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You are here: BAILII >> Databases >> The Law Commission >> TOWARDS A COMPULSORY PURCHASE CODE: (1) COMPENSATION (A Consultative Report) [2002] EWLC 165(13) (24 June 2002) URL: http://www.bailii.org/ew/other/EWLC/2002/165(13).html Cite as: [2002] EWLC 165(13) |
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Part XIII
Conclusion
The cost of implementing the proposals set out in this policy statement will be partially influenced by the extent to which the revised procedures, accompanied by a fairer and more clearly defined compensation code, result in acquiring authorities making increased use of their compulsory purchase powers. Furthermore, the extent to which any such cost has to be borne by the public sector will depend on the degree to which the availability of more efficient compulsory purchase powers makes replacement schemes more attractive as investment opportunities for private sector bodies working in partnership with acquiring authorities.[1]
13.3 Focussing on compensation changes the Government’s view is that:
A clearly defined, and better understood, compensation code should help to reduce the amount of professional time needed to negotiate compensation settlements. Clear but flexible statements of principles can be expected to reduce the number of cases which need to be referred to the Lands Tribunal and the courts, as both claimants and acquiring authorities will have a better idea of what particular elements of the compensation package are intended to cover and of the basis on which they should be calculated. . . .[2]
13.4 The paper goes on to accept that:
Against such potential savings, it has to be accepted that . . . some of the proposals intended to make the compensation package fairer are also likely to increase the amount payable to some of those whose property is acquired. For example, the proposal that provision for disturbance payments should be expressed in legislation as a statement of principles is likely to widen the range of costs and losses which can be recompensed. However, we are satisfied that additional expenditure can be justified in terms of equity and regard for the human rights of those whose private property is directly affected by schemes for the public good.[3]
13.5 The Government asked us to have particular regard to the following:
(1) Construction of a single Compensation Code which will achieve the principle that “in all cases, a claimant should [be] properly compensated for all the losses incurred as a direct result of the compulsory purchase order”. That approach will not differentiate between particular CPO powers used, implementation or lack of it, and whether or not land has been taken.
(2) Clarification of the extent to which CPO valuations should take account of (or disregard) the effects of the scheme underlying the proposal, and whether valuations should take account of development potential of the subject land.
(3) Clarification of the rules relating to compensation for severance/injurious affection (where land is taken) and the ensuring of parity of treatment between those from whom some land is taken and those from whom none is taken.
(4) Clarification of the principles relating to payment of compensation for disturbance (including, for business activities, the determining of the need for relocation or extinguishment), which principles will ensure reimbursement for all costs and losses genuinely incurred as a direct consequence of the dispossession.
(5) Provision of a mechanism whereby eligible claimants can require acquiring authorities to make advance payments without delay where an estimate has been made.
(6) Consideration of the issue of the award of compound interest on late compensation payments (linked to our separate examination of the power of the courts to award such interest) and, more particularly, clarification of the basis for interest payments on fees and taxes.
(7) Provision for compensation for losses incurred where (after the first notice date) compulsory purchase orders are abandoned, withdrawn, quashed or not confirmed. [This work will feature in our second consultative report on Implementation].
13.6 We indicate below in broad terms the likely consequences of reform:
(1) We propose a Compensation Code which should operate as a single and self-contained mechanism. We believe that if Parliament were to enact such a Code it would make the rules relating to identification of interests and assessment of compensation sums far more accessible and comprehensible. That will benefit professional advisers, acquiring authorities, businesses and individuals. Clarity and lack of ambiguity should reduce time expended on interpretation, facilitate and expedite negotiated settlements and reduce the number of contentious matters to be resolved by the Lands Tribunal. A more equitable and transparent set of rules should provide claimants (both businesses and individual citizens) with compensation solutions which feel fairer and are delivered more efficiently. As a consequence, there should be a cost saving both for public authorities and for claimants who are affected by compulsory purchase proposals.
(2) Clarification of the no-scheme rule (both as to increases and decreases in value) should assist valuers in the computation of global compensation packages by reducing the complexity of the formulae and the range of variables which need to be addressed. That should produce time and cost savings for both claimants and authorities. A focussed and narrower definition of the no-scheme rule will mean that the element of disregard in some compensation claims will be reduced and, in consequence, payments in appropriate cases may be more generous. It is impossible, however, to generalise about the overall impact of our proposals in this area except to say that more generous and transparent compensation assessment should encourage earlier settlement of claims and reduce the attendant costs.
We also believe that clarification of the rules relating to planning assumptions will simplify the certification process for local planning authorities and for the Lands Tribunal. If our suggestion relating to consolidation of the Lands Tribunal’s jurisdiction in this field were to be accepted (making the Tribunal a single point of contact for appeal) we believe that would bring a measure of saving to some claimants in time and cost.
(3) Clarification and rationalisation of the rules relating to injurious affection should ensure that the rules relating to damage caused by construction, and damage caused by use of works, will more comprehensible in modern form. Those rules relating to damage caused by construction (whether or not land has been taken) will be put on a similar footing. This should ensure more equitable treatment for claimants. There may be a case for putting all the rules on a single basis (as suggested by CPPRAG), and we specifically consult on this issue.
(4) We seek to clarify the rules relating to disturbance. Change in this field, refining the test for relocation and replacing the “reasonable businessman” test, taken together with the changes proposed by Government should produce fairer outcomes. The proposal relating to the cost of replacing business-related buildings on relocation following severance obviously will have some financial impact but should provide benefit to business owners and the staff they employ.
(5) A mechanism to expedite the payment of advance compensation will put acquiring authorities under some pressure but that is consistent with the Government’s desire for compulsory purchase procedures to be accelerated in the interests of improved economic regeneration and for the effects of dispossession on owners to be mitigated. We anticipate that there will probably be a balancing out of costs to authorities.
(6) At this stage we make no proposal relating to the payment of compound interest pending completion of our more wide-ranging review in this area. There is already in place statutory mechanism for the uprating of simple interest.
(7) Abortive CPOs and the compensation consequences will be addressed in our Implementation report.
