Compulsory purchase and compensation

Citation

Sams, G. (2001), "Compulsory purchase and compensation", Journal of Property Investment & Finance, Vol. 19 No. 4. https://doi.org/10.1108/jpif.2001.11219dab.001

Compulsory purchase and compensation

Gary Sams Consultant Surveyor

Introduction

In the briefing of two years ago (Vol. 17 No. 3) I made reference to a review, which was being undertaken by the Department of Transport, Environment and the Regions, of the laws and procedures relating to compulsory purchase and compensation. I also included a plea that any reforms should include the repeal of most of the planning assumptions, and a substantial redrafting of the laws relating to severance and injurious affection. The findings of this review were published in the middle of 2000, and I am pleased to say that they not only cover these two areas of concern, but recommend that comprehensive new legislation should be drafted consolidating, codifying and simplifying the whole area of compulsory purchase and compensation. New legislation of a comprehensive nature is long overdue, and it is to be hoped that the recommendations will be accepted, and not watered down until we are left with a number of minor reforms such as those which were contained within the Planning and Compensation Act of 1991. Evidence that this hope will be fulfilled was provided in March 2001 when the Law Commission published a scoping paper putting forward initial suggestions as to the form which such legislation may take.

In this year's briefing I summarise the main changes proposed by the DTER and the Law Commission, as well as including my usual commentary on some recent Lands Tribunal decisions, concentrating on a number of cases illustrating the problems which are currently being caused by the planning assumptions.

DETR report

The brief of the advisory group set up by the DETR was mainly to undertake a fundamental review of the laws and procedures relating to compulsory purchase and compensation. Its final report concludes that the current compulsory purchase arrangements are basically sound, with adequate safeguards to protect the human rights of those whose properties are taken away from them. However, it recognises that the existing legislative base is complex and convoluted. Stretching back, as it does, to the Lands Clauses Consolidation Act of 1845, much of the terminology is antiquated; and there is heavy dependence on case law. The review therefore recommends that new compulsory purchase and compensation legislation, consolidating, codifying and simplifying the law should be prepared in consultation with the Law Commission and brought before Parliament at the earliest opportunity. Some of the principal reforms which they recommend for inclusion into this legislation are summarised below.

Mitigating the adverse impact of the scheme

The power given to acquiring authorities under section 26 of the Land Compensation Act 1973 should be extended to include a power to acquire land compulsorily if needed to mitigate any adverse effects which the development may cause. At present acquiring authorities may only acquire adjacent land by agreement for the purpose of mitigating any adverse effects which the existence or use of any public works has on the surroundings of those works. The advisory group recommends that the power should not be limited to a power to purchase by agreement, but extended to a power to compulsorily acquire such land.

Speeding up procedures

A large part of the review is given over to a consideration ways in which the current lengthy compulsory purchase procedure can be improved. It is certainly the case that it takes an inordinate length of time to move from the initial decision to undertake public works, to the time when physical possession can be taken. This appears to have increased in recent years, not least because of attempts by government to extend and improve public consultation.

The speeding up procedures are separated into two areas: those which relate to the confirmation of a compulsory purchase order, and those which relate to the acquisition process once a compulsory purchase order has been confirmed.

In the former category the recommendations include a proposal that mediation, which has already been proposed as a means of settling small-scale planning disputes, should be exploited by acquiring authorities as a means of settling disputes prior to confirmation of a compulsory purchase order. It is also suggested that, subject to suitable safeguards, acquiring authorities should themselves be allowed to confirm uncontested orders.

In respect of speeding up the acquisition process once a compulsory purchase order has been confirmed, the recommendations are that:

• •

  the period between the acquiring authority serving the notice to treat, or executing the general vesting declaration, and taking possession could be reduced to one year, extendable either by the minister at confirmation stage (on the basis of a case put forward by the acquiring authority and discussed at the inquiry) or at any time with the agreement of both parties;

• •

  a landowner should have the right to serve on the acquiring authority, at any time between one year and three years after confirmation of the compulsory purchase order, both a notice to treat and a notice to take possession;

• •

  acquiring authorities should be encouraged to provide those from whom land is likely to be acquired with clear and detailed information about the compensation arrangements and the claimant's own responsibilities in that respect; and

• •

  claimants should be required to submit properly itemised compensation claims with supporting documents and within a specified time scale.

