Land Compensation Manual Section 10: Special cases with the compensation code

Part 2: Easements and other rights over land

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

Easements

10.16 General

In the context of compulsory purchase, easements may be considered under three headings as set out in Paragraphs 10.17 to 19 below.

10.17 Dominant tenement

Land to be acquired may have attached to it an easement over other land which would pass with the land in ordinary private conveyancing, ie the land to be acquired is a ‘dominant tenement’. In these cases the easement is acquired and the compensation payable for the land to be taken should reflect the increase in market value, if any, attributable to the easement.

10.18 Servient tenement

Where the land to be acquired is subject to an easement, ie it is a ‘servient tenement’, the owner of the easement is not entitled to a notice to treat and the acquiring authority is not required to purchase the easement.

Except in the case of land acquired under Pt IX Housing Act 1985 (closing orders, demolition orders etc) the easement continues to subsist after the compulsory purchase of the ‘servient tenement’ by the acquiring authority, but the owner of the easement is precluded from taking legal action to prevent interference with the easement by the authority acting within its statutory powers. Where the easement is interfered with as a consequence of the lawful exercise of statutory powers, and no land has been or will be acquired from the owner of the easement, the owner can claim compensation for any interference with the easement under the provisions which provide for the payment of compensation when damage is suffered, usually section 10 Compulsory Purchase Act 1965 (see Section 14 of this Manual).

10.19 New easements or other interests in land

New easements or other interests in land can be created:

i. By reservation by the owner

When the owner of the land to be acquired wishes to reserve a new easement or other rights over the land to be acquired, the valuer should not provisionally agree a reservation by the owner of a new easement or other right over the land to be acquired without the prior agreement of the acquiring authority.

ii. By the exercise of compulsory powers

General powers of acquisition of land are insufficient by themselves to enable the compulsory purchase of new easements and other rights over land. Part V and Schedule 3 Acquisition of Land Act 1981 enables Acts passed after ALA 1981 to invoke Schedule 3 ALA 1981 thereby enabling the compulsory purchase of rights by the special act.

Acquisition of Land Act 1981

10.20 Application

Section 28 and Part I of Schedule 3 to the Act apply the normal CPO procedures as set out in the Act to the compulsory acquisition of rights over land, and stipulate that any reference to ‘land’ in the Act encompasses rights over land. The particular provisions giving rise to the acquisition of rights over land that are subject to the 1981 Act are as follows:

  1. Section 21A Welsh Development Agency Act 1975
  2. Section 13(1) Local Government (Miscellaneous Provisions) Act 1976
  3. Section 6(5) Development of Rural Wales Act 1976
  4. Section 142(4) Local Government, Planning and Land Act 1980
  5. Section 250 Highways Act 1980
  6. Section 34(3) Telecommunications Act 1984
  7. Paragraph 1 Schedule 3 Gas Act 1986
  8. Paragraph 1 Schedule 3 Electricity Act 1989
  9. Paragraph 3(3) Schedule 4 Communications Act 2003

10.21 Compensation provisions

Section 4 of the Acquisition of Land Act 1981 invokes the provisions of the Land Compensation Act 1961 in respect of compulsory acquisitions.

Statutes that give authority for the acquisition of new rights over land usually contain provisions amending the Compulsory Purchase Act 1965 so that it applies to those rights (particularly with regard to Section 7 - injurious affection and Section 8 - material detriment).

Acquisition or creation of new rights over land by compulsory powers

10.22 General

The major statutes that provide for the acquisition/creation of new rights in or over land are listed at Appendix 5/10/1 and include those listed in Paragraph 10.20 above.

10.23 Basis of compensation

The effect of these specific statutory provisions together with the Acquisition of Land Act 1981 is to apply the full compulsory purchase code to the assessment of compensation for the acquisition/creation of new rights in or over land.

However, the list provided at Appendix 5/10/1 is not exhaustive and reference should always be made to the specific statutory provisions invoked for the particular acquisition in question in order to ascertain details of the compensation provisions that apply in that particular case.

