COMPULSORY PURCHASE & COMPENSATION CHALLENGES & OPPORTUNITIES Jonathan Darby Barrister, 39 Essex Chambers Jon.darby@39essex.com
CPO: WHO? Public bodies with compulsory purchase powers to enable them to carry out their statutory functions; e.g. LPAs, highway authorities, utilities companies and regeneration agencies
CPO: WHAT? Large number of enabling powers Each specifies which bodies are acquiring authorities and the purposes for which the land can be acquired Purpose of acquisition will determine the appropriate statutory power Use the most specific power available for the particular purpose Only use a general power when a specific power is not available
CPO: WHAT? The most commonly used powers are: local authorities for planning purposes local authorities in conjunction with other powers or where land is required for more than one function Homes England urban development corporations local housing authorities for housing purposes to improve the appearance or condition of land for educational purposes for public libraries and museums for airport Public Safety Zones for listed buildings in need of repair
CPO: WHAT? Other powers of compulsory purchase include: Transport and Works Act Order DCO under Planning Act 2008 for a NSIP Hybrid act, e.g. Crossrail Act 2008 (promoted by government but in relation to specified land) Harbour revision order and a harbour empowerment order under the Harbours Act 1964 MHCLG Guidance on Compulsory purchase process and The Crichel Down Rules is available (and essential)
CPO: WHAT? Stage 1: choosing the right power Stage 2: justifying a CPO Stage 3: preparing and making a CPO Stage 4: consideration of the CPO Stage 5: implementing a CPO Stage 6: compensation
CPO: WHEN? Where it is expedient to do so BUT: Only where there is a compelling case in the public interest AA has taken reasonable steps to acquire all of the land and rights included in the Order by agreement CPO is intended as a last resort to secure the assembly of all the land needed for the implementation of projects
CPO: WHY? Compulsory purchase powers are an important tool to use as a means of assembling the land needed to help deliver social, environmental and economic change. Used properly, they can contribute towards effective and efficient urban and rural regeneration, essential infrastructure, the revitalisation of communities, and the promotion of business leading to improvements in quality of life. MHCLG Guidance, para 1
COMPENSATION Assessment of compensation is separate from the confirmation process for CPOs Disputes are settled in Upper Tribunal (Lands Chamber)
COMPENSATION Equivalence principle: Compensation payable for compulsory acquisition of an interest in land based on principle that owner should be paid neither less nor more than their loss What are the elements of compensation? Market value of the interest in the land taken Disturbance payments for losses caused by reason of losing possession of the land and other losses not directly based on value of land Loss payments for distress and inconvenience of being required to sell and/or relocate from property at time not of choosing Severance/injurious affection payments for loss of value caused to retained land by reason of it being severed from the land taken, or caused as a result of use to which the land is put
CHALLENGES & OPPORTUNITIES 1. Earlier legislative reform through Housing and Planning Act 2016 and Neighbourhood Planning Act 2017 2. Letwin Review 3. MPs Land Value Capture Report 4. Consultations: a) On disposal of local authority land b) On guidance re CPO use by new town development corporations
LETWIN REVIEW Draft analysis published in June 2018 concluded that: the homogeneity of the types and tenures of the homes on offer on [large sites], and the limits on the rates at which the market will absorb such homogenous products, are the fundamental drivers of the slow rate of build out Final Report concludes that the Government should: Adopt a new set of planning rules specifically designed to apply to all future large sites (initially those over 1,500 units) in areas of high housing demand, requiring those developing such sites to provide a diversity of offerings, in line with diversification principles in a new planning policy document; and Establish a National Expert Committee to advise local authorities on the interpretation of diversity requirements for large sites and to arbitrate where the diversity requirements cause an appeal as a result of disagreement between local authority and developer
LETWIN REVIEW To give the greatest possible chance of significant change in build out rates and quality of large scale development in longer-term, recommends that Government should: Introduce a power for LPAs in places with high housing demand to designate areas within local plans as land which can be developed only as single large sites, and to create master plans and design codes for these sites to ensure a high degree of diversity and good design to promote rapid market absorption and rapid build out rates Give LPAs clear statutory powers to purchase land designated for such large sites compulsorily at prices which reflect the value of those sites once they have planning permission and a master plan that reflect the new diversity requirements (with guidance for LPAs to press the diversity requirements to point where they generate a max residual development value for the land on sites of around ten times existing use value rather than huge multiples of existing use value which currently apply)
LETWIN REVIEW Also recommends that LPAs are given clear statutory powers to control the development of such designated large sites through 2 structures: A Local Development Company (LDC) to carry out this development role by establishing a master plan and design code for the site, and then bringing in private capital through a non-recourse special purpose vehicle to pay for the land and to invest in the infrastructure, before parcelling up the site and selling individual parcels to particular types of builders / providers offering housing of different types and different tenures; or Establishing a Local Authority Master Planner (LAMP) to develop a master plan and full design code for the site, and then enable a privately financed Infrastructure Development Company to purchase the land from the local authority, develop the infrastructure of the site, and promote the same variety of housing as in the LDC model.
