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You are here: BAILII >> Databases >> The Law Commission >> Towards a Compulsory Purchase [2003] EWLC 286(8) (15 December 2003) URL: http://www.bailii.org/ew/other/EWLC/2003/286(8).html Cite as: [2003] EWLC 286(8) |
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PART VIII
STATUTORY PROJECT AND PLANNING STATUS – THE NEW CODE
8.1 In this Part we set out our recommendations, following consultation, for a new set of rules governing disregard of the statutory project, and planning assumptions, for the purposes of valuation. They are:Introduction
13 The statutory project
13A Other heads of compensation
14 Planning status
14A Alternative development certificates.
8.2 We emphasise once again that the "Rules" are indicative only. The structure and detailed drafting will be a matter for Parliamentary Counsel in due course. 8.3 Finally, we confirm our proposal (Rule 15) for the repeal of the provisions relating, respectively, to "third schedule rights", and to compensation for additional permissions after acquisition.We first set out the rules in complete sequence. The individual sub-rules are then explained by notes with examples.
The new rules
Rule 13 The statutory project and blight
A new Code
(1) All previous rules, statutory or judge-made, relating to disregard of "the scheme" will cease to have effect.
Defining the project
(2) In this Code, "the statutory project" means the project, for a purpose to be carried out in the exercise of a statutory function, for which the authority has been authorised to acquire the subject land.
(3) In cases of dispute, the area of the statutory project shall be determined by the Tribunal as a question of fact, subject to the following:
(a) The statutory project shall be taken to be the implementation of the authorised purpose within the area of the compulsory purchase order, save to the extent that it is shown (by either party) that it is part of a larger project;
(b) Save by agreement or in special circumstances, the Tribunal shall not permit the authority to advance evidence of a larger project, other than one defined in the compulsory purchase order or the documents published with it.
Disregarding the project
(4) In valuing the subject land at the valuation date:
(a) it shall be assumed that the statutory project has been cancelled on that date; and
(b) the following matters shall be disregarded:
(i) the effects of any action previously taken (including acquisition of any land, and any development or works) by a public authority, wholly or mainly for the purpose of the statutory project;
(ii) the prospect of the same, or any other project to meet the same or substantially the same need, being carried out in the exercise of a statutory function, or by the exercise of compulsory powers.
(5) Sub-rule (4) does not require or authorise (save to the extent specified in (b)) consideration of whether events or circumstances at any time (before or after the valuation date) would have been different in the absence of the statutory project.
Depreciation due to blight
(6) Without prejudice to sub-rule (4), no account shall be taken of any depreciation (not attributable to diminished planning prospects) in the value of the relevant interest which is attributable to the land being blighted land, or to any indication (whether by way of particulars in a development plan, or otherwise) that the subject land, or any land in the vicinity, is likely to be acquired by a public authority.
"Blighted land" means land within any category defined by Schedule 13 to the Town and Country Planning Act 1990.
"Planning prospects" mean the prospects of planning permission for valuable development.
Reverse compulsory purchase
(7) For the avoidance of doubt, where land is treated as acquired compulsorily by an authority following a notice served by the claimant, compensation will be assessed:
(a) in any case, in accordance with sub-rule (6); and
(b) where it is blighted land, on the basis that it was acquired for a statutory project corresponding to the public proposal which resulted in it being blighted land.
Rule 13A Other heads of compensation
Injury to retained land
(1) In assessing injury to retained land (head B), reference to the "works" in Rule 4 includes a reference to all the works comprised in the statutory project;
Consequential loss
(2) In assessing compensation for consequential loss (head C):
(a) references in Rule 5 to any consequence of the compulsory acquisition include reference to any consequence of the statutory project;
(b) without prejudice to (a) consequential loss includes any loss of profits of a business (wholly or partly on the subject land) attributable to the matters referred to in sub-rule (6) (depreciation due to blight);
Provided that no claim may be made for consequential loss before the first notice date (save as permitted under Rule 5(1)(d)).
Rule 14 Planning permissions – actual and assumed
Planning permissions and hope value
(1) For the avoidance of doubt, in valuing the land, the circumstances to be taken into account at the valuation date include:
(a) any planning permission for development which is in force at the valuation date (on the subject land or any other land); and
(b) the prospect, in the circumstances known to the market at that date, of any other such planning permission being granted in the future.