Acquisition or creation of new rights over land by agreement

10.24 General

Where a government department/agency or utility company has no powers to acquire new rights in or over land, or does not wish to incur the trouble and expense of going through the compulsory purchase procedure, they would be able to acquire such rights by agreement.

10.25 Basis of compensation

Whilst there is no set basis of compensation for purchases by agreement, valuers should assess the compensation on the basis of the diminution in the open market value of the land. If the compensation demanded by the claimant represents more than that payable under the compulsory purchase code, the valuer should notify the acquiring authority and seek their instructions. Where the acquiring authority instructs the valuer to assess compensation on a basis other than open market value or otherwise not in accordance with the compulsory purchase code, the valuer should, after pointing out to the authority any impropriety in the basis of assessment, comply with the request and note his report accordingly.

Some statutory provisions make special provisions regarding purchases by agreement. For example, Section 247(6) of the Highways Act 1980 excludes the application of Sections 7, 8 and 10 of the Compulsory Purchase Act 1965 to acquisitions by agreement. Section 40(1) of the Telecommunications Act 1984 excludes the application of Sections 4 to 8, 27 and 31 of the Compulsory Purchase Act 1965 to acquisitions by agreement.

When acquiring land by agreement, the valuer should always ascertain whether the claimant and acquiring authority have entered into a Memorandum of Agreement governing the terms of acquisition and basis of compensation. If so, the compensation should be assessed having regard to that Agreement and the report to the acquiring authority noted accordingly.

Exercise of power to carry out works without the acquisition of any interest in land

10.26 General

A number of statutes provide bodies such as government departments/agencies and utility companies with the right to carry out works, eg pipe laying, without the need to acquire any right or interest in the land through which the works are undertaken. These are listed at Appendix 5/10/2 although the list is not exhaustive. The relevant statutes provide that prior notice of their intention to carry out the works must be given, and make provision for the payment of compensation to affected landowners. Examples are given at Paragraphs 10.28 to 10.30 below.

Compensation for pipe laying or other works in land not involving the acquisition of land or legal interests in land, (as for example where a water main to a new housing estate could be routed only through a particular landowner’s land) would not include any ‘ransom value’.

In Kettering BC v Anglian Water Services plc [2001] 2 EGLR 157 the water company wished to route a sewer through the claimant’s land and exercised its powers under section 159 and Schedule 12 Water Industry Act 1991 to lay the pipe and pay compensation for any depreciation in land value and disturbance. The claimant argued that the value of its land before the pipe laying took place included ‘ransom value’ since the land was the only route that could have been taken for the pipe. The value after the pipe had been laid excluded any ‘ransom’ value and therefore compensation equal to the difference in the ‘before’ and ‘after’ values should be paid in addition to any disturbance.

The Lands Tribunal held that the wording of Paragraph 2(1) of Schedule 12 prevented the payment of any ‘ransom value’ since the compensation is payable only for the exercise of a power to lay pipes that had already been granted by statute. The grant of the statutory right in the Water Industry Act 1991 to lay pipes had already destroyed any ability to demand a ‘ransom’ for that right. The Tribunal held that a ‘ransom’ payment could be justified only if the claim were to be assessed as if the statutory power to lay pipes did not exist. However, the power did already exist and therefore no ‘ransom’ payment could be justified.

10.28 Water Industry Act 1991

a) Pipe laying in private land

Section 159 and Schedule 12 to the Water Industry Act 1991 provide the basis for determining the compensation to be paid for the laying of pipes and sewers in private land (where no interest in the land is acquired).

Paragraph 2(1) of Schedule 12 to the Water Industry Act 1991 provides that ‘If the value of any interest in any relevant land is depreciated by virtue of the exercise, by a relevant undertaker, of any power to carry out pipe-laying works on private land, the person entitled to that interest shall be entitled to compensation from the undertaker of an amount equal to the amount of the depreciation’.

Paragraph 2(2) and 2(4) of Schedule 12 provide that the claimant shall also be entitled to compensation for disturbance and injurious affection. Paragraph 3 invokes the rules of Section 5 of the Land Compensation Act 1961 in assessing the compensation for diminution in the value of the land.

