Part XI         
the compensation code – the proposals

Introduction

                11.1             We set out below our provisional Proposals for the matters to be included in the new Compensation Code. We have done this in the form of draft “Proposals”, in order to give a sense of the shape of the new Code.  However, it must be emphasised that the formulation of these Proposals is intended solely to give an indication of the proposed content of the Code; the detailed drafting will be a matter for Parliamentary Counsel in due course. Where, however, we have derived these formulations from sources other than the main provisions of the existing statutory provisions, we have indicated the source in a footnote.

                11.2             The draft proposals are set out under the following main headings:

                                                                   (a)              General definitions

                                                                   (b)              Core principles

                                                                   (c)              Project disregard and planning status

                                                                   (d)              Miscellaneous rules

                                                                   (e)              Injurious affection where no land is taken.

                                                                    (f)              Repeals

(A) GENERAL DEFINITIONS

In these proposals, the following terms are used as here defined:

“Compulsory purchase”: means the compulsory purchase of any land under powers conferred by or under any statute;

“The authority”: means the minister, authority or other person authorised to acquire land by compulsory purchase;

“The claimant”: means a person claiming, or entitled to claim, compensation under this Code;

“Subject land”: means any land of the claimant which is subject to compulsory purchase;

“Retained land”: means any interest of the claimant in land (not subject to compulsory purchase) which, at the date of notice to treat, was held with[1] the claimant’s interest in the subject land;

“First notice date”: means the date on which notice of the making of the compulsory purchase order is first required to be published or served, in accordance with the requirements of the relevant Act;[2]

[See Part IV, para 4.65]

“Date of notice to treat”: means the date of the notice required (under 1965 Act, s 5) to be served, following confirmation of the compulsory purchase order, on owners of interests which the authority wishes to acquire; or the date of a “deemed notice to treat” under other procedures (such as the vesting declaration procedure[3]).

“Valuation date”: means the date on which the authority takes possession of the subject land (or, under the vesting declaration procedure, the vesting date[4]), or (if earlier) the date of agreement or determination of compensation.

[See Part V, paras 5.73-5.74]

(B) CORE PRINCIPLES

Proposal 1: Right to compensation

Subject to the provisions of the Code, any person from whom an interest, in existence at the date of notice to treat, is acquired by compulsory purchase, or whose interest in the subject land is diminished or adversely affected by or pursuant to compulsory purchase, is entitled to compensation assessed in accordance with the following rules.

[See Part IV, para 4.2-4.4]

Proposal 2: Heads of compensation

The right to compensation shall be a right to an amount (not less than nil), assessed in accordance with the principle of fair compensation, having regard to the following matters (as defined below): market value of the subject land; disturbance; injury to retained land (severance or injurious affection, less betterment); (where applicable) equivalent reinstatement.

[See Part IV, paras4.6-4.14]

Proposal 3: Market value

(1) “Market value” of any land means the amount (not less than nil) which the land might be expected to realise if sold in the open market by a willing seller to a willing buyer.

(2) Except as otherwise provided, for the purpose of any provisions of the Code which depend on the value of land (including any reduction or increase in the value of land), value means “market value” as so defined.

[See Part IV, paras4.15-4.19]

Proposal 4: Disturbance

(1) “Disturbance” means any monetary loss or expense, not directly based on the value of land, suffered or incurred by the claimant and fairly attributable to displacement[5] in consequence of the compulsory acquisition of the subject land;

(2) Without prejudice to the generality of (1), in assessing compensation for disturbance, the following rules apply:

(a) All relevant circumstances are to be taken into account, including any circumstances personal to the claimant;

(b) Disturbance includes the amount of any legal or other professional costs reasonably incurred by the claimant in connection with the acquisition;

(c) Where compensation is claimed on the basis of the relocation of a business from the subject land, compensation on the relocation basis shall not be refused solely because it exceeds the compensation which would be payable on the extinguishment basis,[6] unless, in the opinion of the Tribunal, it is unreasonable in all the circumstances (including the cost to the authority and the value of the business to the claimant) to assume relocation of the business;