Appropriate alternative development
(3) Account shall also be taken of value attributable to appropriate alternative development of the subject land, in accordance with the following rules:
(a) "Appropriate alternative development" means development for which planning permission could reasonably have been expected to be granted on the assumptions set out in paragraph (b) (on the subject land, by itself or together with other land), on an application considered on the valuation date ("appropriate alternative development");
(b) The assumptions in (a) are that the circumstances are those prevailing at the valuation date, save that:
(i) The statutory project had been cancelled on that date;
(ii) No action has been taken (including acquisition of any land, and any development or works) by a public authority, wholly or mainly for the purpose of the statutory project;
(iii) There is no prospect of the same, or any other project to meet the same or substantially the same need, being carried out in the exercise of a statutory function, or by the exercise of compulsory powers.
(c) Account shall also be taken of the prospect, on the same assumptions, but otherwise in the circumstances known to the market at the valuation date, of any other such planning permission being granted in the future.
Rule 14A Alternative development certificate
Application for certificate
(1) For the purpose of determining the permission or permissions to be assumed under Rule 14(2)(a) above, either the claimant or the authority may, at any time after the first notice date, apply to the local planning authority for an "alternative development certificate", in accordance with the following rules (and "procedural regulations" to be made by statutory instrument):
(2) An alternative development certificate is a certificate stating:
(a) the opinion of the local planning authority as to the classes of appropriate alternative development (if any) for which permission is to be assumed on the basis set out in Rule 14(2)(a) (on the subject land by itself or with other land);
(b) a general indication of any conditions, obligations or requirements, to which the permission would reasonably have been expected to be subject.
Appeal to Lands Tribunal
(3) There shall be a right of appeal against the certificate to the Tribunal, by either the claimant or the authority, subject to procedural regulations, which shall include:
(a) Power for the Tribunal to determine the timing and scope of the hearing of the appeal, having regard to any related compensation reference;
(b) In particular, power for the Tribunal to direct
(i) that the appeal be determined on its own, or at the same time as a reference relating to the determination of compensation for which the certificate is required;
(ii) that the hearing of the appeal should take the form of a local inquiry before a planning inspector (appointed for the purpose by the Chief Planning Inspector), and that the inspector be given delegated power to determine the appeal on behalf of the Tribunal.
Conclusive effect
(4) Subject to any such appeal, or any direction of the Tribunal, an alternative development certificate shall be conclusive of the matters stated in it for the purposes of assessing compensation.
Special cases
(5) Regulations may provide for the application of the certificate procedure to special cases, including:
(a) the circumstances specified in 1961 Act section 19 (valuation by a surveyor where claimant absent from the United Kingdom or untraceable);
(b) where the authority is seeking to acquire land by agreement.
the new rules annotated –
the statutory project
13 The statutory project and blight
A new Code
8.4 This sub-rule gives effect to our proposal that we should "clear the decks" and start again. As already noted,[1] this recommendation has received almost universal support from consultees. The new Rules will supersede, not only the so-called Pointe Gourde rule, as developed in the cases, but also the various statutory versions or reflections of that rule.[2](1) All previous rules, statutory or judge-made, relating to disregard of "the scheme" will cease to have effect.
Defining the project
8.5 This definition of the "statutory project" is intended to correspond to our "preferred version" of the common law rule, as explained in the previous Part.[3] Attention is focussed on the particular project for which the acquisition is authorised, and of which the activities on the subject land will be an integral part, rather than on a wider "underlying scheme".[4](2) In this Code "the statutory project" means the project, for a purpose to be carried out in the exercise of a statutory function, for which the authority has been authorised to acquire the subject land.
