On 6 April 2018, important changes are being made to planning and CPO law and practice. The changes were introduced by the Housing and Planning Act (HPA) 2016 and the Neighbourhood Planning Act (NPA) 2017 and are now being brought into play by commencement regulations (SI 2018/251 and SI 2018/252).
Compulsory purchase orders and compensation
The amendments address a number of issues. They are intended to benefit those that are due compensation and to speed up the process of confirmation of compulsory purchase orders. The changes relate to:
- the timetable for the confirmation of CPOs
- the ability for inspectors to confirm CPOs instead of the Secretary of State
- compensation after withdrawal of a notice to treat
- advance payment of CPO compensation.
See amendments that will come into force on 6 April 2018.
Neighbourhood Planning Act 2017 provisions
This article also considers other relevant provisions of the NPA 2017 which were brought in on 22 September 2017 relating to:
- the no scheme principle
- second bite compensation
- confirmation notices
- disturbance compensation
- joint CPOs in London
- the model claim form for those claiming CPO compensation.
These amendments are part of a wider suite of changes that are gradually being phased in and this article notes other elements contained in the NPA 2017 and HPA 2016, which have yet to come into force.
See provisions that were brought in on 22 September 2017.
Which CPO schemes are affected?
The new provisions discussed below come into force on 6 April 2018. The provisions relating to confirmation of CPOs (by inspectors and timetables) will apply to any CPOs submitted for confirmation on or after 6 April 2018, whereas the remaining changes apply to CPOs authorised (i.e. confirmed) on or after that date.
The September 2017 changes in respect of the no scheme principle and disturbance apply to all CPOs authorised on or after that date.
What changes are being brought in on 6 April 2018?
1. Confirmation of CPOs
From 6 April 2018, the HPA 2016 introduces a new section 14B to the Acquisition of Land Act 1981, which requires the Secretary of State to publish a timetable(s) in relation to steps to be taken when confirming a compulsory purchase order.
This provision has already been reflected in a recent update to the MHCLG “Guidance on compulsory purchase and the Crichel Down Rules", which now includes target timescales in relation to confirmation. These targets apply to all confirming authorities other than the Welsh Ministers (who are able to introduce their own timeframes, but have not yet done so).
The targets mean that acquiring authorities must be notified within 10 days of the close of the public inquiry into the CPO of the expected date of the Secretary of State’s decision. Target dates for confirmation of CPOs are also included in the updated guidance. There is a target that 80% of cases should be decided within 20 weeks of the close of the public inquiry – with the remaining cases decided within 24 weeks. However, there is no real sanction for failing to comply with the timescales (other than the shame of being named in a published annual report as having failed to meet the target), and the timescales are not statutory, so it remains to be seen whether they will have the desired effect of speeding up the CPO process.
In addition, the Secretary of State will (from 6 April) be able to appoint an inspector to act on its behalf in relation to the confirmation of a CPO for which there are remaining objectors. An inspector can perform the same functions as the confirming authority including holding a public inquiry. Again, this is a step intended to speed up the process and impacts the timetables set out in the guidance, which states that where confirmation has been delegated to an Inspector, 80% of cases should be decided within 8 weeks – with the remainder being determined within 12 weeks.
If these timeframes are followed, there is real potential (particularly with delegated confirmation) to speed up the CPO process and provide certainty to all those involved in the process. This could have great benefits for acquiring authorities and enable development to be brought forward more quickly.
However, the targets are ambitious and there is no real way of enforcing them so it remains to be seen how effective they will be.
2. Claims for CPO compensation
The HPA 2016 allows further regulations to be made in relation to the specific information that must be provided by a claimant when giving notice of a claim for compensation following CPO. We are yet to see what these changes will be, although there is now in place a model claim form, which claimants are encouraged to use to assist in complying with the requirement to make a properly evidenced claim.
New provisions are also being introduced to enable a successor in title to the claimant to claim compensation for loss or expenses caused by the giving and withdrawal of a notice to treat for the compulsory acquisition of land.
3. Advance payments of CPO compensation
An acquiring authority may make an advance payment of compensation following the exercise of compulsory acquisition powers if a request is made by a claimant. The amount payable is 90% of the agreed sum for compensation or 90% of the acquiring authority’s estimate of the compensation due, if possession is taken before compensation has been agreed. A model claim form is available, which claimants are strongly advised to use when making a claim for advance payment.
Under the current position, advance payments must be made within three months from the date of request or when possession is taken (if later). However, under this regime there is no penalty for late payment and no timescale for addressing an acquiring authority’s request for further particulars of the claim. These provisions have therefore been subject to calls for reform for some time.
Under the new provisions, an acquiring authority must, within 28 days of receiving a request for an advance payment, decide whether or not it has enough information to estimate the amount of compensation payable. If the acquiring authority needs more information, it must then require the claimant to provide it.
Payment of advance payments must be made by the date of service of a notice of entry or GVD – or within two months of a request from a claimant (if later). This means that a claimant can obtain payment more quickly and – most importantly – before possession is taken. This will be of significance to claimants as the need for compensation often arises prior to possession being taken, particularly for issues such as relocation of a business.
