 3, 19 and potentially also draft clause 21. CPA's comments on each are set out below.

Compulsory Purchase Order inquiries: costs

2.2 We have by email already provided comments to CLG on this, as well as evidence of the need for this proposed change. This can be found at Appendix 1.

Clause 19 – special parliamentary procedure in cases under the Planning Act 2008

2.3 The CPA is happy with the approach proposed.

2.4 We would however question how the tests "prohibitive costs" (see clause 19(2)(b) and insertion of new section 131(4A) of the Planning Act 2008) would apply.

2.5 The same could also be said of proposed changes to section 131(4B) in relation to the words "although possibly long lived" in paragraph C of that sub-section.

2.6 The same words are again used in the proposed changes to section 132.

2.7 At the very least guidance will be needed to clarify what the legislature intended and CLG's interpretation of these tests.

Clause 21 – bringing business and commercial projects within the Planning Act 2008 regime

2.8 The CPA does not believe that this clause is appropriate for finding its way into the statute book. CPA members' experience is that the development consent process works would work only for major infrastructure where there is clear national policy (examined by parliament) that provides a degree of certainty in principle that a proposed development scheme is likely to prove to be acceptable.

2.9 The CPA does not believe this would apply to most major commercial planning applications for a number of reasons:

2.9.1 The same level of national policy support is unlikely to apply;

2.9.2 If there is local policy support that is compelling, then the Town and Country Planning Act process should be appropriate and available;

2.9.3 The CPA does not believe that developers will wish to "front load" their applications to the extent needed for the DCO process if there is any degree of risk that the scheme may not be approved.

2.9.4 There is also a significant democratic deficit – if compulsory purchase powers are required for major development then it is appropriate that the local electorate under the Town and Country Planning Act 1990 or other appropriate compulsory purchase powers promote a compulsory purchase and there is therefore an element of public local support for a scheme. It is inappropriate that a developer has provided its own compulsory acquisition powers at this stage – it should be entirely reliant on the local planning authority.

2.9.5 Developments are likely to be taken forward by special purpose vehicles (SPV) who may well be a shelf company with limited, if any, assets. If compulsory purchase is taken through by a local planning authority under the 1990 Act then there is at least a backstop that the local planning authority will be able to fund compensation (albeit that it will be backed by a Deed of Indemnity from the developer and the developer's parent). Such safeguards may not exist if the SPV itself is given compulsory acquisition powers. This is a fundamental issue, including effecting the human rights of those persons whose land may be expropriated.

2.10 For all the above reasons we would suggest that this proposed clause is inappropriate and will be ineffective in promoting the growth agenda.

3 Proposed reforms

3.1 The CPA's proposals for additions to the Bill cover:

Acceptance of Applications made under Planning Act 2008

Changes to section 56 etc of the Planning Act 2008 to remove the criminal sanction on developers who advertise the acceptance of their schemes by the Planning Inspectorate for examination. This is a wholly new level of burden on developers proposed by the Planning Act 2008 – it is unnecessary and makes the process for advertising and proceeding to examination for a development consent application very difficult and has delayed several schemes. See Appendix 2 for further details.

It is CPA's suggestion that the criminal sanction is not needed or criminal liability can be avoided by a "reasonable endeavours" defence.

Loss payments

3.2 The CPA believes that the current loss payments regime contained in the Planning and Compensation Act 2004 and amending the Land Compensation Act 1973 is inappropriate. At the moment occupiers receive only 2.5% of the value of their interest as a loss payment whilst investment owners would receive 7.5%. The CPA believes the figures should be reversed. See Appendix 3 for further details.

Advance payments

3.3 The current process for securing advance payments for claimants does not work – there is no sanction on acquiring authorities to not pay in accordance with the requirements of the Land Compensation Act 1973. See Appendix 4 for further details.

Reverse notice to treat

3.4 The CPA propose that owners of order lands be entitled to serve a "reverse notice to treat" to force the acquisition of their land by the acquiring authority in appropriate circumstances. See Appendix 5.

November 2012

Appendix 1

Costs of objectors to compulsory purchase orders that do not reach inquiry

1 Introduction

1.1 The CPA have considered the content of the Growth and Infrastructure Bill, clause 3, regarding costs in compulsory purchase proceedings.

1.2 The CPA welcome the suggestion that the powers to award costs under s250 of the 1972 Act be broadened so that successful objectors (or indeed objectors where the acquiring authority has behaved unreasonably) can obtain their costs without having to attend at inquiry.

