Certificates of Appropriate Alternative Development

As explained in our Compulsory Purchase – An introduction article, potential development value is an important factor to consider when looking to determine compensation for land that is compulsorily acquired.

Section 17 of the Land Compensation Act 1961 sets out a procedure by which a claimant can secure a decision from the local planning authority as to the forms of development permitted on its land, were the land not to be compulsorily acquired. For example, in a ‘no scheme world’. This is possible if the land in question does not have the benefit of planning permission for alternative development, or where any existing permissions are not thought to accurately reflect the development value of the land.

An application for a Certificate of Appropriate Alternative Development (“CAAD”) can be made by either the owner of the interest in land to be acquired or the acquiring authority with the right to do so arising at the date on which the interest is proposed for acquisition.

According to DLUHC Guidance, circumstances in which a certificate may be helpful include where:

• there is no adopted development plan covering the land to be acquired;
• the adopted development plan indicates a green belt or leaves the site without specific allocation;
• the site is allocated in the adopted development plan specifically for some public purpose, e.g. a new school or open space;
• the amount of development which would be allowed is uncertain; or
• the extent and nature of planning obligations and conditions is uncertain.

An applicant can choose to apply for one of two forms of CAAD, either:

1. a positive certificate - that in the local planning authority’s opinion in a no scheme world, other forms of development would be permitted on the land; or
2. a negative certificate - that in the local planning authority’s opinion there is no development that would be permitted in a no scheme world, or certain types of development would not be permitted, on the land.

A positive certificate must specify that the development is an appropriate alternative development, even if it is not specified in the application. It must also provide a general indication of when permission would reasonably have been granted, and any conditions or pre-conditions applicable to the planning permission for the development. This includes any planning obligations that need to be secured.

Once a certificate has been issued, it must be taken into account when assessing compensation.

Points of note

• The recent case of Secretary of State for Transport v Curzon Park Ltd [2021] EWCA Civ 651 held that in determining the development for which planning permission could reasonably have been expected to be granted, a local planning authority was not entitled to take into account CAAD applications or decisions relating to other land also to be acquired for the same underlying scheme. The concern of the Secretary of State (SoS) in the case was that considering CAADs in isolation from one another may lead to the assessment of compensation across multiple sites based on planning permissions which in the real world would not have been achievable or even pursued cumulatively. The SoS has been granted permission to appeal against the Court of Appeal’s decision and the Supreme Court hearing is likely to be towards the end of this year or the beginning of 2023;
• In Golf Café Bars Ltd v (1) West Yorkshire Combined Authority (2) Network Rail Infrastructure Ltd [2021] UKUT 16 (LC) a CAAD for change of use of a service yard to car parking enabled compensation based on hope value to be paid in circumstances in which use as a car park would be in breach of the claimant’s lease. An appropriate sum was deducted to reflect the necessary negotiations which would have been required in order to vary the lease;
• A CAAD lists what is achievable in a no scheme world and that theoretical development must be considered in a real world way. Pro Investments Ltd v Hounslow LBC [2021] UKUT 201 (LC) highlights the need to consider unattractive neighbouring uses, in this case a waste transfer station and non-residential uses, which may limit market interest and have a negative effect on the value of apartments specified within the CAAD; and
• Both the acquiring authority and the applicant have a right of appeal against a certificate. The Upper Tribunal (Lands Chamber) (UTLC) has jurisdiction to deal with any appeal and, as appropriate, may confirm, vary or cancel a certificate and issue a different certificate in its place. At present the UTLC does not have the power to award costs in CAAD appeals but this is proposed for amendment following the decision in Leech Homes.

On 6 June 2022, DLUHC launched a consultation on amending compulsory purchase compensation. This states the government’s intention of amending sections 14 and 17 of the 1961 Act for the value assessment of alternative development to reflect normal market conditions, rebalancing the position on costs and compensation between landowner and acquiring authority to a fairer one. Such amendments will be brought forward within the Levelling Up and Regeneration Bill and will:

• reflect normal market conditions in compensation payments by only allowing the equivalent of planning certainty for appropriate alternative development if a CAAD is obtained in relation to that appropriate alternative development;
• establish a single route for determining hope value based on the likelihood of appropriate alternative development, taking into account the assumptions in section 14(5) Land Compensation Act 1961;
• remove the requirement that acquiring authorities pay the costs of landowners in seeking a CAAD – if a landowner chooses to seek a CAAD then they can do so at their own cost and weigh the risks in doing so against the benefits to value that may materialise; and
• further streamline the process for obtaining a CAAD so that the ask on local planning authorities is simpler and clearer. Local authorities will only be required to issue a CAAD in relation to the type of appropriate alternative development applied for. This change means the claimant must ensure that their application for a CAAD is as comprehensive as possible.