Planning blight and compensation: who qualifies and what do claimants need to show?

There are certain circumstances where property owners – residential, commercial and agricultural – can require public sector bodies and certain private sector project promoters (together referred to in the legislation as "appropriate authorities") to purchase their land. These apply if the property in question is subject to 'planning blight'. If it is, the owner will be entitled to serve a 'blight notice' on the appropriate authority which, if accepted, will mean that the authority must buy the property and compensate the owner for its full unaffected market value.

What is planning blight?

Blight is when the value of a property is substantially reduced because of a proposal to carry out works, such as a new road or airport expansion, or to designate land for particular uses and the owners are unable to sell it as a result at its unaffected market value. This is the amount the property would be worth if the scheme did not exist.

However, it is important to distinguish between two kinds of planning blight:

• Statutory blight is defined in Part 6 and Schedule 13 of the Town and Country Planning Act 1990 which set out a mandatory system that allows directly affected property owners to sell their land and secure compensation for its unaffected value.
• Generalised blight applies to properties and landowners who do not meet the statutory blight criteria, but whose property value is affected by the general level of market uncertainty that major development schemes and proposals can cause.

There is no specific right to compensation for generalised blight, but appropriate authorities will often have discretionary purchase schemes which enable a broader category of landowners to oblige the authority to acquire their land if they cannot sell on the open market. These discretionary schemes are bespoke to each project and authority.

Who qualifies under statutory blight?

Blight notices can be submitted for houses, commercial property or agricultural land, provided that the claimant has occupied it for at least six months. The notice must relate to the whole of the property, even if only part of it is directly affected by the scheme or proposal. If the claimant has already moved out, a notice can also be served within the following 12 months provided that the property has remained unoccupied since.

To be eligible, the claimant must have an interest in the land as one of the following:

• a residential owner-occupier of a private dwelling;
• an owner-occupier of business premises with a rateable net annual value below a specified threshold (currently GBP44,200 in Greater London or GBP36,000 in the rest of England and Wales per year);
• an owner-occupier of an agricultural unit or part of an agricultural unit;
• a mortgage lender who has the right to sell the property and who can give immediate possession; or
• a personal representative of a deceased person (such as an executor under a will) who, at the date of his death, would have been able to serve a blight notice.

Both freeholders and leaseholders are eligible provided that the lease has at least three years left.

What does the claimant have to show?

If a property owner wishes to serve a blight notice, they must demonstrate that the following criteria are made out:

1. which category of blighted land (set out in Schedule 13 of the Act) the property falls under;
2. that they come within one of the categories of eligible persons described above;
3. with certain limited exceptions, that they have made appropriate efforts (referred to as "reasonable endeavours") to sell the property before submitting their claim; and
4. that they have been unable to sell the property except at a price substantially lower than its unaffected market value as a result of the fact that it (or part of it) is blighted land.

Practice point

We're often asked to review blight notices on behalf of acquiring authorities. One of the main problem areas we frequently encounter is where the feedback from local estate agents is that properties won't sell because of an issue with the property itself, such as a dated fit-out or that the garden is too small, rather than because of the development proposals in the area. Claimants and their advisors need to make sure that the evidence they provide clearly demonstrates that buyers are not being put off by these property-specific reasons, or their claims simply won't be successful.

Does the appropriate authority have to accept the blight notice?

The short answer is, no. The legislation sets out a number of grounds on which the authority can refuse to accept a blight notice by serving a 'counter notice'. These include cases where the land is not actually needed for the scheme in question.

The authority has two months in which to serve a counter notice, but if it does not do so within this period then the blight notice automatically becomes accepted.

If a counter notice is served, the claimant has the option to refer the matter to the Lands Chamber of the Upper Tribunal. This independent body will decide on the basis of the evidence whether the claim is valid and, if so, whether the grounds set out in the counter-notice apply.

If a blight notice is accepted, what compensation is payable?

Where a blight notice is accepted as valid, whether automatically or voluntarily by the appropriate authority or following a determination by the Tribunal, the successful claimant has three years to complete the sale. They will be entitled to the full unblighted market value of the land to which the notice relates. This is the amount the property would be worth if the scheme did not exist, not the lower, or blighted, value.

The compensation is calculated in the same way as if the land was being acquired compulsorily, such as under a compulsory purchase order or development consent order. If the claimant and the authority can't agree on the amount payable, the matter can be referred to the Tribunal for a formal binding determination.

For more details on compulsory purchase compensation, please see the earlier articles in this series: “Compulsory Purchase – An introduction” and “Powers of compulsory acquisition under the Planning Act 2008”.

If you have any questions about the compulsory acquisition regime, please contact Tobias Paul in our Planning and Land Use team.