Home loss payments

While consideration is given to the procedural matters outlined above, most of the report is targeted at suggested improvements to compensation provisions. In spite of suggestions, coming from the RICS among others, that there should be a restoration of the pre-1919 principle that compensation should be based upon the market value plus 10 per cent, the group recommends that market value should remain the primary measure of compensation for the land taken. It does, however, recommend extension of home loss payments to small businesses claimants in place of the current farm loss payments regime.

The scheme underlying the acquisition

Considerable time is devoted in the report to the confused state of the law which is aimed at establishing the principle that compensation should be assessed in the "no-scheme world". This is also a question which has taken up a disproportionately large part of my legal briefings in recent years, with my attempts to identify any useful principles from recent case law proving largely unfruitful. It is recognised that the main difficulty is in identifying what exactly comprises the "scheme" in each case. Classical examples of this problem have arisen where a development corporation has been set up. When, for example, they undertake highway improvements it could be argued that the scheme comprises just the highway improvements affecting the subject property, the whole of the highway works to be carried out within the development corporation area, or even the very existence of the development corporation itself, with all its associated benefits, including not only infrastructure works, but any grant aid, environmental improvements, and marketing and promotion of the locality. The group rather ducks the question as to whether the "no scheme" principle should be abandoned entirely, considering that to be a policy matter for ministers to decide. If ministers decide to retain the rule, then they will also need to decide whether to retain the existing rule by disregarding the scheme from its inception, or to change to the approach of imagining that the scheme had been cancelled at the date of valuation. They should also introduce a single statutory provision to subsume the current provisions that are set out in sections 6 and 9 on the 1961 Compulsory Purchase Act, the "Pointe Gourde" rule and rule three of section 5 of the Act.

The concern appears to centre on problems which have recently become apparent in areas such as the London Docklands. The regeneration schemes underlying the compulsory purchase of houses and other property create a substantial increase in value. At present this increase in value must be left out of account as it is entirely due to the scheme underlying the acquisition. This leaves claimants, particularly house owners, unable to purchase a similar replacement house in the locality. This apparent iniquity could be resolved by removing the rule that the scheme should be left out of account, but this would have the impact of substantially increasing the burden of compensation on the acquiring authority. The group does not appear to consider the inequities which may be caused by abandoning this rule. For example, consider an area of agricultural land, well separated from the developed area of a nearby town, and no vehicular access. If a by-pass is built through this land it may well become ripe for development. Few, however, would argue that compensation should be assessed based on development value, rather than on agricultural value as at present.

The planning assumptions

One of the improvements suggested in this briefing two years ago was the abolition of the planning assumptions set out in sections 14 to 16 of the 1961 Act, though with the retention of section 17 which covers certificates of appropriate alternative development. Sections 14 to 16 set out the assumptions which must be made when assessing compensation for compulsory purchase. These include the need to take into account existing planning consents, planning designations set out in local and structure plans, the acquiring authority's own scheme, and schedule 3 development. At best they require the valuer to do what he should do anyway, which is to take into account any realistic development potential to the same extent that it would be taken into account in an open market transaction. At worst, however, they can require the valuer to take into account development value which could never be realised in any "no scheme" world. This is particularly the case in so far as they require the valuer to take into account the development proposed by the acquiring authority, schedule 3 development, and any use for which the land is specifically designated in the local plan, regardless of whether or not planning permission could reasonably be expected for that use.

The report makes all these points and recommends the abolition of the planning assumptions, perhaps with some expansion of section 17 so that a certificate of appropriate alternative development could be obtained in respect of the whole of the land affected by the scheme, and not just the land which is the subject of the particular compulsory purchase compensation claim.

Unlawful or immoral uses

Rule 4 of section 5 of the 1961 Act, which requires that any illegal or immoral use of the land should be left out of account in assessing compensation for compulsory purchase, is one of the few rules which has rarely caused any conflict or difficulty in interpretation. Nevertheless, the group feels that it is difficult to understand why any such value should be left out of account, if it would not have been left out of account in an open market sale, in the absence of any compulsory purchase. It therefore recommends that the rule should be repealed.

