Land Compensation Manual Section 9: Slum clearance and associated procedures

Slum clearance and associated procedures

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

Introduction

9.0 Note

The slum clearance procedures with related compulsory purchase special provisions as originally set out in Schedule 2 Land Compensation Act 1961 and Parts IX and XVII Housing Act 1985 with Schedules 23 and 24 thereof, prior to the abolition of the site value basis by Schedule 9 of the Local Government and Housing Act 1989 (LGHA 1989), continue to apply in respect of all orders made before 1 April 1990.

Similarly compensation payable in cases of closing and demolition orders made prior to 1 April 1990 on individual properties vacated in pursuance thereof continues to be dealt with as originally enacted. These transitional arrangements are made by the Local Government and Housing Act 1989 (Commencement No.5 and Transitional Provisions) Order 1990 (SI 1990 No.431).

Accordingly where orders have been made before 1 April 1990 the existing instructions set out in paragraphs 9.1-9.25 below continue to apply. For orders made on or after 1 April 1990 refer to paragraphs 9.27 et seq.

Special provisions as to compensation in slum clearance schemes where orders made before 1 April 1990

9.1 General

In addition to the normal provisions for statutory compensation (see Sections 2 and 3 of this Manual) special provisions relating to slum clearance schemes are to be found in the following Acts:

  • Housing Act 1985: sections 192, 300, 302, 585(1 to 3), 599(2), 590(1 to 3, 6), 592(1 to 3, 5), 593 to 595, 622 and Schedules 11, 22, 23 and 24

  • Land Compensation Act 1961 (Schedule 2) and Land Compensation Act 1973 (sections 29 and 37).

9.2 Clearance areas

Special provisions are made in sections 579(2) and 585 HA 1985 relating to:

(a) land in a clearance area (other than that referred to in sub-para (b) below) usually shown coloured pink on the map referred to in the Compulsory Purchase Order (see paragraph 9.4);

(b) land included in a clearance area only on account of bad arrangement, narrowness of streets and such usually shown coloured pink hatched yellow on the map referred to in the CPO (see paragraph 9.11);

(c) other land, not included in the clearance area but acquired in connection therewith, usually shown coloured grey on the map referred to in the CPO (see paragraph 9.12).

It should be noted that although the colourings on the CPO map referred to in (a) to (c) above are contained in The Housing (Prescribed Forms) Regulations 1972 (SI 1972 No 228) and are normally used, the use of those colours is not mandatory and reference should always be made to the wording of the relevant CPO.

9.3 Interest created or building erected after the publication of the order of purchase

Section 598 HA 1985 provides that section 4 of the Acquisition of Land Act 1981 (disregard of things done to obtain increased compensation) applies in relation to the compulsory purchase of land for clearance.

Basis of compensation for unfit houses

9.4 Acquisitions

Where houses that are statutorily unfit for human habitation are acquired under section 192 HA 1985 (unfit and beyond repair at reasonable expense) sections 300 and 303(b) HA 1985 (unfit, but capable of providing accommodation of a standard that is adequate for the time being) or section 279 HA 1957 (comprised in a clearance area), compensation is assessed in accordance with sections 585(1 to 3) and 622 HA 1985, that is ‘ … the value at the time when the valuation is made of the site as a cleared site available for development in accordance with the requirements of the building regulations in force in the district’.

Compensation on this basis is subject to ‘ceiling’ and ‘floor’ provisions (see paragraphs 9.8 and 9.9 below).

This basis may also apply where unfit houses are acquired under other statutes (see paragraph 9.10 below).

9.5 Additional heads of claim

In addition to site value, in appropriate cases the claimant may be entitled to:

(i) a well-maintained payment (WMP) under Schedule 23 HA 1985 (see paragraph 9.14); or

(ii) a supplementary payment, to owner-occupiers and others, under Schedule 24 HA 1985 (see paragraphs 9.15 to 9.22); plus

(iii) a home loss payment under LCA 1973 (see Section 13);

(iv) a disturbance payment under section 37 LCA 1973, if not entitled to disturbance under any other enactment (see Section 4).

