The cost of compulsorily acquiring land
How much does it cost a local authority to compulsorily acquire land? Chris Skinner explains in his latest article on CPOs.
If a local authority, or a developer, wants to acquire land for a project it will first seek to purchase it by agreement. This will generally be quicker and cheaper than the local authority seeking to obtain the land by way of a CPO. The latter will only be necessary if the landowner will not agree to sell at a reasonable price.
If a CPO proves necessary the client local authority officer, or developer if it is underwriting the costs, will want to know how much it is all going to cost. The purpose of this article is to give a broad overview of the likely costs of a CPO.
Firstly there are going to be the legal costs associated with the making and confirmation of the CPO, and vesting title in the local authority at the end of the process. These costs will increase if there are objections to the order dealt with at a public inquiry or by written representations. It appears that about 70% of CPOs either receive no objections or the objections are subsequently withdrawn. If the compensation is not agreed by the parties at the end of the process and there is a reference to the Upper Tribunal (Lands Chamber), again there will be legal costs to consider. It is worth noting, however, that in practice most compensation claims are settled by agreement. It can be difficult to quantify legal costs. Much will depend on the complexity of the CPO and whether or not there are objections. If the work is done in house there may be no net cost to the council unless counsel is instructed, perhaps for a public inquiry. If the work it put out to another local authority legal team, or to private practice, it should be possible either to obtain a fixed fee quote or a capped fee based on an hourly rate. A number of local authority legal teams have expertise in CPOs and it is worthwhile considering using one of these. The legal costs for a single plot non contested CPO may well be within the region of £1,500 to £3,000. The additional legal costs if that single plot CPO is considered at a public inquiry could be between £2,500 and £5,000. Obviously the costs will be greater if the CPO is very complex. In the unlikely event of the compensation for the acquisition of the land being referred to the Upper Tribunal (Lands Chamber) there will be significant further legal costs. However if any sum offered by the local authority is not exceeded by the Tribunal award, the claimant will have to pay the council’s costs.
Secondly there are the ancillary and administrative costs to consider. The CPO process involves statutory notices that have to appear in a local paper on three separate occasions. It would be best to budget around £2,000 for this. If you need to employ a process server to deliver the CPO papers to the landowner this is likely to cost about £150 each time a document needs to be served. When the land has vested in the local authority following the making of a General Vesting Declaration there will be Land Registry fees to pay to record the change in ownership. In addition, SDLT will have to be paid on the acquisition based on the estimated market value of the land. When the market value element of the compensation is subsequently settled, a balancing payment of SDLT may be required. SDLT can be avoided if the CPO has been made to facilitate development by a third party (section 60 Finance Act 2003). If there is an objection to a CPO considered at a public inquiry or by written representations the council must pay the Planning Inspectorate’s costs of dealing with the relevant procedure. These costs for a one day public inquiry are likely to be in the region of £5,000.
Thirdly there is the compensation payable to the person who has had his land compulsorily acquired. Whilst making a compulsory purchase order and obtaining ownership of the land can be relatively straightforward, the issue of compensation can appear complex and mysterious. In the House of Lords case of Waters v Welsh Development Agency 2004 Lord Nichols said this:
"Unhappily the law in this country on this important subject is fraught with complexity and obscurity. To understand the present law it is necessary to go back 150 years to the Land Clauses Consolidation Act 1845. From there a path must be traced, not always easily, through piecemeal development of the law by judicial exposition and statutory provision. Some of the more recent statutory provisions defy ready comprehension. Difficulties and uncertainties abound."
This article provides a brief outline of the various heads of compensation.
(a) The main part of the compensation the ex owner can claim is the market value of the land. This will take into account any existing planning permissions for the land, the provisions of the development plan, and the likelihood of obtaining other permissions.
(b) The ex owner will also qualify for a basic loss payment of 7.5% of market value. If he was also in occupation of the land he will qualify for an occupier’s loss payment of 2.5% of market value. If a person is displaced from the home they own as a consequence of a CPO, he will be able to claim a home loss payment of 10% of market value.
(c) If only part of someone's land is CPO’d, and the bit they are left with is less valuable than when it was part of a larger landholding, a claim for severance can be made. If the retained land is less valuable because of what is happening on the part CPO’d a claim for injurious affection may be made.
(d) An occupier of CPO’d land may have a claim for disturbance, if he can show that he has suffered loss as a result of having to move. This might cover, for example, temporary loss of profit for a business caused by the disruption of a move.
(e) Finally the ex owner of land can claim his reasonable legal and surveyors costs associated with the negotiation of the compensation and transferring title to the local authority.
Compensation for the compulsory acquisition of a single empty property will be quite straightforward to assess. If you are compulsorily acquiring a number of businesses, the position will be more complex.
Councillors who are being asked to authorities the making of a CPO will undoubtedly ask the question “how much is this all going to cost?” Hopefully this article will assist with making a reasonable estimate of the potential costs.
Chris Skinner is Practice Director for nplaw, the shared local authority legal service hosted by Norfolk County Council. He also heads nplaw’s CPO Consultancy Service, which carries out CPO work for other councils on a wide range of projects.
This is the fourth in a series of articles by Chris on CPOs. See also:
CPOs and run-down listed buildings
Housing estate regeneration and CPOs
Using compulsory purchase powers to bring forward development on allocated sites