Betterment

At present a claimant who owns land which is adjacent or contiguous to land taken can have his compensation for any land taken reduced by the amount of any increase in value to that adjacent land which is a direct result of the scheme. If the principle of the "no-scheme" world were to be abolished then there would clearly be no justification in retaining such a rule. Even if the principle is to be retained the group sees certain problems in the rule as it works at present. Defining whether land is or is not "adjacent" can give rise to argument, and it may be considered unfair that landowners who have no land taken are allowed to retain any increase in their land value which arises from a nearby scheme, while those who have a some land taken will have their compensation reduced, perhaps even to a zero figure.

The group recommends that:

• •

  betterment should only be set-off against compensation for severance or injurious affection;

• •

  there needs to be a clear definition of "adjacent" for the purposes of assessing betterment; and

• •

  in all cases, the onus should rest with the acquiring authority to prove that betterment has occurred rather than with the claimant to prove that it has not.

Severance and injurious affection where land is taken

Section 7 of the 1965 Compulsory Purchase Act, which governs compensation payable for severance and injurious affection where land is taken, is one of the antiquated sections deriving originally from the 1845 Lands Clauses Consolidation Act. The group sees no reason why the section should not be completely redrafted in the more modern and easily understandable language, and suggests that the problem areas could be clarified and improved in any redrafted section.

The first suggestion is that the section should make it clear that compensation should include business losses (i.e. disturbance compensation) as well as just any depreciation in land value. I would endorse this as a useful clarification as I once looked up the point in six different text books only to find that three stated unequivocally that compensation could only be paid under section 7 in respect of depreciation in land value, while the other three were equally unequivocal that compensation should also be paid for any consequential losses.

The second suggestion is that in respect of some agricultural buildings where the cost of replacement will substantially exceed market value, compensation should be based on the cost of providing a replacement building; effectively a new form of equivalent reinstatement compensation.

The third suggested improvement is that specific provision should be made to allow for "before and after" valuations to be used where, in the Lands Tribunal's opinion, it is appropriate to do so in place of the current position whereby compensation is required to be assessed by valuing the land taken and the severance/injurious affection to the retained land separately. Surprisingly, the report appears to contain no reference or explanation to this third improvement, and in fact, the explanatory text refers to only two problem areas. This change would, however, appear to address the second problem area which I referred to in my briefing two years ago. This is that at present, section 7 only provides a right to compensation in respect of any retained land affected by severance. Insofar are as the actual land taken is rendered less valuable as a result of severance from the other land of the owner, then compensation will be based on the value of that land in isolation and no compensation will be paid for the difference between this reduced value and its value as part of the larger holding. This is clearly inequitable and one approach to resolving the problem would be to base compensation on the difference between the value of the whole site prior to severance and the value of the retained land afterwards. Actually drafting appropriate wording which would achieve this objective may prove more problematical.

Disturbance

The present rules for deciding whether any claimant will qualify for disturbance compensation, and what the amount of that compensation will be, have evolved through case law in spite of the lack of any statutory provisions which specifically set out a right to disturbance compensation. The group proposes that new legislation should include a legal right to disturbance compensation and a code for assessing that compensation based on the principle that a dispossessed occupier should be entitled to "compensation for any loss which flows from a compulsory acquisition provided it is not too remote, and is a natural and reasonable consequence of the dispossession".

The group also recommends that disturbance compensation should include any qualifying losses arising after the date on which the compulsory purchase order is confirmed, even though this does appear to be a restriction on the present situation under which case law suggests that all qualifying losses can be claimed regardless of when they are incurred (Prasad v. Wolverhampton 1983 JPL 449).

Consideration is given to the relocation versus extinguishment argument under which it is open to acquiring authorities to argue that, where a claimant has ceased trading and has claimed compensation based on the total extinguishment of his business, he could have mitigated his loss by relocating and claiming compensation for the, usually much lower, costs associated with removal. There have been a number of cases covering the situation over recent years, most being settled in favour of the claimant, on the grounds that he is far better qualified than the acquiring authority to know whether any alternative premises which may be available would be suitable for his business. The group feels that it would be useful if it was clearly set out that any dispute as to whether relocation should have been undertaken in preference to extinguishment would be resolved based on the following principles:

• •

  Is the business capable of being relocated as a going concern?

