Regeneration X: failed CPOs

The Communities Secretary earlier this month refused to confirm a compulsory purchase order for a key regeneration scheme in London, prompting Southwark Council to announce a judicial review challenge. Simon Ricketts analyses the minister's decision.

The Secretary of State's decision letter dated 16 September 2016 in relation to the Aylesbury Estate CPO has major implications for all regeneration schemes, including the approach that LPAs should take to planning applications. However, in my view it was not unsurprising in the light of other recent decisions. 

The whole of the decision letter is worth reading but I quote the most relevant passages below. It will be seen that the critical failings of the proposals in the eyes of the Secretary of State were (1) the impacts on displaced leaseholders who might not be able to remain in the area and (2) the potentially disproportionate or at least unassessed effects of the proposals on specific protected groups under the Equality Act 2010.

"20. the options for most leaseholders are either to leave the area, or to invest the majority of their savings in a new property. Article 8(1) [of the European Convention on Human Rights - right to respect for private and family life] is therefore clearly engaged. In relation to Article 8(2) (which permits interference which is proportionate when balanced against the protection of the rights and freedoms of others), the Secretary of State finds that the interference with residents’ (in particular leaseholders’) Article 8 rights is not demonstrably necessary or proportionate, taking into account the likelihood that if the scheme is approved, it will probably force many of those concerned to move from this area.

21. For elderly residents, who are of an age where they would probably be unable to obtain a mortgage to make up any shortfall and their future earning potential is likely to be limited, using their savings and other investments would severely limit their ability to choose how they spend their retirement and the use to which they put their savings and investments. The leaseholders are not obliged to accept either of the options to them (shared ownership or shared equity) to stay on the Estate, and could potentially purchase a property on the open market. However, many of the leaseholders will probably be unable to afford these options and will have to move away from the area. The likelihood that leaseholders will have to move away from the area will result in consequential impacts to family life and, for example, the dislocation from local family, the education of affected children and, potentially, dislocation from their cultural heritage for some residents.

22. Article 1 of the First Protocol of the ECHR entitles a person to peaceful enjoyment of their property, but also stipulates that this provision does not impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest. As mentioned below, the Inspector in this case found that the interference with residents’ peaceful enjoyment of their property was not necessary to control the use of property in accordance with the general interest, and accordingly that the interference with Article 1 of the First Protocol was not proportionate (IR422). The Secretary of State agrees that interference with the residents’ human rights is not proportionate in all the circumstances.

23. In making this decision, the Secretary of State must give due regard to the need to (a) eliminate unlawful discrimination, harassment, victimisation; (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and (c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it. Protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. This arises from the Public Sector Equality Duty, under section 149 of the Equality Act 2010.

26. The negative impacts on protected groups would include the effect of the impact on elderly leaseholders currently resident on the Estate, as identified at IR 372 to 373 and IR 401 and 402, namely the fact that many of the leaseholders (who will have no right to be accommodated in the scheme) are of an age where they would probably be unable to obtain a mortgage to make up any shortfall and their future earning potential is likely to be limited. Using their savings and other investments would severely limit their ability to choose how they spend their retirement and the use to which they put their savings and investments. The leaseholders are not obliged to accept either of the options open to them (shared ownership or shared equity) to stay on the Estate, and could potentially purchase a property on the open market. However, many of the leaseholders will probably be unable to afford these options and have to move away from the area. This is likely to impact particularly on those with the protected characteristic of age, including in relation to the care of older relatives and children’s education (as people have to move out of the area, this will mean that the elderly are deprived of having a local family to care for them, and the children of those parents affected are likely to have to move schools when their family moves to a different area).

27. This impact on the care of older relatives may adversely affect their ability to see and be cared for by their family and potentially to integrate with the rest of society (for instance, without a family member to accompany them in a car or on public transport it may be harder for them to access the shops and public facilities like the GP surgery or local library as they will lack the freely offered assistance to do so) and therefore breaches the PSED requirement to have due regard to the need to foster good relations between persons who share a relevant protected characteristic (the elderly) and persons who do not share it (the rest of the population).

28. The impact on children’s schooling may result in adverse impact on the child’s exam performance and their school reports. This is in turn likely to result in a lower level of achievement than otherwise might have been the case, which is likely to result in a lower level of opportunity for the affected child in terms of their ability to apply successfully for jobs (thus adversely affecting equality of opportunity) and – in terms of uprooting them at a vulnerable stage in their development - a negative impact on the affected child’s good relations with their family and extended social contacts (they are likely to go through a period of isolation as a result of being uprooted from the social networks they had established at their previous home).

