Third Special Report of Session 2017–19 Contents

6Compensation

102.The principles of compensation as laid out for HS2 Phase 1 will continue for Phase 2a. In this chapter we look at the schemes under which those affected by the building of the railway may be compensated. HS2’s paper Paper Compensation Code for Compulsory Purchase,66 describes the compensation code under which the HS2 Phase 2a Scheme operates.

Statutory compensation: the compensation code

103.Property owners, freeholders and leaseholders who are affected by public works projects are entitled to compensation under the compensation code. Compensation is based upon the principle of fair compensation, that is the principle of equivalence. The principle is that a person whose land is subject to compulsory acquisition gets monetary compensation that is not less but not more than the loss that he or she has suffered as a result of compulsory purchase.

104.The compensation code is not one single document, but a collective term used for the principles set out in statute and case law. It is based on Acts of Parliament, principally the Land Compensation Act 1961, the Compulsory Purchase Act 1965, the Land Compensation Act 1973, the Planning and Compulsory Purchase Act 1991 and the Planning and Compulsory Purchase Act 2004. Statute Laws are supplemented by case law.67 The application of the Compensation Code to a particular case depends on the individual circumstances and, in the case of a short-term residential tenancy, it is dependent on the type and terms of a tenancy.68

105.Compensation is specifically applies to businesses, homeowners and other property owners, such as those leasing out their properties to tenants. The sections below detail the circumstances under which statutory compensation is payable.

Displaced owners and occupiers

106.Displaced owners such as those that are living in properties in the middle of the proposed route are entitled to the open market unblighted value of the property, as well as removal expenses and related costs and fees. This includes stamp duty.

107.Owner occupiers subject to compulsory purchase may request an advance payment for the land purchased. This may be either 90% of the acquiring authority’s estimate of the compensation due or, if the amount of compensation has been agreed, 90% of that figure.69

108.In addition to compensation payable for acquired land, owners and occupiers can apply for the following loss payments:

a)Home loss payment: this payment compensates a person for the distress and inconvenience of being required to leave their home when it is compulsorily purchased. The principle is that people are compensated for the emotional impact caused by the loss of their home.70 The Government has told us that “the open market value of a dwelling may not always equate to its value to the home owner”. Certain conditions apply in order to qualify for this payment: a person must be the lawful residential occupier and have been displaced from his or her dwelling in consequence of compulsory purchase, and have occupied the dwelling as his or her main residence for at least one year ending with the date of displacement.71 Should a person not meet the second requirement the Secretary of State may make a discretionary payment to the same value as the home loss payment. The Home Loss Payment is 10% of market value.72

The Home Loss Payments (Prescribed Amounts) (England) Regulations 2018 came into force on 1st October 2018. These regulations enabled the Secretary of State to allocate a minimum of £6,300 and a maximum of £63,000 compensation to anyone who is displaced.

b)Basic loss payment: this payment may be available to freehold owners of land and business property of up to £75,000 or 7.5% of the open market value of the property.

c)Occupiers’ loss payment: these payments may be available to occupiers of land and business properties of up to £25,000 or 2.5% of the open market value of the property.

109.HS2 does not want businesses to close unnecessarily but should a business need to be wound up because of the railway then the value of the business as a going concern will be paid in compensation.

Non-displaced owners

110.Part 1 of the Land Compensation Act 1973 enables anyone whose property value is diminished because of the proposed scheme to claim compensation for up to one year after the operation of the railway begins.

111.Compensation is also payable should land be severed. We have heard HS2 speak on many occasions of mitigation measures for cases of land severance such as redirecting access routes. Should severed land become unworkable, for example, in the case of agricultural land, the Promoter may need to purchase that severed land.

112.Compensation is payable should there be any actual damage caused by construction e.g. damage caused by vibration from contractors machinery.73 Owners may seek compensation where the Secretary of State does not need to purchase land but the works interfere with the owner’s enjoyment of the land or diminish its value either permanently or temporarily. Compensation may be claimed in respect of properties which depreciate in value due to physical factors resulting from the public works e.g. noise, vibration, smell, fumes, smoke and artificial lighting, and the discharge on to the land of solid or liquid substance. In some cases this may only be claimed after 12 months of the operation of railway.74

113.Businesses may claim for disturbance compensation if there is an impact from works or the operation of the railway, causing either temporary or permanent loss of profits. This also applies to loss of agricultural crops.

