Land Compensation Manual Section 6: Incidents affecting value

Incidents affecting value

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

Restrictive covenants and onerous conditions

6.1 Restrictive covenants

The valuer should obtain from acquiring authorities particulars of any restrictive covenants running with, or sought to be imposed by the vendor on, land to be purchased for public purposes. The valuer should ensure that the acquiring authority is aware of the broad effect of such restrictions on the compensation payable. Acceptance of liabilities may embarrass authorities in appropriating land to other public uses or in disposing of land surplus to their needs. Covenants running with land, which are registered as land charges and binding on a vendor, cannot be avoided, but it should be noted that authorities cannot be legally restrained from using such land for statutory purposes if compulsory powers have been exercised although, where such powers have not been exercised, there may be circumstances in which authorities could be so restrained. Where an injunction restraining the authority could not be obtained because the powers under which the land is being acquired prevent it, there arises a prima facie liability for payment of compensation to the injured party.

See also paragraph 6.17.

6.2 Undisclosed and new restrictions

Where it is disclosed during negotiations that the land is already subject to restrictions of which the acquiring authority may not be aware or where the vendor maintains a desire to impose a restrictive covenant, or other onerous condition, the valuer should furnish particulars to the authority and ask formally for its views. At the same time advice should be given on the broad effect upon the compensation payable. The negotiations should reflect the effect on value of such covenants and conditions as the authority is ready to accept and these should be specifically described in the report. Acceptance of covenants and conditions normally postulates a saving in monetary compensation.

6.3 Land acquired by CPO

Where the land subject to restrictive covenants is acquired by compulsory purchase under an enactment to which the Compulsory Purchase Act 1965 applies the provisions of section 10 thereof are available to any person who claims that the retained land (or any interest therein) has been injuriously affected by the execution of the works on the land acquired by the authority. All claims relating to compensation under section 10 Compulsory Purchase Act 1965 should be referred to the acquiring authority for confirmation of instructions.

6.4 Land acquired under Pt IX Housing Act 1985

On completion of purchase by a local authority of land purchased under Part IX Housing Act 1985 (clearance areas and such) all permanent rights of way, other rights or easements relating to the land are extinguished subject to payment of compensation in accordance with LCA 1961 to any person who suffers loss by the extinguishment (sections 294 to 295 HA 1985).

6.5 Land acquired by agreement - from 1 April 1974

From 1 April 1974 principal councils, parish councils and community councils were given powers to purchase land by agreement for the purposes of

(a) specific statutory functions, or

(b) the benefit, improvement or development of the area for which each council is responsible.

(sections 120 and 124 Local Government Act 1972).

Any of these authorities purchasing by agreement for the purposes laid down is enabled to disregard restrictive covenants affecting the land subject to payment of compensation having regard to the provisions of section 10 CPA 1965. Principal councils are Metropolitan Councils, District Councils, London Borough Councils and County Councils.

If however, purchase by agreement is proposed for a purpose not covered by LGA 1972 and the authority has doubt as to whether the powers under which it proposes to proceed over ride any restrictive covenant, the authority will doubtless consider first whether waiver of the restrictions can be obtained conveniently by agreement. Some authorities have powers under local Acts to suspend restrictions running with land which has already been purchased, or is proposed to be purchased, by agreement subject to payment of compensation to parties injured.

In considering whether any, and if so what, sum could reasonably be recommended in respect of such suspension or waiver by agreement, the valuer should have regard to the measure of compensation, if any, which would be payable by virtue of section 10 CPA 1965 if the land were being acquired compulsorily. In all such cases the valuer should keep in close touch with the acquiring authority since the decision on procedure rests with that authority. This does not preclude the valuer’s advising on the valuation aspects of the matter.

Where the desired end could not be achieved by such means the authority would have to consider what alternative steps should be taken to secure avoidance, discharge or modification of the restriction for example by use of compulsory purchase powers instead of purchase by agreement, or by procedure after acquisition under section 84 Law of Property Act 1925 as amended by section 28 LPA 1969 - see paragraph 6.10 below.

6.6 Land already held

Where an authority proposes to carry out works that would infringe an existing enforceable restrictive covenant on land that it has already acquired or appropriated, it has various powers available enabling works to proceed, depending on the circumstances (see paragraphs 6.7 to 6.9 below).