 (d) Compensation for disturbance may, if the Tribunal so determines, include costs reasonably incurred in replacing buildings, plant or other installations (whether or not on the land acquired) where (i) they are required for a business to be continued on the retained land; (ii) the need for replacement is fairly attributable to the acquisition, and is reasonable in all the circumstances ((having regard to the cost to the authority and to the likely benefit to the claimant); (iii) the cost is not adequately reflected in any other head of compensation; but (iv) subject to such deduction (if any) as the Tribunal may determine should be made to reflect any improvement in the facilities so obtained over those replaced;

(e) Compensation for disturbance is not payable for loss or expense suffered or incurred before the first notice date;

(f) Where a claimant who was not in occupation of the subject land incurs incidental charges or expenses in acquiring, within one year of the date of entry, an interest in other land in the United Kingdom, those charges and expenses may be claimed as disturbance;[7]

(3) Without prejudice to (2)(a), the rights of traders over 60 years of age to claim compensation on the total extinguishment basis, in the circumstances defined by the 1973 Act, s 46, will be preserved in the new Code.

[See Part IV, paras4.20-4.68]

Proposal 5: Injury to retained land

(1) Compensation for injury to retained land is to be assessed having regard to the following so far as applicable, assessed (subject to (5) below) at the valuation date:

(a) “Severance”, defined as the amount of any reduction in the market value of any interest of the claimant in any retained land, attributable to its severance from the subject land;

(b) “Injurious affection”, defined as the amount of any reduction in market value of any interest of the claimant in the retained land attributable to the nature of, or the carrying out of, the relevant project;[8]

(c) “Betterment”, defined as any increase in the market value of the retained land attributable to the nature of, or the carrying out of, the relevant project;

(d) The “relevant project” shall have the same meaning as in Proposal (8) below.

(2) Compensation under this Proposal is to be assessed by taking the amount of any severance or injurious affection, and deducting the amount of any betterment (save that the total shall not be less than nil);

(3) In assessing injurious affection or betterment, regard is to be had to the effects of the whole of the works comprised in the relevant project, whether on the subject land or elsewhere;[9]

(4) If the claimant so requires, the amount due under this Proposal is to be assessed by calculating the difference at the valuation date between (a) the market value of the subject land and the retained land taken together (disregarding any diminution due to the relevant project) and (b) the market value of the retained land on its own (taking account of any effect on that value of the relevant project).

(5) Where the injury for which compensation is claimed under this proposal is temporary in nature, injurious affection shall be assessed by reference to any reduction in letting value of the retained land during the relevant period, or such other method as the Tribunal may consider appropriate.

[See Part V, paras5.2-5.35]

Proposal 6: Equivalent reinstatement

(1) Subject to (2), where (a) the subject land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, and (b) reinstatement in some other place is genuinely intended, compensation shall (at the option of the claimant) be assessed on the basis of the reasonable cost of equivalent reinstatement.

(2) Compensation on this basis may be refused by the Tribunal, if satisfied that it is in all the circumstances unreasonable, having regard to the cost to the authority and to the likely benefit to the claimant.

(3) Compensation on the equivalent reinstatement basis shall, at the election of the claimant, be paid in the circumstances set out in 1973 Act, s 45 (dwellings especially adapted for the disabled).

[See Part V, paras5.36-5.54]

Proposal 7: Incidental rules

(1) Where an interest is limited as to time or may be terminated by another person, regard shall be had (in assessing compensation for that or any other interest in the subject land) to the likelihood (in the absence of the relevant project) of the continuation or renewal of the interest and the likely terms and conditions on which any continuation or renewal would be, or would have been, granted.[10]

(2) Where the subject land comprises a dwelling-house, there shall be left out of account any increase or reduction in the compensation otherwise payable, which is attributable to the fact that the authority (or any other public authority) have provided or undertaken to provide alternative residential accommodation for the claimant or a residential tenant (under the 1973 Act, s 39 or otherwise).[11]

(3) There shall be disregarded any increase in the value of the land caused by its use in a manner, or for a purpose, contrary to law.[12]

(4) There shall be disregarded:

(a) any new interests created over the subject land, or the retained land, between the date of notice to treat and the valuation date, in so far as they would increase the amount of compensation otherwise payable by the authority;[13]

(b) without prejudice to (a), any enhancements (by creation of interests, or works on the land or otherwise) where the Tribunal is satisfied that the enhancement was not reasonably necessary and was undertaken with a view to obtaining compensation or increased compensation.[14]