8.6 The reference in our proposed definition to "the exercise of a statutory function"[5] is an addition to the previous versions. It is intended to emphasise that the new rules are concerned only with the statutory (or public) aspect of any project. Their purpose is to protect statutory authorities from having to pay prices which are artificially inflated, either by the pressures resulting from their public duties, or by their public contribution to infrastructure or land assembly.[6] It is not to exclude potential value which could be realised though private means.[7]
(3) In cases of dispute, the area of the statutory project shall be determined by the Tribunal as a question of fact, subject to the following:
(a) The statutory project shall be taken to be the implementation of the authorised purpose within the area of the compulsory purchase order, save to the extent that it is shown (by either party) that it is part of a larger project;
8.7 Sub-rule (3) makes clear that, as now, the definition of the project in case of dispute is a matter of fact for the Tribunal. 8.8 However, for the reasons already explained in the previous Part,[8] there would be a rebuttable presumption that the project is limited to the area of the compulsory purchase order. If the authority wishes to argue for a wider project, it would be expected to identify it at the time of the making of the order. Otherwise it would not be permitted to rely on such a wider project for valuation purposes, except in special circumstances at the discretion of the Tribunal.(b) Save by agreement or in special circumstances, the Tribunal shall not permit the authority to advance evidence of a larger project, other than one defined in the compulsory purchase order or the documents published with it.
Disregarding the project
(4) In valuing the subject land at the valuation date:
(a) it shall be assumed that the statutory project has been cancelled on that date;
(a) the following matters shall be disregarded:
(i) the effects of any action previously taken (including acquisition of any land, and any development or works) by a public authority, wholly or mainly for the purpose of the statutory project;
8.9 This sub-rule is the main substantive provision giving effect to the Pointe Gourde principle in the new Code. There are two main changes to the existing law:(ii) the prospect of the same, or any other project to meet the same or substantially the same need, being carried out in the exercise of a statutory function,[9] or by the exercise of compulsory powers.
(1) We have followed our general approach under the new Code, which is to require all issues to be determined by reference to the "valuation date",[10] except as otherwise provided.[11]
8.10 The effect of these changes is best illustrated by reference to the two Jelson cases.(2) It is assumed that the project has been cancelled on the valuation date, not that it has never existed. This reflects the "cancellation assumption" approved by the House of Lords as the test to be used when considering appropriate alternative development under 1961 Act, section 17.[12]
8.11 Paragraph (b) comprises two modifications to the "cancellation assumption", as applied under section 17:
(1) Under (b)(i), for the reasons explained in the previous Part,[13] the effects of any past steps taken to implement the scheme are disregarded.[14] Thus, if the compulsory purchase order is for the last plot required for the completion of a project which has already begun, the owner gets no advantage from having held out for longer.[15]
(2) Paragraph (b)(ii) is directed to the future. It excludes from consideration any future prospect of the same statutory project being carried out, or of any other statutory project to meet substantially the same need. The first part is probably implicit in the cancellation assumption. The purpose of the assumption would be defeated if, having assumed cancellation of the actual project, the Tribunal was required to consider the possibility of exactly the same project being reactivated in the future.[16] The second part of the sub-rule is a logical extension of the same thinking, and follows the wording of a more limited provision of the existing law.[17]
8.12 The hypothetical exercise required by the House of Lords, though theoretically defensible, is impossible to apply in practice without resort to pure guess-work. This was recognised by the legislature in a limited amendment to the 1961 Act, which excludes consideration of alternative highway schemes.[18] Our proposed Rule applies that approach generally to all types of project.
8.13 This sub-rule reinforces the basic principle of the new Code, that circumstances are taken as they are in the real world, except to the limited extent provided by the specific rules. It makes clear that the "no-scheme world", which is a familiar but confusing feature of the current law,[19] has no part in the new Code. However, it also limits the scope for speculation under the cancellation assumption itself.(5) Sub-rule (4) does not require or authorise (save to the extent specified in (b)) consideration of whether events or circumstances at any time (before or after the valuation date) would have been different in the absence of the statutory project.
Depreciation due to blight
(6) Without prejudice to sub-rule (4), no account shall be taken of any depreciation (not attributable to diminished planning prospects) in the value of the relevant interest which is attributable to the land being blighted land, or to any indication (whether by way of particulars in a development plan, or otherwise) that the subject land, or any land in the vicinity, is likely to be acquired by a public authority.
"Blighted land" means land within any category defined by Schedule 13 to the Town and Country Planning Act 1990.