6.7 Statutory basis

The authority has powers to over ride a restriction provided the works are done in accordance with planning permission on land held for planning purposes (section 237 Town and Country Planning Act 1990). Compensation is payable and should be assessed in the same way as for injurious affection under sections 7 or 10 CPA 1965.

Under section 610 Housing Act 1985 the local housing authority or a person interested in any premises may apply to the county court where

(a) owing to changes in the character of the neighbourhood in which the premises are situated, they cannot readily be let as a single dwelling-house but could readily be let for occupation if converted into two or more dwelling-houses, or

(b) planning permission has been granted for the use of the premises as converted into two or more separate dwelling-houses instead of as a single dwelling-house

and the conversion is prohibited or restricted by the provisions of the lease of the premises or by a restrictive covenant affecting the premises, or otherwise.

The court may, after giving any person interested an opportunity of being heard, vary the terms of the lease or other instrument imposing the prohibition or restriction, subject to such conditions and upon such terms as the court may think just.

6.8 By agreement

Where no statutory powers are available the authority may seek to have the restriction modified or removed by agreement.

Upon request to negotiate terms for the waiver of a restriction by agreement the valuer should endeavour to reach a settlement on terms which can be recommended as reasonable in the circumstances, but the final decision lies with the authority who should be consulted before any provisional settlement is made.

6.9 Section 84 Law of Property Act 1925

The authority may make an application under section 84 LPA 1925 (as amended) (see paragraph 6.10).

6.10 Scope of relief

Section 84 Law of Property Act 1925 (LPA 1925) as amended by section 28 LPA 1969 enables the Upper Tribunal (Lands Chamber) to discharge or modify restrictive covenants with or without the payment of compensation. Section 84 as amended is set out in full in Schedule 3 LPA 1969.

Before discharging or modifying a restrictive covenant the Upper Tribunal has to be satisfied that:

(a) by reason of changes in the character of the property or the neighbourhood or other circumstances deemed material the restrictions ought to be deemed obsolete; or

(b) (i) the continued existence of the restriction would impede some reasonable user of the land for public or private purposes; and

(ii) the restrictive covenant either does not secure any valuable practical benefit to persons entitled to the benefit thereof or is contrary to the public interest; and

(iii) money will be an adequate compensation for the loss or disadvantage (if any) suffered by persons entitled to the benefit of the restriction and discharge or modification is granted; or

(c) the persons entitled to the benefit have agreed expressly or by implication to the discharge or modification, or

(d) the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.

The Upper Tribunal may award to the person entitled to the benefit of the restriction an amount under either but not both of the following heads to make up for

(i) any loss or disadvantage suffered in consequence of the discharge or modification, or

(ii) any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it.

6.11 Valuation factors

In valuing land subject to restrictive covenants, for the purpose of acquisition by agreement or disposal for development, the valuer should have regard to the following factors:

(a) the prospect of a successful application under section 84 LPA 1925 with the removal of the restriction being granted with an award of compensation (if any);

(b) the prospect that, on payment of a single premium, an insurance policy may be effected to indemnify the purchaser against claims for compensation or damages arising from breach of enforceable covenants.

6.12 Reservation of minerals

Where on a purchase of land by agreement by a Government Department a vendor is unwilling to convey minerals and reservation is acceptable to the Department concerned, the valuer should seek the vendor’s agreement to the reservation’s being based on the terms of the Mining Code (section 3 and Schedule 2 Acquisition of Land Act 1981).

6.13 Land purchased by agreement before 1 April 1974

An authority which holds an interest in land purchased by agreement before 1 April 1974 for a purpose for which that authority has powers to purchase land compulsorily, whether or not the land was purchased by that authority or another body, and

(a) if the interest were purchased by another body, after purchase it was transferred by an Act or an order under an Act, and

(b) although the provisions of the Lands Clauses Acts or CPA 1965 applied to the purchase, section 68 Lands Clauses Consolidation Act 1845 or section 10 CPA 1965 were not included

may in accordance with section 14 Local Government (Miscellaneous Provisions) Act 1976 make a resolution which when it comes into force will provide that section 68 LCCA 1845 or section 10 CPA 1965 shall apply to the original acquisition. When the appropriate Minister makes an order providing for the resolution to come into force the authority will be in a position similar to that in which it would have been had it purchased on or after 1 April 1974 (see paragraph 6.5) and may disregard restrictive covenants affecting the land subject to the payment of compensation having regard to the provisions of section 10 CPA 1965.

