Land Compensation Manual Section 15: Rights of owners to enforce purchase of lands

Practice note 15/2: Planning Blight, Statutory Provisions

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

How an Owner Qualifies

1.1 Owner taking advantage of blight provisions

An owner who wishes to take advantage of the blight provisions of the T&CPA 1990 must show that:

  • a) the land falls within one of the specified descriptions (see paragraph 2.1-2 below)
  • b) the interest qualifies for protection (see paragraph 3.1-3) and
  • c) the owner of the interest is an owner-occupier and
  • d) reasonable endeavours have been made to sell the interest but the owner has been unable to do so except at a price substantially lower than that reasonably expected to be obtained if no part of the hereditament or agricultural unit were comprised in land of any of the specified descriptions (see paragraphs 4.1-2)

There are special provisions relating to mortgagees and personal representatives (see paragraph 3.3).

The Specified Descriptions of Blighted Land

2.1 Specified descriptions

The specified descriptions of blighted land are set out in detail in Schedule 13 Town & Country Planning Act 1990. The Schedule was significantly amended by the Planning & Compulsory Purchase Act 2004. In general terms the specified descriptions may be summarised as follows:

  • a) Land allocated for public authority functions in development plans
  • b) Land within an area described as the site of a proposed new town or urban development area
  • c) Land within an area declared to be a clearance area or renewal area
  • d) Land on which a highway is proposed to be constructed or land to be included in a highway as proposed to be improved or altered;
  • e) Land within or having a frontage to a highway designated as a new street
  • f) Land in respect of which a compulsory purchase order or development consent order is in force or has been submitted for confirmation; or is subject to an order under the Transport and Works Act 1992
  • g) Land identified in National Policy Statements

The above is not intended to be a comprehensive list of the specified descriptions and in any particular case, reference should be made to Schedule 13 TCPA 1990 (as amended).

2.2 Required statutory action taken

In various decisions the Upper Tribunal has shown that where it is claimed that land falls within one of the specified descriptions, it must be shown that the required statutory action appropriate to the particular category has been taken and published, and, where appropriate, relevant plans are in force. A claim that land is blighted and qualifies for protection under the blight provisions as a result of a general policy statement or decision made without the necessary statutory authority may fail.

Interests that Qualify for Protection under the Blight Provisions

3.1 Qualifications for protection

To qualify for protection it has to be shown that an owner:

a) has an interest in either:

  • i) a hereditament or part of a hereditament. For this purpose a hereditament is the aggregate land that forms the subject of an entry in the Rating List for the time being in force for a rating area but it does not include land that forms the subject of an entry in the Rating List by reason only that it is land over which shooting, fishing or other sporting rights are exercisable or that it is land over which a right to exhibit advertisements is let out or reserved. Where any land is on the boundary between two or more rating areas, section 171(4) TCPA 1990 provides for it to be treated as a single hereditament if but for the boundary division it would have formed a single entry in the valuation list. However, it may be that rights appurtenant to a hereditament are not part of the hereditament as was considered by the Lands Tribunal in the rating case Shell-Mex & BP Ltd and Another v Langley [1962] 1 WLR 1392; or
  • ii) an agricultural unit or part of a unit. Agricultural unit in this context means land that is occupied for agricultural purposes including any dwelling house or any other building occupied by the same person for the purpose of farming the land

b) has an interest that is either freehold or a tenancy granted or extended for a term of years certain of which at the date of service of the blight notice not fewer than three years remain unexpired;

c) is an owner-occupier (section 168 TCPA 1990). There are three classes of owner-occupiers - two in respect of hereditaments and one in respect of agricultural units. In each case however, the claimant must have occupied the whole (or a substantial part) of the hereditament (or the whole of the agricultural unit) for a period of six months immediately preceding the date of the blight notice, or the date when the claimant ceased to be the occupying owner. In the latter case occupation must not have ceased more than 12 months before the service of the notice, and in the case of a hereditament, but not of an agricultural unit, it must have been unoccupied during the intervening period.

