Policy Briefing: Why changed compulsory purchase rules would favour the buyers

A proposal to amend compensation principles in the new Neighbourhood Planning Bill could disadvantage landowners, says Richard Guyatt.

Development: government hopes CPO changes will speed process
Development: government hopes CPO changes will speed process

What does clause 22 of the Neighbourhood Planning Bill propose?

Clause 22 seeks to clarify and codify the ‘"no scheme world" rule, an established principle of compulsory purchase compensation. It means that compensation following compulsory purchase should ignore any uplift in land value attributable to the scheme that has prompted the compulsory purchase order (CPO).

The key proposed change would make it easier for acquiring authorities to broaden the scheme’s definition when calculating compensation for landowners – and as a result probably reduce the sum payable. The bill also makes it easier for acquiring authorities to suggest that separately authorised transport projects can be included in the definition when assessing compensation, if the project is made viable by public investment in the related transport infrastructure. The transport scheme’s impact on land values would also be disregarded for compensation.

What is the rationale behind the proposal?

Although recent cases have provided greater clarity for practitioners on the issue, the government has chosen this area as one in need of codification in statute. Ministers want to make the compulsory purchase process clearer and faster and to ensure that public investment in regeneration schemes achieves the best value. While a line needs to be drawn somewhere, the bill tips the balance in favour of acquiring authorities. Cynics might argue that the change is proposed to enable some land value capture by scheme promoters, making land assembly cheaper for acquirers.

Will the proposals help to reduce compensation disputes?

Deciding what can and cannot be ignored can be difficult. Disregards can lead to significant differences in the compensation due. In such a controversial and difficult area, any new law is likely to bring disputes, especially with such high stakes. The recent legal stability and clarity achieved by several high-profile House of Lords cases may now be lost as new cases arise to test the new provisions. More frequent referrals to the Land Tribunal on this issue must be anticipated.

What are the implications for landowners?

It is surprising that a Conservative government has chosen to intervene in market principles to the benefit of those promoting infrastructure. Many will think value should be dealt with on a case-by-case basis with no statutory presumptions. The proposals are likely to increase rather than reduce landowner complaints of unfairness. The main risk is for landowners looking to acquire sites that may be affected by transport schemes. Where part of their land is later taken compulsorily, the new regime will be applied. This may encourage owners to fight such schemes by promoting alternatives that leave their holding intact. Or it might encourage them to seek an early deal with the acquiring authority, to avoid a lengthy dispute over compensation.

Will there be new burdens or opportunities for local authorities?

Councils may join infrastructure promoters to seek mutual opportunities for transport-related regeneration, relying on the uncertainty of the new rules to strike a deal without using compulsory powers. However, uncertainty over valuation may bring landowners to the table, to improve deals through negotiating a better price than the new rules might give them. Using the development plan process to build a no scheme world argument will be very important – as it already is. Defining a scheme and linking regeneration and transport proposals will aid later arguments on the extent of the overall scheme.

The new rules will not apply to land purchased before the publication of the bill on 8 September 2016 that is later affected by a scheme with a relevant infrastructure element. It will be important to keep this date in mind when considering a proposal for a new infrastructure scheme as there is no end date for this provision.

Richard Guyatt is planning partner at law firm Bond Dickinson and chair of the Compulsory Purchase Association

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