Category Archives: Wayleaves

Industrial purposes in pylon compensation agreement included warehousing

Public utilities have compulsory purchase powers and can insist on acquiring rights they require, but usually prefer to proceed by negotiation and agreement.

On occasion the deed of easement may contain a clause to ensure that if a development opportunity emerges in future, the Grantor or his successors will be entitled to compensation for any reduction in value due to the existence of the pipes or wires.

There may be advantages to both parties in this:

– the Grantor won’t have to accept a speculative assessment as to the reduction in the value of his land at some unknown point in the future for a use which can only be guessed at and could easily be underestimated; and,

– at the time of the easement being granted, the Utility would not be required to make a payment to compensate for a loss which may never happen.

In the Upper Tribunal (Lands Chamber) case of G Park Skelmersdale Ltd v Electricity North West Ltd [2014] G Park Skelmersdale Limited (“the claimant”) sought compensation from Electricity North West Limited (“the respondent”), under a deed of grant (“Deed”) dated 12 May 1967 made between the Central Electricity Generating Board (“CEGB”) and Mr William Holland, (“the Grantor”) who owned Spa Farm, Lathom, Skelmersdale, Lancashire (“the Property”) prior to the claimant.

This said that if the Grantor obtained planning permission for the Property “for residential or industrial purposes” the Grantor could give CEGB 6 months’ notice to pay the Grantor compensation for any diminution in the value of the areas benefited by the planning permission due to the presence of the electric lines above the Property.

The writer was brought up in Lathom within sight of the pylons and remembers their first appearance on the skyline. Indeed the House depicted above is nearby Lathom House, designed by Giocomo Leoni in 1714 for East India Company Director Sir Thomas Bootle, and mainly demolished in 1925.

On 26 March 2008 the claimant gave the respondent notice of planning permission for warehousing and distribution and claimed compensation under clause 3(1) of the Easement.

The parties agreed to postpone the 6 month deadline to pay to allow for consideration of the feasibility of diverting the overhead line to allow the development to proceed but that did not happen.

The two preliminary issues the Tribunal had to decide were:

1. Whether the references to “development … for … industrial purposes” and “such purposes” in clause 3(1) of the Easement included development for primary storage/distribution uses under Class B8 of the Use Classes Order 1987; and

2. Whether the appropriate valuation date for the assessing compensation was the date of:

2.1 the grant of outline planning permission (20 December 2001); or

2.2 the variation of that planning permission (9 September 2004), or

2.3 the approval of reserved matters (15 May 2007), or

2.4 the notice of claim (26 March 2008).

The respondent said clause 3(1) was to restrict compensation to cases where the development prevented was a residential or industrial use. However:

– the Tribunal could think of no reason why CEGB would reasonably expect to pay compensation if the presence of its overhead lines restricted one valuable use of the land, but NOT if another use was restricted; nor

– could it think why the ability to develop the land for certain uses should be restricted without the Grantor having any compensation for the reduction in value due his inability to pursue those uses. Such an uncommercial arrangement was not likely to have been the parties’ intention.

the Tribunal found:

– on the first preliminary issue that the expression “industrial purposes” was not to be narrowly construed, and was wide enough to include the development of the Property for storage and distribution uses within Class B8.

Against the context of the Property’s then agricultural use, the use of the composite expression “residential or industrial purposes” suggested that what was intended “was a broad classification of alternative uses “representing the principal classes of profitable development”, rather than a narrow focus on manufacturing industry.”

Also development for “industrial purposes” had a wider connotation than “development for industry”, and would include ancillary uses. Land used for the storage of raw materials or components for use in manufacturing, or of manufactured goods awaiting distribution to customers, was used for “industrial purposes”.

On the second issue of the valuation date, the relevant planning permission was the outline planning permission obtained in 2001, renewed and then supplemented by the reserved matters approval obtained on appeal on 15 May 2007.

The parties must have intended that the relevant permission would include the details necessary to enable the property to be developed. The test was at what date did the development get the planning permission that could not be implemented because of the electric lines over the property? That date was 15 May 2007 when the final reserved matters approval was obtained. It was only at that date that development could have proceeded.

So the valuation date under clause 3(1) was 15 May 2007.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Electricity Wayleave compensation included reduced value caused by loss of residential development contract

The Court of Appeal case of National Grid Electricity Transmission Plc v Arnold White Estates Ltd [2014] will make power utilities think twice about holding onto the existing routes of their power lines where these impede development.

The respondent had contracted to sell two parcels of land for residential development.

One of these related to a strip and was conditional on the removal of an overhead power line. Due to indexation the price had risen to £5.82m.

When the respondent gave notice terminating the current wayleave, the appellant electricity company applied for and got a statutory wayleave to retain the power line so the conditional contract lapsed.

Planning permission had been got for the land but the conditions precluded development with the power lines still there.

The sole issue was how much compensation was payable to the respondent under para 7 of Schedule 4 to the Electricity Act 1989.

The respondent said it ought to be the value of the land under the contract at the date of the new wayleave notionally free of the new wayleave minus the nominal value of the land at the date of the new wayleave as it actually was i.e. encumbered by that new wayleave.

The date was critical as by 2010 the value of residential land was much less than the contract had provided for.

The Court of Appeal, held that the respondent had been correct in the basis upon which it had claimed compensation.

AWE had crystallised the development value by the two sale contracts made in July 2007, by reference to development values then prevailing.

Nothing in paragraph 7 of schedule 4, precluded compensation for the loss of contractual rights caused by the grant of a wayleave from the compensation afforded by the 1989 Act. In fact, the right to compensation under paragraph 7(1) was conferred in the most general terms.

The only limitation was that the loss claimed for must be loss suffered by the claimant in his capacity as owner or occupier of the land, rather than in some wholly unrelated capacity.

So there would be no compensation for loss suffered betting on the outcome of an application to the Secretary of State under paragraph 6 for the grant of a wayleave, even if the bet was placed and lost by the owner or occupier of the land.

The loss of this contractual right to proceeds of the sale under a conditional contract for the sale of the land, where the contract lapsed because of the grant of the wayleave, was a loss suffered by AWE in its capacity as owner of the land.

It was a right inseparable from the seller’s status as owner of the land in question.

Compensation was to be based upon the special value of the land to the owner rather than its objective market value.

The court commented that future tribunals would be astute to detect and defeat any collusive attempts to manufacture artificially high land contract prices ahead of the grant of wayleaves for the purposes of generating an inflated level of compensation.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.