The two classes of owner-occupier of hereditaments are:

  • i) resident owner-occupier ie an individual who occupies the whole or a substantial part of the hereditament as a private residence during the whole of the six month period mentioned above, or
  • ii) owner-occupier, other than a resident owner-occupier, who has occupied the whole or a substantial part of a hereditament that has, on the date the notice is served, an annual value not exceeding £36,000 (£44,200 in Greater London) (SI 2017 No 472). Prior to 21 April 2017 the annual value limit was £34,800

For property exempt from rating or where part of a property is not rateable the ‘annual value’ will be calculated by adding together the rateable value of the property shown in the rating list and an ‘appropriate value’ provided by the Valuation Officer.

For property exempt from rating this ‘appropriate value’ will be equal to the rateable value that would have applied if the property were not exempt. For domestic property it will be 5% of the capital value as at 1 April 2015 (the antecedent valuation date for rating purposes) assessed on compulsory purchase principles (see para 3.2 below).

The test of occupation for the purpose of the blight notice provisions is the same as for the purpose of rating. ‘Occupation’ therefore means in effect ‘rateable occupation’ (Dingleside Development Company Ltd v Powys County Council [1989] EGCS 135).

Incorporeal hereditaments do not qualify for protection. In Ley v Kent County Council (1976) 31 P&CR 439 a house had a right of way over an access track. Part of the access track was to be acquired for a road scheme. It was held that this did not entitle the resident owner-occupier of the house to serve a blight notice.

3.2 ‘Appropriate Value’

Section 171(2) and (3) T&CPA 1990 provide that the value attributable to an exempt hereditament, or the non-rateable part of it in respect of domestic property (which includes the domestic part of a composite hereditament), shall be 5% of the compensation that would be payable in respect of the value of that property if it were being purchased compulsorily with vacant possession as at the ‘relevant date’. The ‘relevant date’ is defined as ‘the date by reference to which that determination would have been made’ (ie the antecedent date of 1 April 2015). This value is to be certified by the ‘Valuation Officer’.

The intention is to assess a value under rule (2) of section 5 LCA 1961. For blight notice qualification purposes any actual tenancy is to be ignored. No account is to be taken of any anticipated disturbance or other Rule (6) items, or (in the case of a blight notice affecting part of a hereditament) severance and/or injurious affection.

The practical difficulties in ascribing a capital value to the domestic part of a composite hereditament are fully appreciated. Very seldom will this part of the total accommodation subsist in a layout or arrangement compatible with an open market sale lotting. Comparables will also be virtually absent. Nevertheless a capital value method is stipulated in the Act. Where an assessment by the comparative method proves difficult, an alternative approach may have to be considered.

It might be that the only practicable course in the more difficult cases would be to ascribe a capital value to the entire hereditament (ie both the rateable and domestic parts) and from 5% of this figure deduct the rateable value of the non-domestic part.

The ‘value attributable’ in exempt (as opposed to domestic) cases is only expected to arise in a limited field of hereditaments. The capital value method does not apply to these cases and the VO is required to adopt the normal non-domestic rating principles to arrive at an ‘appropriate value’.

The value attributable in respect of an exempt hereditament within an enterprise zone should be approached on the assumption that at 1 April 2017 the EZ was not designated. Any effect of exemption from payment of rates on rental values should be disregarded.

It is emphasised that the provisions covering ‘appropriate value’ in the Act have been made solely for qualification purposes and do not affect the basis of compensation to be applied under a deemed notice to treat following service of a successful blight notice.

There are no provisions for appeal against the value certified by the VO. Inspections should therefore be made in cases where certification is required.

