Compulsory Purchase – An introduction

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What is it and what is it for?

Compulsory purchase is a legal mechanism which enables certain bodies, including local planning authorities, Ministers of State and other public bodies, as well as statutory undertakers (acquiring authorities) to acquire land without first obtaining the consent of the landowner. Compulsory purchase powers are also available to private businesses in certain circumstances, for example when promoting a Nationally Significant Infrastructure Project.

The relevant statutory procedures for the acquisition of land are set out in the Acquisition of Land Act 1981. However, the ability to actually implement these procedures is dependent upon there being a statute which provides the relevant enabling power(s).

Enabling Powers

There are a wide range of enabling powers available, which vary based in terms of the purpose for which the land is being compulsorily acquired and the acquiring authority/authorities that can avail of them. Generally, the purpose for which land is being acquired will dictate the statutory power relied upon in each instance.

For planning and regeneration projects, local authorities often seek to rely upon Section 226(1) of the Town and Country Planning Act 1990 which allows the acquisition of land for ‘planning purposes’.  The key test, set out at Section 226(1A), is whether the proposed development, redevelopment or improvement is likely to contribute to achieving the promotion or improvement of the economic, social or environmental well‑being of the acquiring authority's area.

Government guidance published in 2015 (updated in 2019; Guidance on Compulsory purchase process and The Crichel Down Rules for the disposal of surplus land acquired by, or under the threat of, compulsion) describes compulsory purchase as being a last resort – reflecting its draconian nature. Acquiring authorities are required to attempt alternative means of securing the land required for the proposed scheme. Authorities must determine whether there are alternative schemes that would not require compulsory acquisition, and only turn to compulsory purchase where it’s absolutely necessary.

Whilst the courts have held that Section 226(1) has a wide application, it remains for the acquiring authority to justify its proposals by reference to the wellbeing test. In practical terms, compulsory purchase powers are often utilised to bring forward privately promoted development. Local planning authorities exercise their compulsory purchase powers underpinned by an indemnity from a developer, whereby the developer commits to meeting the costs of promoting the CPO, including any compensation payable.  

The CPO Process

Once an acquiring authority has resolved to proceed with a CPO, the Acquisition of Land Act 1981 sets out the principle statutory procedures which must be followed.

The key stages in the CPO process are; (1) land referencing and attempts to acquire by agreement, (2) the making of the CPO, (3) confirmation of the CPO by the relevant authority, usually the Secretary of State, (4) vesting the land in the authority and (5) settlement of compensation.

Making a CPO typically involves preparation of the following documents by the acquiring authority; (1) the order itself, which includes a schedule of interests to be acquired, (2) an order map showing the land which will be subject to the CPO and (3) a statement of reason for the making of the CPO, which should address issues including human rights. Prior to making the CPO, it is necessary for the authority to establish the relevant land ownership(s) by undertaking a land referencing exercise. Where any special categories of land are involved (i.e. Crown land, Open Space or National Trust owned land), consideration needs to be given to early engagement. For example, Crown interests cannot be compulsorily acquired. The need for replacement land or reliance on exemptions or special parliamentary procedure may be required in order to confirm the CPO.

Once made, the acquiring authority is required to serve and advertise the proposed CPO for a minimum of 21 days before submission to the relevant authority for confirmation, if objections have been received, or before confirming the order itself as an unopposed order.

Before confirming the order, the relevant authority will consider whether there is a compelling case in the public interest to make it. The authority will also determine whether the acquiring authority has been able to satisfactorily demonstrate that the scheme being promoted is unlikely to be blocked by any impediments to implementation. If there are any outstanding objections at the end of the objection period, a public inquiry is likely to be held. Acquiring authorities will often seek to negotiate with objectors to avoid this.

Once the CPO has been confirmed, there are two main routes open to acquiring authorities to obtain possession of the land; (1) the Notice to Treat and Notice of Entry Procedure (‘Notice Procedure’) or (2) the General Vesting Declaration Procedure (GVD Procedure). Broadly speaking, the Notice Procedure enables entry relatively quickly, usually three to four months. This does not occur until compensation is agreed and has been paid. The transfer of title can take significantly longer, whereas the GVD procedure is slightly slower, usually taking around five to six months. The transfer, however, secures title to the land without requiring further action. The GVD procedure is usually used where a private developer wishes to build the scheme as title can be provided at the outset. It must be remembered, however, that certain interests, such as minor tenancies, can only be acquired using the Notice Procedure. 

Compensation

Anyone with an interest in land, or rights in respect of that land, which is subject to a CPO will be entitled to submit a claim for compensation to the acquiring authority under s4 Land Compensation Act 1961. Whilst compensation is based on the principle of “equivalence” and awards are only intended to leave parties no better nor worse off than in a no scheme world based on market value of the interest being acquired, additional payments such as statutory loss are also payable. In addition to the market value of the asset, compensation for disturbance or loss arising from the dispossession may also be claimed.

A variety of factors are considered when seeking to determine the appropriate level of compensation, but generally assessments accord with the following basic principles:

  • No allowance is made on account of the acquisition being compulsory.
  • The value of the land is that which it would be expected to achieve on the open market, when sold by a willing seller.
  • Any increase or decrease in the value of the land due only to the proposed CPO scheme will be disregarded, otherwise known as the “no scheme principle”.
  • Any special suitability of the land will be disregarded.
  • Any increase in the value of the land due to unlawful use is ignored.
  • If land is being used where there is no general demand in the market (eg a church or school), compensation may be assessed based on the reasonable cost of equivalent reinstatement, rather than general market value. This is only applicable where there is a bona fide intention of re-establishing the use.

Another important factor to be considered when considering appropriate compensation is the potential development value of the land. Sometimes, planning permissions for alternative development may already exist and will be taken into account on assessment. In other cases, or where it is believed that development which doesn’t have permission could have come forward, the Land Compensation Act 1961 provides a procedure for securing a Certificate of Appropriate Alternative Development (CAAD).

Finally, it’s worth noting that where the level of compensation remains in dispute, either party has the right to refer the matter to the Upper Tribunal (Lands Chamber) for independent adjudication. The inevitable cost and delay of such a referral provides a good incentive for both sides to engage in positive negotiations and, often, settlement is in the interest of both parties. 

Conclusion

Whilst designed to enable the compulsory acquisition of land, the CPO process is subject to fairly strict legislative controls which are intended to protect landowners’ interests as far as possible. The implementation of a CPO is a procedural process which, despite being largely dictated by the relevant statute and regulations, involves various practical issues and considerations which parties on both sides of the process should be aware of.

Watch out for our next article in this CPO series exploring the specific circumstances allowing for the use of compulsory purchase powers to private businesses.

If you have any questions about the compulsory acquisition regime, please contact Sophie Stewart, Partner or Marc Sorrentino, Associate in our Planning and Land Use team.