Compulsory Purchase - FAQs
A CPO is a legal function which allows certain bodies (such as Local Authorities, Housing Associations and Development Corporations also known as Acquiring Authorities) to obtain land or property without the consent of the owners. CPO powers are granted to an Acquiring Authority to compulsorily purchase land in order to carry out a function which Parliament has decided is in the public interest and are typically used to facilitate the development of new roads, airport extensions, town centre developments and urban regeneration. Commonly used powers of compulsory purchase are:
- Those based upon a specific Act of Parliament, for example The Town & Country Planning Act, Highways Act, or even a Special Act such as Crossrail or High Speed 2
- An Order Under the Transport & Works Act 1992
- Development Consent Orders for developments categorised as Nationally Significant Infrastructure Projects (NSIP).
An Acquiring Authority (often a Local Authority) will make a Compulsory Purchase Order. However, approval to a CPO is required from the Secretary of State, after a Public Inquiry if objections to the Order are made and not withdrawn. The Minister has the power to confirm, modify or reject the CPO.
The principles of compensation are governed by the compensation code, which is derived from statute, case law and established practice. One of the main principles is that of “equivalence”, i.e. a claimant should be placed in no better or worse position (in financial terms) after the acquisition than they were prior to the acquisition.
Section 5 of the Land Compensation Act 1961, lies at the heart of the Compensation Code. In accordance with Rule 2 of Section 5 of the Land Compensation Act 1961, a claimant is entitled to the value of their land/property. Because of the effect a Compulsory Purchase Order can have on property values, when assessing the level of compensation, regard is paid to the “no scheme world”, i.e. the effect of the CPO (both positive and negative) is ignored and the value of the land/property to be taken is on the basis of open market value.
In addition to the value of land/property, a claimant is also entitled to additional compensation normally referred to as “disturbance” under Rule 6 of Section 5 of the Land Compensation Act 1961. Disturbance compensation includes all costs reasonably associated with the CPO. The actual level of compensation will vary from claim to claim and is dependent upon the claimant’s specific circumstances. However, a claimant has a duty to mitigate his/her loss. Examples of items which are claimed under “disturbance” include removal costs and acquisition fees incurred in purchasing a relocation property (including Stamp Duty Land Tax) as well as business losses.
There is also a series of loss payments (view 'What are loss payments? FAQ) which can be paid in conjunction with a claim. These payments are dependent upon the nature of the property (i.e. residential or non-residential), subject to certain qualifying criteria.
Finally, a claimant can claim for reasonable surveyors’ fees incurred in preparing and negotiating a compensation claim together with reasonable legal fees where incurred.
The Acquiring Authority must demonstrate that the taking of land is necessary and that there is a “compelling case in the public interest”. In addition to the Statement of Reason, the Statement of Case prepared by the Acquiring Authority will set out the full particulars of the case to be put to the Inquiry, justifying the reasons for making the CPO, which will normally show how the scheme/redevelopment will contribute to the socio, economic and environmental well-being of the area.
No, not immediately. A CPO is made up of a number of stages which must be gone through before it is enforceable. Having been served notice of a CPO, a property owner may object to the Order. If objections are raised and not withdrawn, a Public Inquiry will be held. Only when the CPO is confirmed by the Secretary of State does the Acquiring Authority have the power to compulsorily acquire land or property. However, the Acquiring Authority will seek to acquire property by agreement throughout the CPO process. If the CPO is confirmed, the Acquiring Authority will then have a period of three years to exercise their CPO powers and therefore at this stage you will lose your property.
Click the link for more information on the CPO Process.
When making the order, the Acquiring Authority will serve notice on parties with an interest in the affected land and will allow a person to object to the CPO. There is a minimum of 21 days (normally 28 days) time period for objections to be lodged, albeit this time period will be specified within the notice. Objections usually fall within three categories:
- Agreement to the scheme but would like to see minor amendments to minimise impact on the claimant’s property.