9.6 Demolition and closing orders (Pt IX HA 1985)

Where a house is subject to a demolition or closing order so that no interest in land is acquired, compensation may nevertheless be payable in respect of the heads of claim referred to in paragraph 9.5 above.

9.7 Interpretation

The following definitions and explanations should be followed:

Date of valuation

The words ‘the value at the time the valuation is made’ do not imply any departure from the principle of making the valuation as at the date possession is taken of the land, or if compensation is assessed before possession is taken, the date the compensation is agreed or determined.

Unit of interest

For the purpose of compensation the unit is that of contiguous ownership and the interest that of the claimant, any covenants between lessors and lessees being regarded as subsisting. Security dependent on the existence of buildings must, however, be ignored.

Surrounding condition

The effect of actual or prospective development, which includes clearance, on the land in the CPO or which would have been included in that order were it not being acquired by agreement, should be disregarded to the extent provided by section 6 LCA 1961 or the Pointe Gourde principle. Each individual interest should be valued on the footing that all other buildings on that land at the time when the clearance area was declared are still standing, except insofar as such buildings have actually been demolished otherwise than as a consequence of the order or allied purchases by agreement, or might have been so demolished. The effect of prospective clearance of the land in, or purchased in association with, the order on the value of the claimant’s interest should be taken into account only to the extent that it might have been cleared had the acquiring authority not acquired and did not propose to acquire any of that land. The possibility that other property not included in the CPO or allied purchases might become subject to clearance either by the authority or by other developers in the absence of the scheme can also be taken into account.

Marriage value

Increased value attributable to the possible marriage of sites in different ownerships should be reflected only where, and to the extent that, the market would expect the marriage to occur in the ‘no-scheme’ world.

Cleared site

A ‘cleared site’ should be assumed to mean that the buildings have been pulled down to ground level but with all necessary retaining walls remaining.

Severance

Section 585(1) HA 1985 does not preclude compensation being paid for injury to other lands held with that acquired unless such injury is dependent upon the existence of buildings on the land acquired (see section 3 of this Manual).

Disturbance payments under section 37 LCA 1973

Section 37 LCA 1973 provides for entitlement to disturbance payments for persons who either have no interest in the land or have an interest but (not qualifying for supplementary compensation) would not receive compensation for disturbance as this would be inappropriate where the land is to be valued as a site cleared of buildings (see section 4 of this Manual).

Building regulations

‘Building Regulations’ means regulations made under Part 1 Building Act 1984, new street bye-laws under Part X Highways Act 1980 and any provision of a local Act or bye-law dealing with the construction and drainage of new buildings and the laying out and construction of new streets.

9.8 ‘Ceiling’ provisions

Para 1 Schedule 2 LCA 1961 provides, subject to the minimum compensation in certain owner-occupied cases (see paragraph 9.9 below), that the compensation payable in respect of an interest in an unfit house shall not exceed the compensation that would have been payable under all heads of claim on a compulsory purchase of the interest in the house disregarding the clearance area and the provisions relating to purchase at site value.

The object of the provisions is to ensure that an owner does not receive more than he would have received had the house not been declared ‘unfit’. Regard should be had both to any potentialities which the land may possess and to any disabilities to which it is subject. The possibility that the house could be the subject of slum clearance action in the future should not be disregarded.

9.9 Owner-occupied minimum compensation (‘floor’ provisions)

Where an owner-occupier was in occupation of the whole or part of a house as a private dwelling at the date of the making of the CPO giving rise to the acquisition, and the compensation falls to be assessed on the basis of site value, Part 3 Schedule 2 LCA 1961 provides that the compensation payable shall not be less than the Gross Value of such house or part of such house so occupied. The compensation to be compared with the Gross Value relates to the whole of the interest being acquired, not only the part which is the resident owner-occupier’s private dwelling and is to include any WMP (see paragraph 9.14) or supplementary payment under Pt 1 Schedule 24 HA 1985 (see paragraphs 9.15-22) paid to that owner in respect of that house but any compensation that is attributable to disturbance, Home Loss Payment, severance or injurious affection should be excluded. The term ‘owner-occupied’ will include any occupier who is entitled to receive Notice to Treat.

