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You are here: BAILII >> Databases >> The Law Commission >> Towards a Compulsory Purchase Code: 2 Procedure (Report) [2004] EWLC 291(8) (16 December 2004) URL: http://www.bailii.org/ew/other/EWLC/2004/291(8).html Cite as: [2004] EWLC 291(8) |
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8.1 During the course of compulsory purchase it will be necessary for the acquiring authority to deal with various rights and interests over the land being acquired. In this Part we consider the current law as it affects such rights and make recommendations for reform. We deal with interference with private rights (easements, covenants and analogous rights such as profits à prendre), with minor tenancies, with mortgages and rentcharges and finally with public rights of way.INTERFERENCE WITH RIGHTS
(1) PRIVATE RIGHTS
8.2 Land that is compulsorily purchased may itself be subject to rights such as easements and covenants which are exercisable for the benefit of neighbouring land. We shall refer to such rights as "private rights". The land over which such private rights are exercisable is termed the "servient land", and the neighbouring land with the benefit of such rights the "dominant land". 8.3 While the compulsory purchase order does not of itself result in the acquisition of private rights over the land, there are statutory powers, albeit exercisable only in limited circumstances, whereby the acquiring authority may expressly "extinguish" such rights. Where private rights are not expressly extinguished difficult questions concerning the enforceability of such rights may arise, both during the execution of the works and subsequently. The effect of the compulsory purchase order is to confer on the acquiring authority immunity from liability for any interference with the enjoyment of private rights attributable to the works being carried out under statutory authority. The scope and extent of this immunity (or, as it is sometimes known, "override"), which according to the circumstances may derive either from statute or from common law, is uncertain. Once the works have themselves been completed, the rights may revive and be enforced against the servient land. Should the servient land be disposed of by the acquiring authority at any time, a purchaser or other third party who obtains that land may be bound by the rights in accordance with ordinary principles of property law. 8.4 In our Consultative Report on Procedure we argued that the existing position gave rise to uncertainty which the acquiring authority should have the opportunity to dispel. We therefore proposed a new statutory procedure whereby either party (the acquiring authority or the claimant) may elect that the rights over the land be extinguished rather than merely overridden. This procedure would enable the acquiring authority to obtain clear title to the land, subject of course to payment of compensation to the dominant owner, and would thereby facilitate the onward transmission of acquired land free of incumbrances. 8.5 Where private rights are extinguished, the claimant would be entitled to compensation under the standard provisions for compensation on compulsory purchase contained in Rules 1 to 6 inclusive of the Compensation Code.[1] In our Final Report on Compensation we recommended that there should be a separate entitlement to compensation where private rights are overridden.[2] The claimant should be entitled to the diminution in the market value of the dominant land and to any consequential loss not reflected in the loss of market value. This recommendation was given expression in Rule 17 of the Compensation Code.Introduction
8.6 Neither the Compulsory Purchase Act 1965 (dealing with the notice to treat procedure) nor the Compulsory Purchase (Vesting Declarations) Act 1981 (dealing with the general vesting declaration procedure) contains clear provisions concerning the interference with private rights over land. 8.7 Section 10(1) of the Compulsory Purchase Act 1965 defines the jurisdiction of the Lands Tribunal to determine compensation disputes as being:Existing Law
in respect of any land, or any interest in land, which has been taken for or injuriously affected by the execution of the works
8.8 The effect of a vesting declaration is that the land vests in the acquiring authority as though under the 1965 Act "any power to execute a deed poll had arisen in respect of all the land and all the interests therein", and the authority had duly exercised that power on the vesting date.[4] The reference to the 1965 Act obscures what might otherwise appear to be a clear statement that the authority obtains clear title, free of any interests. Indeed, it is thought (although the matter is not free from doubt) that the vesting declaration procedure does not operate automatically to extinguish easements and other similar rights over the subject land, because such rights would not be so extinguished had the acquiring authority been proceeding by the notice to treat procedure of the 1965 Act.[5]and thereby recognises the existence of a right of compensation in such circumstances. It does not, however, acknowledge any right of compensation for loss caused by subsequent use,[3] nor does it set out any procedure for determining whether a right has been acquired (or extinguished) or simply interfered with (whether on a permanent or temporary basis).
