Land Compensation Manual Section 5: Costs and fees

Part 1: Legal costs

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

Acquisitions

5.1 General

Where a government department or a local or public authority is empowered to acquire land (whether by agreement or compulsorily) section 23 CPA 1965 generally applies, requiring the acquiring authority to pay the vendor’s legal costs of conveying land - including deducing title.

The costs incurred by a successful objector at a public inquiry are a separate matter and should not be included in either ‘compensation’ or ‘conveyancing costs’ when dealing with the assessment of a claim.

5.2 Wording of offer

Because of the statutory provision requiring the payment of the vendor’s legal costs of the conveyancing of the land being acquired, it is not essential that they be referred to as one of the terms of an offer or agreement. It is nevertheless normal practice to indicate that legal costs will be met by the acquiring authority in the correspondence leading up to settlement of terms of compensation and where this is done the phrase ‘proper legal costs of the vendor’ should be adopted. A requirement on the part of the vendor that their ‘reasonable legal costs’ be met should not be accepted in that whilst there might be some doubt as to what is reasonable there should be no doubt as to what is proper in view of the statutory provisions.

5.3 Solicitors’ charges

Solicitors’ charges are made in accordance with the Solicitors’ (Non-Contentious Business) Remuneration Order 2009 (SI 2009 No 1931) (as amended) which provides that the fee must be fair and reasonable having regard to all the circumstances of the case. In cases of acquisition by local authorities and Government Departments care must be taken that in any provisional agreement the wording in paragraph 5.2 is followed. What is ‘proper’ is a matter for agreement between solicitors having regard to the 2009 regulations.

5.4 Use by the vendor of the acquiring authority’s solicitor

If a vendor indicates to the valuer in the course of negotiations that the vendor does not propose to employ a solicitor but desires the acquiring authority’s solicitor to act on the vendor’s behalf, the valuer in furnishing the report of completed negotiations should state in the space provided for the name and address of solicitor that ‘the claimant does not propose to employ a solicitor’. The space on the form for solicitors’ costs will accordingly be left blank.

No attempt should be made to influence the claimant’s choice of solicitor.

5.5 Acquisition following the service of a blight notice

Where the purchase of the property follows the service of a blight notice under Pt VI TCPA 1990 the vendor is entitled to conveyancing costs under section 23 CPA 1965. Whilst the valuer should always recommend payment of the vendor’s legal costs in mandatory blight purchase cases the views of the acquiring authority should be ascertained regarding the payment of costs in discretionary purchase cases. If the authority were not prepared to pay legal costs in discretionary purchase cases, the valuer should ensure before opening negotiations that the authority had advised the vendor of that.

5.6 Acquisitions by agreement under section 26(2) LCA 1973 or section 246(2) Highways Act 1980

In the case of a purchase by agreement under the above provisions, the valuer should enquire whether the acquiring authority is prepared to pay the vendor’s legal costs.

Compensation costs

5.7 General

In addition to conveyancing costs payable under section 23 CPA 1965 other legal costs may be reasonably and necessarily incurred by a vendor in connection with the taking of land which are properly compensatable by the acquiring authority, eg costs payable to a solicitor for formulating or negotiating a settlement of a claim and those incurred in the purchase of an alternative property (‘Harvey’ costs) see Paragraph 5.9. These are payable by the acquiring authority under the heading of compensation for ‘disturbance or any other matter’ within the ambit of Rule (6) of section 5 LCA 1961. These costs are referred to as compensation costs and should be included by the valuer in arriving at the compensation figure payable so that in reporting provisionally agreed terms to the acquiring authority the recommendation to pay the vendor’s ‘proper legal costs’ will refer only to conveyancing costs payable in accordance with section 23 CPA 1965.

The acquiring authority should not be required to accept liability for costs incurred in obtaining apportionments of mortgages solely for advance payment purposes. Claims in respect of solicitors’ costs incurred in obtaining a discharge of a mortgage for advance payment purposes, where these fall to be borne by the acquiring authority under section 23 CPA 1965, will be dealt with by the authority’s solicitor at the completion stage.

Care should be taken to ensure as far as possible that the costs incurred in obtaining a discharge of a mortgage for advance payment purposes, the preliminary work in examining the nature of the claimant’s interest, the incidence of land charges and the like is not the subject of a recommendation for compensation costs when it is only part of the conveyancing work which has been done at an early stage. Any other kind of duplication, for example, work for which a surveyor’s fee is to be paid should also be avoided.