The Gross Value is that shown in the Valuation List in force at the date of Notice to Treat and where the dwelling is only part of the house for which a Gross Value is shown in the Valuation List, provision is made for the Valuation Officer (VO) to provide a certificate as to the proportion of the Gross Value of the whole house which is properly attributable to the dwelling. There is no provision for an appeal against the amount of the VO’s apportionment. Where the VOA is negotiating it is to be expected that negotiations would be pursued without requiring the issue of a certificate of apportionment. If, exceptionally, a formal certificate is considered desirable, or either the acquiring authority or the claimant applies for one, section 589(3)(b) provides that ‘if the dwelling is only part of the house, its gross value is the amount certified by the district valuer as being properly attributable to the dwelling on an apportionment of the gross value of the house….’. Since these provisions are now almost entirely historic any request for an apportionment should initially be referred to the PS Professional Guidance team.

9.10 Site value under other statutes (Schedule 2 LCA 1961)

In addition to the cases referred to in paragraph 9.4 above, compulsory acquisitions at site value may be effected under other statutory provisions where an order has been confirmed declaring a house to be unfit for human habitation and incapable at reasonable expense of being rendered fit.

Such acquisitions are those falling within Schedule 2 LCA 1961, as substituted by the Housing (Consequential Provisions) Act 1985:

(a) under section 6 Town Development Act 1952;

(b) under Part VI TCPA 1971;

(c) under Part IX TCPA 1971;

(d) under the new towns code within the meaning of the Development of Rural Wales Act 1976;

(e) by the Land Authority for Wales under section 104 Local Government, Planning and Land Act 1980;

(f) by means of an order under section 141 LGPLA 1980 vesting land in urban development corporation;

(g) by acquisition by such a corporation under section 142 LGPLA 1980;

(h) an acquisition of land within the area designated by an order under section 1 New Towns Act 1981 as the site of a new town;

(i) an acquisition by a development corporation or local highway authority or the Secretary of State under the New Towns Act 1981 or under any enactment as applied by any provision of that Act;

(j) an acquisition under the provisions of Part VIII HA 1985 relating to the general improvement areas.

The ‘ceiling’ (see paragraph 9.8) and ’floor’ (see paragraph 9.9) provisions apply to these acquisitions.

Basis of compensation for fit houses

9.11 Land included in a clearance area only on account of bad arrangement and such

Where land is included in a clearance area only on account of bad arrangement in relation to other buildings, or narrowness or bad arrangement of streets (normally shown coloured pink hatched yellow on the map referred to in the CPO (but see paragraph 9.2) the proviso to section 585(2) HA 1985 operates so that the cleared site basis does not apply and the compensation is to be assessed having regard to normal statutory compensation provisions. Where, however, the property comprises a building constructed or adapted as or for the purposes of a dwelling, or partly for those purposes and partly for other purposes, and a part thereof (not being a part used for other purposes) is unfit by reason of disrepair or sanitary defects, compensation is assessed on the cleared site basis.

9.12 Land outside a clearance area but to be acquired therewith

Where land is not included in a clearance area but is to be acquired therewith to secure a site satisfactory for redevelopment purposes, normally shown coloured grey on the map (but see paragraph 9.2) the compensation payable is to be assessed having regard to normal statutory compensation provisions.

Improvement Notices

9.13 General

The basis of compensation referred to at paragraph 9.4 ceases to apply where an authority has served an improvement notice under Part VII HA 1985 and the person having control has served a counter-notice under section 227 HA 1985 requiring purchase. In these circumstances the acquisition is authorised under Part II (Provision of Housing) HA 1985.

Well-maintained payment

9.14 ‘Ceiling’

The amount of a Well-maintained Payment (WMP) is limited by the proviso to paragraph 4(1) Schedule 23 HA 1985. The basis of valuation is that the amount of the WMP shall not exceed a sum equal to the excess of:

(a) the full value of the house, over

(b) the site value thereof.

The following definitions and explanations should be followed:

‘Full value of the house’ means the aggregate of the amounts of compensation which would have been payable on a compulsory acquisition of the various interests under CPA 1965 if the house had been purchased compulsorily without first being declared unfit. Compensation for disturbance to which there would be statutory entitlement should be included but any Home Loss Payment should be excluded.