• •

  Does the claimant have the intention of relocating and is there a reasonable prospect that he will be able to do so?

• •

  Would a reasonable businessman using his own money decide, in the circumstances of the particular case, to relocate the business?

Although not strictly part of disturbance compensation, it is recommended that the duties placed on acquiring authorities to provide accommodation works, which also lack any formal statutory basis, should be clearly set out and strengthened.

One fundamental issue of disturbance compensation is whether it is reasonable to maintain the present principle that only persons who are dispossessed should be compensated. It is as a result of this rule that while persons in occupation of land are compensated for any consequential losses which arise as a result of being forced to give up that occupation, owners of land who are not in occupation, which will include investors and developers, received only compensation based on the value of the land taken and severance and injurious affection. They are unable to recover any consequential losses which they may suffer such as loss of profits, losses on the forced sale of assets and the costs of replacing a suitable alternative property (subject to the amendment to this last rule introduced by Schedule 15 of the Planning and Compensation Act 1991). This is another issue which the group chooses to avoid and leave to the legislators to decide.

Equivalent reinstatement

The equivalent reinstatement rule allows compensation to be assessed based on the cost of replacing the property, rather than on market value. It is intended to apply to those types of use for which there is no general market or demand and is clearly of particular benefit to uses such as churches, where any attempt to assess compensation based on open market value would not only be impractical, but would be unlikely to be sufficient to allow the use to remain in operation. The main area of dispute concerns the question of whether any particular use falls within the criteria set out in rule five of section 5 of the 1961 Act. Again, little guidance is provided by the Lands Tribunal, who have refused rule five compensation to a veterinary surgery, and allowed it in respect of a livestock market in spite of the fact that there was evidence of sales of such businesses. The group recommends clarifying and tightening the qualification rules for rule five:

• •

  by placing an onus on the claimant to show that the value of the site for any purpose for which planning permission could be assumed (and including any compensation payable for disturbance) would be insufficient to enable the activity or use to be resumed on another site;

• •

  the claimant should be required to demonstrate that it is reasonable, in the light of all the circumstances, for him to reinstate the activity or use elsewhere; and that the cost of so doing would not be wholly disproportionate either to the monetary value of the activity or use, or to its social or public value;

• •

  as at present, the date to which the calculation of the "reasonable" cost of equivalent reinstatement should relate should be whichever is the earlier of the date on which the acquiring authority acquire ownership of the property, either in law or in equity, or the date on which the authority takes possession of it; and

• •

  professional fees and interest should be paid on the same basis, and from the same date(s), as for all other compensation claims.

It also suggests that it may be appropriate to extend equivalent reinstatement compensation to the owners of low value houses who are in an area where property values have collapsed and where the compensation they receive on a market value basis would be insufficient to enable them to purchase a replacement house.

Injurious affection where no land is taken

Perhaps the most antiquated and complex compensation provisions are those which apply to claimants who have no land taken, but whose property is adversely affected by nearby public works. In particular, section 10 of the 1965 Compulsory Purchase Act simply reaffirms the right to compensation which case law had previously interpreted as arising from section 68 of the Lands Clauses Consolidation Act 1845. It can only be presumed that the draughtsman found it too difficult to set out clearly the law as it then stood. He was also unable to simply repeat the wording of section 68, as from any reading of that section it is clear that it bears no relationship to any modern understanding of the compensation provisions. He therefore had to resort to basing the compensation provisions upon the judicial interpretation of section 68 rather on section 68 itself.

Section 10 provides a very limited right to compensation to those few claimants who have had no land taken, but have been adversely affected by public works, and are able to meet the complex qualification rules arising from the case of Metropolitan Board of Works v. McCarthy (1874 LR7 HL 243). Somewhat more useful provisions are provided to the owner-occupiers of houses, small businesses and farms by Part I of the Land Compensation Act 1973.