29. Given the lack of clear evidence regarding the ethnic and/or age make-up of those who now remain resident at the Estate and who are therefore actually affected by any decision to reject or confirm the Order, it is not possible to clearly identify BME groups (either of the elderly or children) as disproportionately impacted by the proposal. However, given that 67% of the population living on the Estate were of BME origin (see IR 394), it is highly likely that there is a potential disproportionate impact on the elderly and children from these groups, who are likely to dominate the profile of those remaining on the Estate and who are therefore likely to have to move out of the area if the Order is confirmed.

32..there is a shortage of evidence concerning the precise ethnic make-up of those remaining resident at the Estate, who would be affected by a decision to confirm the Order (see above). If, in practice, the cultural and/or ethnic make-up of those resident at the Estate, who are unlikely to be able to remain there, is pre-dominantly those of one or more particular ethnic/ cultural origins, then their cultural life is likely to be disproportionately affected by a decision to confirm the Order. There is also likely to be a negative impact on their ability to retain their cultural ties, undermining their equality of opportunity with other ethnic groups (such as white British) who may not be so disproportionately affected. This is particularly so, in that white British culture is more widely-established across the UK, including at housing sites to which residents may be moved, whereas minority cultural centres are often less widespread, which is likely to make cultural integration harder for those of BME origin who are forced to move than those of a white British origin."

For more detailed background London Borough of Southwark's statement of case and the leaseholders group's statement of case may be of interest. 

In my view, the decision by the Secretary of State, whether justified on the evidence or not (Southwark are reportedly challenging it) is not unexpected following Horada (on behalf of the Shepherds Bush Market Tenants Association) and others v Secretary of State (Court of Appeal, 18 March 2016) where the Secretary of State's approach to the Shepherds Bush market CPO was struck down on similar issues. 

The Inspector hearing the Shepherds Bush market CPO inquiry concluded: "the current Orion proposal [which was the basis for the CPO] lacks the mechanisms to be assured of retaining the number, mix and diversity of traders in the way explained above. They are vital to the distinctiveness of the market and the Goldhawk Road shops. Therefore, insofar as it would facilitate delivery of the redevelopment scheme promoted, the CPO would not fully achieve the social, economical and environmental well-being sought".

The Secretary of State disagreed and confirmed the CPO. The Court of Appeal held that the Secretary of State had acted unlawfully as his reasoning for reaching a different conclusion had been inadequate (shades of the Dover reasoning flaws covered in my last blog post): "In short, although it is clear that the Secretary of State disagreed with the inspector's view that the guarantees and safeguards were inadequate he does not explain why he came to that conclusion. I do not consider that requiring a fuller explanation of his reasoning either amounts to requiring reasons for reasons, or that it requires a paragraph by paragraph rebuttal of the inspector's views. But it does require the Secretary of State to explain why he disagreed with the inspector, beyond merely stating his conclusion that he did. The two critical sentences in the decision letter are, in my judgment, little more than "bald assertions". The Secretary of State may have had perfectly good reasons for concluding that the guarantees and safeguards were adequate. The problem is that we do not know what they were. In those circumstances I consider that the traders have been substantially prejudiced by a failure to comply with a relevant requirement."

As regards Southwark's failure to comply with the Public Sector Equality Duty, there are certainly echoes of the ruling by the Court of Appeal in one of the rounds of the Wards Corner saga in R (Harris) v London Borough of Haringey (Court of Appeal, 5 May 2010) where the court held that the council, when granting permission, failed to discharge its duties under section 71(1) of the Race Relations Act 1976 (now replaced by the Equality Act 2020 Public Sector Equality Duty) in terms of the potential effects of the scheme on Latin American traders or loss of housing by ethnic minorities.

To add a further Court of Appeal ruling into the blog, Grafton Group (UK) plc v Secretary of State  (Court of Appeal, 21 June 2016) is another recent example of a CPO (in this case to seek to protect Orchard Wharf in London's docklands for operational purposes) being struck down. In this instance, the Secretary of State's reasoning for confirmation the CPO was held to be inadequate given that the basis for the CPO was a development proposal, planning permission for which had been refused.

For any of these schemes to fall over at the last hurdle may be seen as a victory to some but is often a tragedy to others who have spent years seeking to secure outcomes that have previously been accepted as being in the public interest. The main lesson for all of us is surely that we need to go the extra mile (or more) to seek to ensure that the likely effects of the scheme and/or dispossession on all of those likely to be affected are properly analysed, that the analysis takes full account of the Public Sector Equality Duty and that any material effects are explained and justified.

Simon Ricketts is a partner at King & Wood Mallesons. He can be contacted on 020 7111 2768 or This email address is being protected from spambots. You need JavaScript enabled to view it.. This article first appeared on his Simonicity blog.