Compulsory Purchase Ireland

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					               Compulsory Purchase and Compensation in the United Kingdom
                                   From 1845 to 2010


The following paper summarises the presentation by Colin Smith FRICS and Keith Murray FRICS, both of the
Compulsory Purchase Association of the United Kingdom, delivered at the recent IRWA Conference in Calgary,
Canada. The Compulsory Purchase Association was founded in 2002 and has some 500+ members comprising
some 60% chartered surveyors, 30% barristers and solicitors and 10% of town planners and other professional
disciplines.


Introduction
In the UK, ‘compulsory purchase’ can be defined as the taking of a person or company’s land
by the use of statutory powers whilst ‘compensation’ can be defined as the recompense that
person or company receives for the value of its interest in the land taken and for the disruption
caused to its occupation of that land. Whilst the recompense is usually in monetary form on
occasions recompense may be by way of replacement buildings, other works undertaken to
facilitate continuing occupation in a case where only part of an interest in land is taken, or a
combination of the two. Although England, Wales, Scotland and Northern Ireland form a
fairly close geographic unit, there are differences in the law and legal systems as between all
four countries and consequently the following paper focuses upon the English system.


Much of the descriptive terminology and jargon used in connection with the compulsory
purchase and compensation process has its routes in the original 19th century legislation. The
first consolidating Act of Parliament was the Lands Clauses (Consolidation) Act 1845 and the
present day legislation still contains wording in some Acts that has not been altered since that
original Act of 1845. So we talk about those affected by compulsory purchase suffering:
         Blight - being the depreciatory affect upon the value of a property due to an
          impending compulsory purchase
         Material detriment - being where so much of an interest in land is taken so as to leave
          the remainder of relatively little value.
         Severance - being where an interest in land is physically divided into two or more
          parcels, perhaps by the construction of a new road through the centre of a larger area
          of land, whereby one portion of land remaining is rendered less valuable than the
          other due to being separated from it,
         Injurious affection - being where a portion of land that is retained following a
          compulsory purchase of the remainder is rendered less valuable due to whatever
          development takes place on the land that has been acquired,
         Betterment – being where the land that a person retains following a compulsory
          purchase increases in value perhaps due to becoming ripe for development; to the
        extent that in extreme cases betterment can result in no compensation being paid for
        the land which is compulsorily acquired,
       Disturbance which is a convenient, all–embracing description of compensation paid
        for any other loss or injury which is not directly related to the value of the land that is
        compulsorily acquired.


Two sources of compulsory purchase powers exist which represent a combination of general
and specific Acts of Parliament. At the government level (equivalent to perhaps the federal
level in the USA and Canada) compulsory purchase powers are usually provided by a specific
Act of Parliament; a recent example being the Channel Tunnel Rail Link Act 1996 which
completed the high speed rail link from the Channel Tunnel through to the centre of London.
At county and local authority level (perhaps equivalent to the state level in the USA and
Canada) is a Compulsory Purchase Order. Traditionally compulsory purchase powers were
used to facilitate transport (canals, railways, roads) and then later to provide local authority
facilities (such as school, hospitals, defence establishments, airports etc). However in more
recent times compulsory purchase powers have been used to renew and increase the existing
housing stock, to regenerate areas of land and sometimes derelict buildings where their
previous use is no longer required (the UK being a relatively small and intensively developed
country where the re-use of land within the developed areas is essential in order to protect the
surrounding environment), in both cases with and without the involvement of private finance.
However, most recently compulsory purchase has been directed towards the provision of
energy, particularly renewable energy. The UK’s supply of north sea oil and gas is dwindling
and that combined with the need to achieve climate change carbon reduction means that low
carbon and renewable energy from nuclear, wind and wave are being developed with
consequential investment in the electricity transmission network and underground gas storage.


The Compulsory Purchase Process
Whilst the intention is always to try and reach a settlement through negotiation, it is fair to
say that compulsory purchase powers are usually necessary even though at the end of the day
they might not be used.     Their necessity arises as UK landowners have a tradition of not
letting go of their property interests – the expression ‘an Englishman’s home is his castle’
perhaps mirroring the indigenous people’s view their tribal lands!


Central government departments, local authorities and other public bodies (generally referred
to as ‘acquiring authorities’) possessing compulsory purchase powers are therefore
encouraged to consider using them pro-actively wherever appropriate to ensure real gains are
brought to citizens and to the business community without delay; which again recognises,


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perhaps due to the UK’s history of land ownership, that if such acquiring authorities do not
take the initiative with compulsory purchase, a lot of regeneration work would be unlikely to
happen.