3.3 Other interests that may qualify are:

a) A mortgagee in possession, ie a mortgagee who is entitled by virtue of a power which has become exercisable to sell an interest in a hereditament or agricultural unit giving immediate vacant possession of the land. A mortgagee in possession must show either that:

  • i) the mortgagor’s interest could be the subject of a blight notice, or
  • ii) the interest could have been the subject of such a notice served by the mortgagor not more than six months before the notice is served

A mortgagee in possession may not serve a blight notice if a notice served by an owner-occupier is outstanding, and vice versa.

b) Personal representatives. The personal representative(s) of a deceased person, who at the time of death was entitled to an interest that would have qualified for protection had a notice been served, may serve a blight notice if claiming to have made reasonable endeavours to sell the interest; and one or more individuals to the exclusion of a corporate body are beneficially entitled to the deceased’s interest. A personal representative may not serve a notice in respect of part of a hereditament or agricultural unit when the deceased was entitled to an interest in the entirety.

c) Partnerships. Section 164 TCPA 1990 makes special provisions for partnerships, even where after service of a blight notice the constitution of the firm changes, to be treated as a single occupier for the purposes of eligibility under the blight provisions.

Reasonable Endeavours to Sell

4.1 Matters of fact

What may be accepted as reasonable endeavours to sell may be determined by matters of fact. Normally it would be expected that the property would have been put on the market, advertised for sale or brought to the notice of prospective purchasers by recognised channels. However, there may be cases where evidence of endeavours to sell is not available but in the circumstances of the case the valuer is able to accept that efforts to interest prospective purchasers would have been futile. In Perkins v West Wiltshire Council (1975) 31 P&CR 427 the Lands Tribunal held that taking professional advice as to the outcome of placing the property on the market did not represent making ‘reasonable endeavours to sell’.

However, if, because of the general knowledge of a scheme that includes the property to be sold, a professional surveyor advises the claimant that it would be a waste of time and money to place the property on the market the acquiring authority may deem the requirements of section 150(1)(b) TCPA 1990 to have been met without the need for expenditure to have been incurred on advertising. In discretionary purchase cases the acquiring authority would normally expect the claimant to place the property on the market.

4.2 ‘Reasonable endeavours’ to sell

Making ‘reasonable endeavours’ to sell means that the property must be placed on the open market. It is essential neither that the claimant must use an estate agent nor that a ‘For sale’ board must be erected on the property (Lade v Brighton Corporation (1971) 22 P&CR 737). However, the aggregate effect of all the steps taken by the claimant to sell the property must meet the requirement to use ‘reasonable endeavours’.

The marketing of the property at an excessive price may lead to a successful objection to the blight notice by the authority since in that case the reason for the failure to sell would be the excessive price not the threat of compulsory acquisition (Edwards v Surrey CC [1999] RVR 223).

Section 150 T&CP Act 1990 excludes from the requirement to have made ‘reasonable endeavours to sell’, land comprised in paragraphs 21, 22 and 24 of Schedule 13 to the T&CP Act 1990. These comprise:

  • land authorised to be acquired by a special enactment
  • land (or rights over land) authorised to be acquired by a CPO; and
  • land authorised to be acquired under a Development Consent Order

Substantially Lower Price

5.1 Relevant provisions to relieve hardship

The object of the relevant provisions is to relieve hardship caused by the claimant’s inability to sell the property except at a loss which arises because the property is included in an area of land that falls within the specified descriptions set out in Schedule 13 T&CPA 1990. Nevertheless, care must be taken that the object of the provisions is not frustrated because too narrow a view is taken of ‘a price substantially lower’ in section 150(1)(c) TCPA 1990. Each case will have to be dealt with on its merits. Where it can be shown that a property cannot be sold or there is a clearly discernable depreciation in value that can be recognised as attributable to the effect of planning proposals, the valuer should not hesitate to accept the depreciation as being substantial.

5.2 Depreciation in market value

Where a blight notice is being used as a means of expediting the purchase of property that may in due course give rise to a claim for compensation under Rule (5) section 5 LCA 1961 on compulsory acquisition (equivalent reinstatement), the valuer in considering the validity of the blight notice should only have regard to depreciation in the open market value and not to the cost of equivalent reinstatement elsewhere. The valuer should make this clear to the acquiring authority.