(5) Where the market value of an interest in the subject land is assessed on the basis that the land had potential to be developed or used for a purpose other than the purpose for which it was occupied at the valuation date, compensation shall not be allowed under other heads (disturbance or injury to retained land) in respect of loss or damage that would necessarily have arisen in realising that potential.[15]

(6) If it is shown that the claimant has failed (since the first notice date) to take action reasonably open to him to mitigate his loss, the compensation otherwise payable shall be reduced by the amount of such loss as could have been avoided by taking such action when it was reasonable to do so.[16]

[See Part V, paras5.56-5.70]

Proposal 8: Date of assessment

(1) Save as otherwise provided, and subject to Proposal 7(4) above and Proposals 9 and 10 below, interests will be valued as they stand at the “valuation date”, at values prevailing at that date, and in the context of the planning and other circumstances prevailing at that date.

(2) Where compensation is assessed on the basis of equivalent reinstatement, it will be assessed by reference to the the date at which reinstatement became reasonably practicable.

[See Part V, paras5.71-5.91]

(C) PROJECT DISREGARD AND PLANNING STATUS

Proposal 9: disregarding the project

(1) The existing rules, statutory or judge-made, relating to disregard of “the scheme” will be replaced by a new statutory set of rules, by reference to the “relevant project”;

(2) In this and the following proposal:

(a) “The relevant project”: means the project for the purpose of which the authority has been authorised (under the applicable statute) to acquire the subject land;

(b) “Planning status”: means the planning permissions, actual or assumed, relating to the subject land or other land, to be taken into account for the purpose of assessing compensation;

(c) “The cancellation assumption”: means the assumption that the relevant project was cancelled on the first notice date, with no prospect of that, or any other project to meet the same or substantially the same need, being carried out thereafter under statutory powers;[17]

(d) “Planning hope value”: means any increase in value of the subject land derived from the prospect of planning permissions being granted at a date subsequent to the valuation date;

(e) “Blighted land”: means land falling within one of the categories of planning proposals defined by Schedule 13 of the Town and Country Planning Act 1990 (or any replacement thereof);

(f) Any reference to the value of land includes a reference to the profitability of a business on that land.

[(2A)(i)If the authority wishes to contend that the relevant project extends to land other than the subject land, they shall include in the notice of the order a statement (in prescribed form) certifying that fact, defining the nature, extent and purpose of that project, and the date of the resolution of authorising that project;

     (ii)Where such a statement is included in the order, its contents may be challenged by the claimant (but not the authority) on the hearing of a reference to determine compensation;

     (iii)Subject to (ii), in any proceedings before the Tribunal:

                                                                                (a)     The relevant project shall be as defined in the statement under (i);

                                                                                 (b)     The cancellation assumption shall be applied taking (instead of the first notice date) the later of the resolution date defined under (i) and the date three years before the first notice date;

                                                                                 (c)     If no statement is served, it will be assumed (against the authority, but not the claimant) that the relevant project is confined to the area of the compulsory purchase order, and began on the first notice date.

As an alternative to (ii), an interested person could have the right to challenge the statement by objection to the confirming authority, within the time prescribed for objections to the order, and the decision of the confirming authority would then be binding on both parties before the Tribunal.] [18]

(3) In assessing compensation there shall be disregarded:

(a) any increase in value of the subject land fairly attributable to the carrying out of, or the proposal to carry out, the relevant project;

(b) any decrease in value of the subject land fairly attributable (i) to the carrying out of, or the proposal to carry out, the relevant project, or (ii) to any prior indication of the proposal to carry out that project, or (iii) to the subject land being within a category of “blighted land”;

(4) The increase to be disregarded under (3) shall be assessed by comparing the value of the land at the valuation date with the value as it would have been at that date on the cancellation assumption.

(5) The following rules apply where land is treated as having been subject to compulsory purchase, under procedures initiated by the claimant (“deemed compulsory purchase”):

(a) If the deemed compulsory purchase follows service of a blight notice[19] under the Town and Country Planning Act 1990, the relevant project shall be determined by reference to the planning proposal (as defined in Section 149 and Schedule 13 of that Act) by which the land became blighted land;

(b) In any other case (including the service of a purchase notice under section 137 of that Act), the relevant project shall be assumed to be the service by the claimant of the notice which initiated the procedure;

(c) In either case the “first notice date” shall be taken as the date of service of the notice which initiated the procedure;

(6) Nothing in this proposal shall be taken as altering (for valuation purposes) the planning status of the subject land or any other land.