The group recommends that new legislation should be drafted to take the place of section 10 and Part I and that it should follow the basic principle behind section 10, which is that compensation should be payable for any losses where a landowner would have had a claim in common law for nuisance, but for the fact that the works were being carried out under statutory powers. Compensation should be payable whether the loss is caused by the construction of the scheme or its subsequent use, and should include temporary losses. Consideration should also be given to extending the right to all businesses, not just those which fall below an arbitrary rateable value limit.

The above is just a summary of the main recommendations, with other topics covered including specialist provisions relating to utility suppliers, advance payments, taxation, and compensation to potential claimants who suffer losses in respect of proposed schemes which are eventually abandoned.

Law Commission – compulsory purchase and compensation: a scoping paper

The brief given to the law commission was a follow-up on the DETR advisory group recommendation that they should prepare new legislation "consolidating, codifying, and simplifying the law". The group added:

In framing the new statute, particular care should be taken to bring the language up to date and to standardise procedures except where that would create difficulties of its own. The new statute should set out procedures as well as a clearly defined Compensation Code.

The scoping paper is a preliminary study to identify the likely features of such a project, and set out a programme of work. It makes no attempt to duplicate the work of the advisory group, placing the emphasis on the simplifying and modernising of the law, rather than a more general reform. It considers that a key element of its work will be the repeal of the antiquated 1845 Lands Clauses Consolidation Act and the modernisation of the language used in current statute law, along with any other amendments aimed at ensuring that the law would apply fairly in all circumstances and in the way originally intended by Parliament. It considers how some of the specific recommendations made by the advisory group could be incorporated into a new compensation code, and as a first stage proposes to prepare, within 12 months, a consultative report identifying provisions which are suitable for incorporation in the new code, covering the following four areas:

1. 1.

   implementation procedures;

2. 2.

   principles of compensation;

3. 3.

   abortive compulsory purchase orders; and

4. 4.

   compensation where no land is acquired.

The commission identifies two clearly defined elements to its work. The first is the consolidation and qualification of the existing law into a single compensation code, while the second is the implementation of some or all of the reforms recommended by the DTER advisory group. It considers various ways of dealing with these two elements, including a "big-bang" approach with a single bill constituting a complete compulsory purchase bill, covering all of the topics in the draft framework, and a "step-by-step" approach which would take the form of a Consolidation Bill followed by one or more separate bills dealing with other topics.

The planning assumptions

As the reform, and substantial repeal, of the planning assumptions is one of the main areas targeted by the DTER advisory group, it is interesting to note that there have been a number of Lands Tribunal decisions relating to the planning assumptions within the last 12 months, some of which highlight the failings of the present system.

Hooper v. City and County of Swansea (2000) raised interesting questions concerning the approach to assessing compensation at the valuation date, and the use of residual valuations, as well as the planning assumptions. It concerned compensation payable for the compulsory acquisition of a parcel of vacant land, with the parties disputing the intensity of development which should be assumed for compensation purposes. The relevant planning assumption in this case was section 16 of the Land Compensation Act 1961, which requires that planning permission should be assumed for the use for which the land is designated in the current development plan, providing that this is development for which planning permission might reasonably have been expected to be granted in the "no scheme world". As the land is designated for residential use in the local plan, the only matter for dispute was the extent of the residential development which would have been likely in the absence of the scheme. The claimants argued that 15 houses would have been permitted on the site, whereas the local authority believed that only the frontage could be developed for maximum of four or five houses. After taking into account all the planning considerations, the tribunal decided that the claimant was correct and that in the absence of the scheme it is likely that planning permission would have been granted, or permitted on appeal, for 15 houses.

This does not suggest any particular problems with section 16 as it stands, and it appears to have worked as intended in requiring compensation to be assessed taking into account the planning permission which was likely to be granted in the absence of the scheme. It should only be noted that if there had been no section 16, and no planning assumptions, then the market value would have fallen to be assessed without statutory assistance, but would still have needed to reflect the fact that in the no scheme world, planning permission for residential use was likely. In this case, therefore, the planning assumptions did no harm, but neither did they serve any useful purpose.