8.9 Private rights may be extinguished by invoking one of a number of express statutory powers.[6] Such provisions (which are relatively rare) allow the acquiring authority to obtain clean and unencumbered title from the outset. Alternatively, the acquiring authority may enter into an express agreement, usually in consideration for the payment of compensation, with the person entitled to the private right.[7] In the absence of extinguishment by either of these means, however, the compulsory purchase procedure will do no more than "override" the rights in question.Extinguishment
8.10 In Re Simeon and Isle of Wight RDC,[8] Luxmoore J stated the broad effect of "override". Although the private rights may continue to bind the land, it is not possible to prevent the implementation of the statutory project by seeking to enforce the private rights in question:Override
8.11 Private rights may also be overridden by statute. Section 237 of the Town and Country Planning Act 1990 confers an immunity to carry out building operations on land acquired for planning purposes. It empowers local authorities to interfere with easements and other rights where land has been acquired or appropriated[10] for planning purposes provided that development is in accordance with planning permission and compensation is paid:It is, I think, settled law that in all cases where land is subject to a burden which runs with it for the benefit of other land, a purchaser taking under compulsory powers takes the land subject to that burden like any other purchaser; but the covenant cannot be enforced by injunction in the Courts if the breach of it is attributable to the execution of the works authorised by the statute under which it was taken, or to the exercise of the statutory powers thereby conferred on the purchaser.[9]
8.12 Section 237 is, however, limited in its effect. In Thames Water Utilities Ltd v Oxford City Council,[12] a council had appropriated land to planning purposes and used its statutory powers to override a restrictive covenant affecting the land. The land was leased to a football club which was intending to build a stadium upon it, thereby contemplating use in breach of the restrictive covenant. The court held that although section 237 permitted temporary non-compliance with the covenant for the duration of the works of construction, it did not authorise the subsequent use of the land in breach of covenant.The statutory objective which underlies section 237 ... is that, provided that work is done in accordance with planning permission, and subject to payment of compensation, a local authority should be permitted to develop their land in the manner in which they, acting bona fide, consider will best serve the public interest. To that end, it is recognised that a local authority should be permitted to interfere with third party rights.[11]
8.13 Particular difficulty is caused when the acquiring authority wishes to dispose of the subject land for development, as there is a substantial risk that the rights, moribund during the execution of the authorised works or the period of authorised use, may then revive. On disposal of the subject land, the rights remain in suspension in so far as the use of the land continues to be for the purpose for which it was compulsorily acquired. If that original purpose is exceeded, however, immunity from enforcement of the overridden right will cease. 8.14 In Marten v Flight Refuelling Ltd,[13] agricultural land, requisitioned by the Air Ministry in 1942 in order to build an aerodrome, was sold in 1943 to its sitting tenant subject to a covenant restricting its use to that of agriculture. In 1947 the Air Ministry let into occupation an aviation company, and in 1958 the Ministry of Defence compulsorily acquired the land under the Defence Acts. The issue was the extent to which the covenant bound the aviation company, or continued in suspension. Wilberforce J held that the covenant could not be enforced so as to prevent use by the Air Ministry or its agents (the aviation company) for the purpose for which the land was acquired or use by the aviation company so far as its activities could be broadly treated as being done "for the purposes for which the airfield may be considered to have been acquired." The company was therefore protected in respect of its research into flight refuelling being conducted for the RAF, but not in respect of its other activities, in particular contract work being undertaken for the Belgian Air Force. 8.15 What is unclear from the limited authority available is whether the mere fact of payment of compensation[14] for the interference might perpetuate the suspension, notwithstanding the removal or termination of the original cause for the interference. It has been argued that following payment of compensation the acquired land should continue to benefit from immunity only as long as the original cause of interference remains and the statutory scheme carries on.[15] If, therefore, the authority disposes of the land subject to the private rights, those rights may be exercisable once more against the authority's successors in title, notwithstanding payment of compensation.[16]Extent of immunity
8.16 In our Consultative Report on Procedure we identified various deficiencies in the present law, and came to the provisional view that statutory clarification was necessary.[17] The deficiencies are as follows:Deficiencies
(1) There is no universally applicable means whereby the acquiring authority can choose to extinguish private rights on payment of compensation;
(2) The effect of override is uncertain. In particular, it is not clear whether and when statutory immunity extends to successors in title of the acquiring authority;
(3) The Thames Water Utilities[18] decision has highlighted a limitation on the statutory powers contained in section 237 of the Town and Country Planning Act 1990 which appears to be unsatisfactory; and
(4) In general terms, clarification of the effect of interference with private rights and its relationship with the payment of compensation is much needed.
8.17 In our Consultative Report on Procedure we proposed a new statutory procedure whereby either party could elect to proceed on the basis of extinguishment of rights rather than simply overriding them to the extent required by the project.[19] That procedure was designed to address the four deficiencies identified. 8.18 The key procedural components of these proposals were that:Provisional proposals
(1) There should be a presumption that private rights which attach to the subject land are overridden, unless (and save to the extent that) the acquiring authority elects to extinguish them;
(2) Where private rights are to be extinguished, the authority should proceed as though those rights are interests entitling the relevant owner to notice to treat. On completion of the purchase (or, if earlier, on taking of possession by the authority), all rights to which the election relates shall be extinguished;
(3) Where private rights are to be overridden, immunity should attach to the erection, maintenance or use of any building or other work whether done by the local authority or by a person deriving title under them, if done in accordance with planning permission;
(4) Any person who suffers loss by the extinguishment or override of any right, is entitled to compensation under the Compensation Code;[20] and
(5) Where a compensation claim is made for rights which have been overridden, either party may elect for compensation to be paid on the basis of extinguishment (or partial extinguishment) of the right. In that event, the right shall be treated as extinguished (or partially extinguished) for all purposes.