It is worth noting that a claimant will be required to repay any advance payment made prior to possession being taken, if possession is not subsequently taken.
The changes also enable a penalty rate of interest to be applied to any late payment but this rate has not yet been set (there has been rumour of around 8% above base rate) and the MHCLG confirmed on 28 February 2018 that it wishes to engage further with stakeholders to discuss “potential gaming risks” associated with this approach so this is still one to watch.
From 6 April 2018, section 38 of the NPA 2017 also makes further technical amendments to the provisions on advance payments and the information requested from the claimant by an acquiring authority.
What changes were brought in on 22 September 2017?
1. The no-scheme principle
These provisions essentially put the assessment of compensation for land taken by compulsory purchase on a statutory footing. They also provided clarity to the no-scheme principle that in determining compensation, any increase or decrease in value caused by the scheme of acquisition should be disregarded.
The new sections (s6A-6E inserted into the LCA 1961) embodied the no-scheme principle and set out the parameters of how the “scheme” is to be approached. These new sections replaced the previous legislation (s6-s9).
The key addition was the extension of the definition of the scheme to allow for specific transport infrastructure projects to be disregarded. The reason for this change was to prevent those owners facing a CPO for, say, a regeneration scheme securing increased compensation for their site when that increased land value could be attributed to a transport scheme, such as a new road which opened up that site for redevelopment.
Acquiring authorities will be looking at these provisions to limit compensation. Claimants will need to be careful to ensure that any pre-existing value, such as a ransom, doesn’t fall foul of these changes.
2. Removal of second-bite compensation
Claimants are no longer entitled to claim additional compensation where, within 10 years of the completion of the compulsory purchase by the acquiring authority, a planning decision is made granting consent for additional development on the land. This repealed Part 4 of the LCA 1961. The previous law was considered unnecessary as the prospects of obtaining planning permission in the future should have already been taken into account when assessing compensation as part of the application of the statutory planning assumptions.
3. Time period for confirmation notices
A requirement on acquiring authorities was introduced to serve and publish a confirmation notice within six weeks of a CPO being confirmed (unless a longer period is agreed between the acquiring and confirming authorities). The result of this is that a CPO now becomes operative on the date of the confirmation notice. This triggers the statutory six week period within which any challenge must be made and the three year implementation period. Previously there was no set period for a confirmation notice to be served. The amendment therefore gave those affected by a CPO more certainty.
4. Compensation for disturbance
The new law regularised the assessment of compensation for disturbance for licensees with no interest in land with that for business tenants and lessees with a break clause (via a new section 47 LCA 1973).
Prior to the amendments, those with a minor interest in land may have been entitled to more compensation than someone with a leasehold interest as, in assessing the compensation entitlement for tenancies, it was assumed that the landlord would terminate the tenant’s interest at the first available opportunity.
However, under the new provisions, the prospect of continuation or renewal of the tenancy is to be taken into account. The effect of this is to overcome the decision in Bishopsgate Space Management v London Underground [2004] and place all interests which do not benefit from security of tenure on the same footing.
5. Joint CPOs – GLA and TfL
The Greater London Authority, a Mayoral Development Corporation or Transport for London are now allowed to acquire land authorised by a compulsory purchase order on behalf of each other for a joint project. It is considered by the government that these changes will assist in bringing forward comprehensive developments, particularly for housing. These changes should make the CPO process more efficient and cost effective in such circumstances.
6. Model claim form
As well as bringing into force the above changes, the government also published a model claim form on 22 September with accompanying guidance.
This advises acquiring authorities to send the form to potential claimants at the earliest opportunity and encourages claimants to complete and return it as early as possible. It is not to be treated as a “once and for all” process as the form can be updated or supplemented by correspondence throughout negotiation in the usual way.
The intention is to make it clearer to claimants and acquiring authorities what information and what level of detail should be provided by claimants and to encourage early disclosure and transparency in negotiations.
The claim form is intended to assist a claimant in complying with the statutory requirement to make a detailed and properly evidenced claim. It highlights that, where a reference is made, a claimant risks an award of costs against them if they have not provided the information in time to enable the acquiring authority to make a proper offer.
The indication is that if the model claim form is not used, provided late and either not completed by the claimant or poorly completed, the Tribunal may rely on this as justification to award costs against claimants. It will be important for claimants to use the new forms and for their advisers to ensure it is completed as fully and as early as possible.
Future changes
There are still some important changes to the CPO regime contained within both the NPA 2017 and the HPA 2016 which are not yet operative.
For instance, it is not yet possible to take advantage of the new powers to take temporary possession of land in the NPA 2017. These provisions could prove very useful for acquiring authorities and are long awaited by many. In addition (and as discussed above) a provision in the HPA 2016 concerning a penal rate of interest where advance payments are paid late has not yet been brought into force. MHCLG intend to consult further on the level of the interest rate to ensure it is fair to both acquiring authorities and claimants.
There is still a lot of detail to be worked through to ensure that these unimplemented provisions work in practice. As such, it is not possible to say with any certainty when we might expect to see the full extent of the amendments to the CPO regime in operation or what their impact will be.
If you have any questions about the above changes or about CPO or compensation more generally, please contact Gary Soloman or Jen Ashwell.