Compensation for damage or disturbance will be payable following the execution of the works and on each subsequent occasion that the authority causes damage in exercising the right to re-enter for the purposes of inspection, maintenance or repair.

Paragraph 3(4) of Schedule 12 to the Water Industry Act 1991 provides for the set off against any compensation to which the claimant may be entitled under Paragraph 2, of the enhancement in value of any of the claimant’s contiguous or adjacent land due to the carrying out of the works.

It should be noted that if a water company acquired the land or an easement therein by compulsory powers under section 155 of and Schedule 9 to the Water Industry Act 1991, the full compulsory purchase code would apply and any ‘ransom’ element would be compensatable subject to the usual rules governing the assessment of compensation under the statutory compensation code (see Paragraph 10.27 above).

b) Pipe laying in streets

Paragraph 1(2)(b) of Schedule 12 to the Water Industry Act 1991 provides that compensation for street works shall be payable ‘for any loss caused or damage done in the exercise of those powers’. Section 5 of the Land Compensation Act 1961 would not be applicable to the assessment of compensation in such circumstances.

10.29 Highways Act 1980

Sections 100, 101 and 102 of this Act contain provisions enabling highway authorities to construct or lay in land adjoining or lying near to the highway such drains or barriers as they consider necessary for the draining of highways, and to discharge water from such drains into any natural or artificial inland waters or tidal waters; to fill in any ditch on land adjoining or lying near to the highway; and to carry out works to protect the highway from hazards of nature.

In each case provision is made for the payment of compensation to the owner or occupier of any land who suffers damage by reason by the exercise of those powers.

10.30 Other Acts

Most utility companies have powers to carry out works in streets in order to execute their functions as utilities. For example, Schedule 4 to the Gas Act 1986 provides a gas supplier with the power to open or break up any street for the purposes of laying, repairing, altering or removing gas services, subject to the payment of compensation for any damage done in the exercise of those powers. In every case, the valuer should have regard to the Act authorising the works in respect of which compensation is claimed in order to ascertain the appropriate compensation provisions.

Exercise of statutory powers in contravention of restrictive covenant

Where a body undertakes development in pursuance of statutory powers (eg under the Housing Acts) in contravention of a restrictive covenant the owner of the benefitted land would be precluded from obtaining an injunction to stop the development. They would instead be entitled to compensation under section 10 Compulsory Purchase Act 1965 for the breach of covenant.

10.32 Measure of compensation

Where compensation is payable under section 10 in respect of a breach of covenant comprising execution of works in exercise of statutory powers authorising those works, that compensation is to be assessed by reference to the diminution in value of the benefited land consequent on the carrying out of the authorised works on the restricted land (ie injurious affection).

In Wrotham Park Settled Estates v Hertsmere BC [1991] 1 EGLR 230 (which was heard as a preliminary point of law) the owner of the benefitted land had imposed a covenant ‘Not to develop the said land for building purposes except in strict accordance with the layout plan to be first submitted to and approved in writing………’. The Lands Tribunal had to decide the appropriate measure of compensation which was either:

(a) the amount of the difference between the value of the interest immediately before the commencement of the development with the benefit of the restrictive covenant and the value of the interest immediately thereafter given the carrying out of the development;

or

(b) the amount that could reasonably have been expected to be paid at the time when the development had begun to the owner of the interest for allowing such amount of the development (if any) as was in excess of that to which under the restrictive covenant it could not reasonably have withheld its consent when considering any layout plan submitted to it for approval. The Tribunal held that the measure of compensation in (a) above was appropriate. Section 10 CPA 1965 provided for compensation for injurious affection. Reference to the bargaining position of the parties was not relevant.

10.33 New right to override restrictive covenants – Housing and Planning Act 2016

Sections 203 to 205 of the Housing and Planning Act 2016 provide a statutory right for certain public bodies to carry out building or maintenance work on land they own in contravention of a restrictive covenant and to pay compensation accordingly.