6.14 Effect of compensation already paid for planning control

The provisions relating to compensation arising out of planning control are set out in the T& CP Act 1990.

This section deals with the compensation payable on the acquisition of an interest in land that has been the subject of previous planning compensation.

When compensation arising out of planning control has been paid it will normally have been entered in the Land Charges Register in accordance with section 110 TCPA 1990 and should be revealed by the acquiring authority or the owner at an early stage negotiations.  

6.15 Schedule 3 Pt II development – section 15(4) LCA 1961

Where compensation has become payable in respect of development included in Pt II Schedule 3 TCPA 1990 following

(a) refusal of planning permission for such development; or

(b) grant of planning permission for such development, but subject to conditions; or

(c) an order requiring removal of any building or discontinuance of a use

before the date of notice to treat, then in in assessing the price payable for acquisition of an interest in the land, planning permission is not to be assumed for the Schedule 3 rights to which that compensation relates.

NB: For Compulsory Purchase Orders made or confirmed on or after 6 April 2012, sections 15(3) (which gave assumed permission for ‘Schedule 3’ rights) and section 15(4) (referred to immediately above) were effectively ‘written out’ of the LCA 1961 thus making the above provision redundant for acquisitions made under such later CPOs.

6.16 Planning restrictions - Pt IV TCPA 1990

If compensation has been paid in respect of a planning decision revoking or modifying a planning permission (Pt IV TCPA 1990) and the compensation or payment is registered against the land, then, wherever the estimate of market value is based upon the prospect of new development’s being carried out regard should be had (to the extent that the market would do so) to the possible recovery by the Secretary of State of the whole or part of any registered compensation or payment before the contemplated development could be carried out by virtue of the provisions of section 111 TCPA 1990.

Any such anticipated recovery payment should not be confused with a recovery payment arising out of the acquisition by virtue of the provisions of section 308 TCPA 1990 which is paid to the Secretary of State by the acquiring authority.

6.17 Section 106 TCPA 1990

Where land is to be acquired which is subject to a section 106 TCPA 1990 agreement care must be taken as to the effect of that agreement, ie does it impose a restriction on the use of the land and thus have a bearing on value? This point was well illustrated by the Court of Appeal decision in Abbey Homesteads (Developments) Ltd v Northamptonshire County Council [1992] 2 EGLR where it was held that the agreement ran with the land as a restrictive covenant.

Section 12 Land Compensation Act 1961

6.18 General

Section 12 LCA 1961 provides that where prior to the date of the notice to treat the land has been affected by a planning decision or order whereby the person would be entitled to claim planning compensation (irrespective of whether or not such a claim has been made prior to the date of notice to treat) then if no notice that compensation has become payable has been registered by the date of notice to treat, but such a notice is subsequently registered, the compensation on acquisition is to be assessed as if the planning compensation had been registered before the date of the notice to treat.

6.19 No claim made

Where at the time the valuer is required to negotiate for the acquisition of an interest in the land the subject of a planning decision or order, compensation in respect of which would fall to be registered in accordance with section 110 T& CPA 1990 and a claim for planning compensation has not been made, the procedure shown in paragraphs 6.20 to 6.23 should be adopted.

6.20 Time expired

If the time in which a claim for planning compensation could be made has already expired, it should be assumed that a late claim will not be admitted and section 12 LCA 1961 will not, therefore, apply. In arriving at the value of the interest to be acquired regard should be had to the existence of the planning decision or order.

6.21 Time not expired

If the time in which a claim for planning compensation could be made has not expired, the negotiations should not proceed until a claim is made, or the time for making such a claim has expired.

6.22 Claim made

Where the valuer is required to negotiate for the acquisition of an interest in land such as is referred to above and a claim for planning compensation has been made but not settled, the negotiations for acquisition should be conducted on the assumption that section 12 LCA 1961 and that the claim for planning compensation will be settled in due course. It will not be possible, however, to conclude negotiations unless or until the amount of planning compensation to be registered can be definitely established.