[See Parts VI and VII, paras7.1-7.28]

Proposal 10: Planning status

(1) The following rules will apply for the purpose of determining planning status at the valuation date:

(a) Account is to be taken of any planning permissions in existence at the valuation date (on the subject land or any other land);

(b) Planning permission is to be assumed (so far as not in existence at the valuation date) such as would permit the carrying out of the relevant project (on the subject land and any other land comprised in the project);

(c) Planning permission is to be assumed for any development (on the subject land or any other land) such as would reasonably have been expected to be granted not later than the valuation date, on the cancellation assumption;

(d) No other assumptions are to be made as to the existence of any planning permissions at the valuation date, but this rule does not prevent account being taken of any planning hope value.

(2) For the avoidance of doubt, in relation to any permission assumed under this Proposal:

(a) the assumption that permission has been granted does not of itself imply any assumption that work has been or will be carried out, or expenditure incurred, in implementing the permission;

(b) regard shall be had to any costs or expenses which would reasonably have been expected to be incurred in obtaining or implementing the permission; or in complying with any conditions, obligations or requirements to which the permission was, or would reasonably have been expected to be, subject.

(3) For the purpose of determining the permission or permissions to be assumed under (1)(c) above, either the claimant or the authority may, at any time after the first notice date, apply to the local planning authority for a “planning status certificate”, in accordance with the following rules (and “procedural regulations” to be made by statutory instrument):

(a) A planning status certificate is a certificate stating the opinion of the local planning authority as to the development (if any) on the land comprised in the application for which planning permission would reasonably have been expected to be granted on the cancellation assumption;

(b) The application for a certificate may relate to the subject land or any part of it, and any adjoining land which could reasonably have been expected to be part of the same development (whether or not in the ownership or control of the claimant);

(c) The certificate should include:

(i) Where permission would reasonably have been expected at some future date, an indication of the date;

(ii) A general indication of any conditions, obligations or requirements, to which the permission would reasonably have been expected to be subject;

(d) Either:[20]

(A) There shall be a right of appeal against the certificate to the Secretary of State, by either the claimant or the authority (based on the present right under 1961 Act, s 18ff); or

(B) There shall be a right of appeal against the certificate to the Tribunal, by either the claimant or the authority, subject to procedural regulations, and any time-limits there laid down; the regulations will give the Tribunal a wide discretion as to the timing and nature of the hearing of the appeal, having regard to any related compensation reference; in particular the Tribunal may direct:[21]

(i) that the appeal be determined on its own, or at the same time as a reference relating to the determination of compensation for which the certificate is required;

(ii) that the hearing of the appeal should take the form of a local inquiry before a planning inspector (appointed for the purpose by the Chief Planning Inspector), and that the inspector be given delegated power to determine the appeal on behalf of the Tribunal;

(e) In determining compensation:

(i) the Tribunal must take account of any permission, which is to be assumed in accordance with the planning status certificate;

(ii) in deciding (under the above rules) whether any other permission is to be assumed at the valuation date, it must have regard to any contrary opinion expressed in the certificate;

(f) Regulations may provide for the certificate procedure to be applied (with or without modifications) to special cases, including:

(i) where an offer is made by the authority, before the first notice date, to negotiate for the purchase of an interest in land which is, or may be, subject to compulsory purchase;[22]

(ii) where a claimant is absent from the United Kingdom or cannot be traced.[23]

[See Part VIII, paras7.30-7.45]

 (D) MISCELLANEOUS RULES

Proposal 11: Interference with easements etc.

(1) Where the carrying out of the purpose for which the subject land is acquired results in interference with, or breach of, any easement, restrictive covenant or other right affecting the subject land, which is attached to other land, compensation shall be payable under this Proposal.

(2) Compensation under this proposal shall be assessed by reference to the reduction (if any) in the market value of the land to which the right is attached, so far as attributable to such interference or breach.[24]

[See Part VIII, paras8.3-8.9]

Proposal 12: Acquisition of rights

Where the interest acquired is a right over land (including a newly created right):

(i) The value of the right shall be assessed by reference to the depreciation, if any, in the market value of the land over which the right is acquired;

(ii) Other heads of compensation (disturbance, injurious affection but not severance) shall be allowed under the ordinary rules (see above).