Despite the rigid structure underlying the compulsory purchase process, acquiring authorities
are still encouraged to seek to acquire land by negotiation and view the use of compulsory
purchase as a last resort, albeit that the negotiation process will undoubtedly be encouraged
by running the compulsory purchase process in parallel with negotiations


and backing the negotiation process with a CPO does work.
By way of example, in the case of one recent CPO, out of 133 interests identified in the
original Order, agreement with regard to compensation was reached with 132 of those
affected, it only being necessary to implement the formal CPO process in the case of a single
landowner.


So the UK has a very formal and regimented process by which compulsory purchase powers
are granted.


Whilst compulsory purchase powers are seen as an important tool for acquiring authorities to
use as a means of assembling the land needed to help deliver social and economic change
within the UK and it is recognised that used properly they contribute significantly towards
effective and efficient urban and rural regeneration, no compulsory purchase powers will be
made available before the acquiring authority seeking such powers has demonstrated that
there is ‘a compelling case in the public interest’ that justifies the use of compulsory
purchase.


Furthermore the burden of establishing this compelling case lies with the acquiring authority.
There is no primary assumption that compulsory purchase is in the public interest. It is not a
question of the person likely to be affected having to demonstrate that compulsory powers
should not be granted; the acquiring authority has to make its case and prove its need for
compulsory purchase powers.


The process of getting a Compulsory Purchase Order breaks down into five recognisable
stages.


A Compulsory Purchase Order (‘CPO’) is first ‘made’. ‘Making’ a CPO requires the Order to
be drafted in a set format which is prescribed by law. But at this stage it has no force. In


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reality it is as useful as the paper that you are holding whilst reading this article in terms of
expropriating a person’s land. The CPO will invite those wishing to object to it to lodge
formal objections within a specified time limit, being no less than 21 days. Provided that
objections are received, which is usually the case, then a public inquiry will be held.


The public inquiry is the second stage in the process and as its name suggests, it is an
examination in public of the justification put forward by those seeking compulsory purchase
powers as to why those powers should be granted. The inquiry is overseen by an independent
Inspector appointed by the government. The inspector’s function is to hear the arguments on
both sides for and against the purpose for which the CPO is being sought. The Inspector
summarises all the evidence and prepares a report together with a recommendation that goes
to an appropriate central government Minister of State. This Minister must take a balanced
view between the intention of those seeking the compulsory purchase powers and the affected
landowners.


The third stage is the Minister’s decision. The Minister must be satisfied that the acquiring
authority has made out a compelling case that justifies the taking of another’s land and must
also be satisfied that what the acquiring authority intends to do with the land once it has
acquired it will be done within a reasonable time scale. The Minister will do one of three
things. It will either confirm the CPO as made, confirm it but with modifications which will
usually be the exclusion of an area of land where the Inspector and/or Minister believe there
is no justification for its inclusion or, in very rare cases, the Minister will refuse to confirm
the Order in its entirety. But the Minister must act reasonably. Even the Minister’s decision
can be challenged in the UK Courts if an objector has grounds for thinking that the Minister’s
decision was perverse given all the evidence put before the Minister.


The fourth stage in the process is the confirmation of the CPO by a public announcement and
notification to those affected by it is ‘confirmed’. Once this is done, the Order has power
equivalent to an Act of Parliament. It will enable a person’s land to be taken even where that
person resists. In the majority of cases the land will be taken before the compensation
payable has been agreed.

The final stage is the implementation of the Order. A confirmed CPO has a total life
expectancy of 6 years. Once the Order is confirmed there is a period of 3 years in which it
must be activated by the service of a formal notice in respect of any land identified within the
Order. Following this notification, there is a further 3 years in which possession of the land
must be taken. If the Order does not get implemented within the first 3 years or possession of



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the land is not taken within the subsequent 3 years, the CPO will lapse and be of no further
use.


The Infrastructure Planning Commission
A recent development in the compulsory purchase process as a whole was the creation of the
Infrastructure Planning Permission (‘IPC’) in 2008 which came into operation with effect
from 1 April this year.


The conceived purpose of having the IPC is to have a fast track process whereby a single
body is responsible for securing planning permission and the use of compulsory purchase
powers within a fixed timetabled period of some 12 to 18 months. Just to put the IPC time-
scale into context, a period as long as even 18 months can be contrasted with the length of
time it took to get to the opening of the new Terminal 5 at London’s Heathrow Airport where
the entire process took some 19 years from the time that the new terminal was proposed until
the date of its official opening, which included a 4 year period from 1995 until 1999 during
which the public inquiry took place!


