Compulsory purchase compensation reforms: the next stage

Earlier this month, the Ministry of Housing, Communities and Local Government (MHCLG) published the outcome of their recent consultation on reforms to the compulsory purchase process – a procedure under which public bodies invoke powers to acquire interest from private parties without their consent.

This consultation sought views on a range of proposals related to compulsory acquisition, with the stated aim of making the process faster and more efficient and to encourage it’s more wide-spread use by acquiring authorities.

In this article we look at the key measures confirmed in MHCLG's response document, outlining the direction of travel for limiting the application of hope value and streamlining the compulsory purchase order (CPO) process.

Key measures at a glance

MHCLG confirmed in their response that the following measures on which it consulted will be taken forward, via the Planning and Infrastructure Bill where primary legislation is needed:

• Expanding the remit of directions to remove ‘hope value’ (value attributed to future development potential) from compensation packages to include CPOs made on behalf of parish, town or community councils.

• The decision as to whether to confirm a CPO with a direction removing hope value may be delegated to inspectors, or the authority itself where there are no objections, and other pre conditions are met.

• Directions removing hope value will apply to other heads of claim where open market value is a relevant factor in working out the compensation due.

• Electronic service of notices required by the CPO process will be permitted, where recipients agree. An expedited notice process for vesting will be introduced, bringing three months down to six weeks.

• Useful powers for an acquiring authority to make specified modifications when confirming a CPO itself.

• Inspectors may be appointed to decide whether to confirm CPOs under the New Towns Act1981, a form of delegation currently missing from that legislation.

• Some tweaking with temporary possession powers in the Neighbourhood Planning Act 2017, of interest mainly due to the commentary on when those powers might be brought into force.

• Modest changes to loss payments.

Of these key changes, those relating to hope value, and streamlining of procedure, are of particular interest.

Limitation on the application of hope value

Under this overarching head, there are a number of proposals included in the MHCLG response, building on new powers introduced under the previous government in the Levelling-up and Regeneration Act 2023, which allowed acquiring authorities to include directions in CPOs removing hope value from the assessment of compensation. This could be done where it would be shown to be in the public interest – for example, in relation to public sector led affordable housing, health, or education uses.

MHCLG has confirmed now that it will proceed, through the Planning and Infrastructure Bill, with removing hope value in relation to CPOs involving section 125 of the Local Government Act 1972. This will allow CPOs to be made on behalf of parish, town or community councils acquiring land for schemes providing affordable housing in the local community. It's a relatively narrow category of powers, and responses to the consultation suggested such a reform is most likely to assist in the delivery of smaller scale community-led projects.

Secondly, inspectors may have delegated to them decisions as to confirmation of CPOs that include directions removing hope value, as per new wording to be included in revised CPO guidance.

Further, where there are no objections to a CPO that has such a direction included, MHCLG will permit the acquiring authority to confirm the CPO itself, as it can do now for CPOs that have no such direction. Where CPOs falling within this category are delegated to an inspector, they also will be empowered to issue a direction that in fact additional compensation is due - which will primarily happen when the statement of commitments prepared as a justification for removing hope value is not met. The balance of the consultation responses was clearly and strongly in favour of these measures, and it's no surprise they are being carried through.

Also of interest, MHCLG has decided against general directions that would set out types of development where hope value would as a matter of course be removed. Although it recognised a broad consensus among consultees to unlock brownfield and stalled sites, it noted that the consultation did not address the specific public benefits which could be delivered by removing hope value in the sites put forward. Similarly, the consultation responses did not address specifically how the additional hope value compensation payable to landowners was preventing the delivery of housing in the examples given by consultees.

Procedural streamlining and expedition

Any updating of procedures for service of notices is to be welcomed. CPO can be a paper heavy exercise and the logistics of service can add cost and delay. A wholesale adoption of electronic service of notices would have been very welcome, without caveat. However, MHCLG has retained the safeguard of recipients needing to confirm in writing that they accept electronic service. As per other changes, this will be covered by the Planning and Infrastructure Bill.

The consultation response document also confirms that newspaper notices will be retained, but simplified in terms of how land is described - in other words, shorten them.

A key and very welcome change that the paper confirms will go forward is the ability of an acquiring authority to make certain minor modifications to a CPO, even where confirming it itself. There was much support for this, and MHCLG itself supports it subject to secretary of state oversight - how that is done will appear in the guidance.

Modifications will be permitted where not controversial or unfair on a person with an interest in land affected, or where they would not likely cause objection. Examples of this may be filling in blank cells in the CPO table of interests with a ‘-‘ or a ‘n/a’, or deleting plots no longer required to be acquired via CPO, or the addition of land, with the owner’s consent. It's intended that the list of what may be permitted will appear in the Planning and Infrastructure Bill.

Allied to this is the need to expedite the CPO process in certain circumstances. Where preparing to vest land in the acquiring authority, a three month period is currently required by way of notice of such vesting. That can often be a ‘dead’ period, especially in the case of unknown owners and/or empty properties, where there is nothing to be gained by such delay. MHCLG confirm that, where agreement is obtained from the owner, a six week period will apply.

Temporary possession

The ability to include plots for temporary possession has been on the statute book for some time, in the Neighbourhood Planning Act 2017, but has not been brought into force. It would seem from the MHCLG response that this is because 'the government is required to publish regulations on the reinstatement of land following a period of temporary possession. Alongside the commencement of the temporary possession power provisions…the government will publish guidance on how [it] may be used including the calculation of compensation'.

We can hope that this will see this power being made available for use.

What's next?

As stated above and in the MHCLG response document, many of these changes require legislation in the form of the Planning and Infrastructure Bill. It's therefore possible that they may yet be amended, expanded or abandoned during the course of the legislative process. Developers, local authorities, and landowners will need to watch this space to keep abreast of these changes to the regime.

Ashfords has a breadth of experience in advising on compulsory purchase issues. If you would like to discuss any of these issues further or need advice on a particular project, please contact Barnabas Elbourn or David Richardson in the planning and infrastructure consenting team.