Planning Assumptions - updated with effect from June 2011


Update


Please see below an extract from the Hansard report on the Localism Bill 2nd Reading showing Lord Boyd’s speech in favour of our proposed amendment.

Lord Boyd of Duncansby: My Lords, I declare an interest as a Scottish solicitor but registered to practise in England and Wales. Part of my practice is in planning matters and I am also a legal associate of the Royal Planning Institute. My noble friend Lord Beecham drew our attention to the size of this Bill. In those circumstances it might seem perverse of me, and unwelcome to your Lordships, to address an issue that is not in the Bill, but it relates to the planning assumptions that underpin the assessment of compensation on compulsory purchase.

Let me tell the House why I am addressing this issue at this stage. In 2002 the London Borough of Wandsworth served a purchase notice on a company called Greenweb Ltd for a small piece of land to preserve its status as a public open space. Both the local authority and Greenweb were agreed that the market value of the land was £15,000. Greenweb had in fact paid £30,000 for this piece of ground. Greenweb contended that under the statutory rules it was entitled to considerably more. Indeed, it said that it was entitled to £1.6 million-over 100 times the value. The issue went to the Lands Tribunal and from there to the Court of Appeal, which, with great reluctance, upheld the landowner's claim and Greenweb Ltd found itself with a windfall of more than £1.5 million in profit for a £30,000 outlay. Though that case may be an extreme example of the perversity of some of the rules on compensation and the injustices that can be created, it is an example nevertheless.
The injustice is not just on the side of local government. Another case, decided by the House of Lords in 2009, Transport for London v Spirerose Ltd, arguably produced

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an injustice on the other side. In that case, the House of Lords said that the landowner was entitled to £400,000 for the land that was the subject of the compulsory purchase order. The Lands Tribunal and the Court of Appeal had valued the land at £608,000, the difference being in the assumptions that were made about the planning permission that was granted, the House of Lords saying that all that the landowner was entitled to was "hope value".

The law on compulsory purchase and compensation is a minefield of complexity, a mixture of statute overlaid with judge-made rules and again overlaid with statute. In 2002, the noble and learned Lord the then Lord Chancellor referred both the procedural and the compensation issues to the Law Commission. In 2003, it published its final report on the compensation issues. That report was well received. Regrettably, the previous Government did not find time to implement the report's recommendations. This is not the time or the place to try to implement all of them, but there is a need to address one aspect which underpinned both the cases that I have mentioned and produced the most difficult results: the planning assumptions that are made in assessing compensation.

In Committee in another place, Barbara Keeley moved amendments which would rewrite the planning assumptions in the Land Compensation Act. The amendment had the backing of the Compulsory Purchase Association and the Royal Institution of Chartered Surveyors and was in accordance with the recommendation on planning assumptions contained in the Law Commission's report. In response, the Minister, Greg Clark, very helpfully said that he would reflect seriously on what had been said and consider representations with an open mind. Since then, I am pleased to say that-as reported to me at least-good progress has been made. There was a meeting between the CPA, RICS and officials of the government department, and they have been encouraged by the positive nature of the exchanges. An impact assessment has been drafted, and there seems to be general agreement that no concomitant changes or amendments are required, an issue which concerned the Minister in Committee.

I hope that this matter can now be addressed. There is widespread agreement as to the nature of changes that are required and the need to effect them now. In the Court of Appeal judgment, all three judges expressed the hope that parliamentary time would be found to address these issues. Lord Justice Buxton said that if government were not prepared to act, local authorities, faced with uncertainty and deprivation of scarce funds, must exert political pressure to correct the anomaly.
We will return to this issue in Committee. Those who have promoted the change in the law have been greatly encouraged by the Government's response so far. I hope that that will continue. Certainly, if the Government decide to bring forward amendments to the Bill, they will have my full support in doing so.


Background

Every year millions of pounds are spent by local authorities, government departments, statutory utilities and railway companies on land acquired by compulsory purchase for town centre schemes, transport, housing and general infrastructure projects.

However, the statutory provisions governing the compensation payable for compulsory purchase are over complicated and out of date. As a result significant funds intended for infrastructure and regeneration are spent instead on extended negotiations and litigation, and compensation payments become unpredictable, unfair and delayed.

A specific area of compulsory purchase law has become particularly expensive and unpredictable and requires urgent reform. In this paper, the Compulsory Purchase Association proposes such a reform.

Where land has redevelopment value, that value can be the basis of compensation. Because the local authority cannot grant planning permission that would conflict with the proposed CPO scheme, assumptions must be made as to what might have been permitted without the CPO in order to reach a fair assessment of compensation. For example, could the dilapidated factory being acquired  have been redeveloped for a lucrative housing development or must it have remained in industrial use?

It is the rules governing these assumptions (known as the statutory planning assumptions) that are in urgent need of reform. 

The scope of the problem

Between 2003 and 2009, over a thousand CPOs were made in England. Compulsory purchase powers were also sought via Harbour Revision Orders, Transport and Works Act Orders and Hybrid Bills. Huge and vital projects such as the London Olympic Park, Crossrail, Thameslink, and the Channel Tunnel Rail Link (High Speed One) make extensive use of such powers.