LAND VALUE CAPTURE REPORT Summary of key conclusions / recommendations: Scope for central / local government to claim greater proportion of land value increase through reforms to existing taxes and charges, improvements to compulsory purchase powers, or through new mechanisms of land value capture CPO powers can be important in enabling development and provision of infrastructure on large sites where ownership is fragmented. This could facilitate completely new developments, extensions to existing communities, or the build out of large schemes within urban areas CPO process should be further simplified, to make it faster and less expensive for local authorities, whilst not losing safeguards for those affected Land Compensation Act 1961 requires reform so that LPAs have power to compulsorily purchase land at fairer price
LAND VALUE CAPTURE REPORT Compulsory purchase reforms would give greater powers to LPAs to assemble land and achieve higher level of control over developments in their areas Compensation paid to landowners should reflect costs of providing affordable housing, infrastructure and services that would make a development viable, as well as capturing proportion of profit landowner will have made Where public land is put forward for resi development, important to ensure that the max value is capture for new infrastructure and public services. This may not always equate to selling public land to the highest bidder Consider use of existing CPO powers to enforce Local Plan policies, in particular in relation to affordable housing, where some developers seek to use viability assessments to avoid their obligations
CONSULTATIONS From 29 October 2018 to 14 January 2019 Of relevance: Disposal of local authority land New town development corporations: draft CPO guidance
DISPOSAL OF LOCAL AUTHORITY LAND Housing White Paper set out intention to: Amend planning rules to allow all authorities to dispose of land with benefit of planning permission which they have granted to themselves (see 2018 Amendment Regs) Consult on extending flexibility to dispose of land at less than best consideration (e.g. where wider public benefits would be created by that disposal) S/S approval is required for disposal at undervalue General consent issued under s.123 of LGA 1972 in relation to land held for purposes other than housing or planning allows disposal at undervalue of less than 2m if will help secure improvement of economic, social or environmental well-being of area Power to issue general consent for disposal of land held for planning purposes (s.233 of TCPA 1990) not yet exercised, but consultation on whether it should now be switched on
DISPOSAL OF LOCAL AUTHORITY LAND Land held for purposes other than housing or planning: s.123 of LGA 1972 Existing 2m threshold out of date? New threshold ( 5m / 10m) would provide local authorities with more flexibility? Land held for planning purposes: s.233 of TCPA 1990 Current requirement to seek consent for every disposal at undervalue unnecessary? Delays development? Undervalue threshold? Should consent include well-being criteria?
NEW TOWN DEVELOPMENT CORPORATIONS Can be established for purposes of developing a new town: s.3 of NTA 1981 Area can be designated as site of proposed new town under s.1 of NTA 1981 where S/S satisfied that it is expedient in the national interest New town development corporations have power to acquire, hold, manage and dispose of land and other property (and generally do anything necessary / expedient for purposes of new town: s.4(2), subject to s.5 of NTA 1981 Powers to acquire land by agreement or compulsion: s.10 of NTA 1981 Any land within area of new town, whether ot not proposed to be developed Any land adjacent to that area required for purposes connected with development of new town Any land, whether adjacent or not, required for provision of services for purposes of new town
NEW TOWN DEVELOPMENT CORPORATIONS Context of current consultation: Housing White Paper commitment to legislate for locally accountable new town development corporations Neighbourhood Planning Act 2017 amendments so that S/S can transfer oversight of new town development corporations to local authorities NB - 2018 Regs re transfer of functions from S/S to one or more local authorities where an area has been designated as a locally-led new town All new town development corporations have extensive CPO powers essential for carrying out necessary land assembly BUT current CPO guidance does not cover these powers
NEW TOWN DEVELOPMENT CORPORATIONS Draft CPO guidance setting out how we expect new town development corporations compulsory purchase powers to be used, and the policy factors which Ministers will take into account when deciding whether to approve new town CPOs Provides answers to a series of questions relating to: Purpose of new town development corporations Powers under the NTA 1981 Procedure for new town CPOs Factors to be taken into account by S/S re confirmation of new town CPOs How new town development corporations can dispose of acquired land
Jonathan Darby Barrister, 39 Essex Chambers Jon.darby@39essex.com 39 Essex Chambers LLP is a governance and holding entity and a limited liability partnership registered in England and Wales (registered number 0C360005) with its registered office at 39 Essex Street, London WC2R 3AT. 39 Essex Chambers members provide legal and advocacy services as independent, self-employed barristers and no entity connected with 39 Essex Chambers provides any legal services. 39 Essex Chambers (Services) Limited manages the administrative, operational and support functions of Chambers and is a company incorporated in England and Wales (company number 7385894) with its registered office at 39 Essex Street, London WC2R 3AT