1.3 Concrete examples of the situation that currently may arise are set out below:

Case A

An inquiry into a nationally significant land assembly and regeneration compulsory purchase order in East London promoted 2006 was objected to by a CPA committee member representing a client affected by the proposed compulsory acquisition. At the time the inquiry was held, the affected party was close to, but had not reached, agreement with the promoting authority. However the promoting authority would not provide information as to its detailed plans on the use of the land, which was clearly marginal to the overall scheme. The information required affected both the landowner's claim for compensation and also the strength of their case objecting to the redevelopment. Ultimately the client had to attend at inquiry into the compulsory purchase order and make short representations, including an application for costs (which was successful). The acquiring authority was found to have behaved unreasonably and the landowner was entitled to its costs – however considerable additional costs (approximately £5,000) were incurred because of the need to make a case at and attend inquiry. The accepted offer of costs did not cover all of the landowner's costs (it is rare that an order for costs results in 100% recovery).

Case B

Two CPA committee members represented a mutual landowner client in relation to a small compulsory purchase order in Suffolk in 2010. It was clear, including from the acquiring authority's own papers, that the compulsory purchase order had little chance of success.

There were no reasonable grounds for promotion of the compulsory purchase order and the affected landowner made a strong objection and incurred considerable costs to preserve their very well trading commercial premises. Eventual costs in excess of £100,000 were incurred defending its position, despite the acquiring authority being told that such costs were going to be incurred at several stages (instruction of planning witness, site visit, instruction of counsel, etc). It was only two weeks before the date of the inquiry into the compulsory purchase order that the Council agreed to withdraw the threat of compulsory purchase.

At that stage agreement on costs could not be reached and the landowner's only recourse was to insist that the compulsory purchase order inquiry was held. This led to the acquiring authority, through its solicitors, representing that the landowner was itself acting unreasonably in insisting that the inquiry should be held and even suggesting it should make its own application for costs against the landowner for unreasonable behaviour.

Finally an agreement in relation to costs, to be assessed if not agreed, was reached three days before the inquiry was held. The parties incurred considerable additional expense, and the Planning Inspectorate had an Inspector tied up for unnecessary time because the current legislation would not allow for an award of costs without an inquiry being held. The assessment of costs was eventually settled by a mutually appointed expert. The landowner did not recover all of its costs and so was put to considerable expense, despite the whole process for promoting the compulsory purchase order being a negotiating tactic for the acquiring authority in a commercial arrangement with a third party, in which the landowner had no role.

Appendix 2

Growth and Infrastructure Bill

Submissions relating to certification of accepted applications

Under the 2008 Act

Submissions relating to certification of accepted applications

Under the 2008 Act

1 Introduction

1.1 The CPA believes that the current penalties attaching to the certification process for confirming notices have been served in relation to accepted application under the planning Act 2008 is excessive and causes unnecessary delay.

1.2 In short, it is our belief that the criminal penalty contained in the 2008 Act relating to this process is unnecessary and overly burdensome. Whilst developers will always wish to do all they reasonably can to provide notice to all affected parties, there will be some instances where confirming service is just not possible to the level of certainty that anyone issuing a certificate under the 2008 Act would be content to deal with.

2 Detail

2.1 Section 56 of the 2008 Act requires the applicant for a Development Consent Order to give notice to prescribed persons, the Marine Management Organisation where appropriate, local authorities, the Greater London Authority if part of the application is in London and any person listed within section 57 of the 2008 Act. Notice must be in prescribed form and set out details of how to make representations to the application.

2.2 The Notice must also be publicised in a prescribed manner – this requires publication in both national and local newspapers. Site notices are also required to be posted.

2.3 Section 57 lists the categories for persons on whom notice must be served. These mirror those contained in section 44 and essentially include any landowner (freehold or leasehold) tenants, occupiers and persons with easements, restrictive covenants other interests in lands to which the compensation code may apply.

2.4 Section 58 requires the applicant to provide in the prescribed form (as prescribed by the Infrastructure Planning (Applications – Prescribed Forms and Procedures) Regulations 2009 - APFP), a certificate confirming that the application has been publicised in the manner prescribed in section 56 and 57.

2.5 Sub-section 3 of section 58 states that a person will commit a criminal offense if they issue a certificate which contains details that are false or misleading or if this is done recklessly.

