Land Compensation Manual Section 13: Loss payments

Part 2: Basic loss and occupiers loss payments

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

General

13.16 New legislation

Sections 106 to 110 of the Planning and Compulsory Purchase Act 2004 introduced ‘Basic’ and ‘Occupiers’ loss payments to be paid to claimants other than residential occupiers and residential owner-occupiers. These have been inserted into the Land Compensation Act 1973 as sections 33A to 33K.

It should be noted that the provisions relating to Home Loss Payments and BLPs/OLPs are not consistent in that there are different qualifying conditions and minimum/maximum payments.

The new payments apply to displacements in consequence of Compulsory Purchase Orders made or made in draft on or after 31 October 2004. ‘Made’ in this context refers to the date that the CPO is formally put under seal by the acquiring authority and not to any later date of confirmation for example following a subsequent public inquiry.

Basic Loss Payments

13.17 Entitlement to payment

The Basic Loss Payment (BLP) is payable to a person

(a) who has a qualifying interest in land;

(b) whose interest is acquired compulsorily;

(c) to the extent that he is not entitled to a home loss payment in respect of any part of the interest.

13.18 Qualifying interests

An interest in land is a qualifying interest if it is a freehold interest or an interest as tenant and the interest subsists for a period of not less than one year ending with whichever is the earliest of:

(i) the date on which the acquiring authority takes possession of the land under section 11 of the Compulsory Purchase Act 1965;

(ii) the date on which the acquiring authority enters the land if it proceeds under Schedule 3 to that Act;

(iii) the vesting date if a general vesting declaration is made under section 4 of the Compulsory Purchase (Vesting Declarations) Act 1981;

(iv) the date on which compensation is agreed;

(v) the date on which the compensation is determined by the Lands Tribunal.

The provisions therefore do not apply to licensees, lodgers, squatters, trespassers or to the acquisition or creation of an easement or right of way.

13.19 Amount of basic loss payment

The amount of BLP payable to a qualifying claimant is the lower of 7.5% of the value of the interest £75,000.

13.20 Payment

Where a claimant is entitled to a BLP it must be made not later than whichever is the latest of the following dates:

(a) the last day of the period specified in section 33A(4) (see paragraph 3.18 above);

(b) the last day of the period of three months beginning with the day the claim is made;

(c) the day on which the amount of the payment is determined.

Occupiers loss payments - agricultural land

13.21 Qualifying conditions

The Occupiers Loss Payment (OLP) is payable to a person if

(a) he has a qualifying interest in land (see 13.18 above);

(b) the land is agricultural land;

(c) the interest is acquired compulsorily;

(d) he occupied the land for the necessary period (see 13.18 above).

13.22 Amount of payment (agricultural land)

‘Agricultural land’ has the meaning assigned to it in section 109 of the Agriculture Act 1947 and means land used for agriculture which is so used for the purposes of a trade or business and includes horticulture, fruit growing, seed growing, dairy farming and livestock breeding and keeping, the use of land as grazing land, meadow land, osier land, market gardens and nursery grounds and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes. It does not include

(i) land used as pleasure grounds, private gardens or allotment gardens or

(ii) land kept or preserved mainly or exclusively for the purposes of sport or recreation.

The amount of OLP payable in respect of agricultural land is the greatest of

(i) 2.5% of the value of the interest;

(ii) the land amount;

(iii) the buildings amount.

The maximum amount that may be paid is £25,000.

The land amount is the greater of £300 and the amount derived from the following table:

Area of the land   Amount per hectare
Not exceeding 100 hectares   £100 per hectare or part thereof
Exceeding 100 hectares   (a) £100 per hectare for the first 100 hectares and
Exceeding 100 hectares   (b) £50 per hectare for the next 300 hectares or part thereof

The buildings amount is £25 per square metre (or part of a square metre) of the gross floor space of any building on the land. The gross floor space must be measured externally.

13.23 Agricultural land - dual entitlement

If a claimant is entitled to both an OLP in respect of agricultural land and a payment under section 12(1) of the Agriculture (Miscellaneous Provisions) Act 1968 payment may be made in respect of one entitlement only.

If a claim is made under both provisions the claimant must be paid in respect of the entitlement that produces the greater amount.

Occupiers loss payments - other land

13.24 Qualifying conditions

The Occupiers Loss Payment (OLP) is payable to a person if

(a) he has a qualifying interest in land (see 13.18 above);

(b) the land is not agricultural land;

(c) the interest is acquired compulsorily;

(d) he occupied the land for the necessary period (see 13.18 above).

13.25 Amount of Occupier’s Loss Payment (other land)

The amount of OLP payable in respect of other land is the greatest of

(i) 2.5% of the value of the interest;

(ii) the land amount;

(iii) the buildings amount.

