Legal

The government has devoted considerable time and energy to reviewing our compulsory purchase laws as a means of delivering its ambitious housing and regeneration plans. Yet its response in December to two reports into the law of compulsory purchase it commissioned from the Law Commission was basically "thanks but no thanks". The government regretted that the complexity of the law in this area meant that it would not have the legislative time to translate the reports' recommendations into law.

This article looks at some recent changes in compulsory purchase legislation from the point of view of residents of affected homes. Clearly local authorities, developers and registered social landlords need to understand the specific concerns of the people whose homes they are compulsorily purchasing if they are to minimise costs and delay and encourage negotiated deals.

But first is a brief CPO update in case you have missed any recent episodes of the compulsory purchase drama.

In July 2000 the Compulsory Purchase Policy Review Advisory Group, commissioned by the DETR, published its proposals for reviewing compulsory purchase law. CPPRAG urged the government to work with the Law Commission to consolidate, codify and simplify our complex CP laws. This was followed in December 2001 by the then Department of Transport, Local Government and the Regions' green paper Compulsory Purchase and Compensation: delivering a fundamental change, and in July 2002 by the publication of a policy statement setting out the government's proposals.

The most pressing of CPPRAG's proposals were enacted in the Planning and Compulsory Purchase Act 2004. The trickiest proposals about procedures and compensation were referred to the Law Commission, whose reports have just been shelved.

Those whose homes are acquired do not benefit from the enhanced value of their area when they sell to the council

So what has been achieved for residents and what hasn't? First, money. The 2004 act introduced a "basic loss" payment to supplement the existing home loss payments of 10% of the value of the property acquired, subject to a minimum of £3100, a maximum of £31,000 and a fixed rate for tenants of £3100. The new basic loss payment is only 7.5% of the value, but has a higher cap of £75,000. In addition there is a new "occupiers home loss" payment of 2.5% of the value, up to a cap of £25,000. The catch is that the old home loss payments must be subtracted from the new basic and occupiers' loss payments. So although non-resident and higher-value property owners do much better, owners whose properties are worth £310,000 or less are no better off. The latter group includes almost everyone whose home is being compulsorily purchased, as few high-value houses are included in compulsory purchase schemes.

A second benefit for residents is that tenants as well as leaseholders and freeholders are now "statutory objectors" and have significantly greater rights to be consulted and to register their objections than before. This is important because in some cases the local authority has CPO'd its secure tenants rather than seeking a court order for possession of each tenancy agreement on regeneration grounds.

There are, however, two key issues that the legislation does nothing to address. First is the hardship suffered by people whose homes are in a regeneration area but are not being CPO'd. Even though their homes may be "blighted", unlike those whose homes are being CPO'd, they are not entitled to serve a blight notice requiring the council to buy their homes. Furthermore their rights to compensation for the diminution in value of their property and the suffering caused by living on a building site sometimes for years can only be compensated in very limited circumstances and which often means not at all.

Secondly, the law of compulsory purchase has always involved a delicate balancing of the public interest in allowing redevelopment to go ahead at an affordable cost to the public purse and the interests of those whose property is being taken away from them. English law has adopted the so-called "no-scheme principle" which means that the land is valued on the basis of its open market value without any increase or decrease attributable to the redevelopment. This supports the general principle that the owner should neither be better nor worse off financially after the compulsory acquisition than they were before.

Although this may at first seem fair, it creates the potential for unfairness between those whose land is acquired and their neighbours whose land is retained. Those whose land is retained will benefit from the uplift in value that follows from the regeneration and this may be quite considerable. However, those whose homes are being acquired do not benefit from the enhanced value of their area when they sell to the local authority, but have to pay the enhanced price for alternative accommodation in their area. This often means they can no longer afford to live in the area despite the shared equity schemes on offer to them. By failing to reconsider the basis of compensation, the government has done nothing to counter the view of right-to-buy leaseholders and freeholders that not only are they the only people not benefiting from the development potential of their property, but that the realisation of that potential is pricing them out of their own area.