Consultation
8.19 In our Consultative Report on Procedure we first asked whether consultees agreed that, where there is to be interference with existing private rights, the position should be clarified by legislation.[21] Respondents were unanimous that the procedure for interference with private rights should be so clarified. Particular concern was expressed about the decision in the Thames Water Utilities[22] case and its impact on statutory immunity.The need for legislative reform
8.20 We then asked whether consultees considered that the acquiring authority should elect to extinguish or to override rights from the outset and in the event that rights are to be extinguished, the authority should proceed by way of notice to treat.[23] 8.21 Most consultees agreed that the notice to treat procedure was the appropriate machinery to effect extinguishment of private rights, although some concern was expressed about the practical problems that may arise. In particular, the Law Society observed that the acquiring authority may not be aware of all private rights affecting the subject land. This may lead the authority, as the Welsh Development Agency argued, to serve notices on neighbouring landowners whether required or not. 8.22 English Partnerships advanced the argument that private rights should not be capable of being overridden and that extinguishment (with proper compensation) should therefore be the only means of dealing with them. The CPO should contain a schedule listing those private rights to be extinguished. This would provide certainty for the current and future owners of the land affected. 8.23 Although no other consultees argued that override should be abolished, there was some support for adoption in appropriate cases of the "scheduling" approach to private rights. Concern was, however, expressed that it would not always be practicable as the acquiring authority may not be aware of the private rights likely to be interfered with. One suggestion was to introduce a statutory presumption of extinguishment: that all easements affecting the subject land (whether or not "scheduled" to the order) would be extinguished unless the order provides to the contrary. Another was that it should be for the parties to agree whether rights are overridden or extinguished, and that in default of such agreement they should be overridden. 8.24 There was some concern about the appropriate timing of an election by the acquiring authority. We can see that it may often be difficult to identify rights that are likely to be affected, and the extent of interference, until the works have commenced. On the other hand, the need for certainty may dictate expedition. 8.25 In general, however, consultees supported our proposal that the acquiring authority should be entitled to elect between extinguishment and override.Election by the acquiring authority
8.26 We asked whether either party should be able to opt for extinguishment (or partial extinguishment).[24] This could be achieved by allowing the owner whose rights are to be interfered with to serve notice on the authority seeking extinguishment (instead of override) of those rights. 8.27 A significant majority of consultees agreed that affected owners should be entitled to elect extinguishment of their private rights, subject to certain caveats. It was suggested that it would be necessary to impose time limits for such an election, for instance, that the election would have to occur before service of notice of entry. It was also suggested that the owner's notice should be subject to appeal by the acquiring authority. 8.28 In response to this question, another important issue was raised: whether a landowner should have the right to oppose an election by an authority for extinguishment. RICS argued that extinguishment should not follow automatically once the election is made by the acquiring authority. Landowners should be entitled to object to an authority's intent to extinguish. For example (it was said), where there is to be an acquisition of open space land (protected by a covenant as to future use) for urban regeneration, and that land is to remain open space in the development project, why is it necessary to extinguish the covenant automatically? Surely that issue should only arise if, at a later date, the authority seeks to undertake infill construction on that land?Election by the affected party
8.29 Finally, we asked consultees whether, in the event of "override", statutory immunity should apply both to erection and to use of any buildings or other works.[25] This issue arose from the decision in Thames Water Utilities v Oxford City Council[26] which gave a restrictive interpretation of section 237 of the Town and Country Planning Act 1990. We further proposed in the Consultative Report on Procedure that an extended section 237 should apply generally to all authorities exercising compulsory purchase powers, not just local authorities exercising planning powers.[27] Consultees favoured clarification and expansion along these lines.Extent of immunity
Recommendations for reform
8.30 We recommend that the procedure for interference with private rights following compulsory purchase should be set out clearly in legislation. It should apply to compulsory purchase under both the notice to treat and the vesting declaration procedures.Procedure to be contained in legislation
8.31 We believe that it is important to retain the flexibility currently afforded by the dual options of extinguishment and override. We resist the suggestion that acquiring authorities should be entitled only to extinguish private rights. While we can see the advantage of listing the rights being affected in a schedule to the order itself, and thereby providing certainty, we do not think this is practicable in all cases.[28] 8.32 The effect of extinguishment is that the right will be permanently eradicated. It will not be capable of subsequent revival. To insist upon extinguishment in all cases would impose greater liability to compensate upon the acquiring authority than currently applies. Where the acquiring authority only requires suspension of the rights for a limited period or for limited purposes, extinguishment may be a disproportionate response to the authority's needs. It should however continue to be a matter for the discretion of the acquiring authority whether it deals with private rights by means of extinguishment or "override". We consider that it would be highly unsatisfactory for those with private rights to be entitled to challenge the election that is made as it could place serious obstacles in the way of the process of confirmation. 8.33 It is unrealistic, in our view, to expect acquiring authorities to be aware of all private rights which may affect the subject land. This is a further reason why "override" and its concomitant immunity is so important and so useful, as it enables works to be carried out pursuant to the CPO without prior identification of every possible infringement of private rights over the subject land. 8.34 We believe that we should retain "override", acknowledging that where works are being carried out the rights affected should be curtailed only so far as is necessary, and should be capable of subsequent revival. This would allow for flexibility in the process of land assembly where it may not be clear, until the works are under way, to what extent interference is required. 8.35 We therefore recommend that there should be a presumption that a CPO overrides private rights exercisable over the subject land, without need for the rights to be expressly identified in the order itself. At the same time, it should be open to the acquiring authority or the owner of the private right potentially overridden by compulsory purchase to elect to have the right extinguished.Presumption of override with election to extinguish
8.36 If the acquiring authority wishes to extinguish the rights, then it must identify them and make an election before the first notice date, that is the date of publication of the notice of making the order. Notice to extinguish (which we refer to as "notice of election") must be served by the authority on every "qualifying person", as newly defined in section 100(5) of the Planning and Compulsory Purchase Act 2004.[29] The recipient of the notice may object to the proposed extinguishment by serving counter-notice to such effect. The only ground of objection will be that the dominant land (that is, the land benefited by the right in question) will no longer be reasonably capable of being used for its current purpose. The objection will be determined by the Secretary of State as part of the order confirmation process. If there is no objection, then the authority should serve notice to treat on the owner of the right, and it will be duly extinguished on completion of the purchase or on taking of possession by the authority (if earlier). 8.37 Where a right is being overridden by an acquiring authority (no notice of election having been served), the owner of the right may in turn elect that the right be extinguished and compensation paid on that basis. In this case, the authority will have no right of objection or appeal. 8.38 If an authority proceeds on the basis of partial extinguishment of a right (serving notice of election accordingly), leaving the remainder to be overridden, a claimant should (we believe) be able to serve notice of extinguishment relating to that remainder.Notice of election: timing and service
8.39 It is essential that legislation makes clear the effect of private rights being overridden. While the statutory purpose is being carried out (in accordance with planning permission) by the acquiring authority or by any person deriving title under it, the right will not be enforceable by the owner of the dominant land. This arrangement will protect not only the acquiring authority but also their successors in title such as purchasers of the freehold estate or tenants. Any works falling outside the statutory purposes will not benefit from statutory immunity.Effect of override
Recommendation (22) – Interference with private rights
(1) Where an authority undertakes an operation on or uses land for a statutory purpose, and that land is subject to easements or other private rights, it should be presumed that such rights will be overridden, unless the authority elects to extinguish the rights (or any of them) over all or part of the land.