‘Site value thereof’ should be the aggregate of the compensation payable in respect of the various interests ascertained in accordance with paragraph 9.4 excluding any home loss payment. In cases where the value of a number of adjacent sites in one ownership exceeds the aggregate value of those sites were they assessed individually and in isolation, the amount attributable to any site should be the amount that it contributes to the actual compensation paid.

In demolition and closing order cases it is necessary to assume a notional CPO. This should be taken to be limited to the site that is the subject of the well-maintained award.

Supplementary payments to owner-occupiers and others

9.15 General

Schedule 24 HA 1985 provides that in certain circumstances the authority concerned shall make payments to owner-occupiers and others who are displaced from unfit houses. Payments may arise in respect of houses that are subject to a demolition or closing order or are included in a clearance area and fall to be purchased at site value or are purchased at site value by virtue of an unfitness order made under Schedule 2 LCA 1961 (see paragraph 9.10 above) or fall within sections 289 to 300 HA 1985.

9.16 Entitlement to payment

An owner of an interest greater than a minor interest, or a statutory tenancy, in an unfit house is entitled to a supplementary payment in respect of the interest where:

(i) the house is vacated in pursuance of a repair notice, demolition order, closing order, unfitness order (Schedule 2 LCA 1961) or clearance area or purchased under section 300 HA 1985 (condemned house for temporary housing use) or section 264 HA 1985 (in pursuance of an undertaking to demolish) or purchased at site value; and

(ii) on the relevant date and throughout the qualifying period the house was wholly or partly occupied as a private dwelling and the person so occupying it (or, if during that period it was so occupied by two or more persons in succession, each of those persons) was a person entitled to an interest in that house or a member of the family of a person so entitled.

Relevant date is in the case of:

Repair Notices - date the notice was served (section 192 HA 1985);

Demolition and Closing Orders - the date the order was made;

Undertaking to demolish - date the undertaking was given (section 264 HA 1985);

Clearance Area - date the area was declared (section 289 HA 1985);

Condemned house for temporary housing use - date the notice was served (section 300 HA 1985).

‘Family’ in relation to any person means the husband or wife of that person and the children or children-in-law (including adopted, step or illegitimate children) or parents of either spouse.

The ‘qualifying period’ is the period of two years ending with the relevant date. If an owner-occupier is absent from home because of conditions of service in the armed forces, or because of change in place of employment during part of the qualifying period amounting in total to a year or less, the absence is to be disregarded.

9.17 Hardship cases (paragraph 2(2) Schedule 24 HA 1985)

Owners of an interest in an unfit house purchased by them, or a member of their family, less than two years before the relevant date are not usually entitled to a supplementary payment.

However, if the owners would have been so entitled if the qualifying period had been the period beginning with the date of the purchase by them or a member of their family and ending with the relevant date and the authority is satisfied that before that purchase all reasonable enquiries had been made and the purchaser had no reason to believe it was likely that slum clearance action would commence within a period of two years, the authority will make a supplementary payment.

Where the valuer is negotiating the compensation payable in respect of an unfit house and becomes aware that owners of an interest in the house might be entitled to a payment under the provisions of paragraph 2(2) of Schedule 24 the valuer should, before accepting an entitlement, obtain from the authority written confirmation that they are satisfied that all reasonable enquiries had been made and the owners or the member of their family who purchased the house had no reason to believe it likely that slum clearance action could commence within a period of two years.

9.18 Business premises

The person entitled to the receipts of a business (which expression excludes the letting of lodgings) conducted in an unfit house purchased at site value in pursuance of a CPO (section 585 HA 1985) or vacated following the making of a demolition or closing order, is entitled to a payment under Part II Schedule 24 HA 1985 in respect of the interest in the business premises, provided the interest is greater than a minor interest or statutory tenancy, and that the house or part thereof has been occupied at all times for business purposes during the two years preceding the date of the order.

9.19 Occupation before 13 December 1955

Paragraph 3 Part 1 and paragraph 3 Part II Schedule 24 HA 1985 make special provision for houses and houses used for business premises that would not normally qualify for a payment, but were occupied at the relevant date and 13 December 1955. Any cases of difficulty should be referred to the PS Professional Guidance team.