6.23 Withdrawal of claim

Negotiations must not proceed on the basis that the claimant will withdraw the claim for planning compensation and that compensation on acquisition will include the benefit of a right to make a fresh planning application and to receive appropriate compensation in the future if an adverse decision is made.

Landlord and Tenant Act 1954

6.24 General

Part II of the Landlord and Tenant Act 1954 (LTA 1954) (as amended by the LPA 1969 and the LCA 1973) contains provisions that give a tenant occupying business premises a right, subject to certain conditions and exceptions, to a new tenancy when the current tenancy ends.

6.25 Statutory provisions with regard to compensation for compulsory purchase

Section 47(2) LCA 1973 repealed section 39(1) LTA 1954 with the result that the continuation of the tenancy and the qualified right of the tenant to a renewal thereof under Pt II LTA 1954 should be taken into account in assessing the value of the landlord’s interest.

For acquisitions under a CPO authorised on or after 22 September 2017 section 47 LCA 1973 has been substituted by section 35 of the Neighbourhood Planning Act 2017 with a revised section 47 which is slightly more comprehensive in its terms.

6.26 Effect on value of the landlord’s interest

The effect of the original (or revised) section 47 LCA 1973 does not mean that it is to be assumed that the tenant would inevitably obtain a new tenancy but rather that in assessing the prospects of obtaining a new tenancy it is to be assumed that no purchase of any interest in the land has taken place or is proposed by an authority with compulsory powers. Any application for a new tenancy would still have to be regarded as open to the possibility of opposition from the landlord on any of the grounds in section 30 LTA 1954.

6.27 Landlord’s liability to pay compensation

Where the circumstances are such that the landlord would have been in a position to obtain possession under section 30 LTA 1954 regard should be had to the landlord’s obligation to pay the tenant compensation under section 37 LTA 1954 in certain circumstances.

6.28 Improvements by tenant

Section 34 LTA 1954 as amended by section1 LPA 1969 provides that improvements carried out by the tenant, should in certain circumstances, be disregarded in fixing rent. The relevance of these provisions should not be overlooked when acquiring landlords’ interests in leases due for early renewal.

6.29 Effect on value of tenant’s interest

The value of the tenant’s interest should also be assessed having regard to the continuation of the tenancy and the qualified right to a renewal thereof. Where the interest is for a ‘short term’ for the purposes of section 20 CPA 1965 see section 7 of this Manual.

6.30 Tenancies ‘contracted out’ of the LTA 1954

In Bishopsgate Space Management Ltd v London Underground Ltd [2004] 2 EGLR 175 the Lands Tribunal (President George Bartlett QC) determined that, as a matter of law, a claimant’s leasehold interest that had been ‘contracted out’ of the security of tenure provisions of the LTA 1954 must be valued as if it would be determined at the earliest date that a termination could have resulted under a landlord’s notice given on the date of entry. Thus it should be assumed that the landlord would have terminated the tenancy at the first opportunity, which in Bishopsgate was at a break clause.

However, for acquisitions under a CPO authorised on or after 22 September 2017 the revised section 47 LCA 1973 provides that regard must be had to the likelihood of the renewal or continuation of the tenancy, thus effectively overruling the Tribunal’s decision in Bishopsgate Space Management.

6.30 Revised section 47 LCA 1973

For compulsory acquisitions authorised on or after 22 September 2017 the revised section 47 provides that in relation to land subject to a business tenancy:

(1) This section applies where

(a) in pursuance of an enactment providing for the acquisition or taking of possession of land compulsorily an acquiring authority

(i) acquires the interest of the landlord in land subject to a tenancy, or

(ii) acquires the interest of the tenant in, or takes possession of, land subject to a tenancy, and

(b) before the authority acquired the interest or took possession of the land, the tenant under the tenancy was carrying on a trade or business on the land.

(2) The principles in subsections (3) and (4) are to be applied in assessing the compensation payable by the authority to the landlord or the tenant in respect of the acquisition of the interest in or the taking of possession of the land or, as the case may be, under section 121 of the Lands Clauses Consolidation Act 1845 or section 20 of the Compulsory Purchase Act 1965 (tenants from year to year and such).