Blight Notices

6.1 Extent of blight notice

A blight notice initially must include the whole of the claimant’s interest in the hereditament or the affected area if the claimant owns an agricultural unit. If the claimant’s interest is only in part of the hereditament or agricultural unit then the whole of that part should be included. The authority cannot be required to purchase a part only of the claimant’s interest. Alterations to the extent of the interest to be purchased that may be made by the authority in a counter notice are covered by section 151(4)(c) TCPA 1990 (see paragraphs 7.1-7.4 below). See also paragraphs 8.1-8.6 below in the case of an agricultural unit.

Counter Notices

7.1 Service of counter notice

To avoid authorities’ being forced to purchase land unnecessarily they are given an opportunity by section 151 TCPA 1990 to serve a counter notice in the prescribed form within two months of the date of service of the blight notice. The grounds on which a counter notice may be served are set out in sections 151(4), 159(1), 161(5) or 162(5) TCPA 1990 (as amended).

7.2 Proposal not to purchase whole of hereditament

Where the counter-notice includes the ground in section 151(4)(c) TCPA 1990 that the authority does not propose to purchase the whole hereditament or affected area of an agricultural unit and the claimant accepts that only the part specified is required then the blight notice shall apply to that part only.

7.3 Interest ceasing to have effect

Where the counter notice disclaims any intention by the appropriate authority to acquire the land the subject of the blight notice and either the counter notice is accepted by the claimant or upheld by the Upper Tribunal (Lands Chamber), any power of compulsory acquisition of the interest of the claimant in the hereditament or agricultural unit, conferred by a CPO or special enactment shall cease to have effect.

7.4 Reference to Upper Tribunal in dispute

Any dispute regarding the counter notice may be referred to the Upper Tribunal (Lands Chamber) for determination.

Blight Notices in Respect of Agricultural Units

8.1 Farmer served with notice to treat

Where a person is served with a notice to treat in respect of part of the farm that person may, under section 53(1) LCA 1973, serve a counter notice requiring the authority to purchase the whole of the agricultural unit. The test is whether what is left of the farm is capable, either on its own or with ‘other relevant land’, of being farmed as a separate agricultural unit.

8.2 Extension to blight cases

Section 158 TCPA 1990 extends this principle to blight cases. Where it is proposed to acquire part only of a farm and only that part (the affected area) falls within the specified descriptions contained in Schedule 13 TCPA 1990 (see paragraph 2.1 above), section 158 TCPA 1990 entitles the claimant to serve a blight notice in respect of the affected area and, in the circumstances described at paragraph 8.3 below, the remainder of the unit (the unaffected area).

8.3 Service of blight notice

A claimant whose interest comprises an agricultural unit of which part is, and part is not within the specified descriptions of blighted land, may serve on the authority under the provisions of section 158 TCPA 1990 a blight notice requiring purchase of the whole farm (or the whole of that part to which the notice relates). To be successful the notice must include the ground that the unaffected area is not reasonably capable of being farmed, either by itself or in conjunction with other relevant land, as a separate agricultural unit. Where the claimant’s interest is only in part of the agricultural unit, the whole of that part should be included (see paragraph 6.1 above).

8.4 Other relevant land

‘Other relevant land’ means land comprised in the remainder of the farm or land comprised in any other agricultural unit occupied by the claimant on the date of the service, being land in respect of which the claimant is entitled to an owner’s interest as defined in section 168 TCPA 1990 (see paragraph 8.1 above).

8.5 Claim made in blight notice not justified

Section 159 TCPA 1990 gives the authority the power to object by counter notice but the grounds must include that the claim, as to the inability to farm the unaffected area by itself, made in the blight notice is not justified. Valuers will therefore be required to report whether, in their opinion, the ‘unaffected area’ included in the notice is or is not reasonably capable of being farmed, either by itself or in conjunction with other relevant land.