Blight notices

114.Blight is the reduction in the value of a property which is under threat of compulsory purchase. Under planning law blight notices may be served by either an owner or occupier of a freehold house or the occupier of a leasehold house or flat which has more than three years of its term to run.

Calculating compensation payments

115.Counsel for HS2 explained that the principle of equivalence was used when calculating compensation payments under section 20 of the Compulsory Purchase Act 1965. If there is disagreement between the parties about the amount of compensation payable to the claimant then a dispute is referred to the Lands Chamber of the Upper Tribunal which will determine the level of compensation.

116.When HS2 calculates payments for temporary possession and use of land several factors are taken into account

a)The length of time for which the land is required;

b)Likely cost of restoration;

c)Safeguards required to secure maintenance of mitigation measures, for example for earthworks or planting, and future access to the railway infrastructure, for example, balancing ponds.

HS2 evaluates these criteria against comparative overall cost of temporary use versus permanent acquisition.

117.The Bill contains provisions to protect the required land from any conflicting proposed developments. This has been a source of concern to some petitioners who have requested that planning restrictions be lifted before the Bill receives Royal Assent. It has not been possible for the Committee to grant such requests as the Secretary of State needs to safeguard the land for the Scheme. Discussions need to take place between HS2 and the petitioners on such matters.

Discretionary compensation schemes

118.In addition to this there are schemes that apply specifically to HS2, such as, the Express Purchase Scheme, the Home Owner Payments Scheme, the Rural Support Zone and the Need to Sell Scheme.

Measuring distances for compensation

119.The centre between the two railway lines is the starting point when understanding compensation calculations.

Non Statutory Property Package diagram

Source: HS2 - P7(37) HOC/10001/0038

Express Purchase scheme

120.This scheme applies to those who hold property in the surface safeguarded area or if 25% of the total area of the property falls within the area marked “surface safeguarding” on the safeguarding maps.75 The scheme aims to assist owner occupiers in applications to HS2 under the statutory blight regime.76 There is no requirement for the owner to attempt to sell the property. Owners can sell their property to the Government through this scheme, at the full, unblighted market value, and receive in addition a 10% home-loss compensation payment up to a maximum of £49,000, as well as receiving reasonable moving costs including stamp duty, legal and surveyor’s fees and removal costs.

121.The HS2 Residents Commissioner has said that “Express Purchase is a misleading term–there are a significant number of stages to go through before HS2 Ltd can acquire a property, and the process can be very drawn out, leading to frustration on the part of applicants.”77 We support the view of the Residents’ Commissioner and expect HS2 to make faster decisions, reduce unnecessary bureaucracy and deliver a faster service to customers.

122.We are grateful to the Residents Commissioner for briefing us on her role confirming that she did not act on behalf of individual residents but residents as a whole. However we understand that her title gives rise to confusion and suggest that HS2 provide a simpler, clearer definition of that role on the website.

Homeowner Payments scheme

123.The Homeowner Payments scheme applies to owner-occupiers of rural properties within 300 metres of the centreline of the Phase One railway. There is a differing scale of compensation payments from £7,500 to £22,500 and is intended for those who will be affected by the route and associated works to receive “an early share of the benefits”.78 This scheme may apply to petitioners whose properties fall within both HS2 Phase 1 and HS2 Phase 2a.