There then followed a dispute as to how compensation should be assessed at the valuation date. The surveyor for the claimant argued that the most likely scenario was that the plots would be sold individually on a self-build basis over a period of time, and compensation should be based upon the value of the 15 individual plots, but with some discount to reflect the period of time over which the sales would take place. The acquiring authority argued that the land could only be valued at the valuation date, by assuming that it could be sold to one hypothetical purchaser. If 15 separate sales on the valuation date were a realistic possibility, then this could be taken into account, but both parties accepted that this was unlikely. Compensation should, therefore, be based on the price likely to be paid on a single sale to a developer, which would be significantly lower than for separate sales, as deductions would need to be made for infrastructure costs, developer's profit, and all the other expenditure normally allowed for in a residual valuation.

The tribunal found that the approach for the claimant was "fundamentally erroneous". A sale of the land must be assumed to have taken place on the valuation date, not over a period of 12 months or more commencing with the date, and on that basis the most likely purchaser would be a developer who intended to carry out works to make it saleable to purchaser's requiring individual self-build plots.

Having decided on this approach, it seems clear that a residual valuation would be the most appropriate way to assess the quantum of compensation payable. The tribunal accepted this, but found itself unable to do so without first repeating its well known antipathy to the residual basis, commenting that the valuation put forward by the acquiring authority was a shortened form of residual valuation which contained fewer variables than the more common residual approach and was therefore less prone to error. This statement encapsulates the basic misconception behind the tribunal's suspicion of the residual valuation approach. It seems to feel that using a direct capital comparison valuation approach, with arbitrary adjustments to reflect the characteristics of the subject property, is more accurate than an approach which specifically states the assumptions made in respect of each variable. In fact, of course, exactly the same adjustments need to be made in each case; it is simply that in the tribunal's preferred approach the adjustments are implicit, while in a residual valuation they are explicit.

Stayley Developments Ltd v. Secretary of State for the Environment Transport and the Regions (2000) was a referral of preliminary issues concerning almost the full range of planning assumptions, including section 17 certificates. It concerned compensation to be paid in respect of the compulsory purchase of a large area of predominantly agricultural land for the construction of the last link of what is now the M60 Manchester orbital motorway. A certificate of appropriate alternative development under section 17 had already been issued in respect of the land acquired and therefore there was no dispute as to the planning assumptions to be made respect of this land. However, in connection with the assessment of compensation for severance and injurious affection to the land retained by the claimant, there was considerable dispute as to the uses which could be assumed on that other land.

The claimant first tried to rely on section 14 of the 1961 Land Compensation Act, which requires that any planning permission actually in force in respect of the relevant land should be taken into account. An actual planning permission had been granted in respect of the retained land and the claimant argued that in the no scheme world planning permission would have been granted for the same development as that permitted in the scheme world, and its claim was based on this assumption. The acquiring authority contended that the planning permission was the result of the motorway and its junction, and in the no scheme world the land would have remained without planning permission for development. The tribunal was able to dispense very quickly with the claimant's argument. Section 14 is an assumption which applies only to the land acquired, and the planning permission referred to did not include the land acquired as it was designated for motorway construction. Section 14 "does not require, or imply, that a permission which does not grant permission to develop any of the relevant land must be taken into account".

The claimant then tried section 15(5), which requires that where a section 17 certificate has been issued, planning permission must be assumed for the development set out in that certificate. As stated above, a section 17 certificate had been issued in respect of the subject land, and it appeared that the development referred to in the certificate was likely to take place as part of a much larger development, which would include the claimant's retained land. The claimant argued, quite logically, that it was clear from the section 17 certificate that planning permission should be assumed for the development set out in that certificate on the claimants retained land. However, as the acquiring authority pointed out, section 15 relates only to planning assumptions in respect of the land acquired and cannot require any assumptions to be made in respect of other land. The tribunal agreed that as a matter of law no assumption arises that planning permission would be granted for such development of the other land. Accepting this point, the claimant still argued that "strong weight" should be attached to the view of the local planning authority as evidenced by the decision to grant the certificate. The tribunal agreed that it needed to give some weight to these views, but felt that the reasons given by the planning authority for granting the certificate were distinctly lacking in any detailed consideration of the relevant planning factors, and chose to attach very little weight to it.