(2) Where rights over land are overridden, the erection, construction or maintenance of any building or work on land or any use of land, whether done by the authority or by a person deriving title under it, should be deemed lawful if done in accordance with planning permission and for the statutory purpose, notwithstanding interference with the rights.
(3) Where an authority elects to extinguish any right, it should be required to serve "notice of election" on every qualifying person on or before the first notice date, describing the right and its extent.
(4) On receipt of a notice of election, the qualifying person should be entitled either to:
(a) accept the notice; or
(b) serve on the authority "notice of objection" to the proposed extinguishment within a prescribed period, which objection will be determined by the Secretary of State as part of the order confirmation process.
(5) Notice of objection should be able to be upheld by the Secretary of State only on the ground that other land held by the qualifying person which benefits from the right will no longer be reasonably capable of being used for the purpose for which it is currently being used by that person.
(6) Where notice of election is accepted or notice of objection is not upheld, the authority should proceed as though the right in question was an interest entitling the owner to notice to treat; and, on completion of the purchase or on prior taking of possession by the authority, the right described in the notice of election shall be extinguished.
(7) Where any right is overridden by an authority, and work on, or use of, the land has commenced (whether by an authority or a person deriving title under it), the owner of the right should be entitled to serve on the authority "notice of extinguishment" requiring the authority to acquire the right (or part of the right) and extinguish it.
(8) Section 237 of the Town and Country Planning Act 1990 should be amended so that immunity extends to the use of "any building or work" (as well as to erection, construction, etc), and to any acquiring authority acting within its statutory powers for a statutory purpose, in accordance with such permissions or consents as are required.
(2) MINOR TENANCIES
8.40 Where land is being compulsorily purchased, the acquiring authority must consider carefully the position of any potential tenants. There may be properties let on a fixed term which has many years to run as well as properties let on periodic tenancy which are terminable by service of notice to quit. Tenants may be protected by a regime of statutory security, for instance the Landlord and Tenant Act 1954, Part II (applying to business tenancies) or the Agricultural Tenancies Act 1995.[30] 8.41 The acquiring authority may decide to terminate the tenancy by exercising its powers as landlord under the tenancy agreement, for example, by serving notice to quit of an appropriate length on a periodic tenant. In the case of a fixed term tenancy to which no statutory security regime applies, it may simply allow the fixed term to expire. The advantage to the authority of letting the contract of tenancy take its course is that no compensation will be payable to the tenant, for the very good reason that the tenant will have suffered no loss as a result of the compulsory purchase. It may be, however, that this method of proceeding is not appropriate to the circumstances. Typically, the acquiring authority may require to terminate the tenancy, and to recover possession, expeditiously, before the date on which the tenancy agreement, together with any applicable regime of statutory security, will allow. 8.42 Statute has accordingly made provision for the effect of compulsory purchase of land on certain tenancies. We shall first consider section 20 of the Compulsory Purchase Act 1965, which deals with so-called "short tenancies" where an authority is proceeding with its main acquisition by notice to treat. We shall then examine section 9 of the Compulsory Purchase (Vesting Declarations) Act 1981, which sets out a procedure applicable to "minor tenancies" and also to certain other, longer, tenancies which are about to expire (hereafter "expiring tenancies"). The 1981 Act applies where an authority is proceeding with its main acquisition by vesting declaration. 8.43 In our Consultative Report on Procedure we proposed to retain the substance of the existing law, subject to restating that law in modern language. These proposals, as we have already indicated,[31] attracted a considerable number of comments. In our Final Report on Compensation we took the view that there was no need for a separate set of compensation rules governing minor tenancies, and recommended that the general rules for compensation applying to the compulsory acquisition of other interests should be applied on the acquisition or extinguishment of such tenancies.[32]Introduction
Existing Law
8.44 Where the acquiring authority proceeds with its main acquisition by notice to treat, section 20(1) of the Compulsory Purchase Act 1965 applies:Notice to treat procedure
8.45 The object of this provision, which derives from section 121 of the Lands Clauses Consolidation Act 1845, has traditionally been interpreted to be "to put short tenancies on a special footing of their own."[33] It is not therefore necessary (despite the apparently clear statement to the contrary in section 5 of the 1965 Act) for an acquiring authority to serve notice to treat on those with "short tenancies" as defined.[34] 8.46 Section 20 sets out no more than a statement of compensation entitlement. It was left to the Court of Appeal, in Newham LBC v Benjamin,[35] to elucidate the procedure underlying this provision. The authority could simply serve notice to quit in its capacity as landlord, or wait for the tenancy to expire, and thereupon recover possession. In either case, no entitlement to compensation, other than a possible claim for "disturbance" under the Land Compensation Act 1973,[36] would arise. Alternatively, the acquiring authority could expedite the recovery of possession by making a demand (through service of notice to treat) that the tenant leave earlier than his or her entitlement under the tenancy agreement. In that case, compensation pursuant to section 20 would be payable.If any of the land subject to compulsory purchase is in the possession of a person having no greater interest in the land than as tenant for a year or from year to year, and if that person is required to give up possession of any land so occupied by him before the expiration of his term or interest in the land, he shall be entitled to compensation for the value of his unexpired term or interest in the land, and for any just allowance which ought to be made to him by an incoming tenant, and for any loss or injury he may sustain.