9.20 Amount of supplementary payment

Where under the provisions of Part 1 Schedule 24 HA 1985 a person qualifies for a supplementary payment the amount of that payment is a sum equal to the excess of:

(a) the full compulsory purchase value of the interest ascertained in accordance with paragraph 9.12, over;

(b) the amount that was or would have been payable in respect of that interest in connection with the compulsory purchase of the house at site value ascertained in accordance with paragraph 9.4 but excluding any Home Loss Payment and WMP.

Full compulsory purchase value will not only have regard to the mode of occupation subsisting at the qualifying date (see paragraph 9.21) but will also have regard to any inferior interests (for example tenancies, tenancies-at-will, licences, squatters and such) that may have been created since the owner qualified for a supplementary payment but before Notice to Treat.

The value may therefore be based on vacant possession value, tenanted value or a combination of the two. It will, in appropriate cases, include compensation for disturbance (including trade disturbance). In the case of a demolition or closing order the date of the order is to be assumed to be the date of the hypothetical Notice to Treat.

In appropriate cases this supplementary payment may be reduced as indicated in paragraph 9.22 below.

9.21 Partial occupation by a qualifying owner

A full owner-occupier supplement is payable not only where the whole house is occupied during the qualifying period by the person entitled to an interest (or a member of their family) but also where only part is so occupied, provided that in the latter case the remainder is occupied for the purpose of a private dwelling.

Changes in the mode of occupation subsequent to qualification will not affect an owner’s right to an established claim although the amount of that claim may be affected (see paragraph 9.20).

9.22 Part of house occupied as a private dwelling - disputes

(a) The supplements are payable only in respect of such parts of the houses as are occupied at the date of the making of the order for the purposes of a private dwelling or the purposes of the business respectively. Any dispute as to the purpose for which any part of a house is occupied will be determined by the Secretary of State.

(b) Where a supplementary payment falls to be made as to part only of a house the sum arrived at under paragraph 9.20 is to be apportioned on the basis of what is reasonable. For this purpose it is anticipated that in normal cases and provided there is no premium in vacant possession, this result can best be obtained by apportioning this sum, less disturbance, in the same proportion as the net rental value of the separate parts of the property, as it existed, bear to the aggregate net rental value of the whole. In the absence of actual rents rental values should be estimated. The appropriate amount payable for disturbance should be added to the resultant figures. If facilities are jointly used (for example washing facilities) then, in arriving at the value of each portion, account must be taken of the availability of these facilities but duplication should be avoided.

The valuer should make arrangements with the authorities to ensure that there is sufficient description and evidence of condition of these properties at the date upon which they are vacated available to substantiate the opinion of value.

Repayment of supplementary payments and well maintained payments

9.23 General

Section 590 HA 1985 provides in certain circumstances for repayment of WMPs and owner-occupier’s supplementary payments on revocation of a demolition order or determination of a closing order.

9.24 Part repayment

Section 590(3) HA 1985 provides that where any person who has received a payment in respect of premises under either Schedule 23 or 24 HA 1985 and would have been liable to make repayment on determination of the demolition order or closing order and the order is determined in respect of part only of the premises then on demand that person shall repay to the authority the appropriate fraction of that payment.

9.25 Appropriate fraction

The appropriate fraction referred to in paragraph 9.24 above is governed by alternative provisions:

(a) if the payment was not reduced by any amount attributed to part of the premises not occupied as a private dwelling (paragraph 4(3) Part 1 Schedule 24) the appropriate fraction is the rateable value of the part in respect of which the order has been determined over the rateable value of the whole, both rateable values being at the date when the order was made;

(b) if the payment was reduced because part of the premises was not occupied as a private dwelling the appropriate fraction is the rateable value of the part in respect of which the closing order has been determined over the rateable value of that part used as a private dwelling, both values being at the date when the reduction was made (that is date of order or undertaking);

(c) the rateable values in paras (a) and (b) above are to be determined in accordance with section 590(6) HA 1985.

Note: Orders or undertakings will have been made before the repeal of the General Rate Act 1967 on 1 April 1990 so that the relevant rateable values are available.

