Compulsory purchase powers are provided to enable acquiring authorities to compulsorily purchase land to carry out a function which Parliament has decided is in the public interest.
Compulsory purchase powers are conferred and prescribed by Acts of Parliament, and require the approval of the Government Minister specified in the particular Act. In practice, the greatest users of compulsory purchase powers are likely to be Local Authorities and the Highways Agency, although it is worth remembering that major utilities such as water or electricity companies also have compulsory purchase powers to enable them to take such rights as are needed to enable them to provide their services to a new development or to upgrade existing supplies.
The compulsory purchase process is made up of a number of stages. It is important to note that the acquiring authority does not have the powers to compulsorily acquire land until the appropriate Government Minister confirms the Compulsory Purchase Order (CPO). However, they can acquire by agreement at any time and they will normally attempt to do so before acquiring by compulsion.
How much compensation?
Compensation following a compulsory acquisition of land is based on the principle of equivalence. This means that you should be no worse off in financial terms after the acquisition than you were before. Likewise, you should not be any better off. Because the effects of the CPO on the value of a property are ignored when assessing compensation, it is necessary to value the land on the basis of its open market value without any increase or decrease attributable to the scheme of development which underlies the CPO.
Depending upon the particular circumstances in each case compensation can be claimed under the following “Heads of Claim”:
Subject to satisfying qualifying criteria a claimant may be entitled to a loss payment in addition to any other compensation due. This is an additional amount to reflect and recognise the inconvenience and disruption caused by the acquisition. It is split into the basic loss payment related to the value of the interest in the property acquired and an occupier’s loss payment payable on top of that if the claimant is also the occupier of the property.
Compensation When No Land is Taken
The above comments apply only where land (or new rights over land) is acquired. However, a right to compensation may also arise in limited circumstances when no land is taken but when statutory powers are exercised, i.e. Where a reduction in the value of land is caused by the Execution (the construction) of Public Works (this is quite rare but relates to a situation where a loss is caused by something authorised by an Act of Parliament which but for the Act of Parliament the action would be actionable at law, e.g., interference with a right of way); or more commonly where a reduction in the value of land is caused by the subsequent Use of Public Works, where a right to compensation may arise under Part 1 of the Land compensation Act 1973 – a Part 1 Claim.
Part 1 Claims
This right to compensation under Part I of the Land Compensation Act 1973 applies to certain “public works” i.e., a highway, an aerodrome and other works provided under statutory powers. In addition to new works the provisions cover substantial alterations and changes of use to existing works but not intensification of a use (unless alterations are also carried out). Qualifying conditions have to be met in order to be able to claim.
The amount of compensation is based upon prices current on the first claim day, which is 12 months after use of the public works first commenced and is based upon the depreciation in the value of the land due to the “physical factors” caused by the use of the public works. The seven physical factors are:
Any depreciation in value which is attributable to reasons other than these seven specific factors is not compensateable and so for example there is no compensation the loss of a view.
As mentioned above utility companies usually have statutory powers in the background to enable them to acquire easements, for example to lay a new sewer or water supply, but typically will prefer to proceed by agreement.
How we can help
If you are faced with any issues involving the above please contact Lloyd Smale FRICS, RICS Registered Valuer here at Carter Geering on 01363 773757, mobile 07535 099660 or by email firstname.lastname@example.org for an initial no obligation consultation.