8.47 Where the acquiring authority proceeds with its main acquisition by vesting declaration, the governing statute is the Compulsory Purchase (Vesting Declarations) Act 1981. It contains special rules which are applicable to land that is subject not only to a "minor tenancy" (that is "a tenancy from year to year or any lesser interest"[37]) but also to a "long tenancy which is about to expire".[38] This latter class of tenancy is intended to catch tenancies (of whatever duration) which shall terminate, or which are terminable, within one year of the vesting date: in other words, they are functionally equivalent to tenancies with an interest no greater than that enjoyed by tenants from year-to-year. The special procedure of the 1981 Act therefore applies to a wider range of tenancies than that of the 1965 Act. 8.48 The vesting declaration does not confer on the authority an immediate right to immediate possession, but anticipates the service of notice to treat, followed by notice of entry, on the occupiers of the land:Vesting declaration procedure
(2) The right of entry conferred by section 8(1) above shall not be exercisable in respect of that land unless, after serving a notice to treat in respect of that tenancy, the acquiring authority have served on every occupier of any of the land in which the tenancy subsists a notice stating that, at the end of such period as is specified in the notice (not being less than 14 days) from the date on which the notice is served, they intend to enter upon and take possession of such land as is specified in the notice, and that period has expired.
(3) The vesting of the land in the acquiring authority shall be subject to the tenancy until the period specified in a notice under subsection (2) above expires, or the tenancy comes to an end, whichever first occurs. [39]
8.49 Where the acquiring authority is proceeding by vesting declaration, notice to treat must, therefore, be served in order to terminate such tenancies in the absence of any contractual entitlement to do so. Where the authority is proceeding by notice to treat, on the other hand, no further notice to treat is required to be served in order to effect termination. The range of tenancies covered is wider in the case of the vesting declaration procedure than in the case of the notice to treat procedure. 8.50 As we explained in the Consultative Report on Procedure,[40] the advantage of these somewhat complicated provisions is that the acquiring authority is not initially concerned with those holding minor and expiring tenancies. It is open to the authority to allow fixed term tenancies to expire or to serve notice to quit pursuant to its rights under the tenancy or to come to terms with the tenant as to compensation or as to relocation. There is, it would appear, an attractive pragmatism underpinning the words in the statute.General
8.51 The statutory provisions are over-complicated, and section 20 is in need of restatement in modern terms. There are differences between the two procedures which have no sound rationale and which could usefully be eradicated.Deficiencies
8.52 We accordingly proposed that section 20 of the Compulsory Purchase Act 1965 should be restated in modern language, in accordance with the Newham case,[41] and that it should be expanded so as to include "long tenancies about to expire", thereby achieving consistency with section 9 of the Compulsory Purchase (Vesting Declarations) Act 1981.[42]Provisional proposals
8.53 We asked consultees whether they agreed that the current procedures for minor tenancies under the 1965 and 1981 Acts operated satisfactorily, and, if not, what amendments they believed should be made.[43] We also asked consultees whether section 20 of the 1965 Act should be restated in modern form, so as to achieve consistency with section 9 of the 1981 Act.[44] 8.54 While almost all consultees considered that section 20 of the 1965 Act should be restated in modern form, dissatisfaction was expressed by many about the current procedures. 8.55 As the Newham case indicates, it is common practice where the notice to treat procedure is being utilised to serve notice to treat on those holding such tenancies even though it is not required. This approach is viewed by some consultees as a sensible application of caution: for instance, there may be doubts as to the duration of the interests in question (and hence whether they fall within the class of minor tenancies at all). It also means that a tenant who expected to have their fixed term tenancy renewed at the end of the term (or periodic tenancy continue) obtains proper warning of the impending compulsory purchase of the tenanted land. 8.56 Criticism was made of the vesting declaration procedure by English Partnerships, arguing that it is not advantageous to an acquiring authority adopting that procedure to be required to serve notice to treat on minor tenancies and tenancies which are about to expire. They contend that it should be open to the authority to include all interests within a general vesting declaration without the need to pursue two separate routes in order to obtain full title (and thereby vacant possession). They contend that current law is unnecessarily complicated and they doubt the benefit of the dual system which does not require notice to treat under the 1965 Act but which makes it mandatory under the 1981 Act. 8.57 A more fundamental concern was the case for separate treatment of minor tenancies. Some consultees argued that having to distinguish certain types of property interest causes practical problems. First, many short-term tenants have an expectation that their tenancy will be renewed. Allowing their tenancies to expire by effluxion of time denies them the opportunity to arrange their affairs, and leaves them without compensation. Secondly, it can be difficult for acquiring authorities to establish whether a particular interest falls within the definition of minor tenancy. For this reason (as we have outlined above), authorities often serve notice on minor tenants. 8.58 Particular reference was made by the NFU and CAAV to tenancies of agricultural property; each proposing that notice to treat should be required in all such cases. Traditionally, a tenancy from year-to-year has been granted to an agricultural tenant on an indefinite basis and such tenancies have been protected under the agricultural holdings legislation. The Agricultural Tenancies Act 1995 now makes provision for "farm business tenancies". Any such tenancy granted for a term of more than two years will continue as a tenancy from year-to-year.[45] These consultees argued that the potential duration of the tenant's entitlement under this legislation was such that the tenant should be served with notice to treat.Consultation