8.14 This sub-rule gives effect to our proposal for a wider rule for the disregard of decreases in value. As explained in the previous Part,[20] this is reflected in the existing law, under which depreciation due to any "indication" of the prospect of compulsory acquisition is excluded.[21] We think it is clearer and more logical to express this as a separate sub-rule, to reflect the fact that it is not simply the "other side of the coin"[22] of the rule for increases, but has a distinct purpose for the protection of property rights.[23] 8.15 We have retained the word "indication", but widened the rule to cover, first, depreciation due to any indication of the prospect of acquisition, not just of the subject land, but of any land in the vicinity; and, secondly, "statutory blight".[24] 8.16 The exclusion (in the parenthesis) of depreciation due to diminished planning prospects is intended to avoid any overlap with the planning status rules, which will be governed exclusively by Rule 14.[25]"Planning prospects" mean the prospect of planning permission for valuable development.
Reverse compulsory purchase
(7) For the avoidance of doubt, where land is treated as acquired compulsorily by an authority following a notice served by the claimant, compensation will be assessed:-
(a) in any case, in accordance with sub-rule (6); and
8.17 Where the acquisition results from a blight notice or purchase notice served by the owner, there is no statutory project as such, and normally no reason to infer one, since it is the owner's choice to dispose of the land. [26](b) where it is blighted land, on the basis that it was acquired for a statutory project corresponding to the public proposal which resulted in it being blighted land.
8.18 However, if the service of the notice is the consequence of blight caused by public proposals, or by indications of such proposals, it is fair that compensation should be assessed on the unblighted basis. This can be generally achieved by making clear that rule (6) applies to such cases of "reverse" compulsory purchase. However, as we have explained, that would not cover depreciation due to loss of any planning prospects. This may cause unfairness, where the land is blighted by public proposals which are likely to result in compulsory acquisition in due course. Accordingly, paragraph (b) ensures that, in respect of proposals recognised by the 1990 Act as giving rise to statutory blight, the owner is able to take advantage of the planning assumptions under Rule 14, as though there were a statutory project for the same purpose.[27]
13A Other heads of compensation
Injury to retained land
8.19 Under this head of compensation, the no-scheme rule has no direct application.[28] The issue is whether the compulsory acquisition has caused any diminution in the value of the retained land, whether by severance or by the adverse effect of the works.[29] It is necessary to reproduce the statutory rule that the extent of any injury is to be judged by reference to "the whole of the works".[30] (In our view, although the existing statutory rule does not use the term "statutory project", we think that the effect is identical to our proposed Rule).(1) In assessing injury to retained land (head B), reference to the "works" in Rule 4 includes a reference to all the works comprised in the statutory project;
Consequential loss
(2) In assessing compensation for consequential loss (head C):
(a) references in Rule 5 to any consequence of the compulsory acquisition include reference to any consequence of the statutory project;
(b) without prejudice to (a) consequential loss includes any loss of profits of a business (wholly or partly on the subject land) attributable to the matters referred to in sub-rule (6) (depreciation due to blight);
8.20 Where an authority acquires a business site in an area affected by blight, compensation for the land is based on the unblighted value. As we explained in the previous Part,[31] fairness and consistency in our view require that the same principle should apply to assessment of compensation for loss of profits.Provided that no claim may be made for consequential loss before the first notice date (save as permitted under Rule 5(1)(d)).
| Example A public house was acquired compulsorily. Both parties based their assessments of market value on the turnover of the public house. The claimant argued for a sum of £800,000 and the authority for a figure of £435,000. The difference depended on the expected turnover in the absence of the compulsory purchase order, and the reasons for the decline in trade in the months preceding the compulsory purchase order. The Tribunal held that the pattern of trade had been adversely affected by the prospect of the compulsory acquisition2 and the decreased value should be disregarded when assessing the property's trading quality and amount of compensation due. Compensation was determined at the higher figure. 1 Mercury Taverns Ltd v Coventry City Council LT 3.6.03 unreported. Although the case is directly relevant to market value (head A), it is no different in principle from a claim for consequential loss based on loss of profits. 2 The Tribunal found that the most plausible explanation for the decline in trade was that the landlady's attention had been distracted from running the pub, originally by her attempts to prevent the compulsory acquisition; latterly by her preparations to operate a different pub elsewhere. |
8.21 It is perhaps immaterial whether this is seen as an aspect of the Pointe Gourde rule. It may equally be seen as an extension of the "cause of action" underlying the claim for consequential loss. The claim is for loss caused, not merely by the compulsory acquisition, but also by the project giving rise to the acquisition, and by the associated blight.[32]
8.22 To ensure consistency with the rules for consequential loss, the proviso makes clear that the normal commencement date for loss under this sub-rule is the first notice date.[33]Planning status
Rule 14 Planning permissions – actual and assumed
Planning permissions and hope value
(1) For the avoidance of doubt, in valuing the land, the circumstances to be taken into account at the valuation date include:
(a) any planning permission for development which is in force at the valuation date (on the subject land or any other land); and
8.23 Since planning permissions normally run with the land, we see no reason why the benefit of any permissions actually in existence should not be taken into account, whether or not they would have been granted in the absence of the statutory project.(b) the prospect, in the circumstances known to the market at that date, of any other such planning permission being granted in the future.
