Crumbs of comfort

The Property & Compensation Consultation, part 3

Until I started researching the statutory provisions for compensation that apply in the UK for the public consultation that was held on the Exceptional Hardship Scheme in 2010, I didn’t realise just how limited is the relief offered. As well as the limited scope of the provisions, there is also a question of timing. Some of the provisions for HS2 will come into place when the safeguarding directions that I mentioned in my blog Keeping things safe (posted 29 Dec 2012) are made, but the full suite of measures will not all be available until one year after HS2 Phase 1 has been in operation – currently scheduled to be 2027.

There is a very good outline of the statutory compensation provisions in Chapter 1 of the consultation document High Speed Two: Property and Compensation for London –West Midlands. In addition, the Department for Communities and Local Government has published helpful guides that go into the subject in more detail. For example, the provisions that apply to the owners and occupiers of residential properties are described in the booklet Compulsory Purchase and Compensation: Compensation to Residential Owners and Occupiers.

The legislation prescribing the statutory compensation regime is set out in two principal Acts of Parliament: the Land Compensation Acts of 1961 and 1973, and the Compulsory Purchase Act 1965.

In view of all this readily-available information, I aim to limit my comments in this blog to identifying the basics of what compensation is on offer and when it becomes available. Also, although the provisions encompass compensation payments for commercial and agricultural properties, I intend to limit my comments to compensation for residential properties. Those wishing information relating to commercial properties should consult the booklet Compulsory Purchase and Compensation: Compensation to Business Owners and Occupiers. Similar information for agricultural properties may be found in the booklet Compulsory Purchase and Compensation: Compensation to Agricultural Owners and Occupiers.

Central to the statutory compensation provisions is the concept of compulsory purchase. This the procedure by which an “acquiring authority” is able to wrest the land that it needs for a particular development from the legal owner; it is outlined in the booklet Compulsory Purchase and Compensation: Compulsory Purchase Procedure.

However, it is also important to note the following rider that appears in paragraph 1.19 of the consultation document High Speed Two: Property and Compensation for London –West Midlands:

“…it is important to note that the inclusion of a property in the safeguarded area does not necessarily mean that it will need to be compulsorily purchased or demolished to make way for the railway. It is also possible that additional property or land outside of the safeguarded area may be required as construction and engineering plans are further refined.”

If all or a part of your property is subject to a compulsory purchase order you will receive compensation. Your entitlement can be affected by a number of complicating factors, such as the consideration of the effects of severance if only part of the land is taken, any planning permissions granted for the property and any additional value that your property has by virtue of its location (e.g. as an access to another development). I think that it is best for the current purposes to ignore these complications and just consider the compensation due on the simple purchase of a whole property from an owner-occupier, with no other complicating factors.

Compensation will normally be paid at the point that the development work starts, or around that date. The calculation of the appropriate level of compensation is based on the principle of equivalence. This means that you should be no worse off in financial terms after the acquisition than you were before. Likewise you should not be any better off – Heaven forfend!

Applying the principle of equivalence the compensation payment is made up of three elements: the value of the property taken, an additional home-loss compensation payment, and disturbance compensation.

The value of the property is based upon what the property might be expected to realise if sold in the open market by a willing seller and without any increase or decrease attributable to the scheme of development which underlies the compulsory purchase order. The compensation will be 100% of this value.

The home-loss payment is an additional sum to reflect and recognise the distress and discomfort of being compelled to move out of your home, but is subject to meeting certain qualifying criteria. The level of this element has been set at a fixed percentage of the property value of 10%, currently with a minimum value of £4,700 and a maximum of £47,000.

Reimbursement of reasonable expenses occasioned by being “disturbed” from your property will also be repaid. Eligible expenses will include removal costs and legal fees, and a list of examples is included in paragraph 2.54 of Compulsory Purchase and Compensation: Compensation to Residential Owners and Occupiers.

The statutory compensation provisions include a few more crumbs of comfort, but describing these will have to wait for the next blog.

Important note: This blog is, of necessity, only a very brief overview of the compensation regime associated with compulsory purchase and I am not legally qualified. You should not therefore rely legally on anything in this blog.

Further information can be found in the documents linked to from this blog, but this is a complex topic and the information in the documents should not be regarded as a substitute for professional advice. If your property falls, in whole or in part, within the safeguarding zone I recommend that you give serious consideration to the advice in the Foreword to Compulsory Purchase and Compensation: Compulsory Purchase Procedure:

“If you think your property may be the subject of a CPO you should seek advice from a professionally qualified person such as a chartered surveyor or solicitor, who should be able to advise on your rights and also act on your behalf if appropriate. It is best to seek professional help as early as possible.”

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