The maximum amount that may be paid is £25,000.

The land amount is the greater of

(i) £2,500;

(ii) £2.50 per square metre (or part of a square metre) of the area of the land.

If only part of land in which a person has an interest is acquired, for the figure of £2,500 there shall be substituted £300.

The buildings amount is £25 per square metre (or part of a square metre) of the gross floor space of any building on the land. The gross floor space must be measured externally.

13.26 The ‘Buildings amount’

No definition of what comprises a building is provided. It is suggested that, pending the receipt of judicial or government guidance, a pragmatic approach should be adopted. The Concise Oxford Dictionary defines a building as a ‘permanent fixed thing built for occupation (house, school, factory, stable and such)’. Other dictionaries define a building as a ‘structure with walls and a roof’. It would be reasonable to ignore any building that would be incapable of rateable occupation due to its condition notwithstanding some spurious form of occupation claimed by the owner.

13.27 Payment (OLPs in respect of agricultural and other land)

Where a claimant is entitled to an OLP it must be made on or before the latest of:

(a) the date of displacement;

(b) the last day of the period of three months beginning with the day the claim is made;

(c) the day on which the amount of the payment is determined.

Factors common to basic and occupiers loss payments

13.28 The ‘Value of the interest’

Section 33A(6) defines the value of an interest as ‘its value for the purpose of deciding the amount of compensation payable in respect of the acquisition’.

It has been argued that the ‘value of the interest’ is represented by the amount of compensation under all heads of claim. This argument is based on the legal concept that the value of the land and the disturbance loss are no more than two inseparable elements of a single whole that together make up the value of the land to the owner.

Bridge LJ said in Hughes and another v Doncaster Metropolitan Borough Council [1991] 1 EGLR 31 “It is well–settled law that whatever compensation is payable to an owner on compulsory acquisition of his land in respect of disturbance is an element in assessing the value of the land to him, not a distinct and independent head of compensation…………. Judicial interpretation of the Act of 1845 held that the value of the land meant its value to the owner, not its value to the acquiring authority…………… This value was to be assessed as including all the loss which the owner suffered in consequence of being dispossessed”.

He went on to say “Thus, although compensation in respect of the market value of land acquired and compensation for disturbance must in practice be separately assessed, the courts have consistently adhered to the principle………….that the two elements are inseparable parts of a single whole in that together they make up ‘the value of the land’ to the owner, which, unless he retains other land depreciated by severance or injurious affection, was the only compensation which the 1845 code awarded to him”.

Thus the open market value of the land acquired and the compensation for disturbance are separately assessed elements that together comprise the ‘value of the land to the owner’.

However, section 33A(2) Land Compensation Act 1973 provides that a claimant is entitled to payment of a percentage of ‘the value of his interest’ as the amount of the Basic Loss Payment.

Further, in defining ‘the value of an interest’ section 33A(6) refers neither to the ‘value of the land’ nor the ‘value of the land to the owner’ nor ‘the value of the land to be purchased by the acquiring authority’ but defines the value as ‘its value for the purpose of deciding the amount of compensation payable in respect of the acquisition’. The precision of the language adopted by the Parliamentary draughtsmen naturally leads to the conclusion that the ‘value of an interest’ comprises only one element in the ‘the amount of compensation payable in respect of the acquisition’. The ‘value of an interest’ is thus the value to be ascertained under Rule (2) of section 5 Land Compensation Act 1961.

Pending any judicial authority in the matter, valuers should take the ‘value of an interest’ to be that ascertained under Rule (2) of section 5 LCA 1961.

13.29 Persons excluded from payment

No BLP or OLP shall be made to a person on whom the following notice has been served and not complied with in respect of the land acquired:

  • a notice under section 215 of the Town and Country Planning Act 1990 (power to require proper maintenance of land)
  • a notice under section 189 or 190 of the Housing Act 1985 (require to repair dwelling unfit for human habitation or in state of disrepair)
  • a notice under section 48 of the planning (listed buildings and conservation areas) Act 1990 (repairs notice prior to compulsory acquisition of listed building).

No BLP or OLP shall be made to a person on whom an order under section 264 or 265 of the Housing Act 1985 (closure or demolition of dwelling unfit for human habitation) has been served and not quashed on appeal in respect of the land acquired:

13.30 Occupation

The degree or nature of occupation required to satisfy the ‘occupation’ requirement for OLP is not set out in the Act. It is suggested that the standard of occupation required for the service of a blight notice should be adopted.

In Ministry of Transport v Holland (1963) 14 P&CR 259 the leaving of chattels in sheds and a garage in the grounds of a vacant dwellinghouse did not constitute occupation of part of the hereditament for blight notice purposes. In that case the Court held that the test of occupation for blight was the same as that for rateable occupation.