2.6 The APFP certificate form is precise and it is not clear that derogations from the certification are permitted. That said, there are several instances of where derogations have occurred and these appear to have been accepted by the Planning Inspectorate.

2.7 Our concern relates to the statement that

"notice of the accepted application was given to the required persons identified in accordance with section 56"

The word "given" is also used in the 2008 Act in relation to provisions regarding service. Its use is somewhat ambiguous.

2.8 Methods of service permitted under the 2008 Act (section 229 allows service by

(a) hand delivery

(b) leaving it at the last known or usual abode of that person or and address for service that was given

(c) first class post

(d) registered post or recorded delivery

(e) by email of agreed to by the relevant person

(f) by delivering to the Secretary of an incorporated body by the methods described (b), (c) and (d) above.

2.9 The combined effect of the criminal sanction and section 229, in regards to the certificate process, actually means it is more desirable for applicants to serve by first class post (a notoriously unreliable method of service) than using a more reliable method such as registered post. If a method where tracking is possible (courier, hand delivery, registered post) is used then it is more likely that the applicant will know that certain notices have not been appropriately received or were received late.

2.10 In such circumstances, it there appears the combined impacts of the necessity for certification (backed by criminal sanction) and methods of service mean that unreliable method of service is the preferable way forward. In situations where there are landowners affected by compulsory acquisitions does not seem appropriate.

3 Proposals for reform

3.1 Given how many notices need to be served it is almost inevitable that some will be returned undelivered. The effect of that (whether by first class post, registered post or otherwise) means that the applicant cannot provide a section 58 certificate until such time as the notice has been re-served. If the recipient is abroad for a long time, is untraceable or there are other difficulties with service, the DCO application process can be significantly delayed. The Planning Inspectorate will not commence the process for appointing an inspector and arranging for a Preliminary Meeting until section 58 certificate is issue.

3.2 CPA would therefore suggest:

3.2.1 the criminal sanction in the section 58 is removed ; and/or

3.2.2 that derogations are clearly permitted, with a full explanation, either in a revised version of the APFP or by an amendment to section 58 through the Growth and Infrastructure Bill to allow the applicant to explain why it is not possible to give a full certificate that all notices have been served. The certificate could have a schedule attached to explain what has happened in individual instances and the Planning Inspectorate/Secretary of State could then decide whether service has been appropriately carried out.

4 Reasons for reform

4.1 CPA are aware of at least 3 instances where applications have been materially delayed because of the considerable burden of proving service as a result of section 58 of the 2008 Act. At least a month's delay and considerable additional costs have been incurred by the applicant in having to re-serve documents. It is inappropriate that this administrative process cause such significant delay and cost. Whilst it is not suggested for one second that service is not vitally important and applicant should use all reasonable endeavours to effect service, the current burden on applicants is out of proportion to the harm perceived by the legislation.

Appendix 3

Loss payments

Loss Payments

sections 33A-F Land Compensation Act 1973

Basic and Occupiers Loss payments were inserted into s.33A – F of the Land Compensation Act 1973 (the 1973 Act) by the Planning and Compulsory Purchase Act 2004. They introduced payments in addition to the loss incurred as a result of the acquisition of an interest in land used for purposes other than as a main residence or an agricultural holding. Loss payments were already available for main residence and agricultural holdings.

The concept behind loss payments is to provide an acknowledgement of the fact that a party is displaced from property against their will. This is not otherwise permitted because of s. 5(1) of the Land Compensation Act 1961 (the 1961 Act).

There are currently three issues with the provisions in s.33A-F of the 1973 Act.

· the method of calculation of the payments is ambiguous and open to argument,

· the "building amount " is based on Gross External Area which is difficult to measure in practice and is also inconsistent with market practice for the measurement of most buildings,

· the level of payments is not fairly distributed between occupiers and investors.

Ambiguity

 

The wording of the provisions is ambiguous in that it relates the payment to a percentage of the "value of [the claimant’s] interest in land". This leads to some ambiguity over whether this means the market value of the interest under s.5(2) LCA 1961 or whether it also includes disturbance compensation and injurious affection as these items together with the amount under s.5(2) comprise the value of the interest to the owner which is the compensateable amount.

In the case of occupiers, particularly leasehold occupiers, this can make a significant difference to the Loss Payments received as the s.5(2) value of the lease is commonly very low but the disturbance compensation can be considerable.