5.8 Solicitor’s incidental costs

Difficulties sometimes occur in dealing with minor legal expenses, eg solicitor’s costs in connection with the service of Notice to Treat and Notice to Enter and the preparation and submission of a claim for compensation. Whilst strictly such costs are not covered by section 23 CPA 1965 and should be included in the compensation settlement as compensation costs, in practice such costs are normally dealt with by the acquiring authority’s solicitor at the same time as conveyancing costs and as part of the ‘proper legal costs of the vendor’. This practice is clearly administratively more convenient and avoids the possibility of duplication which could occur if the valuer agreed and included such costs in the compensation settlement. In the circumstances valuers should continue to report cases on the assumption that such incidental legal costs are within the ambit of ‘the proper legal costs of the vendor’.

If an acquiring authority specifically requests that such incidental costs be included in the compensation settlement notwithstanding the normal practice of including them as part of the conveyancing costs, the valuer should proceed as requested giving details in the report of the work undertaken by the solicitors for which costs have been agreed and included in the compensation settlement and the amount of such costs.

5.9 ‘Harvey’ costs

In order to reach a settlement as to the compensation properly payable where a claimant who has been displaced has purchased alternative accommodation, the valuer will need to include (where appropriate) an agreed amount for legal costs properly incurred in obtaining such accommodation. Although competent to advise on the admissibility of such a claim the valuer should not become involved in negotiating the amount of the remuneration of solicitors or Counsel unless it is known that the acquiring authority wishes this to be done. If the valuer had any difficulty in settling the amount of such costs the case should be submitted through the normal channels to the acquiring authority’s solicitor.

5.10 Solicitor negotiating

Where a settlement of compensation has been agreed with the claimant’s solicitor, a note to this effect should be added to the report in order that the acquiring authority may take account of this when settling the amount of legal costs. In this case the valuer would not recommend payment of a separate surveyor’s fee.

If the valuer were requested by an acquiring authority to advise on the reasonableness of solicitors’ negotiating fees where a solicitor had negotiated a settlement of compensation, the valuer should bear in mind that the total fee payable to the solicitor should not exceed the fees that would have been payable had more than one professional person been involved, for example a solicitor and a surveyor.

5.11 Reports

Reports should differentiate clearly between ‘conveyancing’ costs and ‘compensation’ costs. The former should be reported in the space provided for legal costs and a note inserted therein drawing attention to there being also ‘compensation’ legal costs except where such compensation costs are limited to ‘Harvey’ expenses. Any sums agreed for compensation costs should be included in the total compensation and details of these items other than for ‘Harvey’ expenses should be given under ‘Remarks’ together with any agreed figures.

Disposals

5.12 Leases

Section 1 Costs of Leases Act 1958 states:

‘Notwithstanding any custom to the contrary, a party to a lease shall, unless the parties thereto agree otherwise in writing, be under no obligation to pay the whole or any part of any other party’s solicitor’s costs of the lease’.

If a valuer negotiates the taking of a lease on behalf of a Government Department or local authority and the question of the payment of the lessor’s legal costs is raised the valuer should refer the matter to the authority concerned, except where compulsory hiring powers are being exercised in which case the valuer’s recommendation should follow similar phraseology, suitably adapted, to that used in acquisition cases.

In the case of leases between two public authorities the valuer should leave the question to be settled by the authorities concerned.

5.13 Disposals by government departments

Where the disposal is by a department that relies solely upon the VOA for advice in its land transactions the valuer should provide as follows:

a) if the disposal were initiated by the department, each side would bear its own legal costs. However, if the disposal were to a public body and the consideration were very small, the vendor might be justified in requiring the purchaser to pay all the legal costs, and in such a case the valuer should recommend accordingly;

b) if the disposal arises out of a request made by the prospective purchaser irrespective of the nature of the purchaser or the amount of the consideration, the purchaser should be required to pay the disposing Department’s legal costs.

Disposals of surplus agricultural land to former owners are to be treated as falling within paragraph (a) above.

5.14 Where disposing departments do not rely wholly on VOA for advice

Where the disposal is by a department that does not rely wholly on the VOA for advice on estate and valuation matters the valuer should proceed in accordance with Paragraph 5.13 above unless specific instructions to the contrary have been received from the disposing Department.

5.15 Transfer between Exchequer departments

This instruction does not apply to transfers between Exchequer departments. In such cases the payment of legal costs does not arise.

Part 1 Land Compensation Act 1973

Section 3(5) of Part 1 of the Land Compensation Act 1973 provides for the payment of ‘….. any reasonable ….. legal expenses incurred by the claimant ….. for the purposes of the preparation and prosecution of the claim …..’. These are expressed as being ‘in addition to the compensation’. In many cases the claimant does not incur legal costs, although such costs may arise in connection with the mortgagee’s interest in the land. For example, under Section 10(1)(c) of the Act any compensation must be paid to the mortgagee, and if the compensation were sufficient to clear the mortgage the claimant would be entitled to the reimbursement of any legal costs reasonably incurred in connection with the redemption.

5.17-19 Reserved