| Example The subject land had been acquired for the M66 motorway. By the time of the notice to treat, the motorway scheme had led to permission being granted on the surrounding land (but not the subject land) for industrial and related development. A section 17 certificate was given for industrial development of the subject land. In valuing the subject land, the hypothetical permission for the subject land was taken into account.2 However, the actual permission for the surrounding land was ignored, under the no-scheme rule.3 The highly artificial result was that the subject land was valued with permission for industry, but as though surrounded by agricultural land. Under our proposals the actual permissions on the surrounding land would be taken into account. The subject land would therefore be valued in a more natural "real life" context. 1 Stayley Developments Ltd v Secretary of State LT December 2000 (ACQ/144/1998); [2001] RVR 251. 2 As required by 1961 Act, s 15(5). 3 See Appx D, para D.99, where this case is discussed in detail. |
8.24 This provision is consistent with our general approach that interests should be valued as far as possible by reference to circumstances in the real world as they stand at the valuation date. By the same token, if in the circumstances known to the market at that date there is a genuine prospect of permission in the future, it is an element of value which should in principle be taken into account. Such "hope value" is the subject of sub-rule (1)(b).
Appropriate alternative development
(2) Account shall also be taken of value attributable to appropriate alternative development of the subject land, in accordance with the following rules:
(a) "Appropriate alternative development" means development for which planning permission could reasonably have been expected to be granted on the assumptions set out in paragraph (b) (on the subject land, by itself or together with other land), on an application considered on the valuation date ("appropriate alternative development");
(b) The assumptions in (a) are that the circumstances are those prevailing at the valuation date, save that:
(i) The statutory project had been cancelled on that date;
(ii) No action has been taken (including acquisition of any land, and any development or works) by a public authority, wholly or mainly for the purpose of the statutory project;
(iii) There is no prospect of the same, or any other project to meet the same or substantially the same need, being carried out in the exercise of a statutory function, or by the exercise of compulsory powers.
8.25 This rule (though apparently complex) is intended to embody, in much shorter and simpler terms, the general philosophy of the 1961 Act: that the subject land should be valued with the benefit of any permission which would have been expected in the absence of compulsory purchase.[34] We do not understand the principle to be controversial. 8.26 Our proposed criteria, based on the "cancellation assumption", are designed to be consistent with those applied under Rule 13(4). In line with our general approach to the Code,[35] they are applied at the valuation date. For the reasons explained in the previous Part,[36] the rule is related to the subject land "by itself or together with other land". Paragraph (c), which matches sub-rule (1)(b), allows for "assumed" hope value.(c) Account shall also be taken of the prospect, on the same assumptions, but otherwise in the circumstances known to the market at the valuation date, of any other such planning permission being granted in the future.
Rule 14A Alternative development certificate
Application for certificate
(1) For the purpose of determining the permission or permissions to be assumed under Rule 14(2)(a) above, either the claimant or the authority may, at any time after the first notice date, apply to the local planning authority for an "alternative development certificate", in accordance with the following rules (and "procedural regulations" to be made by statutory instrument):
(2) An alternative development certificate is a certificate stating:
(a) the opinion of the local planning authority as to the classes of appropriate alternative development (if any) for which permission is to be assumed on the basis set out in Rule 14(2)(a) (on the subject land by itself or with other land);
8.27 This rule is intended to provide for a certification procedure, corresponding to section 17 of the 1961 Act. Unlike that provision, it is expressly linked to a rule (Rule 14 above) providing for "appropriate alternative development" to be taken into account in valuation. 8.28 We use the terms "appropriate alternative development" and "alternative development certificate", so as to emphasise the continuity with the existing law under 1961 Act, section 17.(b) A general indication of any conditions, obligations or requirements, to which the permission would reasonably have been expected to be subject.