The CPA have been advised by the Department for Communities and Local Government (CLG) that the intention of the wording was that the payment should be a percentage of the market value only, as assessed under s.5(2) of the 1961 Act. This interpretation curtails the usefulness of the Basic Loss payment in particular to those hardest hit by compulsory purchase, that is businesses occupying leasehold premises.

PROPOSAL: The CPA propose that the alternative interpretation be adopted and confirmed, that is that the Basic Loss payment (and occupiers Loss Payment where applicable) be calculated as a percentage of the entire compensation payable, including disturbance. The maximum values already imposed on the Basic and Occupiers Loss payments are £75,000 and £25,0000 respectively and would limit the additional expense of such a measure. If the proposal to reverse the current percentage rates for Basic and Occupiers Loss payments outlined below is also adopted, the additional expense would be further reduced or removed altogether.

Building Amount

The Occupiers Loss payment has alternative methods of calculation. The first is a percentage of the "market value" of the interest. However, where the interest has little or no market value the claimant can elect to calculate the amount by reference to the area of the buildings he occupies (the "Building Amount" or the area of land occupied (the "Land Amount").

The building amount is based upon the Gross External Area (GEA) of the buildings occupied by the claimant. The GEA is the area within the footprint of each floor of the building. It is the most generous calculation of the area of a building as it takes into account walls, stairwells, bathrooms and other features that are not normally valued.

The problem with GEA is that it is physically difficult to establish and must usually be measured specifically for the compensation claim.

If the standard market practice for measurement were to be adopted, not only would the area be easier to ascertain, it may also have been recorded previously for letting or rent review purposes.

PROPOSAL: The "buildings amount" should be measured in line with the Royal Institution of Chartered Surveyors standards of measuring practice.

Amount to be paid

The Basic Loss payment is available to both occupiers and owners of a building and is based on 7.5% of the "market value" of the interest held, subject to a maximum payment of £75,000.

The Occupiers Loss payment is only available to those in occupation of all or part of a building. There are three methods which can be used to calculate it. The claimant is able to choose by which method the loss payment should be calculated. The choices are;

· 2.5% of the value of his interest

· The land amount (£2.50 per square metre of the land occupied)

· The building amount (£25 per square metre of the GEA)

For a leaseholder on a normal occupational lease or tenancy, the value of the interest is likely to be minimal. This means that they will receive no Basic Loss payment, and the Occupiers Loss payment is likely to be the building amount.

The maximum amount payable for an Occupier Loss payment is £25,000 and the minimum is £2,500.

Disparity between parties

In the most common situation for commercial premises is to have an investor landlord with a valuable freehold or long leasehold land interest and an occupying business tenant holding a lease from the landlord at a market rent.

Because the lease has little or no market value, the Basic Loss the tenant receives will be at or near nil. The landlord will receive 7.5% of the market value of his interest, capped at £75,000. The landlord will not receive any Occupiers Loss payment, but this will be a maximum of £25,000. In most cases the landlord investor receives up to three times more Loss payment than his tenant, and yet it is the tenant, in having to close down or relocate his business, which has suffered the more disruption.

PROPOSAL: The CPA propose that the percentage rates be reversed so that the Basic Loss payment becomes 2.5% of the value of the interest subject to a cap of £25,000. The Occupiers Loss payment should become 7.5% of the value of the interest (or the land or building amount), subject to a cap of £75,000.

Route to reform

Under s.33K of the 1973 Act, the Secretary of State

"may by regulations substitute for any amount or percentage figure specified in these sections such other amount or percentage figure (as the case may be) as he thinks fit"

If the change is not due to a change in the value of money or land, a draft of the regulation must be laid before and approved by resolution of each House of Parliament.

Summary

The current Basic and Occupiers Loss payments are designed to reflect some of the inconvenience and upheaval that is caused by compulsory purchase but is not reflected in the disturbance compensation payable by virtue of s.5(1) of the 1961 Act.

The CPA are concerned that the payments are poorly targeted and should be adjusted to provide more compensation to occupiers, and less to investors. This would reflect the relative level of disruption and inconvenience caused to each group.

By calculating the Loss payments with regard to the total compensation and reversing the current percentages, we believe that the necessary adjustment can be made without undue additional expense to the acquiring authority.