The IPC is tasked with looking at national projects such as nuclear power, wind farms,
railways, roads etc and reaching its decision in the light of national policy statements whereby
it will issue a Development Consent Order. However, as with many political animals, the IPC
has been affected by the recent change in Government within the UK. Whilst it will be
retained whereas the previous indications were that it would be abolished, its power will be
curtailed to the extent that its recommendations will still be subject to Ministerial approval,
much the same as a CPO.


Compulsory Purchase Activity
The period from 1996 through to 2007 saw increasing use of the compulsory purchase
process to bring about schemes ranging from major public infrastructure projects such as the
Channel Tunnel Rail Link, linking London directly to cities such as Paris and beyond by rail,
to the use of compulsory purchase powers to create new stadiums for private football clubs,
albeit with regeneration for poor quality areas as the background justification for such
schemes. However although the financial and economic downturn from 2008 onwards has
seen many compulsory purchase schemes fall by the wayside, one significant scheme
continues and that is the site assembly for the 2012 Olympic Games.


The CPO which enabled all the lands needed for the construction and development of the new
facilities required for the games to be secured was implemented in July 2007. It covers a site


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in excess of 500 acres (200 hectares) in the East London area of London, parts of which site
had been previously identified for regeneration. This was an area of London which attracted
many of the less desirable but necessary businesses such as waste transfer stations,
reclamation businesses etc and consequently considerable remediation was necessary. It was
also a particularly unattractive area of London and to improve its visual appearance,
particularly for the Olympic Games, some 52 electricity towers were removed with the
electricity supply cables being re-installed in tunnels underneath the land. Securing the site
necessitated the displacement of some 800+ businesses, the majority of which have been
relocated some of which had to close permanently.


The total cost is now predicted to be around $12billion (four times the original estimate) of
which approximately $1.5billion relates to the cost of acquiring land and relocating
businesses. Once complete the site will be linked to central London by Japanese Javelin trains
with a journey time of only 7 minutes from the centre of the city.


The Basis of Valuation for Compulsory Purchase
Very little of the law that applies to the valuation process is set down in statute. On the other
hand however, if all the case law that has arisen as a result of the various decisions of the
United Kingdom law courts was printed and piled up, you could realistically expect to get a
pile reaching a considerable way up the height of the Statue of Liberty. Compensation law is
very much based on case law rather than statute.


And we in the UK have not been troubled by looking to decisions from other countries for
guidance as to how compulsory purchase compensation should be assessed. A trawl through
our case law has the resemblance of a world-wide holiday tour itinerary with a focus on
property development:
    •   Zanzibar – Railway construction
        Secretary of State for Foreign Affairs –v- Charlesworth [1901]
    •   Canada – Hydro-electric power
        Cedar Rapids Co –v- Lacoste [1914]
    •   Canada - Hydro-electric power
        Fraser –v- Fraserville City [1917]
    •   India – Harbour construction
        Vyricherla Narayana Gajapatiraju –v- Revenue Divisional Officer Vizigapatam
        [1939]
    •   Trinidad : Naval base construction




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        Pointe Gourde Quarrying & Transport Co Ltd –v- Sub-Intendent of           Crown     Lands
        [1947]
    •   Australia – Shopping centre
        Melwood Units Ltd –v- Main Road Commissioner [1979]
    •   Hong Kong – New town
        Director of Buildings and Land –v- Shun Fung Ironworks Ltd [1995]
Two specific valuation ‘Rules’ are codified in the current compensation law. The Land
Compensation Act 1961 sets out 6 statutory Rules which govern the principles to be applied
to determine compensation.


Rule 2 states ‘the value of land shall, subject as hereinafter provided, be taken to be the
amount which the land if sold in the open market by a willing seller might be expected to
realise’. The assumption is that both parties to this hypothetical transaction are willing. The
acquiring authority is willing to purchase and the seller is willing to sell; neither parties being
under duress or being forced to sell. However the market value must ignore any increase in
value that arises solely as a result of the proposal for which compulsory purchase powers are
being used. For example, a compulsory purchase may comprise 10 individual sites which are
acquired for $10 each making a total acquisition cost of $100. The site once assembled might
then have a value of $200 if it were to be resold once assembled. But the former owners of
those 10 individual sites do not get any additional payment to reflect the additional value that
has been created.