- Agreement to the purpose of the scheme but that it could be located elsewhere.
- Object to the scheme completely, for example, that the scheme being proposed is not in the public interest. Such objections must challenge the scheme itself.
Objections on financial or compensation grounds will normally be disregarded as there is a separate procedure for resolving such disputes through the Upper Tribunal (Lands Chamber).
For more information on objecting to a CPO please click the link.
The Acquiring Authority will normally seek to negotiate with claimants and objectors from when a CPO is made and in particular in the run up to a Public Inquiry. There is no set timescale from when a CPO is made but set out below is a summary of the minimum timetable for a CPO from the making of the Order:
Making the Order
21 days minimum for objections.
Public Inquiry held within 22 weeks from Secretary of State confirming that an Inquiry will be held.
The length of an Inquiry will depend upon the number of objections and the complexity of the scheme, normally 1-3 weeks.
Following the inquiry, the Planning Inspector will make recommendations to the Secretary of State. There is no definitive timescale as it is dependent on the complexity of the scheme. Average timescale –3 months.
Following confirmation of a CPO, the AA has 3 years in which to exercise the CPO.
Once a CPO has been confirmed, possession can be achieved in one of two ways:
1. Notice to Treat/Notice of Entry
A Notice to Treat/Entry will be served, stating that entry will take place after the minimum period of 3 months
2. General Vesting Declaration
The AA will serve a preliminary notice but must then wait two months before it can make the CPO. The AA will then serve notice serving the CPO, giving a date when formal possession will be taken. Overall the minimum period for taking possession is 3 months.
In summary, from the making of the Order to confirmation, a CPO could take 12-18 months. The time period from confirmation of an Order is relatively quick, dependent upon the Acquiring Authority’s timetable for possession and development but this would be typically less than 6 months.
With regard to professional fees incurred in dealing with an objection to a CPO, a statutory objector who is successful in sustaining an objection, such that the CPO is not confirmed or the objector’s land is excluded from the CPO, will be awarded costs unless there are exceptional circumstances for not doing so.
In respect to professional fees incurred in negotiating a claim for compensation, the Acquiring Authority will usually pay the reasonable surveyor’s (and legal) fees which are incurred in negotiating the claim. However, the position can change if settlement of the claim cannot be agreed and the matter is ultimately referred to the Upper Chamber (Lands Tribunal) for determination.
When compensation is agreed with the Acquiring Authority, this will be paid at the earliest opportunity, normally within 1-2 months of agreeing compensation. This may be subject to the Acquiring Authority seeking appropriate internal approvals and authorities, for example the Local Authority may need Cabinet or Executive approval.
Once the land or property is taken by the Acquiring Authority under a CPO and the claim for compensation has not been settled, under Section 52 of the Land Compensation Act 1973, a claimant can request an Advance Payment. An Advance Payment is based upon 90% of the Acquiring Authority’s initial estimate and must be paid within three months of the request. The balance of the claim can be settled by negotiation or ultimately determined by the Acquiring Authority if settlement cannot be reached.
Under the compensation code there are a number of loss payments which can be paid, subject to claimants meeting the requisite qualifications.
If you are a qualifying occupant of a residential property you may be entitled to a Home Loss Payment which equates to 10% of the Market Value of your interest, subject to a minimum payment of £6,300 and a maximum payment of £63,000. Residential tenants may qualify for the minimum payment of £6,100.
Under the Planning and Compulsory Purchase Act 2004, property investors and business owner occupiers who meet the qualifications can claim a Basic Loss Payment. This payment is calculated at 7.5% of the value of an interest up to a maximum sum of £75,000. In addition, an “occupier”, whether they be an owner occupier or a business tenant (subject to qualification criteria) may also be entitled to an Occupier Loss Payment. This payment equates to an additional 2.5% of the value of the interest, or £25 per sq m of building taken (or £2.50 per sq m of land) subject to a minimum sum of £2,500 and a maximum payment of £25,000.
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