Keeping CPO powers alive

Martin Damms and Richard Foster examine the law relating to exercise of compulsory purchase order powers and the time limits that apply to them.

At a time when many acquiring authorities are on the point of losing their hard won compulsory purchase order (CPO) powers for want of funding, a number will be anxiously looking for ways to keep their powers alive.

Moreover, with accountants preaching financial restraint, how can an acquiring authority retain its powers for as long as possible, whilst attempting to secure procurement and funding arrangements and keep its financial exposure to a minimum?

What are the pros and cons of proceeding by notice to treat or general vesting declaration and does one have any advantage over the other in relation to time limits for the exercise of powers?

Is it possible to make a general vesting declaration after notice to treat has been served?

What are the time limits for the exercise of CPO powers?

Section 4 of the Compulsory Purchase Act 1965 ("1965 Act") terminates CPO powers three years from the date of the press notice of confirmation of a CPO.

How can CPO powers be exercised?

A CPO can be exercised either by service of notices to treat ("NT") under section 5 of the 1965 Act or execution of a general vesting declaration ("GVD") under section 4 of the Compulsory Purchase (Vesting Declarations) Act 1981 ("the 1981 Act").

It is possible to make a GVD in relation to part of the land in a CPO and serve NT in relation to the remainder. It is not possible to include "new rights" in a GVD. Such rights do not fall within the definition of "land" for the purposes of the 1981 Act and can only be acquired through an NT.

What are the pros and cons of proceeding by NT or GVD?

One of the main advantages of the NT mechanism is that it is a flexible and relatively quick means of exercising powers. It is possible to serve NT and notice of entry ("NE") under section 11 of the 1965 Act, specifying that entry will be taken after the minimum notice period of 14 days. Thereafter, compensation has to be settled and paid and a transfer taken of the land or a deed of easement completed for new rights. Acquisition can take many months and sometimes years to complete. However, where securing the early possession of land is of paramount importance NT may be preferable.

An authority may be able to extricate itself from the obligation to purchase by withdrawing NT by agreement. Alternatively, a NT may be withdrawn, under section 31 of the Land Compensation Act 1961, within six weeks of receipt of a claim for compensation or six weeks from determination of compensation by the Upper Tribunal (Lands Chamber), subject to the payment of compensation. In contrast, once a GVD has been made an authority has to proceed with the obligation to purchase.

A disadvantage of NT is that it does not facilitate the rapid acquisition of title. Where an authority has a requirement to secure title quickly the GVD process may be preferable. A GVD enables title and the right to possession of land to be secured in a little over three months (assuming the minimum vesting period of 28 days is specified) or later if required. The interests caught by the GVD (freeholds and substantive leasehold interests) are converted into rights of compensation. Compensation has to be settled and paid following the making of the GVD.

The GVD procedure is commenced by the giving of a preliminary notice under section 3 of the 1981 Act. Such notice has to be given before a GVD is made and can be given with notice of confirmation or later. A minimum period of two months must then elapse before a GVD can be made (section 5(1) of the 1981 Act). The earliest date land may vest  under section 4 of the 1981 Act is 28 days after the giving of notice of the making of the GVD to affected interests.

Certain interests are excluded from vesting and must be served with a NT and NE under section 9 of the 1981 Act before possession can be taken against them (namely a "minor tenancy" (a tenancy for a year or from year to year or any lesser interest) and a "long tenancy about to expire" (a tenancy greater than a minor tenancy but having a period left to run that is less than some period specified in the GVD)). This exclusion saves the authority having to deal with and compensate tenants whose interests may expire before possession is required.

What are the time limits for service of a NT and use of the GVD procedure?

The giving of NT and the making of a GVD are also time limited by the 1965 Act. However, the effect of the time limit gives rise to uncertainty because of a lack of harmonisation between the 1965 and 1981 Acts.

Section 5(2A) of the 1965 Act states:

A notice to treat shall cease to have effect at the end of the period of three years beginning with the date on which it is served unless:

(a) the compensation has been agreed or awarded or has been paid into court,

(b) a general vesting declaration has been executed under section 4 of the Compulsory Purchase (Vesting Declarations ) Act 1981,

(c) the acquiring authority have entered and taken possession of the land specified in the notice, or

(d) the question of compensation has been referred to the Upper Tribunal

Where NT ceases to have effect, an authority must immediately give notice of the fact to relevant parties and pay compensation (section 5(2C) of the 1965 Act).

Where NT is given within the three-year period the effect of section 4 of the 1965 Act is clear. The powers will have been duly exercised within the three-year time limit and the NT will remain valid for a further three years. By serving NT an authority can effectively secure up to a six-year long validity period for acquisition.