(3) Regard must be had to

(a) the likelihood of the continuation or renewal of the tenancy,

(b) in the case of a tenancy to which Part 2 of the Landlord and Tenant Act 1954 (security of tenure for business tenants) applies, the right of the tenant to apply for the grant of a new tenancy,

(c) the total period for which the tenancy may reasonably have been expected to continue, including after any renewal, and

(d) the terms and conditions on which a tenancy may reasonably have been expected to be renewed or continued.

(4) It is to be assumed that neither the acquiring authority nor any other authority possessing compulsory purchase powers have acquired or propose to acquire any interest in the land.

Leasehold Reform

6.30 Leasehold Reform Act 1967

The Leasehold Reform Act 1967 confers on tenants of houses held on ‘long leases’ (granted for more than 21 years) the right to acquire the freehold or an extended lease. There are special provisions relating to properties having no rateable value that is leases granted after 1 April 1990.

The tenant must have been the tenant (that is leasehold owner) under a long tenancy for the last two years.

The Act has been substantially amended over the years, more recently by the Leasehold Reform, Housing and Urban Development Act 1993, the Housing Act 1996, the Commonhold and Leasehold Reform Act 2002 and the Housing and Regeneration Act 2008.

Previously houses had to fall within certain rateable value limits in order to qualify for enfranchisement or the grant of an extended lease. The rateable value limits have now been removed for enfranchisement although houses that had formerly been excluded due to their higher rateable value are subject to a different basis of valuation for enfranchisement.

6.31 Leasehold Reform, Housing and Urban Development Act 1993

This Act confers on qualifying tenants of self-contained blocks of flats the right collectively to acquire the freehold. Qualifying tenants are those holding their flat under a ‘long lease’ and two thirds of the tenants must thus qualify.

The notice to enfranchise must be served on the freeholder by a number of qualifying tenants of flats contained in the premises as at the relevant date which is not less than one-half of the total number of flats so contained.

The method of calculation of the purchase of the freehold is set out in Schedule 6 to the Act and provides for the freeholder to receive 50% of any marriage value where the unexpired terms of the leases do not exceed eighty years, otherwise it is taken to be nil.

The Act also gives an individual qualifying tenant of a flat the right to acquire an extended lease of their flat for a 90 year term at a peppercorn rent commencing at the expiry date of their current lease. The tenant must have owned the flat for the last two years. The right is perpetual in that a further 90 year extension of the ‘new’ lease may be applied at any time. The method of calculation of the premium for the grant of the new lease is set out in Schedule 13 to the Act and again provides for the freeholder to receive 50% of any marriage value if the unexpired term does not exceed 80 years.

6.32 Effect of Notice to Treat on tenant’s notice

Where a tenant gives notice to his landlord of his desire to have the freehold or an extended lease, the provisions of section 5(6) LRA 1967 and sections 30 and 55 LRHUD Act 1993 cause that notice to be ineffective if, before the completion of a conveyance in pursuance of that notice, notice to treat or has been served on either landlord or tenant. Nevertheless, provided the tenant’s notice is served on his landlord before the valuation date (see section 2 of this Manual) the compensation payable in respect of any interest in the house is to be determined subject to and with the benefit of the rights and obligations arising from the tenant’s notice as if that notice were effective.

6.33 No notice served by tenant or period of ownership less than required at date of Notice to Treat

The precise position in cases where the tenant has either not served a notice, although qualified, or has not completed the length of ownership requirement and but for the scheme might have done so, is not clear.

It is considered that the provisions outlined in paragraph 6.32 do not apply in these cases and valuers should proceed accordingly. In any case where the claimant contends that the benefit of the Act should be reflected even though no positive steps have been taken should be referred to the PS Professional Guidance team before proceeding further with negotiations.

6.34 Retention or resumption of land required for public purposes

The effect, broadly, of section 28 LRA 1967 is to enable certain public authorities that are landlords to resist enfranchisement or extension of the lease in a house comprised in a property where a Minister of the Crown certifies that the property will within ten years be required for ‘relevant development’ as defined in section 28(6).

A list of the authorities to which the section applies is given in section 28(5) LRA 1967 and the Secretary of State may extend it to other authorities.

Where a Certificate under section 28(1) is given, a notice served under LRA 1967 by a tenant of such a house desiring to have the freehold or an extended lease will have no effect.