8.59 We believe that it is important that acquiring authorities have flexibility in the methods of acquisition open to them. Not only should they continue to be able to choose between notice to treat and vesting declaration, they should be free either to invoke the normal contractual means of termination of tenancies (notice to quit, expiry of a fixed term) or to expedite the process by taking earlier possession and paying compensation to the dispossessed tenant. It should therefore be a matter of discretion for the acquiring authority whether to give notice to quit, to wait for tenancies to expire or to terminate by giving notice to treat. 8.60 At the same time, we believe that it is important that tenants who are likely to be affected by the exercise of compulsory purchase powers should obtain adequate notice of the authority's intentions in this regard. It is incongruous that the existence of a mandatory duty to serve notice to treat on the tenant depends on the choice of proceeding made by the acquiring authority. 8.61 Since Newham LBC v Benjamin,[46] it has been good practice, where the acquiring authority has been proceeding by notice to treat and wishes to terminate minor tenancies, to serve notice to treat on the tenants themselves. We believe that this practice should now be given statutory recognition and that acquiring authorities should be required to serve notice to treat whichever procedure they are adopting to effect the main acquisition. Section 20 of the 1965 Act should therefore make clear that the taking of early possession is a matter for the discretion of the acquiring authority, but once that discretion is exercised positively, the service of notice to treat on the tenants affected becomes mandatory. 8.62 This would, in our view, effect the reform being sought by those seeking better protection for those holding farm business tenancies as they would now be entitled to notice to treat if the acquiring authority adopts the "early possession" route. Similar protection would be afforded to tenants in analogous situations, notably a person holding a business tenancy within Part II of the Landlord and Tenant Act 1954.Recommendations for reform
Recommendation (23) - Minor tenancies
(1) The procedure for dealing with minor tenancies, and long tenancies about to expire, applicable where the acquiring authority is proceeding by vesting declaration (and contained in the Compulsory Purchase (Vesting Declarations) Act 1981), should be retained without amendment.
(2) The law should be amended so as to ensure that analogous procedures, and protections, apply where the acquiring authority is proceeding by notice to treat under the Compulsory Purchase Act 1965. In particular:
(a) where the authority acquires land, it should be subject to any existing minor tenancy and any long tenancy which is about to expire;
(b) the authority should not be obliged to recover possession immediately on acquiring the land, and it should be entitled to allow such tenancies to expire, or to serve notice to quit in order to terminate them; and
(c) if the authority wishes to terminate such a tenancy before it is entitled to do so under the tenancy agreement or otherwise, it should serve notice to treat, and notice of entry, on the occupier(s) of any of the land in which the tenancy subsists.
(3) MORTGAGES AND RENTCHARGES
8.63 Where money has been lent on the security of the land being compulsorily purchased, the mortgagee (the lender) is entitled to notice to treat, and provision is made by sections 14 to 17 of the Compulsory Purchase Act 1965 for the applicable compensation procedures. Section 18 makes similar provision in relation to rentcharges. 8.64 In our Consultative Report on Procedure, we sought views of consultees concerning any practical problems encountered in these areas and, subject to responses, proposed the retention of these provisions in the 1965 Act. There are no relevant recommendations in our Final Report on Compensation, and the Compensation Code contains no provisions dealing with mortgages or rentcharges.Introduction
8.65 By section 14 of the Compulsory Purchase Act 1965, an acquiring authority may purchase or redeem the interest of a mortgagee either immediately or on six months' notice. In either case, the mortgagee must be paid the outstanding capital sum (the principal), all interest due under the mortgage and any costs and expenses incurred. If the authority elects for immediate purchase, the authority must also pay six months' additional interest to the mortgagee. There are default procedures operative in the event of the mortgagee failing to release his or her interest in the mortgage or failing to make good title. 8.66 Section 14 confers a power on the acquiring authority. It does not impose a duty. The Lands Tribunal cannot review the conduct of the authority in the sense of determining the date by which it should have exercised its statutory power. This was the basis of the claimant's case in Shewu v Hackney LBC.[47] A CPO was made in respect of the claimant's house in 1984, at which time the mortgage was in arrears (of an amount in the region of £9,000) and the mortgagee (the local authority) was seeking possession. Possession was not in fact taken pursuant to the compulsory purchase powers until 1996. In the interim, the arrears had increased to over £28,000. This sum was however considerably less than the value of the house. The Court of Appeal held that the Lands Tribunal had no jurisdiction to decide by which date the acquiring authority should have redeemed the mortgage (and thereby released the claimants from further liability for interest). 8.67 Where there is negative equity, section 15 of the 1965 Act applies. The mortgagee, the mortgagor (that is, "the person entitled to the equity of redemption") and the acquiring authority are required to come to agreement as to the value of the land or the compensation to be paid. In default of such agreement, the Lands Tribunal decides. The amount agreed or awarded must then be paid by the acquiring authority towards the mortgage debt. The liability of the mortgagor under the mortgage is not, however, discharged and insofar as there is a shortfall, the mortgagee will be entitled to claim that sum from the mortgagor.Existing Law