In Segal v Manchester Corporation (1966) 18 P&CR 112, legal argument that the ownership of vacant houses constituted owner occupation for blight purposes was rejected by the Lands Tribunal.

In Holmes v Knowsley BC (1978) 35 P&CR 119 it was held that whilst the occupation of a house for the purposes of preparing it for residential occupation could not be classed as ‘residential owner occupation’ it nevertheless comprised ‘owner occupation’.

13.31 Composite properties

Where an interest in land comprises partly a dwelling in respect of which a person is entitled to a Home Loss Payment, the value of the interest for BLP and OLP purposes is the value of the whole interest less the value of so much of the interest as is represented by the dwelling.

13.32 Purchase Notices and Blight Notices

The definition of ‘acquired compulsorily’ encompasses acquisitions made under a Purchase Notice (section 137 Town & Country Planning Act 1990) and under a Blight Notice (section 150 Town & Country Planning Act 1990).

13.33 Equivalent reinstatement

Where compensation is assessed under Rule (5) of section 5 of the Land Compensation Act 1961 (equivalent reinstatement) the ‘value of the interest’ for BLP and OLP purposes shall be nil. Since the amount of BLP payable to a qualifying claimant is the lower of 7.5% of the value of the interest or £75,000 no BLP would be payable in a Rule (5) case.

However, it would appear that this provision would not preclude the payment of an OLP by reference to the ‘land amount’ or the ‘buildings amount’ since the payment is expressed as comprising the greatest of 2.5% of the value of the interest or the land amount or the buildings amount.

13.34 Disputes

Any dispute as to the amount of a BLP or OLP must be determined by the Upper Tribunal (Lands Chamber).

13.35 Acquisition by agreement

Where an authority that has the power to acquire an interest in property compulsorily acquires it by agreement, the authority may make a payment equal to a BLP or OLP to a claimant who would have qualified for payment had the acquisition been compulsory.

13.36 Advance payments on account of BLP or OLP

Advance payments may be made at any time prior to the determination of the payment.

The amount by which any advance payment exceeds the payment ultimately determined must be repaid to the acquiring authority.

13.37 Statutory interest

The BLP or OLP will carry interest at the rate prescribed by regulations under section 32 Land Compensation Act 1961.

13.38 Regulations

The Secretary of State may by regulations alter any amount or percentage figure relating to BLP or OLP. This would be carried out by way of Statutory Instrument.

Scope of assistance to acquiring authority

13.39 Status of BLP and OLP

A BLP or OLP is not a head of claim but a separate statutory entitlement and thus does not form part of the compensation payable for the acquisition of an interest in land.

13.40 Estimates

Acquiring authorities should be alerted at the estimate stage to the extent of their possible liability for BLPs and OLPs. When sufficient information is available valuers should detail in their reports the interest of the owner and/or occupier and the market value of the interests in each property to be acquired when those interests are qualifying interests. Where the valuer considers that there is likely to be a material sum involved relative to the total of the estimate, there is no objection to adding the following statement after the Opinion of Value:

‘The authority will be likely to incur Basic Loss Payments and Occupiers Loss Payments under Part III of the Land Compensation Act 1973 (as amended) which, on present information, could amount to a sum in the order of £….’.

In other cases, the report should state that any liability for BLPs and OLPs has not been included in the estimate.

13.41 Market value of claimant’s interest

In cases where a claimant qualifies for payment of a BLP and/or OLP the market value of the claimant’s interest in the dwelling should if possible be agreed with the claimant or the claimant’s agent (that is apportioned from the compensation payable in respect of any other heads of claim). Where this element were part of premises that combine business and domestic uses the value of any part in respect of which a HLP were payable would need to be apportioned from the remainder.

13.42 Entitlement to payment

It is the acquiring authority’s responsibility to determine the entitlement of a claimant to a BLP or OLP. Any recommendations as to the quantum of payment made by the valuer would be subject to the proviso that the acquiring authority must satisfy itself as to the claimant’s entitlement to payment.

13.43 Reports of completed negotiations

Valuers’ reports to acquiring authorities should include a paragraph to the effect that:

‘For the purposes of calculating the amount of Basic Loss Payment and/or Occupiers Loss payment in accordance with sections 33A, 33B and 33C of the Land Compensation Act 1973, the market value of the claimant’s interest in the property has been agreed/is assessed in the sum of £….’.

Farm Loss Payments

13.44 Repeal of provisions

Section 120 and Schedule 9 to the Planning and Compulsory Purchase Act 2004 repealed sections 34 to 36 of the Land Compensation Act 1973 (Farm Loss Payments) except in relation to Compulsory Purchase Orders made, or made in draft, before 31 October 2004.