Where the tenancy has not been extended under the LRA 1967 but the tenant is entitled to acquire the freehold or an extended lease, section 28(1)(b) provides in certain circumstances for the landlord’s over riding rights under section 17 to apply as if the tenancy had been extended. Section 28(2) provides that where by virtue of section 28(1)(b) a tenancy of any property is to be treated as having been extended, then as regards that property the tenancy shall not terminate either by effluxion of time or in pursuance of any notice given by the landlord or the tenant or by the termination of a superior tenancy. One effect of section 17 is to entitle the tenant to compensation in accordance with Schedule 2 when an order is made by the Court under section 17(2) entitling the landlord to possession of the house. The compensation is broadly the market value of the leasehold interest as though it had been extended by the provisions of the LRA 1967.

It is not expected that a certificate under section 28(1) will be given in respect of a house occupied by a leaseholder who has not owned it long enough to become entitled under LRA 1967, since the effect of a certificate will be to deprive the tenant of any chance of becoming so entitled, even though the lease still has enough time to run to enable him to complete two year’s ownership. If the valuer is called upon to advise in a case where a certificate has, nevertheless, been given in such circumstances and the matter is relevant to the valuation, particulars should be submitted to the PS Professional Guidance team so that the appropriate Government Department may be consulted.

6.35 Application to the Crown as landlords

The enfranchisement provisions of the LRA 1967 and the LRHUDA 1993 do not generally apply to land held by the Crown (which for this purpose includes the Crown Estate Commissioners, the Duchy of Lancaster, the Duchy of Cornwall and government departments). However, it is the Government’s intention that the Crown should act in any particular case as if those Acts did apply. Crown land for these purposes includes properties held by Government Departments.

Enfranchisement (although not necessarily the grant of extended leases) would be refused where the property is held inalienably, where there are particular security considerations, where the property is in or intimately connected with the curtilage of historic Royal Parks and Palaces, or where the properties or the areas in which they are situated have a long historic or particular association with the Crown. In these circumstances, where the tenant would otherwise be qualified to enfranchise, a new or extended lease would be granted.

The Crown will follow the valuation bases set out in the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993.

In cases of dispute, the First-tier Tribunal will be empowered to act as arbitrator on voluntary reference.

Where the question of whether or not enfranchisement would be permitted in relation to Crown land has not been decided and is pertinent to the valuation, reference should be made to the PS Professional Guidance team so that the appropriate Department may be consulted.

Family Law Act 1996

6.36 Family Law Act 1996 (as amended)

The Family Law Act 1996 (FLA 1996) provides, inter alia, that where one spouse or civil partner is entitled to occupy a dwelling house by virtue of any beneficial estate or interest or contract, or any enactment giving the right to remain in occupation, they will be given, if in occupation, the right not to be evicted, or if not in occupation, a right (with leave of the Court) to enter into and occupy the dwelling house.

This right does not apply to a dwelling house that has not been or has never been intended to be a matrimonial or civil partnership home.

A spouse or civil partner who has only an equitable interest in such a dwelling house or in the proceeds of sale thereof is to be treated, for the purpose only of determining whether he or she has rights of occupation, as not being entitled to occupy by virtue of that interest.

Either party may apply to the Court to declare, enforce, restrict or terminate the rights of the other. The Court may exclude one spouse or civil partner totally from certain parts of the house, particularly any part used for trade or business and also order one spouse or civil partner to make payments to the other and impose obligations as to repair and maintenance between the parties.

Where one spouse or civil partner is entitled to occupy the house by reason of an estate or interest and the other is not, the other’s ‘rights of occupation’ may be registered as a charge on the property and when registered the rights are to be treated as ranking in priority as an equitable interest created at the latest of the following dates:

(a) the date the interest in the property was acquired;

(b) the date of the marriage or civil partnership;

(c) 1 January 1968 (the date of commencement of the Matrimonial Homes Act 1967).

(The question whether the charge can secure priority if it is not registered as a land charge is not free from doubt but the above interpretation should be adopted).

The ‘rights of occupation’ will terminate on the ending of the marriage or civil partnership (by death or otherwise) unless in any prior proceedings the Court has directed otherwise. The spouse or civil partner entitled to the ‘rights of occupation’ may release or modify his or her rights by a release in writing, and if the house is sold with vacant possession the FLA 1996 provides that it is an implied term of the contract that the vendor will at his or her expense, procure the cancellation of any registration of the charge.