Rule 2 obviously relies upon there being evidence of value from market transactions but
sometimes properties have to be acquired using compulsory purchase powers where there
may be no open market evidence of value for that particular type of property; by way of
example, government buildings such as schools or leisure facilities, churches etc. In such
cases Rule 5 provides an alternative basis of valuation.


Rule 5 states ‘where land is, and but for the compulsory acquisition would continue to be,
devoted to a purpose of such a nature that there is no general demand or market for land for
that purpose, compensation may, if the Lands Tribunal is satisfied that reinstatement in some
other cases is bona fide intended, be assessed on the basis of the reasonable cost of equivalent
reinstatement’.


Under this basis of valuation effectively what happens is that the acquiring authority
exercising the compulsory purchase powers has to secure an alternative piece of land and
build a replacement property thereon. The owner of the land that is being compulsorily


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purchased takes ownership of the new facility and gives up ownership of its original facility
in return.


The final Rule relating to compulsory purchase valuation is Rule 6 which states, perhaps
somewhat obscurely, ‘the provision of Rule 2 shall not affect the assessment of compensation
for disturbance or any other matter not directly based on the value of land’.


What this Rule does is provide compensation where occupiers of land are forced to relocate
their businesses or homes. In the case of businesses, it will also provide compensation
equivalent to the value of the business if the business cannot find somewhere to relocate to
and consequently is forced to close. But it is not a $ for $ reimbursement of the costs that
might be involved in moving. There is no guarantee of a 100% recovery of cost or loss.


Taking an example often encountered, an existing business may well have a piece of
machinery working perfectly well and producing a good quality product but which cannot be
moved due to its age. In such a case, the owner of that machinery will only be compensated
for its written down value which is likely to be considerably less than the cost of a new
machine. But in order to continue its business, the owner of the business will have buy a new
machine and the owner will not receive compensation for the difference between the written
down value and the cost of the new machine. The owner will have to provide the difference
between the compensation received and the cost of the replacement machine out of its own
pocket.


Dispute Resolution
Traditionally where the two sides are unable to agree compensation the matter has been
referred to the Lands Tribunal, now referred to as the ‘Upper Tribunal – Lands Chamber’.
When cases are heard before this Tribunal, the Tribunal hearing will be presided over by
either a barrister or a senior chartered surveyor, or sometimes one of each, both of whom will
be very experienced in compensation law and valuation.


The Tribunal will decide the compensation to be paid on the facts and arguments presented to
it. There is no appeal to a higher court in respect of the Tribunal’s decisions so far as the
amount of compensation that is to be paid. However, should the Tribunal determine a point
of law which either party disagrees with, an appeal from the Tribunal’s decision can be made
first to the Court of Appeal and then, subject to leave to appeal being granted by the Court of
Appeal, to what was previously known as the House of Lords but is now known as the
Supreme Court.      Anyone familiar with the English parliamentary system will know, the


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House of Lords is the senior chamber within the UK Parliament which approves all UK
legislation.


More recently however alternative means of dispute resolution have evolved, largely on
account of the fact that, as with all litigation, resorting to the courts is a very expensive and
long winded process. Mediation is now encouraged and widely used in an endeavour to bring
two parties to an agreement. A variation of mediation is Early Neutral Evaluation under
which process both sides will submit representations to a panel usually comprising a barrister
and a surveyor, both of whom being experienced in compulsory purchase compensation law
and practice. The ENE panel will then express their view as to how the matter might be
determined should it be referred to the Lands Tribunal - but at considerably less cost than the
Lands Tribunal.


Of course in the case of either mediation or ENE it is still open to both parties to take their
case to the Lands Tribunal but it is often the case that one party, having been able to give the
other’s case closer scrutiny, may prefer to reach a settlement rather than involve the Lands
Tribunal – particularly when the risk of an adverse award of costs is factored in.


The Need for Reform

Despite the fact that the law in the UK was formulated over 150 years ago and has continued
to evolve, it is not faultless. Indeed a recent report by the Law Commission in England
identified a number of areas where urgent change was needed and this has been emphasised
particularly by decisions given by the Supreme Court in two recent cases which, it can only
be said, has resulted in turmoil so far as one area of compulsory purchase compensation
valuation is concerned. There is therefore an urgent need for reform, not least because
arguably some of the areas identified by the Law Commission as being in need of reform
have human rights implications.


But as with all things it is a question of balance, and in this case unfortunately the balance is
the need to find parliamentary time to amend the UK legislation relating to compulsory
purchase compensation versus a perceived benefit, so far as the politicians are concerned,
which would relate to relatively few voters!


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