[See Part VIII, paras8.10-8.20]

Proposal 13: Advance payments

The claimant shall be entitled to an advance payment on account of compensation and interest, in accordance with sections 52 and 52A of the 1973 Act (which will be incorporated into the Code), subject to the following:

(i) Section 52(6) will be amended so that, whether or not the mortgage exceeds 90% of the authority’s estimate, the authority shall, if so requested by the owner and mortgagee, make the advance payment direct to the mortgagee;

(ii) Where it is shown that the authority has delayed unreasonably in making such a payment, or that the estimate on which the payment was based was unreasonably low,[25] the County Court may, on the application of the claimant, may make such interim or final orders (including imposing time-limits), as are necessary to enforce the authority’s obligations under this proposal.

[See Part VIII, paras8.21-8.29]

Proposal 14: Lands tribunal jurisdiction

The Lands Tribunal shall have jurisdiction (subject to procedural rules) to determine any claim (common law or statutory) relating to damage to land or to the use of land, where it arises out of substantially the same facts as a compensation claim which has been referred to the Tribunal.

[See Part VIII, paras8.30-8.32]

Proposal 15: Interest

Interest on compensation, in respect of the compulsory purchase of any land on which entry has been made before payment of compensation, shall be paid from the date of entry at such rate as may be prescribed from time to time under 1961 Act, s 32 or any replacement.[26]

[See Part VIII, paras 8.33-8.48]

Proposal 16: Subsequent planning permission

1961 Act, s 23 (compensation where permission for additional development is granted after acquisition) will be repealed.

[See Part VIII, paras 8.65-8.75]

(E) INJURIOUS AFFECTION WHERE NO LAND IS TAKEN

Proposal 17: Compensation for effects of public works

Part I of the Land Compensation Act 1973 will be expanded and amended to provide a complete code for compensation for injurious affection where no land is taken:

(1) A new provision of the 1973 Act (to replace 1965 Act, s 10) will confer a right to compensation where the market value of an interest in land is depreciated by “physical factors” caused by the construction of “public works”,[27] but only to the extent that a claim would have arisen at common law apart from the immunity conferred by the statute.

(2) The 1973 Act, Part I (compensation for depreciation due to the use of public works) will be retained, subject to the following:-

(a) Repeal of:

(i) section 2(3) and (6) (rateable value limit of £24,600, currently applicable to interests other than dwellings or agricultural units);

(ii) section 4(5) (existing use only);

(iii) section 5 (requirement to assume that no permission would be granted for new development).[28]

(b) Other detailed amendments proposed by CPPRAG to be reviewed following consultation.

[See Part IX]

(F) REPEALS

Proposal 18: Repeals

Repeals

 (1) The above provisions are to replace the following existing statutory provisions, which will accordingly be repealed:

Land Compensation Act 1961

ss 5-9, 10A, Sched 1 (rules for determining amount of compensation)

ss 14-16 (planning assumptions)

ss 17-22 (certificates of appropriate alternative development)

ss 23-30, Sched 3 (compensation for additional development)

Compulsory Purchase Act 1965

s 7 (compensation for severance etc)

s 10 (injurious affection where no land is taken)[29]

Land Compensation Act 1973

s 2(3) and (6) (rateable value limit of £24,600)[30]

s 4(5) (existing use only)[31]

s 5 (requirement to assume that no permission would be granted for new development)[32]

s 44 (injurious affection by the whole of the works)[33]

s 45 (disturbance provisions for the disabled, and over 60s)[34]

ss 47-8 (continuation of business and agricultural tenancies)[35]

s 50 (compensation where occupier is rehoused)[36]

s 51 (designation in new town for public development)[37]

 ss 52, 52A (advance payment)[38]  

Acquisition of Land Act 1981

s 4 (disregard of enhancements)[39]

Review

 (2) The remaining provisions of the Land Compensation Act 1961 will be subject to review; they are:

 ss 1-4 (Determination of disputed compensation)[40]

s 11 (land of statutory undertakers)

s 12 (outstanding right to compensation for refusal of         permission)[41]

s 31 (withdrawal of notices to treat)[42]

s 32 (rate of interest after entry)[43]

ss 33-42 (miscellaneous and interpretation)[44]

[See Part X]