124.Following the Department for Transport’s Review of Non-Statutory Schemes Property Schemes for HS279 published November 2018 the Home Owner payments have been increased. This change will apply to Phase 2a once the Bill has received Royal Assent. The increases will be: Band 1: £8,000 Band 2: £16,000 Band 3: £24,000.80

Need to Sell scheme

125.This scheme is a discretionary purchase scheme and applies to owner-occupiers who have a compelling reason to sell their property, but have not been able to do so (other than at a substantially reduced price) as a direct result of the announcement of the HS2 route.81 This scheme applies where the property is likely to be substantially affected by HS2’s construction or operation. The owner-occupier must provide evidence of an attempt to sell the property by seeking a market valuation from three different estate agents; put the property on the market for at least 3 months with a recognised estate agency; and demonstrate that they have made reasonable efforts to sell at different market prices and ways of marketing their property.82 This scheme replaced the exceptional hardship scheme which operated under HS2 Phase 1.

Rent Back or Voluntary Purchase Scheme

126.All homes purchased by the Promoter can be considered for ‘rent back’. Owner occupiers may choose to ‘rent back’ their own properties and continue to live in them. This is a voluntary scheme and the property must comply with the relevant standards for residential occupation.

Alternative cash offer

127.Alternatively, owners may choose to receive a cash sum of 10% of the unblighted value of their property of between £30,000 and £100,000.

Special circumstances and future work

128.A tenant who occupies a dwelling, business premises or agricultural premises on a short tenancy is entitled to claim a disturbance payment covering any reasonable losses if their dwelling is compulsory purchased.83 This does not however, apply to those tenants with shorthold assured periodic tenancies and some agricultural tenancies and to permanent narrow boat dwellers under tenancy. We heard that there are individuals in this position under Phase 2a proposals. These are vulnerable tenants and we have expressed our concern to the Secretary of State for Transport, Rt Hon Chris Grayling MP.84

129.The Secretary of State told us that he understood and shared the Committee’s concerns that vulnerable individuals be properly supported and compensated. Although we recognise that the matter of vulnerable tenants raised by Antoinette Sandbach MP to this Committee apply to the HS2 Phase 2b route, this should not prevent the Secretary of State from promoting cross departmental working in order to rectify this situation before the HS2 Phase 2b Bill is introduced into Parliament, so that there is a dedicated compensation scheme in place to which vulnerable individuals and group of tenants may apply.

130.The Government confirmed in its response to our special report that the compensation schemes do not extend to a person who lives on a narrow boat.85 The Secretary of State in his letter of 11 March said that his officials had written to the Ministry of Housing, Communities and Local Government asking officials to consider reviewing the issue of home loss payments for houseboat owners within the wider land compensation regime.86 We welcome recognition by the Government that this is an unresolved issue.87

131.We are acutely aware that that despite the variety of compensation schemes some people remain disadvantaged by the existing schemes and suggest to the Secretary of State that the definitions and classifications of ‘atypical’ properties must be broadened to cover tenants not covered by existing schemes. This needs to include compensation payments to those unable to secure a similar property of a similar type at a similar rent. There may be tenants who for personal reasons are wedded to their community and cannot tolerate the thought of leaving. If they are forced to do so they would not have anywhere else to go. An identifiable fund should made available for houseboat occupiers who currently rent a mooring space from which they can claim compensation as if they were in the same position as a leaseholder with 24 months to run on the lease. We heard that under Phase 2a there are nine people who are affected this way.88 We direct HS2 Community Engagement Officers to publicise this change to those occupiers so that they are made aware of the instruction of the Committee.

132.We expect the Government to take this initiative forward and introduce a more permanent and inclusive compensation scheme for this and other vulnerable groups before the publication of the Phase 2b (Crewe - Manchester and Birmingham - Leeds) Bill. We instruct HS2 to specifically look at the compensation package offered relating to mobile homes before HS2 Phase 2b commences.

133.We understand that such tenants will not have access to legal resources under which to make their case and that as a result of the Scheme will be disadvantaged. No one should become homeless because of HS2. The Residents’ Commissioner told us that she had previously had discussions with the Citizens Advice Bureau in 2016 whereby HS2 explored the possibilities for the Citizens Advice Bureau to provide some form of support service to those seeking to apply for property schemes. But that this was not an area with which the Citizens Advice Bureau was familiar and the Citizens Advice Bureau would be unable to guarantee that each office in every area would be able to provide an appropriate level of support to potential applicants.