Discretionary payments (before and after 1 April 1990)

9.26 Retail shops affected by clearance area

Where no land is taken and an acquiring authority proposes to make a discretionary payment under section 596 HA 1985, in estimating the loss regard shall be had to the probable future development of the locality.

Slum clearance compensation where orders made on or after 1 April 1990

9.27 Abolition of site value basis

Part IV Schedule 9 LGHA 1989 makes extensive amendments to Part XVII HA 1985. In particular sections 585 to 595 together with all related provisions dealing with cleared site value compensation have been repealed including Schedules 23 and 24 concerning well-maintained payments and owner-occupier supplements. Section 10 with Schedule 2 Land Compensation Act 1961 has also been repealed.

These repeals came into effect on 1 April 1990 for new orders made from that date which are now dealt with under normal compulsory purchase provisions. Additionally in appropriate cases there are Home Loss Payments (see Section 13) and discretionary disturbance payments where there is no interest in land (see Section 14) under Part III LCA 1973. Compensation in respect of Orders made before 1 April 1990 continues under the previous provisions. Transitional arrangements are contained in the Local Government and Housing Act 1989 (Commencement No 5 and Transitional Provisions) Order 1990 (SI 1990 No 431) and reference should be made to paragraphs 9.0 to 9.25 above for such cases.

9.28 Closing and Demolition Orders

The transitional arrangements ensure that closing and demolition orders made before 1 April 1990 continue to be dealt with under the previous site value provisions. Where such orders are made on or after 1 April 1990 there are fresh arrangements for compensation - see paragraphs 9.29 to 30 below.

9.29 Compensation for closing and demolition orders

Section 584 HA 1985 (inserted by paragraph 75 Schedule 9 LGHA 1989) provides that owners of premises subject to a closing or demolition order, whether as landlord or owner-occupier are to be compensated for any decrease in the compulsory purchase value of their interest in the premises due to the order. The values are to be taken as at the date on which an order is made and assessed in accordance with Rule (2) of section 5 of the Land Compensation Act 1961. Whilst not free from doubt the totality of compensation for the diminution in value of an owner-occupier’s interest should also include a sum for disturbance compensation under Rule (6). Any dispute over the compulsory purchase values used to arrive at the depreciation in value is to be determined by the Upper Tribunal (Lands Chamber) (section 584A(2)(b)).

In addition owner-occupiers or tenants may be entitled to a Home Loss Payment under section 29 LCA 1973 as amended (see Section 13 of this Manual). In cases where there is no entitlement to a section 584A payment (ie tenants), disturbance payments are available under section 37(1)(b) LCA 1973 (see Section 4 of this Manual).

9.30 Revocation of closing and demolition orders

Where a closing order on any premises is revoked and a demolition order made in its place any earlier compensation paid to the owner or previous owner under the closing order is deducted from that payable under the demolition order (section 584A(3) HA 1985).

Where closing or demolition orders are determined or revoked on premises rendered fit or being reconstructed the compensation is repayable where the recipient has the same interest in the premises at the time of determination or revocation (section 584B(1) HA 1985).

When a closing order is determined in respect of part of the premises and the recipient has the same interest in the premises at the time of termination a repayment is to be made. This will be the lesser of either the amount by which the value of the interest of the recipient in the premises increases as a result of the determination of the closing order, or the amount already paid to the recipient under the closing order. The value is to be taken at the date of the determination of the closing order and assessed in accordance with the rules set out in section 5 Land Compensation Act 1961 so far as applicable and subject to any necessary modifications.

9.31 Compensation where occupiers rehoused

Section 50(1) LCA 1973 provides that no reduction is to be made in compensation payable where an owner-occupier is rehoused by the acquiring, or another, authority.

Where a dwelling is tenanted, compensation will be payable on the basis of the interest in the dwelling subject to the tenancy. In cases where a dwelling was tenanted at the date of the Notice to Treat but had become vacant before the date of entry then the interest is normally valued with the benefit of vacant possession. However section 50(2) LCA 1973 requires that where the tenant has been rehoused by the local housing authority prior to entry then the interest is to be valued as subject to the tenancy.