Appeal to Lands Tribunal
(3) There shall be a right of appeal against the certificate to the Tribunal, by either the claimant or the authority, subject to procedural regulations, which shall include:
(a) Power for the Tribunal to determine the timing and scope of the hearing of the appeal, having regard to any related compensation reference;
(b) In particular, power for the Tribunal to direct
(i) that the appeal be determined on its own, or at the same time as a reference relating to the determination of compensation for which the certificate is required;
8.29 We have concluded that the right of appeal in respect of the certificate should be to the Tribunal, not to the Secretary of State of any other administrative agency. Our reasons are explained in the previous Part.[37] This will have the logical, and in our view desirable, consequence that the Tribunal is the ultimate arbiter on all matters relevant to the determination of compensation. We recognise, however, the advantages of the certificate procedure, as administered by planning authorities, in providing a flexible method of obtaining a ruling on the planning assumptions at an early stage, including local inquiries at the appeal stage. Our proposal is dependent on the Tribunal being able to develop equally flexible and economic procedures, if necessary in co-operation with the planning inspectorate. On the basis on our discussions with the Tribunal, and other responses, we have no reason to think this will not be possible. We propose that the details should be covered by regulations.(ii) that the hearing of the appeal should take the form of a local inquiry before a planning inspector (appointed for the purpose by the Chief Planning Inspector), and that the inspector be given delegated power to determine the appeal on behalf of the Tribunal;
Conclusive effect
8.30 On the assumption that either party has the right of appeal against a certificate to the Tribunal, we see no reason why it should not be made conclusive in normal circumstances. We see this as an improvement on the existing position, which makes a certificate conclusive against the authority, but not in its favour, and may therefore lead to extra uncertainty and expense in re-litigating the same issue.[38](4) Subject to any such appeal, or any direction of the Tribunal, an alternative development certificate shall be conclusive of the matters stated in it for the purposes of assessing compensation.
Special cases
(5) Regulations may provide for the application of the certificate procedure to special cases, including:
(a) the circumstances specified in 1961 Act section 19 (valuation by a surveyor where claimant absent from the United Kingdom or untraceable);
8.31 This sub-rule is uncontroversial, and addresses two distinct issues covered by the 1961 Act:(b) where the authority is seeking to acquire land by agreement.
(1) Section 19 of the 1961 Act provides a procedure for an application for a section 17 certificate to be made by the surveyor who determines compensation where the claimant is absent;[39]
(2) Section 22(2) provides a separate definition of the "proposal" for the purposes of the section 17 certificate, for cases where there is an offer to acquire by the authority, rather than a compulsory purchase order. In such a case it may be assist negotiations if the parties are able to obtain a decision on the planning assumptions to be made.
We think both these matters can be best addressed by regulations, rather than as part of the basic Code.
Provisions not replaced
Third Schedule rights
8.33 This concept dates back to the 1947 Act, under which the rights to carry out certain categories of minor development, listed in the Third Schedule to that Act, were treated as falling within the "existing use" of land. They were subject to compensation if the land were compulsorily acquired, and, in some cases, even if permission for such development was merely refused. The concept survived the restoration of market value, and still exists, in much restricted form, in the Town and Country Planning Act 1990.[42] 8.34 We commented that the survival of these rights in the 1961 Act seems an unnecessary complication. Our provisional proposal was simply to repeal section 15(3) and (4),[43] without replacement. Only one respondent opposed this proposal, largely on the grounds that such rights were a well-established part of the "existing use" value of land. However, we remain of the view that their historical value has been largely superseded, and that they are an unnecessary complication in a modern code.
