Land Compensation Manual Section 1: Compulsory purchase - general

Compulsory purchase - general

The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.

1. Powers of compulsory acquisition

1.1 General

The power to take land compulsorily for public purposes derives from the authority of Parliament as expressed in statute law.

1.2 Ascertainment of powers available

When instructed to undertake a valuation or negotiation for the compulsory acquisition of an interest in land the valuer should initially ascertain from the acquiring or compensating authority (which could be a Government Department, local authority, parish/town/community council or other public body) the purpose of the acquisition and the statutory powers under which it is being acquired. Those powers will specify the basis of assessment of compensation. The valuer should not assume that those powers are being or will be exercised without obtaining the confirmation of the acquiring authority.

Once the relevant Act authorising the acquisition has been ascertained it can be read on the Internet. Acts of Parliament (usually rewritten to incorporate amendments) can be found on www.legislation.gov.uk. The website is continually updated although amendments to some Acts may not yet have been made.

1.3 Definition of land

In this Manual ‘land’ should be read to include, where appropriate in the context, ‘rights in or over land’.

Compulsory Purchase Act 1965

1.4 General

The Compulsory Purchase Act 1965 (CPA 1965) provides a code of law that spells out the powers of the acquiring authority to implement a compulsory purchase order by taking possession and securing a conveyance of the land and the rights of the parties in consequence of such processes.

The procedures for compulsory acquisition are set out in the Acquisition of Land Act 1981 (ALA 1981).

If an acquisition under an unfamiliar local or general Act were encountered the valuer should ascertain by reference to the Act, or by enquiry of the acquiring authority, whether the ALA 1981 and/or CPA 1965 apply or whether there were any modifications or special provisions applicable to the case.

1.5 General Vesting Declaration

Where a General Vesting Declaration (GVD) is made to secure expedited completion the procedural steps are different. These are set out in the Compulsory Purchase (Vesting Declarations) Act 1981.

Entitlement to compensation

1.6 General

The following classes of person may enjoy a right to compensation arising from the compulsory acquisition of land:

  1. (a) a person who is required to convey, assign or surrender an interest in land to the acquiring authority (see Paragraphs 1.7 and 1.8 below)
  2. (b) a person whose interest in land is depreciated in value although no part of it is acquired (section 10 CPA 1965 or Part I Land Compensation Act 1973 (LCA 1973))
  3. (c) a person who is displaced from lawful possession of any land acquired under compulsory powers but who has no compensatable interest in such land (section 37 LCA 1973)

The above entitlements comprise compensation for the acquisition, or depreciation in value, of land or the consequential losses arising therefrom. There are in addition statutory entitlements to which the claimant may be entitled such as:

  1. (d) Home Loss Payments to a person who is displaced from a dwelling by compulsory powers (section 29 LCA 1973)
  2. (e) Basic Loss and Occupiers’ Loss Payments to a person who is displaced from property or land other than a dwelling by compulsory powers (sections 33A to 33K LCA 1973)

1.7 Freeholders and leaseholders

Freeholders and leaseholders (except where their unexpired term at date of entry is less than a year) who have been or are deemed to have been served with notice to treat are entitled to compensation in respect of the acquisition of their interest by the acquiring authority.

1.8 Short term tenants

(a) Contractual tenants

Contractual tenants (including Assured/Assured Shorthold residential tenants) under a tenancy for a year or from year to year and tenants holding under a lease originally granted for a term of years but having less than a year unexpired at date of entry have an interest in land and in consequence are entitled to compensation under section 20 CPA 1965 if they are required to give up possession before the expiration of their term or interest. They may also be entitled in appropriate circumstances to Home, Basic or Occupiers’ Loss Payments under sections 29 to 33K LCA 1973.

(b) Statutory tenants

Statutory tenants under the Rent Acts have no estate or interest in land and therefore are not entitled to compensation under section 20 CPA 1965. They may, however, be entitled in appropriate circumstances to Home Loss Payments and/or disturbance payments under section 29 or section 37 LCA 1973. Protected and Assured tenants not entitled to compensation under (a) above may similarly be entitled to Home Loss and/or disturbance payments.