However, what is the position where an acquiring authority chooses to proceed by way of a GVD and how are the provisions of section 5(2A) of the 1965 Act to be interpreted in relation to a GVD?

In Westminster CC v Quereshi [1991] 1 EGLR 256, Aldous J considered whether a preliminary notice constituted the exercise of a CPO for the purposes of section 4 of the 1965 Act. He considered that it did. However, in Co-operative Insurance Society Ltd v Hastings Borough Council [1993] 37 EG 151, Vinelott J disagreed and held that a preliminary notice committed an authority to nothing and was simply a warning that a GVD may be made.

Because of the conflict between these two cases, paragraph 63 of ODPM Circular 06/2004 on Compulsory Purchase advises authorities that a GVD should be made within three years of the order becoming operative.

Thus the net result is that as the law currently stands, the exercise of powers by service of NT has the effect of extending the life of CPO powers to six years. However, where powers are exercised by way of GVD the powers will subsist only for a little over three years (depending on the vesting date specified by the authority). This inconsistency between NT and GVD procedures is prejudicial to an authority that wishes to proceed by GVD.

Harmonisation of time limits for the two regimes is clearly desirable. The Law Commission's final report on Compulsory Purchase and Compensation 2004 (Law Com No. 291) considered these issues but its recommendations for reform have not been implemented.

However, it is generally accepted that the judgement of Vinelott J in the Co-operative case is a correct statement of the law and is consistent with section 7(1) of the GVD Act 1981 which recognises that the equivalent step to service of NT occurs on execution of a GVD.

Can a GVD be made after NT has been served?

It is clear that NT under the1965 Act can be served following the giving of a preliminary notice under section 3 of the 1981 Act. However, is it possible to switch to the GVD procedure after NT has been served to effectively extend the validity period for CPO powers and enjoy the convenience of vesting title and the right to possession under the 1981 Act? The answer is possibly, though the matter is not free of doubt.

Many leading text books on compulsory purchase state that a GVD cannot take effect where a NT has been served in relation to the relevant interest. The same opinion is clearly expressed in ODPM Circular 06/2004 (paragraph 62). This view appears to be founded on section 7(1) of the 1981 Act, which provides for a deemed NT being served where a GVD is made.

However, the deemed NT under section 7 does not apply if an actual NT has been served under section 5 of the 1965 Act and the 1981 Act itself suggests that the execution of a GVD after NT may be possible. There is nothing in the 1981 Act which appears to prevent this. Furthermore:

• section 4(1) of the 1981 Act enables an authority to execute a GVD in respect of any land they are authorised to acquire and imposes no restriction on interests that may be acquired by GVD (subject only to certain tenancies)
• section 7(1) of the 1981 Act deems NT to have been served on every person who could have been served under section 5 of the 1965 Act, other than those who had already been served with NT. The effect of section 7(1) is to exclude from the deeming of a NT an interest that has already been the subject of NT under the 1965 Act
• this interpretation is also consistent with section 5(2A) (b) of the 1965 Act, which provides that a NT will cease to have effect at the end of three years unless " a general vesting declaration has been executed under section 4 of the Compulsory Purchase (Vesting Declarations) Act 1981."
• The Law Commission's final report (4.9) observes that the three-year time limit for "exercise" of CPO powers specified in section 4 of the 1965 Act does not clearly refer to both NT and a GVD.

An authority may therefore be able to proceed by GVD notwithstanding that a NT has been served. However, in view of the alternative views expressed in ODPM Circular 06/2004 (paragraph 62) and leading texts on the subject, there is clearly scope for legal argument and challenge.

The question of whether any GVD executed following the service of NT would be regarded as a fresh attempt to exercise CPO powers and therefore be invalid (whether executed before or after the three-year time limit in section 4 of the 1965 Act) is of paramount importance in seeking to reconcile the law on these issues.

The position will remain unclear until the courts resolve this conflict or the law is clarified by statute.

Conclusions

As the law currently stands, if an authority wishes to proceed by GVD it is prudent to heed the advice in Circular ODPM 06/2004 and ensure that the GVD is made before the three-year period specified in section 4 of the 1965 Act has expired.

However, where powers are intended to be kept alive as long as possible, proceeding by NT may be preferable because this will prolong the powers for up to six years whereas if GVD powers are not available after the expiry of the three-year period specified in the 1965 Act, transfer of title may be prolonged thereby creating difficulties for disposal to developers.

Martin Damms is a Legal Director and Richard Foster is a Consultant in the planning and environment team at Pinsent Masons.