Two examples of common circumstances are shown in Annexure 1. Loss payments are calculated for each under the existing system, and under two potential alternatives. Our preferred proposal, A, gives an end result very close to the existing system. Proposal B takes only the change of percentages and retains the existing use of the s.5(2) value. This results in a significant under compensation.

Basic and Occupiers Loss Payments - Annexure

Existing System

 

Example 1

Take for example a 100m2 B1 unit held on a 5 year market lease from the freehold or long leasehold investor owner

Investor Occupier

Value of land taken (freehold) £100,000

Value of land taken (lease) £ nil

Disturbance £ 7,000 £75,000

Basic Loss @ 7.5% £ 7,500 £ nil

Occupiers Loss @ 2.5% OR £ nil £nil

Occupiers Loss (bldgs amt) OR £ nil £ 2,500

Statutory minimum £ nil £ 2,500

Total compensation (exc Loss Payment) £107,000 £ 75,000

Total Loss Payments £7,500 £ 2,500 Total £10,000

Example 2

Take for example a 1,000m2 B1 unit held on a 15 year market lease from the freehold or long leasehold investor owner

Investor Occupier

Value of land taken (freehold) £1,000,000

Value of land taken (lease) £ 5,000

Disturbance £ 70,000 £750,000

Basic Loss @ 7.5% £ 75,000 £ 375

Occupiers Loss @ 2.5% OR £ nil £ 125

Occupiers Loss (bldgs amt) OR £ nil £ 25,000

Statutory minimum £ nil £ 2,500

Total compensation (exc Loss Payment) £1,070,000 £ 755,000

Total Loss Payments £75,000 £ 25,375 Total £100,375

7.5% 3.3%

In both examples the investor owner receives three times the Loss Payment of the occupier who has had to uproot and relocate his business, and prepare and submit a time consuming disturbance compensation claim.

Proposal A

 

Calculate Basic and Occupiers loss payments on total compensation and switch Basic and Occupier loss %.

Example 1A

Investor Occupier

Total compensation £107,000 £ 75,000

Basic Loss @ 2.5% £ 2,675 £ 1,875

Occupier Loss @ 7.5% £ nil £ 5,625

Total Loss Payment £ 2,675 £ 7,500 Total £10,175

2.5% 10%

Example 2A

Investor Occupier

Total compensation £1,070,000 £ 755,000

Basic Loss @ 2.5% £ 25,000 £ 18,875

Occupier Loss @ 7.5% £ nil £ 56,625

Total Loss Payment £ 25,000 £ 75,500 Total £100,500

2.5% 10%

Proposal B

 

Reverse percentages but calculate on s.5(2) 1961 Act value.

Example 1B

Investor Occupier

s.5(2) compensation £100,000 £ nil

Basic Loss @ 2.5% £ 2,675 £ nil

Occupier Loss (bldgs) £ nil £ 2,500

Total Loss Payment £ 2,675 £ 2,500 Total £5,175

2.5% 3.3%

Example 2B

Investor Occupier

s.5(2) compensation £1,000,000 £ 5,000

Basic Loss @ 2.5% £ 25,000 £ 125

Occupier Loss (bldgs) £ nil £ 25,000

Total Loss Payment £ 25,000 £ 25,125 Total £50,125

2.5% 3.3%

Appendix 4

Advance payments

PROPOSALS FOR REFORM OF S. 52 OF THE LAND COMPENSATION ACT 1973

Introduction

1. Section 52 of the Land Compensation Act 1973 provides for the making of an "advance payment" on account of compulsory purchase compensation where an acquiring authority has taken possession of land. In response to a request for an advance payment, the acquiring authority must pay 90% of their estimate of the compensation due (or 90% of the compensation agreed to be due) within 3 months of the request.

The problem

2. The experience of the CPA and its members is that advance payments by acquiring authorities are not made within 3 months as required. In the most extreme case of non-payment which has come to the Association’s attention, a claim for compensation had been made to the (then) Lands Tribunal and the acquiring authority had made a "sealed offer" (in effect an offer of settlement) in the sum of more than £1m but had made no advance payment under section 52 despite being requested to do so.

3. The purpose of advance payments is to put the claimant in a financial position, so far as is possible and as early as is possible, so that it can re-order its affairs and go about its life with the minimum of disruption. In the majority of cases the claimant will find it necessary either to move to house, if their home is acquired, or to move to other business premises, in order to avoid closure of their business.