1.9 Licensees

A licensee has no interest in land entitling him to compensation from the acquiring authority except that he may qualify for a disturbance payment under section 37 LCA 1973 provided he is in lawful possession. Agricultural tenants are excluded from the provisions of section 37 LCA 1973 but may be entitled to a discretionary payment under section 22 Agriculture (Miscellaneous Provisions) Act 1963.

1.10 Holders of options to purchase

The holder of an option to purchase the land acquired may be entitled to claim compensation. (Oppenheimer v Minister of Transport [1942] 1 KB 242).

1.11 Persons entitled to the benefit of easements or restrictive covenants

Persons entitled to the benefit of an easements or restrictive covenants over or affecting the land acquired are not entitled to notice to treat but may have a right to claim compensation under section 10 CPA 1965 for depreciation in the value of their interest as a result of losing the benefit of the easement or restrictive covenant.

1.12 Mortgagees

Sections 14 to 17 CPA 1965 lay down provisions governing the acquisition of land subject to mortgage. The acquiring authority may secure the release of the mortgagee’s interest by paying the principal and interest due whether or not it has previously purchased the equity of redemption (the mortgagor’s interest). If the value of the mortgaged land is less than the outstanding charge, the value of the land or the compensation to be paid for it must be agreed between the mortgagee and the person entitled to the equity of redemption on the one part and the acquiring authority on the other part or, in default of agreement, be determined by the Upper Tribunal (Lands Chamber). The amount so agreed or determined shall be paid to the mortgagee who shall then convey or release all interest in the mortgaged land to the acquiring authority. Where part only of the land subject to the mortgage is taken and that part is of less value than the outstanding mortgage, and the mortgagee does not consider the remaining land to be sufficient security for the outstanding charge or is unwilling to release the part required, the value of such part and the compensation for severance shall, failing agreement between the parties, be determined by the Upper Tribunal (Lands Chamber) and paid to the mortgagee.

Purchase by agreement

1.13 Schedule 6 CPA 1965

Many Acts that authorise compulsory acquisition also contain separate provisions that empower the purchase of land by agreement. It is usual for such provisions to import Pt I CPA 1965 so that compensation will be assessed in accordance with the statutory code (see Schedule 6 CPA 1965). In some cases, however, section 10 CPA 1965 is specifically excluded (eg by section 227(2) Town and Country Planning Act 1990) and reference should be made to the empowering Act to find out which provisions of CPA 1965, or what other provisions, are incorporated.

1.14 Purchase with compulsory powers in the background

In cases where an authority is purchasing land by agreement under provisions which authorise compulsory acquisition, eg where negotiations are proceeding at the initiative of the authority in advance of the making or confirmation of the CPO, the purchase price should be assessed having regard to the statutory code of compensation.

1.15 Other purchases by agreement

In cases where there are no compulsory powers in the background or the statutory code is not written into the provisions that empower purchase by agreement there are no statutory rules for the assessment of compensation. Unless otherwise indicated by instructions in a specific case or type of case (see below) the consideration for the purchase will be open market value but not exceeding the amount that would have been paid in compensation under the compulsory purchase code. Examples of powers to purchase by agreement are summarised below:

  • section 246(2A) Highways Act 1980 - purchase by a highway authority of land, the enjoyment of which is seriously affected by the carrying out of the works or the use of the highway to be constructed or improved
  • section 26(2) Land Compensation Act 1973 - purchase by the responsible authority of land (other than a highway) the enjoyment of which is seriously affected by the carrying out of the works or the use of the works to be constructed or improved
  • section 4 Physical Training and Recreation Act 1937 - purchase by a local authority of lands, whether situate within or without their area, for the purpose of gymnasiums, playing fields, swimming baths and such
  • section 9 Housing and Regeneration Act 2008 - purchase by the Homes and Communities Agency of any land

Absent and untraced owners

1.16 General

Schedule 2 CPA 1965 sets out the procedure to be adopted for the assessment and payment of compensation where the owner of an interest is absent from the UK or cannot be found. The assistance of the VOA is available to the surveyor member of the Upper Tribunal (Lands Chamber) appointed to make a valuation of the interest in question. In all such cases the valuation request from the Tribunal will be routed via Chief Valuer Group and any requests received direct by the valuer should be referred to the PS Professional Guidance team.