134.We note that HS2 are currently procuring a service to provide help for people with special needs to give them additional support in applying for compensation.89 HS2 should maintain records of numbers of applicants in order to monitor progress of this new scheme and ensure that the data is shared with the Residents Commissioner in order for her to evaluate the success of the schemes and the support provided to vulnerable applicants.

Rural Support Zone scheme

135.Most of the HS2 Phase 2a line will run through rural areas. This scheme applies to those properties in rural areas, which lie between the outer border of the safeguarding area and within 120 metres of the centreline of the new railway.90 Successful applicants can require the Promoter to purchase their properties at the full unblighted value. Owners may receive a cash offer from HS2 of either between £30,000 and £100,000 or request that HS2 voluntarily purchase the property. The Department for Transport as part of its review in 2018 looked at Rural Support Zone payment levels but agreed to make no change. We believe that this fund should not be capped.

Prolonged Disturbance scheme

136.We note that HS2 has been developing its Prolonged Disturbance Compensation Scheme and the House of Lords may wish to seek information about how and whether this new scheme may become available to Phase 2a residents.

What happens if there is disagreement between parties?

137.Applications to the various schemes are not always straightforward: parties will disagree with valuations or the degree of disturbance that they might experience. This can lead to a breakdown of relationships. Rather than issues being immediately escalated to the Lands Tribunal, there are three options that parties may use:

a)Early Neutral Evaluation: An independent person or panel is appointed by those in dispute to provide a reasoned, written Opinion setting out its view of the likely outcome of the case after hearing all parties’ evidence. The Opinion is not a judgement nor a decision but can be used by the parties as a basis for further negotiations.

b)Mediation: A structured negotiation in which a trained mediator works with the parties to help them agree a mutually acceptable solution. Mediation can take place face to face or the mediator can go between the parties identifying issues and possible solutions.

c)Independent Expert Determination: The expert considers the material or evidence put forward by the parties to the dispute, either orally or in writing, and makes a determination based on that evidence. The expert’s determination or award is binding on the parties.91

138.One Member of Parliament raised issues about the impact of the Scheme on constituents’ lives, telling us that a number of his constituents had complained to him that they had suffered considerable financial loss to the extent of £100,000 in some cases and others tens of thousands of pounds. They had told him that this was because of the proposed Scheme and the ways in which the compensation scheme was operating.92 The Committee does not have the power to investigate such matters. Those people and businesses affected by the Scheme should not be financially disadvantaged, but neither should anyone make a profit from this scheme.


66 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672200/C8_-Compensation_Code_for_Compulsory_Purchase_v1.5.pdf

67 HS2 Information Paper C8, para 2.1.

68 HS2 Information Paper C15, para 3.3

69 HS2 Information Paper C8, para 4.1

70 Government response to the Committee’s Second Special Report of 2017–19, paragraph 143

71 Government response to the Committee’s Second Special Report of 2017–19, paragraph 143

72 4 June 2018, Q48

73 Section 10 of the Compulsory Purchase Act 1965

74 C8: 5.1–3

76 HS2 (London - West Midlands) Bill: Second Special Report of Session 2015–16, para 262

77 HS2 Residents’ Commissioner, 9th Report, May 2018

78 HS2 Property Schemes, guide to HS2 property schemes Phase 2a CS858/08–17, p.27

79 Published November 2018

81 HS2 Residents’ Commissioner 8th Report, January 2018

82 Residents’ Commissioner 8th Report, January 2018

83 Government response to the Committee’s Second Special Report of 2017–19, Paragraph 141

84 Letter from the Chair to the Secretary of State for Transport dated 11 February 2019

85 Para 146, Government response to the Committee’s Second Special Report of 2017–19

86 Letter from the Secretary of State to the Chair, 11 March 2019, para 5

88 12 June 2018, Qq328–338

89 Letter from the HS2 Residents Commissioner to the Chair dated 25 April 2019

90 HS2 Residents’ Commissioner – 8th Report– January 2018

92 14 May 2018, Q 27




Published: 7 June 2019