4. In either case, as a move must necessarily take place at the time of dispossession, it follows that the majority of claimants are forced to fund their relocation as best they can before receiving any compensation and indeed in advance of receiving any advance payment. Where residential properties are subject to a mortgage, delay in the making of an advance payment can create further financial difficulties.

5. In the context of promoting economic growth, which is the fundamental objective underpinning the Growth and Infrastructure Bill, it goes without saying that property owners and businesses should not be subject unduly to unnecessary financial stress and disruption.

The Solution

6. The Growth and Infrastructure Bill should include additional provisions as follows:

(1) Prescribed claim form

The written notice requesting an advance payment under section 52 should be in a prescribed form and have prescribed content such as, for example, claim forms under Part 1 of the Land Compensation Act 1973.

The prescribed content of the advance payment request should balance the needs of the authority for reasonable information with the level of information a claimant can practically be expected to provide in the early stages of a claim.

A potential and beneficial side-effect of a prescribed procedure could be that negotiations might be shortened by incentivising claimants to provide a more fully reasoned claim together with supporting evidence earlier on in the process.

(2) Mechanism for enforcing making of payments by acquiring authorities

7. Section 52 in its current form lacks any "teeth". There is no mechanism whereby a claimant can require an acquiring authority to pay an advance payment except by seeking a mandatory order in judicial review proceedings which would be likely to take many months to progress through the courts.

Section 52 needs to be amended so as to provide an enforcement procedure whereby an acquiring authority can be ordered by, say, the Upper Tribunal (Lands Chamber) to make an advance payment on the Tribunal being satisfied that the acquiring authority has been provided with the required detail identified by the prescribed notice of claim.

(3) Advance payment before taking of possession

8. As noted above, an advance payment is only made once possession is taken. Where a business is relocating in advance of possession however, it will often be incurring substantial up-front expenditure which the present regime expects the business to fund itself, recovering such items of cost which are compensatable under the statutory compensation code once possession has been taken. But in present economic circumstances, a business may find it impossible to borrow sufficient money to fund its relocation. Home and property owners also face similar problems, although without an interruption of their business.

Section 52 needs to be amended so that acquiring authorities can make advance payments of compensation before possession is taken, thereby assisting those relocating to do so with the minimum of stress and financial burden.

Conclusion

9. Section 52 of the Land Compensation Act 1973 should be amended to provide for:

(1) A prescribed form of request or claim for an advance payment of compulsory purchase compensation;

(2) A mechanism for enforcing the making of appropriate advance payments by acquiring authorities;

(3) The making of an advance payment in advance of possession being taken.

Appendix 5

Reverse Notice to Treat

Reverse notice to treat and entry

1. Research has shown that persons affected by compulsory purchase are more concerned by the process rather than the amount of compensation they ultimately receive. [1] One complaint is the delay and uncertainty as to when an acquirer will take entry; this is a particular problem to small businesses. It also concerns others. Once a compulsory purchase order has been confirmed, any affected owner ought to be entitled to serve a reverse notice to treat and notice of entry. These reverse notices would have the same legal consequences as if they had been served by the acquirer, save that the owner will have the ability to determine the entry date, and therefore the valuation date for compensation purposes. There are no strong arguments why the risks as to the commencement of a scheme should be borne, as now, by property owners rather than the acquirers and the wider society.

2. Although the blight notice procedure is available for some owners, the procedure suffers from delays for two reasons. First, acquirers frequently serve counternotices. There can be no objection to the proper determination by the Upper Tribunal of any grounds relied. Second, where no counternotice is served, or the Tribunal uphold the blight notice, and there is a deemed notice to treat, the procedure does not contain any easy procedure to fix the entry date. If the Authority has no need for possession, the claimant is left with having to make a reference to the Upper Tribunal to have the compensation determined. Once determined, the claimant has the "statutory contract" that arises where there is a notice to treat and an agreement as to the "price", and may enforce that contract by specific performance. The reality, particularly where the compensation is not large, is that affected claimants merely suffer the hardship rather than face the costs and uncertainties of a reference. The absence of an effective remedy can be very serious where the claimant holds a lease of business premises. The claimant will remain bound to pay the rents, and may have a business that is suffering as the effect of the scheme encourages adjoining businesses to leave.


[1] The Operation of Compulsory Purchase Orders: Land Use, Minerals, Land Instability and Waste

[1] Planning Research Programme (DETR, December 1997)

Prepared 27th November 2012