8.68 It did not appear to us at the time of the Consultative Report on Procedure that the provisions under consideration had given rise to particular difficulties in practice. Insofar as the mortgagor may be placed in a financial predicament by delay in the compulsory purchase, we felt that the proposals contained in the Policy Statement imposing tighter timelimits on exercise of compulsory purchase powers and amending procedures for advance payments would deal directly with the root cause of the problem.Deficiencies
8.69 We accordingly proposed to retain the existing provisions dealing with mortgages and rentcharges contained in the 1965 Act.[48] We did note the desirability of a simpler statement of the rules in any future consolidation.Provisional proposals
8.70 We asked consultees whether sections 14 to 18 of the 1965 Act gave rise to any practical problems which should be addressed.[49] More specifically, we asked consultees what they believed to be the practical benefits (if any) of the alternative options for dealing with mortgages contained in section 14.[50] 8.71 For the most part, consultees were unable to identify any real practical problems concerning these provisions, and the majority agreed with our provisional proposal. 8.72 The principal practical problem that was identified was that of "negative equity". CAAV believe that the claimant should not be put in a position of default by the misfortune of compulsory purchase, in particular where there has been no previous difficulty in servicing the mortgage debt. RICS has similar views. The acquiring authority should be required to put the claimant in the same (or similar) position as they were before the acquisition took place, and in order to achieve this it should take reasonable steps to ensure that any loan secured on the property (or any new property) should be of the same amount, and subject to the same conditions, as the previous mortgage. Both CAAV and RICS proposed that the appropriate means of effecting this would be to require the acquiring authority to indemnify the claimant. 8.73 The Welsh Development Agency took a more commercial view of the mortgage agreement. The mortgage comprises a debt knowingly incurred by the mortgagor which the mortgagor should therefore be required to pay off. It is no more than a monetary loan secured on land, and analogous to a bank loan secured on business equipment. 8.74 We considered the question of negative equity in the course of our work on compensation for compulsory purchase. In our Final Report on Compensation, we considered that the only truly effective solution to the problem of negative equity would involve a very considerable expansion of the current law of consequential loss.[51] We do not consider it appropriate to re-open this issue now, as it is essentially a matter of compensation rather than procedure.Consultation
8.75 It seems to us that the law should strike a fair balance between the competing rights of mortgagee, mortgagor and acquiring authority. It should take into account the effect of the compulsory acquisition on the relationship of mortgagee and mortgagor. 8.76 We do not think that it is possible to make a compelling case for reform of sections 14 to 18 of the 1965 Act. As one consultee put it, the provisions may not be "perfect", but they are "reasonably reliable in complex areas". There is no evidence of practical difficulties in their operation.Recommendations for reform
Recommendation (24) - Mortgages and rentcharges
The procedure for dealing with mortgages and rentcharges in the subject land (contained in the Compulsory Purchase Act 1965) should be retained in its current form, subject only to restatement in modern language in any future consolidation.
(4) PUBLIC RIGHTS OF WAY
8.77 There is a statutory procedure available under section 32 of the Acquisition of Land Act 1981 whereby the acquiring authority may seek to extinguish a public right of way over the subject land.Introduction
8.78 Section 32 makes provision for what might be termed an "acquisition extinguishment order". The acquiring authority must be satisfied either that a suitable alternative right of way has been or will be provided or that no alternative is required. The order is subject to confirmation by the Secretary of State. 8.79 Extinguishment of a right of way under an extinguishment order cannot take effect before:Existing Law
(a) the CPO has been confirmed (or if the Secretary of State is the acquiring authority, before the order is made);
(b) the date the acquiring authority takes possession (if possession has been taken in exercise of the power contained in section 11 of the Compulsory Purchase Act 1965 or by agreement); or
(c) the date the acquisition of the land is completed (if possession is not taken in exercise of the power as above).[52]
8.80 In the absence of any information as to how the section 32 procedure worked in practice, we took the view in the Consultative Report on Procedure that it seemed useful to have a specific power of this kind in order to stop-up rights of way. We noted that there was an apparent overlap with powers statutorily conferred on highway authorities and planning authorities.[53]Deficiencies
8.81 We proposed that the current statutory power contained in section 32 of the Acquisition of Land Act 1981 should be retained without amendment.[54]Provisional proposals
8.82 We asked consultees how frequently this procedure was used in practice, and whether it gave rise to any practical difficulties.[55] 8.83 We were not entirely surprised by the general response that section 32 is little used, and indeed that its existence is not widely known. Some consultees admitted that they had never used the procedure as a result of ignorance. No particular problems had come to light when the procedure had been invoked, and it was generally felt that it should be retained.Consultation
8.84 We accordingly confirm our provisional proposal to the effect that the procedure contained in section 32 of the 1981 Act should be retained without amendment.Recommendation for reform
Recommendation (25) – Public rights of way
Section 32 of the Acquisition of Land Act 1981 should be retained in its current form and should not be amended.
