Not exceptionally helpful

The Property & Compensation Consultation, part 5

It will have been about three years after the first announcement was made about HS2 that the first of the statutory compensation provisions comes into play. During this period we have had only the protection of the discretionary Exceptional Hardship Scheme (EHS) to shield property owners from depreciation in value due to HS2. The scheme is “discretionary” because it is not a requirement of statutes and refers to “exceptional hardship” because it is not designed to benefit everybody, but only the worse cases of hardship brought about by HS2 property blight. Details of the scheme may be found in the booklet HS2 Exceptional Hardship Scheme for Phase One: Updated Guidance and Application Form.

In order to filter out the “less deserving” applicants, the bar to qualify for help under the scheme has been set pretty high. Five criteria have been defined, and all must be satisfied.

Criterion 1 sets the requirements for ownership and residence qualification; these are broadly consistent with the qualification criteria for the statutory provisions. As well as owner-occupiers of private residential properties, the scheme extends to owner-occupiers of business premises with an annual rateable value not exceeding £34,800, owner-occupiers of agricultural units, mortgagees repossessing a property and executors of a deceased’s estate.

Criterion 2 requires the property to be on the line of the route or in close proximity to the route, but properties above tunnels are excluded unless they are also in close proximity to a surface feature (such as a ventilation shaft or a tunnel portal). The meaning of “close proximity” is not explained, only that a fixed distance does not apply and that the “particular characteristics of the property”, including whether other built development lies between the property and the trackway and whether the route is in cutting or raised up, will be taken into account. Since no “rules” have been published for making this determination, it is impossible in many cases for an applicant to assess in advance what is the likelihood of this criterion being satisfied. In practice it seems to be left to the “good sense” of the adjudicators. This is clearly a major weakness of the scheme and carries an obvious risk of there being inconsistencies in the treatment of different applicants.

Criterion 3 is another controversial and ill-defined requirement. You are required to demonstrate that you “have made all reasonable efforts to sell” over a minimum period of three months. You are allowed to offer your property for sale at an asking price that reflects the unblighted market price, but you will be ineligible for the scheme if you have received an offer better than 85% of that price. This latter requirement can be criticised for forcing owners to sell at a discounted price and thereby adding to the blight conditions. It also means that any owners that are able to sell by accepting a discount will be at a financial disadvantage to any that cannot sell but are successful in receiving compensation from the EHS, which will be at 100% of the unblighted market price.

Criterion 4 requires that you purchased your property “before you could be reasonably expected to have been aware of the high speed rail proposals”.

Criterion 5 requires that you have “an urgent need to sell your property”. This alone is not sufficient however; you also need to show that you “would suffer exceptional hardship if you had to wait until such time as new discretionary arrangements to assist affected property owners come into force”. The HS2 Ltd booklet accepts that it is not possible to “pre-define what this means for individuals, or give examples of specific situations” that would be seen to satisfy Criterion 5, but the document does cite some examples. Notably missing from these examples is emigration. It is also far from clear what “family circumstances” would be seen to qualify – would this definition be stretched to cover such circumstances as relocating to be near to other family members, moving to a home more suitable to age (e.g. a bungalow) and relocating or down-sizing on retirement? Even if you satisfy the “need to sell” aspect of Criterion 5, there is still the potential pitfall of the “exceptional hardship” hoop to jump through.

The EHS process is initiated by the applicant completing the application form that is contained within the HS2 Exceptional Hardship Scheme for Phase One: Updated Guidance and Application Form. Applicants are advised to submit “as much supporting evidence as you can” to support their application.

Each application is then reviewed by the EHS Secretariat to “ensure that it is complete and contains the required information”. Applicants are told:

“If information or evidence is missing you will be contacted and asked to provide it. In addition, in almost all cases the estate agent(s) currently marketing the property will be contacted.”

When the EHS Secretariat is satisfied with the supporting evidence, the application is considered by the EHS Panel. The decision made by the panel, whether the Government should agree to purchase the applicant’s property or not, serves as a recommendation to the Secretary of State for Transport, although I think this is, in practice, a legal nicety.

Members of the EHS Panel that sits on any particular day are drawn from a pool of members, both independent and HS2 Ltd employees. A list of these members may be found here. A quick scan down the list confirms that most of the independent members have either a background in the legal profession, or as a magistrate or member of a tribunal, or have experience in property-related activities. The HS2 Ltd employees on the list cannot claim such associations, and all have day jobs that do not appear to qualify them particularly for the role of panel member.

At least two independent members of the pool must be present at a meeting of the EHS Panel, and one of these must chair the meeting. One HS2 Ltd employee must also be present to make up a three-person quorum. It is not clear if there are any further rules about how the Panel must be constituted in the event of a Panel size in excess of three.

The Secretary of State’s (or should that be the Panel’s) decision will be notified to the applicant by letter. If the application is unsuccessful the notification will detail “the reasons why”, but experience indicates that this is likely to be only the briefest summary of the views expressed by the Panel.

So much for the theory of the administration of the EHS. In the next blog I will examine how things have worked out in practice.

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2 responses to this post.

  1. Posted by ChrisEaglen on January 8, 2013 at 8:46 am

    How do the large value outside of all the zone purchases occur. There are alledged to have been several in one area beyond the 120m even.

    Reply

    • Criterion 2 for the Exceptional Hardship Scheme is not explicit about what “in close proximity to the route” means. However, I have personal experience of involvement in two applications where the distances were both in the region of 600m and the Panel accepted that Criterion 2 had been satisfied. These cases appear to have been helped by the intervening terrain being mostly open country.

      Reply

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