8.35 This proposal was for the repeal of the provisions of Part IV of the 1961 Act, providing for compensation where planning permission for additional development is granted after compulsory acquisition.[44] They apply, in summary, where, within ten years of the completion of purchase by the authority, a planning decision is made granting consent for "additional development" on the subject land. The person to whom compensation was paid is entitled to claim the additional amount that would have been payable with the consent.[45] 8.36 We regarded this right to additional compensation as anomalous. We said:Subsequent planning permissions
Compensation under the ordinary rules is intended to reflect the full market value of the land at the valuation date, with all its present and future potential, including any hope value for future development. The claimant is then free to use the money for alternative investments (any delay in payment being compensated by interest). There is no obvious reason why he should be treated as though he had retained his investment in the acquired land, until any potential value had become a certainty. No such expectation would arise on an ordinary sale in the private market, in the absence of a specific provision in the contract of sale for "clawback" of future development value.[46]
8.37 Most respondents agreed that the provisions of Part IV of the 1961 Act should be repealed. Indeed, although we asked for information about the use of the provisions in practice, none of our respondents was able to refer to any actual examples. It was suggested that this might because the provisions were not well-known, or because the 10 year period was too short. Some thought that the period should be extended to 15 or 25 years.[48] Those who favoured retention acknowledged that market value should reflect the "hope" of future permissions, but thought that fairness required some provision to deal with cases where there are unforeseen changes in the planning framework. 8.38 In the light of these responses, and the lack of evidence of use of the provision, we see no reason to change our proposal for repeal. 8.39 We accordingly recommend:We also considered that, if the provision were to be retained, its detail should be reviewed and updated.[47]
Rule 15 Provisions not replaced
The following should be repealed without replacement:
(1) 1961 Act section 15(3) and (4) ("Third Schedule rights")
(2) 1961 Act, section 23 (compensation where permission for additional development is granted after acquisition).
Note 2 See the provisions cited in para 7.2 above. The proposed repeals are listed in Appx B to this report. [Back] Note 3 Paras 7.16 – 7.18 above. [Back] Note 4 Para 7.26 above. [Back] Note 5 We have not thought it necessary to define “statutory function” (cf Local Government Act 1972, s111, referring to the “functions” of a local authority). It is intended to encompass either a specific statutory duty to provide a particular service (e.g. that of a water undertaker) or a more general statutory responsibility (eg that of a housing or planning authority). [Back] Note 6 See para 7.25 above. For example, in Wilson v Liverpool City Council [1971] 1 WLR 302 (the facts are summarised under para 8.8 below), the land was compulsorily acquired for public housing; compensation was assessed on the basis of private residential development, but discounting the added value given by the authority’s investment in infrastructure. [Back] Note 7 CP 165, paras 7.20 – 7.21. As we noted, the same objective lay behind the Scott Report’s recommendation, which led to rule (3) of the 1919 rules: “while we would exclude as a basis of market value any possible competition for the land between statutory undertakers, we would not exclude the competition of those who require the land for any purpose for which statutory powers are not required” (see Appx D, para D.31). [Back] Note 8 Paras 7.26– 7.28 above. [Back] Note 9 Again we have not attempted a definition of “the exercise of a statutory function”. There is a parallel with the words “in the exercise of statutory powers”, in 1973 Act, s 1(3) (compensation for use of public works). The intention is to exclude the possibility of a similar project by an authority exercising a statutory function; but not one by a private developer, even though necessarily acting under statutory authorisations (such as planning permissions): see Herts CC v Ozanne [1991] 1 WLR 101, 110–113 (discussing the similar words “in pursuance of statutory powers” in 1961 Act s 5 rule (3)). The distinction may not always be clear-cut, particularly in relation to privatised utilities: cf Harwich Dock Co Ltd v IRC (1978) 76 LGR 238 HL (a rating case, relating to a dock constructed, unusually, under statutory authorisations, rather than a specific Private Act). [Back] Note 10 The “valuation date” for valuing the subject land is the date of determination, or if earlier the date when the authority takes possession: see Rule 10, discussed