Minerals

1.17 General

There is a presumption in English law that the owner of the surface is entitled to the whole of the property and as a general rule a compulsory acquisition of land will include all that is above and below the surface. However, this basic presumption is subject to many exceptions. In particular, minerals have frequently been severed from the ownership of the surface by statute, deed or custom.

Spoil heaps associated with mineral workings lying on the surface may or may not form part of the land on which they rest depending on whether or not the materials in the spoil heaps have retained their chattel nature. Legal advice will often be necessary to determine whether or not spoil heaps will pass with the surface on compulsory acquisition of the land on which they rest. Where spoil heaps are present on land to be acquired the advice of the Mineral Valuer will be required in all cases.

Frequently minerals are severed from the surface by inclusion of the ‘Mining code’ in the Compulsory Purchase Order (CPO). The ‘Mining Code’ is now found in Schedule 2 to the Acquisition of Land Act 1981 and follows the previous provisions of sections 77 to 85 Railway Clauses Consolidation Act 1845. The inclusion of the mining code in a CPO means that the acquiring authority does not acquire minerals under or within a specified distance of the land acquired. There are special arrangements by which the mineral owner may be compensated at a later date if the acquiring authority does not wish the minerals to be extracted from beneath or nearby the acquired land. From a legal standpoint the term ‘minerals’ has no clear meaning unless specifically defined in a particular statute. Whether or not a particular stratum will be acquired together with the surface may require legal guidance. This will be the case particularly where the ‘mineral’ in question forms the surface of the land.

Reference should be made to Section 11 of this Manual for instructions on the valuation of land where the value of the land or the compensation payable on acquisition may be affected by the presence of minerals or by the presence of buildings and plant erected or used for the purpose of winning and working or of processing minerals.

Purchase Notices and Blight Notices

1.18 General

Under certain circumstances government departments and local authorities may be compelled to purchase land as a result of a purchase notice or blight notice served on them by an owner, as if they themselves had served notice to treat under a CPO. Purchase notices arise under sections 137 to148 TCPA 1990, and blight notices under sections 149 to 171 TCPA 1990.

Reference should be made to Section 15 of this Manual in respect of such acquisitions.

Payment of interest on compensation

1.19 Compulsory acquisition of land

Where land is acquired following service of notice to treat interest is payable under section 11 CPA 1965 from the time of entry until the compensation is paid.

Where land is vested in an acquiring authority interest is payable from the date of vesting until the compensation is paid by virtue of section 10 Compulsory Purchase (Vesting Declarations) Act 1981.

1.20 Compensation for damage or injury to land

Where statute provides for the payment of compensation for damage or injury to land, unless the relevant provision makes express mention of entitlement to interest, none is payable, either as an additional sum, or as part of the compensation.

Section 80 of the Planning and Compensation Act 1991 now provides for the payment of interest on compensation awarded under various Acts where interest had not been payable previously. The relevant enactments and the time from which interest is payable are listed in Schedule 18 to the Act.

1.21 Rate of interest

In all cases within Paragraphs 1.19 and 1.20 above section 32 LCA 1961 provides that the rate of interest payable shall be such rate as may from time to time be prescribed by regulations made by the Treasury. Reference to rates of interest means simple interest. This derives from common law and has wide statutory recognition. Successive Statutory Instruments have varied the rate of interest as shown in Appendix 1/1.

From 31 December 1995 a revised method of calculating the rate of interest was introduced by the Acquisition of Land (Rate of Interest after Entry) Regulations 1995. From that date the rate is fixed at 0.5% below the median base rate quoted by the seven largest banks authorised under the Banking Act 1987 on the reference date (31 March, 30 June, 30 September and 31 December) immediately preceding the day on which entry is made onto the land.