8.6 Relevant test

The question of whether the ‘unaffected area’, together with other relevant land, is not reasonably capable of being farmed, should not be confused with the primary question in blight cases of whether a sale is possible except at a substantially reduced price. Before upholding an objection to the blight notice the Upper Tribunal must be satisfied that the unaffected area can be farmed by itself. If the Tribunal is satisfied in this respect and upholds the objection on these grounds only, then the blight notice becomes valid only in respect of the ‘affected’ area.

Although the earning capacity of the ‘unaffected area’ farmed in isolation may be reduced, this is only one facet of the wider practical test of whether the land is capable of being farmed. Land value changes are not a relevant matter. Each case will need to be considered on its merits and the advice of the PS Professional Guidance Team should be sought in difficult cases.

Basis of Compensation

9.1 Authority deemed to be authorised to acquire the interest

If a counter notice is not served, or if served is not upheld by the Upper Tribunal, the authority concerned is deemed to be authorised to acquire the interest the subject of the blight notice and to have served a notice to treat under the appropriate enactment in respect thereof. The date on which a notice to treat is deemed to be served is, in a case where an objection has been referred to the Tribunal, such date as the Tribunal may direct, and in any other case, the date of expiry of the period of two months from the date of service of the blight notice.

9.2 Assessment of Compensation

Compensation for the acquisition should be assessed in accordance with the provisions of the LCA 1961 including where appropriate compensation for severance and disturbance, except where the claimant has invoked section 158 TCPA 1990 successfully (see 8.2 above) requiring the authority to purchase the whole of his agricultural unit on the grounds of non-viability of the remainder, compensation for the remainder of the unit falls to be assessed on existing use value basis.

9.3 Compensation for disturbance

The assessment of compensation for disturbance should be approached on the footing that the deemed notice to treat has been served specifically for the acquisition of the land for the purpose of the scheme for which it will ultimately be required and the taking of the initiative by the occupier should be disregarded. This means that the normal rule, that loss or damage directly attributable to the compulsory purchase is compensatable, should be applied. It would therefore seem reasonable, for example, to resist a claim for removal costs by a claimant who is moving to another part of the country because of a change of job because such removal costs are not a consequence of the compulsory acquisition. In this respect the onus of proof for resisting a claim based on the claimant’s motives for moving rest with the acquiring authority (Campbell Douglas and Co Ltd v Hamilton DC [1983] 2 EGLR 183).

The claimant’s legal costs of sale are payable in planning blight cases whether or not disturbance is payable (section 23 CPA 1965).

Reasonable surveyor’s fees in connection with the negotiation of the compensation claim are payable in planning blight cases whether or not disturbance is payable as surveyor’s fees fall within the scope of ‘any other matter’ (not disturbance) in Rule (6) section 5 LCA 1961.

In the application of the basic principles to claims for total extinguishment of, or damage to, a business the availability of suitable alternative accommodation should not be disregarded, but no alternative property that is itself blighted should be regarded as a reasonable proposition unless it is abundantly clear that the interest being acquired offered no better prospect of continued occupation quite apart from the scheme than the suggested alternative.

In discretionary purchase cases it is likely that the appropriate authority will require the applicant to produce additional evidence to show that the applicant has a valid reason, other than the possibility of compulsory purchase at some future date, for wishing to sell immediately and that hardship will result if the applicant is unable to do so. In such cases a claim for compensation under all heads of Rule (6) may not be justified.

Other Remedies Open to the Claimant

10.1 Other remedies

A claimant who has been served with a counter-notice which indicates that the authority proposes to purchase only a part of the hereditament as specified in the counter-notice may seek, if the notice is not acceptable to the claimant, a remedy in the material detriment provisions of section 8 CPA 1965 or such similar provisions as are applied by the relevant Act under which the acquisition is to be made.