at Part VI above. [Back] Note 11 See para 2.3 and para 6.2 above. [Back] Note 12 Fletcher Estates v Secretary of State [2000] 2 AC 302, 322H. See para 7.29ff above. In the context of 1961 Act, s 17, the cancellation assumption is applied at the date defined by 1961 Act, s 22(2) (see para 7.29 n 57 above), rather than the “valuation date”. In the new Code, the valuation date is used as the base date wherever possible. [Back] Note 13 See paras 7.29 – 7.30 above. [Back] Note 14 The words in parenthesis recognise that value may have been added by physical works (such as infrastructure improvements), or by other action, such as land assembly. [Back] Note 15 A hypothetical example is discussed in para 7.32 above. [Back] Note 16 See Grampian Council v Secretary of State [1983] 1 WLR 1340, 1345. [Back] Note 17 The exclusion of any other project to meet “substantially the same need” was explained in CP 165, paras 7.20 – 7.21. The wording follows that of 1961 Act, s 14(6), which is directed only to road proposals, and was designed to reverse the effect of the decision of the House of Lords in Margate Corp v Devotwill Investments [1970] 3 All ER 864: see Appx D, paras D.80 – D.81 below (the case is summarised in the following example). This also accords with the original intention of 1961 Act, s 5(3) (as proposed in the Scott Report): see Part VII, n 5 above. [Back] Note 18 1961 Act s 14(6). [Back] Note 19 See Appx D, para D.78 – D.81. [Back] Note 20 Paras 7.19 – 7.21; Appx D, paras D.82– D.83. [Back] Note 22 Or “the reverse of the medal” (see Appx D, para D.83 n 157). [Back] Note 23 See para 7.20 above; CP 165, paras 6.37 – 6.38. [Back] Note 24 The term “statutory blight” refers to the categories which may give rise to service of a blight notice under the 1990 Act: see paras 7.44 – 7.45 above. [Back] Note 25 Thus, on the facts of the second Jelson case (see para 8.10 above), this sub-rule could not be relied on to secure residential value (as was held to be the effect of the corresponding words of rule 1961 Act, s 9). [Back] Note 26 See paras 7.44 – 7.45 above. [Back] Note 27 In the interests of certainty, we have confined this provision to the statutory categories of blight. As we have explained (para 7.20), the provisions relating to statutory blight are to be subject to review by the Government, in the course of which any anomalies or inadequacies can be addressed. [Back] Note 28 See para 7.46 above. [Back] Note 29 See para 3.13 above. [Back] Note 30 1973 Act, s 44: see para 3.14 above. [Back] Note 31 Para 7.48 above. [Back] Note 32 This can be seen as a limited extension of the approach of the Shun Fung case: see para 7.48 above. [Back] Note 33 See para 4.40 above. [Back] Note 34 See paras 7.50– 7.52 above; Appx D, para D.98ff. [Back] Note 36 Para 7.55 above. [Back] Note 37 Para 7.59ff above. [Back] Note 38 1961 Act s 14(3)(3A). See the Pentrehobyn case (Appx D Postscript), where the Tribunal disagreed with the nil certificate issued on appeal by NAW. [Back] Note 39 For the valuation procedure in such cases (under 1965 Act Sched 2) , see CP 169, para 5.38ff [Back] Note 40 CP 165, para 7.47. [Back] Note 41 Following the 1991 Act (see below), the only categories which remain relevant, for compensation purposes under the 1961 Act, are para 1 (rebuilding or alteration of existing buildings, subject to no more than 10% increase) and para 2 (use of a single house as two houses). These “rights” are distinct from the actual permissions granted for certain forms of minor development (such as house extensions) granted by development order (under 1990 Act s 58(1)(a)); as actual permissions, they will be reflected in compensation under 1961 Act s 14(2). [Back] Note 42 Schedule 3 has to be read subject to the conditions specified in Schedule 10. The right to compensation on a refusal of planning permission was repealed by Planning and Compensation Act 1991, s 31, following a Consultation Paper (“Compensation Provisions in the Town and Country Planning Acts” – DoE 1989), which described these provisions as “rarely used and increasingly anachronistic”. [Back] Note 43 Section 15(4) excludes cases where compensation has previously been paid under a removal or discontinuance order. [Back] Note 44 The provisions have an unusual history. They were first enacted in the 1959 Act (s 18), recast in the 1961 Act, repealed by the Land Commission Act 1967, and then re-enacted with modifications by the Planning and Compensation Act 1991: see now 1991 Act, s 66 and Sched 14. [Back] Note 45 See CP 165, paras 8.65ff. [Back] Note 46 CP 165, para 8.72. [Back] Note 47 For example, we suggested that it should have been redrafted to take account of the West Midland Baptist case, which established that values should be taken at the date of entry or determination of compensation (“the valuation date”), rather than the date ofnotice to treat: CP 165, para 8.74. [Back] Note 48 On the other hand, one respondent thought that it should be reduced to five years. [Back]