The tribunal has effectively concluded that none of the planning assumptions had any legal application to the assessment of compensation in respect of the land retained. This would have a significant impact on the approach to the valuation of that land. If the tribunal had decided, even on a very marginal balance of probability, that planning permission should be assumed for any form of development, then the valuation would be carried out on the assumption that such a planning permission was in place, and would reflect the whole of any development value generated by that assumed planning consent. There would be a "statutory assumption of certainty that the permission would be granted". Having, however, decided that none of the planning assumptions were directly applicable to the retained land, then any valuation could only reflect the hope value which may be attached to the prospect of development, rather than the whole of the development value. The remainder of the decision was, therefore, addressed at a detailed consideration of the relevant planning considerations in order to express an opinion as to the form of development for which planning permission could have expected in the no scheme world.

The final case concerns the most controversial of the planning assumptions, that which requires compensation to be assessed on the assumption that planning permission would be granted for Schedule 3 development. Old England Properties Ltd v. Telford and Wrekin Council (2000) concerned the compensation to be paid following the acceptance of a purchase notice on a piece of vacant land which was the site of a former railway station and station house. The purchase notice had been served following the refusal of an outline planning application for residential development of the reference land. It is a prerequisite for the acceptance of a purchase notice that the land has been rendered "incapable of reasonably beneficial use", and planning permission had been refused on normal planning grounds, rather than because it was required for any public works. Common sense would, therefore, suggest that the compensation payable would be a nominal sum. However, section 15(3) is one of the planning assumptions which pays little heed to common sense, and requires compensation to be assessed on the assumption that planning permission would be granted for any development falling within part one of Schedule 3 to the 1990 Town and Country Planning Act. This includes "the rebuilding, as often as occasion may require, of any building which was in existence on 1 July 1948 …". The claimant argued that as there had been a station house on the site in 1948, then, for compensation purposes, planning permission must be assumed for residential development of the site, regardless of the fact that this was not a possibility in the real world. Fortunately, the land tribunal had little difficulty in avoiding the obvious inequity which would arise if that argument was successful.

The "get out clause" available to the tribunal was the fact that the development upon which the claimant based his compensation claim was rather different to a simple rebuilding of the original station and house, which is the only development which can be assumed under section 15. The tribunal therefore asked itself three questions:

First, whether the assumed rebuilding must take place on the site of the original building? Second, whether the cubic content and gross floorspace of the individual buildings originally on the reference land may be merged to allow the rebuilding of a larger building or buildings? Third, whether the assumed planning permission would create hope value for a greater density of development as a matter of law or as a matter of fact?

After consideration of the relevant legal precedents, the tribunal was able to discern the following principles:

• •

  the rebuilding envisaged within Schedule 3 must constitute the rebuilding of the original building and not the erection of a new building; this is a question of fact and degree in each case;

• •

  rebuilding must take place on the site of the foundations of the original building, subject only to any minor deviations necessary to allow the 10 per cent permitted increase in size;

• •

  there is no compulsion on rebuilding to create a slavish copy of dimensions, appearance and materials of the original building; and

• •

  a notional planning permission under section 15 (3) of the 1961 Act that may be incapable of implementation and therefore valueless.

Applying those propositions to the facts of the case the tribunal was able to conclude fairly comfortably that the only planning permission which could be assumed would permit the rebuilding of a small part of the station house in two parts in a corner of the reference land, with residential use on the ground floor and a ticket office on the first floor. This suggests that the land had little or no value, and compensation had to be assessed on that basis. The tribunal could not, however, end its decision without pointing out the potentially ludicrous situation which would arise if the claimant's argument was successful, and he was able to claim compensation based on residential development value in respect of a site where residential development had been refused by the planning authority. It pointed out that:

… this is anomalous. I would hesitate to perpetuate this anomaly unless forced to do so. Fortunately, I am able to arrive at a determination of this preliminary issue which produces a common sense answer by the application of the relevant statutory provisions to the facts.

Hopefully, the proposed repeal of the planning assumptions will mean that the Lands Tribunal will not be in the position of having to tackle this particular anomaly in the future.