Compulsory Purchase: Valuation of land in a notional “No Scheme” World

The valuation of land that is acquired for development under a Compulsory Purchase Order (“CPO”) (“the subject land”) must ignore any increase or diminution in the value of that land which is attributable to the development of any other land which is also acquired for development under that CPO that would not be likely to have been carried out but for that CPO.

This is to exclude from calculating compensation, increases or reductions in value attributable to the scheme involving the compulsory purchase.

This is based on the principle in Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947].

To apply these rules of valuation, you must first determine the existing planning status of the subject land.

Sections 14-16 of the Land Compensation Act 1961 (“the 1961 Act”) contained a series of assumptions about planning permission which had to be made for the purpose of valuing the subject land in assessing compensation.

These assumptions were additional to any actual planning permission in force (s.14(2)) and did not exclude “hope value” based on the prospect of permission for a development beyond the developments for which planning permission was to be assumed under sections 15 and 16 (section 14(3)).

Section 15 assumed that permission for development was granted in accordance with the acquiring authority’s proposals and the same assumption was made under sections 16(1)-(3) if the subject land formed part of the site to be developed in accordance with the then current development plan.

In each case section 16(6) of the 1961 Act required the valuation to assume that planning permission would be granted subject to such conditions as might reasonably be expected to be imposed.

The fact that these sections assumed a planning permission being in place did not mean it was to be assumed that permission for some other kind of development would not be granted. Expert evidence would help decide that in each case.

But section 16(7) operated to limit the extent to which planning permission for the subject land was to be assumed to be granted by creating a fiction in which the overall redevelopment scheme had been cancelled in respect of, but only in respect of, the subject land: i.e. as if the landowner had succeeded at the public inquiry in persuading the Inspector to omit the subject land from the CPO.

But there was no requirement to assume that the CPO would not have gone ahead in respect of the remainder of the CPO land or that the development of the scheme would not have proceeded without the subject land.

Section 16(7) was not a valuation disregard, but it was part of the valuation process. It might in some cases have required the assumption that planning permission for the relevant development would not be granted. There would be cases, such as roads and other linear transport proposals, where the notional exclusion of the subject land might have required it to be assumed that the scheme would not have gone ahead.

In J S Bloor (Wilmslow) Ltd v Homes and Communities Agency [2015] the owner of the subject land would have perceived himself to be in a relatively strong position with regards to having to make or avoiding contributions to the loop roads and other service connections under the redevelopment scheme (“the KBP Scheme”). The land would therefore have a substantial value based on an expectation of planning permission for a residential development linked to a proposed spine road.

But such value would all have been attributable to the development of the KBP Scheme on the adjoining land and would therefore fall to be disregarded.

The Court of Appeal found that any value due to a possible self contained development of the subject land, independent of the KBP Scheme, and using a nib of its own land for highway access was not attributable to the KBP Scheme on the adjoining land so as to require it to be disregarded under section 6 of the 1961 Act. But in seeking to exclude any diminution in value attributable to that development it was necessary to make a notional adjustment to the planning policies which continued to apply to the subject land at the valuation date.

This was because, in the imaginary planning environment conjured up by sections 14-16 of the 1961 Act, the KBP scheme would severely diminish the planning prospects for an independent development on the subject land. So the task for the valuers and the tribunal had to be to devise a way of excluding or disregarding the KBP Scheme’s impact on that independent value. That could only be done by further modification to the actual planning situation whereby the valuers assume that the KBP scheme and its supporting policies were no longer in place.

The real issue was whether the tribunal had struck the balance, between the “no KBP scheme universe” and the actual planning position, in the right place.

It was not simply a matter of watering down the strict application of the existing and emerging development plan but otherwise leaving the allocation for development of the subject land in place.

What the tribunal should have done was to consider the planning potential of the subject land without regard to the KBP Scheme and it’s underlying policies (policy EC/6 and developing policy EC/7) and therefore its effect on value.

The effect of section 6(1) was that the tribunal needed to consider what wider planning policies (which were not specific to the scheme) would have been likely to have applied in a “no KBP Scheme world”, including in particular PPG3, and to have assessed whether there was any real chance of planning permission being granted for an independent residential development of the subject land under those policies. That approach would have struck the appropriate fair balance between the general public interest and the individual interest as was required under the 1961 Act.

The assumption that policy EC/6 and developing policy EC/7 continued to apply was based on a wrong application of section 6(1) of the 1961 Act and the valuation calculated on that basis must be set aside.

Since the valuation date in this case the relevant provisions of the 1961 Act have been replaced and re-cast by the provisions of the Localism Act 2011.

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