Although the matter is not free from doubt, it is arguable that the spouse or civil partner entitled to rights of occupation under the FLA 1996 is a person within the meaning of ‘persons interested in ….. land’ for the purposes of section 5 CPA 1965 and is entitled to receive separate notice to treat and notice of entry.

As it is unlikely to be to their financial benefit to proceed otherwise, it is expected that usually the parties will take advantage of the provisions of the FLA 1996 to enable the vendor to sell the interest which is subject to the charge with vacant possession, notwithstanding that separate notices to treat may have been served. Therefore, where the acquisition is in respect of an interest in a matrimonial home and the vendor offers to sell the interest with vacant possession, the presumption should be that the vendor will obtain release from any ‘rights of occupation’. If a notice to treat has been served and the price has been agreed the contract which is deemed to arise may be regarded as having the benefit of the implied term and the vendor will procure the cancellation of the registration of any land charge. If the rights are not registered there is nothing that the vendor need do, but an authority might take the precaution of obtaining the other party’s release of their rights of occupation.

In either of the circumstances mentioned in the preceding paragraph the husband and wife or civil partners should be regarded as a single entity for the purpose of assessing compensation for disturbance.  

Where only part of the matrimonial home for example part of the garden, is being acquired with vacant possession, the valuer should assume, for the purposes of assessing the compensation payable for injurious affection and severance, that the parties would so arrange their affairs within the provisions of the FLA 1996 in respect of the remaining land to their financial advantage.

If the vendor informs the valuer that he or she is unable to offer the interest with vacant possession because of the right of occupation, or a separate claim for compensation is received from the other spouse, and the aggregated value of the separate interests falls short of the vacant possession value of the vendor’s interest, the valuer should not hesitate to draw the attention of the parties to the disadvantage of not proceeding to a sale with vacant possession. If the parties nevertheless desire their respective interests to be separately assessed, the valuer should obtain particulars of each party’s claim and submit with full details to the PS Professional Guidance team for instructions.

Land Compensation Act 1973

6.37 Rehousing

Where a house that is compulsorily acquired is the subject of certain orders, improvement notices or undertakings under the Housing Acts or (having been previously acquired by an authority) is required for redevelopment or improvement, the displaced occupier has the right to be rehoused subject to the provisions of section 39 LCA 1973.

A person shall not be treated as displaced in consequence of the carrying out of any improvement to a house or building unless he is permanently displaced from the residential accommodation in question in consequence of the carrying out of that improvement.

There is no right to be rehoused if the acquisition were in pursuance of a ‘blight’ notice; if the occupier had been permitted to occupy the house pending its demolition; if the occupier were a trespasser; if the occupier were being provided with a mortgage under section 41 LCA 1973, the Small Dwellings Acquisition Acts, the Housing (Financial Provisions) Act 1958 or by a New Town authority for the purpose of enabling the occupier to obtain alternative accommodation; if suitable alternative accommodation were available on reasonable terms; or if the occupier were not in residence at the appropriate date as specified in section 39(6) LCA 1973.

The authority responsible for the rehousing is the local housing authority, whether or not it is also the acquiring authority. Special rules apply in New Towns - see section 39(8) LCA 1973.

6.38 Caravan dwellers

The rehousing provisions of LCA 1973 apply, mutatis mutandis, to the displaced occupier of a residential caravan site, but not if there is alternative residential accommodation or an alternative site for stationing the caravan available on reasonable terms (see section 40 LCA 1973).

6.38 Effect of rehousing on value

(a) Rehousing of tenants as part of the authority’s scheme will not enable a landlord to claim value based on vacant possession (section 59(2) LCA 1973).

(b) The compensation payable in respect of the acquisition of an interest in land is not to be reduced on the grounds that the person entitled to the compensation is to be offered accommodation (section 50(1) LCA 1973).

(c) Where, without any initiative by the local authority, an owner occupier of a dwelling offers to sell it to the authority making it a condition of the sale that the authority undertakes to rehouse the vendor in council property, the valuer should value or negotiate on whatever figure is equitable in the particular case, subject to a maximum limit of vacant possession value.

Before adopting this course of action the valuer should be satisfied that it is not the intention of the authority to exercise compulsory powers in the event of failure to buy by agreement.