Generally section 203 applies to building or maintenance work where:

  • (a) there is planning consent for the building or maintenance work
  • (b) the work is carried out on land that has at any time on or after 13 July 2016
  • (i) become vested in or acquired by a specified authority, or
  • (ii) been appropriated by a local authority for planning purposes as defined by section 246(1) of the Town and Country Planning Act 1990
  • (c) the authority could acquire the land compulsorily for the purposes of the building or maintenance work, and
  • (d) the building or maintenance work is for purposes related to the purposes for which the land was vested, acquired or appropriated as mentioned in paragraph (b)

The provisions also apply to land of other categories of owner where acquired prior to 13 July 2016.

Section 204 specifies that the compensation is to be calculated on the same basis as compensation payable under sections 7 and 10 of the Compulsory Purchase Act 1965.

Statutory interest

10.34 Compulsory acquisition of interest in land

Where an interest in land is acquired and compensation is assessed under the LCA 1961 and section 32 thereof applies, interest at the statutory rate is payable from the date of entry to the date of payment.

10.35 Compensation for works

In the case of compensation for carrying out works on private land Schedule 18 to the Planning and Compensation Act 1991 (as amended by the Water Consolidation (Consequential Provisions) Act 1991) provides that interest generally shall be payable from the date of claim, or in respect of disturbance damage caused by reason of expenditure, from the date on which the damage is sustained. However, in each case the Act under which the work is authorised together with Schedule 18 should be referred to in order to ascertain the precise provisions regarding the payment of interest.

Disputed compensation

10.36 Procedure

The general policy is to refer all disputed cases to the Upper Tribunal (Lands Chamber) and where other provisions are set down (as in Paragraph 1(3) of Schedule 12 to the Water Industry Act 1991 - disputes in respect of compensation for street works to be referred to arbitration) it would be open to the parties to invoke Section 1(5) of the Lands Tribunal Act 1949 so that the Upper Tribunal could act as arbitrator. Paragraph 30 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 (SI 2010 No 2600) specifies which provisions of the Arbitration Act 1996 apply to such proceedings where the parties have not agreed otherwise.

Network Rail/Transport for London

10.37 Payments for bridge and pipe easements

In 1936 agreement was reached between the Railway Companies and the Chief Valuer on behalf of the Ministry of Transport that payment for easements in respect of bridges and bridge widenings over railways would be based on a set formula. The formula was first reviewed in 1955 and then at subsequent dates.

Most recently agreement was reached with Railtrack plc (now Network Rail) and London Regional Transport (now Transport for London) for a revised scale of payments for bridge and pipe easements, which had effect as from 1 July 2001.

Since neither party has requested an update of the Scale since that time, it would be appropriate for valuers to adjust the figures in that agreement in line with the RPI in order to update them to a current date.

The full text of the Scale is set out at Appendix 10/3 to this Section of the Manual.

The value of the easement itself would in most cases be small. However, the payment comprises compensation for the depreciation in the value of the owner’s interest plus other losses and costs to the owner incurred as a direct consequence of the acquisition of the interest in land. The compensation therefore includes the following:

  • a) Partial sterilisation of the land and its future development potential;
  • b) Costs to Network Rail in respect of their engineers’ considering the granting of the easement;
  • c) Costs in notifying the various operational divisions of the grant of an easement and the necessary recording by each of its existence;
  • d) Increased spraying costs around bridge structures for the control of weeds (without the bridge spraying may be achieved by mechanical means but the existence of the bridge could require manual spraying);
  • e) Potentially increased costs and liabilities where derailments or accidents occur at or under a bridge;
  • f) Increased vandalism emanating from bridges;
  • g) Limitations in the future design of operational equipment and electrification systems.

Where the grant of the easement would release development or other value (where the assessment of such value is not precluded by the statutory compensation code or the Pointe Gourde rule) the application of the Scale would not apply. (See the Lands Tribunal case Railtrack plc v Guinness Ltd (2001) CON/153/2000 (unreported) and the subsequent Court of Appeal case Railtrack plc v Guinness Ltd [2003] 1 EGLR 124).

British Waterways

10.38 Easements affecting waterways

On 2 July 2012 all of British Waterways’ assets and responsibilities in England and Wales were transferred to the newly founded charity the Canal & River Trust. In Scotland British Waterways continues to operate as a stand-alone public corporation under the trading name Scottish Canals.