Two cases that reached Court in 2007 and 2008 have brought the problems with statutory planning assumptions into the spotlight.

In one case the Court of Appeal accepted that Wandsworth London Borough Council was required to pay £1.6m for a site that both sides agreed had an open market value of only £15,000.

In another, which reached the House of Lords, it was held that all redevelopment compensation had to fall within the very tight definitions of the statutory planning assumptions, or be certificated. This has understandably led to a substantial increase in certification requests which in turn has provided Local Planning Authorities with an extra burden of work for which they are not reimbursed. Certification is also a role which is inefficiently spread across Local Planning Authorities.

These two cases alone have added around £2.5m in additional costs to the respective projects

The problem is not a new one. The Law Commission investigated the problem and came to some firm and acceptable conclusions in its report: Towards a Compulsory Purchase Code: Compensation (LC No 286 of December 2003). The Labour government effectively shelved the recommendations; in December 2005 it rejected the proposal for an entirely new code as too ambitious, and requiring too much further work.

We agree comprehensive reform would be a substantial undertaking, albeit a valuable one, but that is not the purpose of this paper. Reform of the statutory planning assumptions is a discrete exercise; the Law Commission has done the research, carried out the consultation, and suggested new rules. Reform now will bring certainty and save money in compensation and on legal costs, by both claimants and acquiring authorities. Reform is a technical exercise, but not complex, and one that will bring enormous benefits.

The Courts have severely criticised the current rules and have urged that their reform should be given every priority. Judicial criticism is found in the House of Lords, the Court of Appeal and the Lands Tribunal. At the national conference of the Compulsory Purchase Association on 16th June 2010, the participants were unanimous that reform was urgently required.

What is the solution?

The Law Commission consulted widely on its proposals for the reform of the compensation rules. In relation to statutory planning assumptions, it recommended rules that address these problems in a simpler, clearer and yet effective manner at Rules 14, 14A, & 15 in its report. The Compulsory Purchase Association urges the Government to enact reforms closely based on these rules in the forthcoming legislation to reform the Town Planning system.

Such a reform will remove a loophole allowing land owners to claim demonstrably excessive compensation in certain circumstances, and effect significant savings in the implementation of compulsory purchase powers by clarifying the  law and reducing costly litigation and delay.

We urge the Government to include this reform in the forthcoming Planning and Localism Bill. 


CPA Action on this issue to date

The CPA have been actively pursuing reform in this area since 2008. Following meetings with Government and Opposition in 2009, and a Stakeholder meeting with key decision makers across the professions in March 2010, proposals for reform were debated at the National Conference on 16th June 2010.

We have since met with CLG and discussed our reforms and written to Bob Neill MP, Parliamentary Under Secretary at CLG suggesting that they be included in the Localism Bill. We were advised that there was no room in the Bill at its introduction for the inclusion of our reforms.

A working party was formed to seek an amendment to the Localism Bill to include the CPA’s proposed reform. The CPA would like to gratefully acknowledge the invaluable assistance and advice that is being provided by Bircham Dyson Bell at no cost to the Association.

The Association’s campaign reached an important milestone when provisions to reform sections 14 – 22 of the Land Compensation Act 1961 were tabled as New Clause 19 to the Localism Bill by Barbara Keeley MP, Labour Shadow Minister for Communities and Local Government on 10th March 2011.

Barbara Keeley introduced the clause with a detailed and well argued statement on the need for reform which was acknowledged by Greg Clarke, Minister of State, Department for Communities and Local Government, who responded on behalf of the Government. For the full statements of Barbara Keeley and Greg Clark see the record of the 24th sitting of the House of Commons Public Bill Committee on the Localism Bill 2010-11 (10th March 2011) here. New Clause 19 can be read in full in this document. 


Documents

Compulsory Purchase Compensation - Statutory planning assumptions: a broken system and proposals for reform from the Compulsory Purchase Association  Sept 2010   - click here 

Reply from Bob Neill MP click here

Letter to Bob Neill MP 15th October 2010 click here

Letter to Bob Neill MP 16th July 2010  - click here

CPA Proposed Amendment to Localism Bill (this will be posted once in settled form). Any members wishing to see or comment on the draft form please contact Paul Astbury.

Spirerose v Transport for London Lands Tribunal Decision   - click here

Spirerose v Transport for London Court of Appeal Decision   - click here

Spirerose v Transport for London House of Lords  Decision   - click here

Greenweb v Wandsworth Borough Council Court of  Appeal Decision – click here

Law lords block appeal in “Luftwaffe law” case – EG article click here

24th sitting of the House of Commons Public Bill Committee on the Localism Bill 2010-11 (10th March 2011) here


 

Member(s) responsible:

Paul Astbury, Immediate Past Chairman

Colin Smith, Hon. Secretary

Barry Denyer Green, Elected Member

Richard Honey, Elected Member

Charles Norman, Elected Member

 

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