Note 1 See Towards a Compulsory Purchase Code: (1) Compensation (2003) Law Com No 286, Parts II to IV for proposed Rules 1-6 [Back] Note 2 Law Com No 286, paras 9.10-9.12. [Back] Note 3 This is a deficiency which we have recommended remedying by legislation: see Law Com No 286, para 9.12, Rule 17 of the Compensation Code. [Back] Note 4 Compulsory Purchase (Vesting Declarations) Act 1981, s 8(1). [Back] Note 5 Law Com CP No 169, para 6.18. This understanding of the current law is acted upon by the Land Registry who do not routinely remove notice of easements and covenants encumbering the land that is subject to a general vesting declaration. On the contrary, it is their practice on first registration to place a protective entry on the register to the effect that the land will be subject to any easements and covenants that may have been imposed prior to the date of vesting. [Back] Note 6 See Housing Act 1985, s 295; Town and Country Planning Act 1990, s 236; Channel Tunnel Rail Link Act 1996, s 7; Regional Development Agencies Act 1998, ss 19, 20 and Sched 6. [Back] Note 7 B Denyer-Green, Compulsory Purchase and Compensation (6th edn, 2000), p 105. [Back] Note 9 Re Simeon and Isle of Wight RDC [1937] Ch 525, 535 per Luxmoore J. [Back] Note 10 “Appropriated” means, for land that is already held by an authority, changing the statutory purpose for which it is held. [Back] Note 11 R v City of London Corporation, ex p Mystery of the Barbers of London [1996] 2 EGLR 128, 129 per Dyson J. [Back] Note 12 [1999] 1 EGLR 167. This first instance decision does not refer to the earlier, and arguably inconsistent, decision of Wilberforce J in Marten v Flight Refuelling Ltd [1962] Ch 115. [Back] Note 14 Where the private right is not expressly released or extinguished by the terms of the agreement with the acquiring authority. [Back] Note 15 See B Denyer-Green, Compulsory Purchase and Compensation (6th edn, 2000), p 115. The author contends that in this respect it is arguable that Marten v Flight Refuelling Ltd is wrong. [Back] Note 17 Law Com CP No 169, para 6.22. [Back] Note 18 [1999] 1 EGLR 167. [Back] Note 19 Law Com CP No 169, paras 6.22-6.25 and Proposal 10. [Back] Note 20 See Towards a Compulsory Purchase Code: (1) Compensation (2003) Law Com No 286, Part XII, Rules 1 (right to compensation for cessation of interest or right overridden) and 17 (interference with easements, etc). [Back] Note 21 Law Com CP No 169, para 6.25, Consultation issue (P)(1). [Back] Note 22 [1999] 1 EGLR 167. [Back] Note 23 Law Com CP No 169, para 6.25, Consultation issue (P)(2). [Back] Note 24 Law Com CP No 169, para 6.25, Consultation issue (P)(3)(b). [Back] Note 25 Law Com CP No 169, para 6.25, Consultation issue (P)(3)(a). [Back] Note 26 See para 8.12 above. [Back] Note 27 Law Com CP No 169, para 6.23. Powers analogous to section 237 can be found in New Towns Act 1981, s 19 and the Leasehold Reform, Housing and Urban Development Act 1993, Sched 20, para 5. [Back] Note 28 At present, where rights are being acquired or extinguished compulsorily, it is open to the acquiring authority to “schedule” them: see ODPM Circular 06/2004, App U, para 16(l). This procedure is not available, however, where the rights are only being overridden. [Back] Note 29 Amending Acquisition of Land Act 1981, s 12. [Back] Note 30 The use of the term “minor tenancies” in relation to residential property may need further consideration in the event of implementation of the Law Commission’s final recommendations in its Renting Homes project, which shifts the focus of housing law from residential tenancies to occupation agreements: see Interim Report (2003) Law Com No 284. [Back] Note 31 Law Com No 286, para 9.15. [Back] Note 32 Law Com No 286, para 9.16, Rule 18 of the Compensation Code. [Back] Note 33 Newham LBC v Benjamin [1968] 1 WLR 694, 700 per Lord Denning MR. [Back] Note 34 The term “short tenancies” is used in Newham LBC v Benjamin [1968] 1 WLR 694. The 1965 Act refers, somewhat misleadingly, to the tenants affected by section 20 as “tenants at will, etc”. [Back] Note 35 [1968] 1 WLR 694. The provision being interpreted was the Lands Clauses Consolidation Act 1845, s 121, the precursor of section 20, and in all material respects the same. [Back] Note 36 1973 Act, ss 37, 38. We now refer to such loss as “consequential loss”: see Law Com No 286, para 4.4 et seq, Rule 5 of the Compensation Code. [Back] Note 37 Compulsory Purchase (Vesting Declarations) Act 1981, s 2(1). [Back] Note 38 Defined in the Compulsory Purchase (Vesting Declarations) Act 1981, s 2(2) as “a tenancy granted for an interest greater than a minor tenancy, but having on the vesting date a period still to run which is not more than the specified period (that is to say, such period, longer than one year, as may for the purposes of this definition be specified in the declaration in relation to the land in which the tenancy subsists.)” It is to be assumed that the tenant will exercise options to renew, and the landlord will exercise options to terminate. [Back] Note 39 Compulsory Purchase (Vesting Declarations) Act 1981, s 9. [Back] Note 40 Law Com CP No 169, para 6.8. [Back] Note 41 Newham LBC v Benjamin [1968] 1 WLR 694 [Back] Note 42 Law Com CP No 169, para 6.8, Proposal 9. [Back] Note 43 Law Com CP No 169, Consultation issue (O)(1). [Back] Note 44 Law Com CP No 169, Consultation issue (O)(2). [Back] Note 45 Agricultural Tenancies Act 1995, s 5(1). The example was given of a tenancy granted for a ten-year fixed term which has eleven months remaining until its expiry. The effect of the statute is that the tenant would have the right to 23 months’ possession before they could be required to deliver up under the tenancy agreement. [Back] Note 46 Newham LBC v Benjamin [1968] 1 WLR 694. [Back] Note 47 [1998] 2 EGLR 232; (1999) 79 P & CR 47 (CA). [Back] Note 48 Law Com CP No 169, para 6.71. [Back] Note 49 Ibid, Consultation issue (R)(1). [Back] Note 50 Ibid, Consultation issue (R)(2). [Back] Note 51 Law Com No 286, para 4.29. As we explained at n 54, we would regard the loss occasioned by negative equity as one “based on the value of the land”, and excluded today by the Land Compensation Act 1961, s 5 rule (6). [Back] Note 52 Acquisition of Land Act 1981, s 32(4). An order cannot be made in respect of a right of way crossing land containing “apparatus” (including telecommunications apparatus) belonging to a statutory undertaker without that undertaker’s specific consent (which consent may not be unreasonably refused): s32(6). [Back] Note 53 Highways Act 1980, ss 116-120; Town and Country Planning Act 1990, ss 209-217. [Back]