Before September 1994 there existed a Scale of Payments agreed with the British Waterways Board for bridges and pipes crossing waterways. The agreement provided that either party may ask for ad hoc consideration of exceptional or abnormal cases, otherwise the Scale was the basis upon which claimants’ valuers and the Estate Officers of the Board made their recommendations.

The terms of the agreement had also been made known to other interested bodies but the Scale of Payment was not necessarily binding on any particular Local or Water Authority.

In August 1994 the Property and Development Manager to British Waterways advised the VOA that he regarded the agreement as time expired and that, for the time being at least, compensation for new crossings should be negotiated on an individual basis. Each case should therefore now be dealt with on its merits.

Wayleave agreements for electric cables

10.39 General

Currently by negotiation between the Country Land & Business Association, the National Farmers’ Union and the Farmers Union of Wales and the Energy Networks Association (a body that represents the interests of the ‘wires and pipes’ transmission and distribution network operators for gas and electricity in the UK and Ireland), a revised scale of annual payments to (i) owners (ii) occupiers and (iii) owner occupiers of land for Grid and distribution lines over agricultural land has been agreed and is updated annually.

10.40 Payments to agricultural owners and occupiers

The scale of rent and compensation for interference with agricultural operations can be found in a table on the Energy Networks Association website www.energynetworks.org. The compensation payments are intended to cover the costs of keeping the site of a pole or a tower clean and of avoiding it in the course of cultivations, the loss of profit on the unproductive area and for diminished yields immediately outside that area.

10.41 Payments to Government Departments

The scale of charges would apply similarly to wayleaves granted by Government Departments to energy companies.

10.42 Inadequate compensation

If, while dealing with Government property the valuer becomes aware that the annual payment made under the Agreement in respect of a wayleave is insufficient to cover the damage sustained, the valuer should report the matter to the PS Professional Guidance Team.

10.43 Termination of wayleave by landowner

In Naylor v Southern Electricity Board [1996] 1 EGLR 195 the owner-occupier of a residential property terminated the wayleave for overhead electricity cables that passed over the garden of the property. The Electricity Board initiated a CPO in order to obtain an easement for the cables. The compensation for the easement was agreed at £150 and the unaffected value of the property agreed at £195,000. The claimant claimed between 15% and 20% of the property value for injurious affection and the Electricity Board offered £2,925 (1.5% of the property value). The Lands Tribunal determined the compensation at £4,000. Compensation was payable solely in respect of the lines that oversailed the garden. No compensation was due in respect of the effect of poles and supports situated on immediately adjoining land.

Surveyors’ fees in relation to work undertaken/interests acquired by utility companies

10.44 Compulsory acquisitions

In all cases where an authority is acquiring a new easement or other right over land, or carrying out works by compulsory means or with compulsory powers in the background, the claimant’s surveyor’s fees should be assessed in accordance with Section 5 Part 2 of this Manual.

Some utility companies publish fee scales (ie ad valorem fees) that they are willing to pay to claimant’s surveyors. For example, National Grid publishes a fee scale with separate payments to apply respectively to work related to existing installations and to work on new installations. However, the Scale makes provision for payment on an hourly rate basis in appropriate circumstances. There would be no object to a valuer’s accepting or recommending the Scale fee if it represented the reasonable cost of undertaking the work involved in the case.

However, any such scale would not override the requirement for the fee to reflect the work reasonably and necessarily undertaken by the surveyor. In Poole v South West Water Ltd [2011] UKUT 84 (LC) the Upper Tribunal awarded fees on an hourly rate basis to the claimant’s surveyor instead of Rydes Scale (1996) plus 20% as proposed by the Water Authority.

10.45 Acquisitions by agreement

When acquiring land by agreement, the valuer should have regard to the Memorandum of Agreement or the instructions of the acquiring authority in recommending reimbursement of the claimant’s valuer’s fees. If the acquiring authority has agreed to pay such fees without specifying any particular basis, the valuer should recommend payment on the basis of Section 5 Part 2 of this Manual.

10.46 to 10.50 Reserved