Compulsory Purchase Orders: a reformed regime

“The current law of compulsory purchase of land is difficult to locate, complicated to decipher and elusive to apply. The case for its reform is overwhelming and has been recognised by government.” So wrote the Law Commission in its December 2004 report which recommended root-and-branch reforms to the law on compulsory purchase and compensation. Despite nearly 20 years of practitioners’ blood, sweat and tears in the name of consolidation, codification and simplification, the law underpinning the compulsory purchase system remains much the same – a disparate collection of archaic statute and case law.  The government says it wants to see a faster, more efficient compulsory purchase system. To this end, the Levelling Up and Regeneration Bill proposes a number of changes to the system to streamline and modernise the process for compulsory purchase orders. These changes fall short of the sweeping reform some say is needed, but a number of them do have potentially wide-ranging consequences. What are the key proposals? What is the basis for the changes to the CPO regime? The government’s proposed reforms to the CPO system stem from two of its recent flagship policies. The first, the Build Back Better High Streets strategy, emphasised the role of CPO as a catalyst for the regeneration of high streets and town centres. The second, the Levelling Up White Paper, published in February 2022, made clear that the government wants communities to be given the necessary tools to “take the lead”. As is usual for the government’s interventions in the planning system, speed and efficiency are the order of the day. Here, the government stresses that it wants a system that “acquiring authorities are confident in using” and that “produces the right outcomes” to bring forward housing, regeneration and infrastructure. Those whose land stands to be acquired might reasonably ask “the right outcomes for whom?” given that the approach taken by the Bill does, at first glance, seem to be geared primarily towards addressing concerns faced by acquiring authorities, and not those living under the shadow of a CPO. As well as procedural reforms, the government is keen to ensure that development proposals that are reliant on a CPO remain viable and are able to deliver their promised public benefits. A particular concern is the approach taken to “hope value”. The government’s proposed changes to the compensation framework are potentially significant and may prove the most controversial of the lot. What procedural reforms are being proposed, and what effect will they have? The Bill proposes a number of changes to CPO procedure. Here are three key changes.  1. Removing the right to an inquiry Objections to a CPO may be considered at inquiry, hearing, or by written representations. Currently, objectors have the right to be heard at inquiry – and most objections are heard this way – even in cases where the issues may be straightforward or there are only a few objectors. The Bill would remove this right and give the confirming authority the discretion to choose the appropriate forum. Objectors will be able to request a hearing instead. While the removal of the right to an inquiry might sound disadvantageous to affected landowners, this may not always be the case. Hearings are less formal than inquiries and provide arguably a more user-friendly forum in which to voice concerns and encourage active participation. The process has generally worked well in the infrastructure consenting arena and could be a win-win for acquiring authorities and objectors alike. 2. Conditional confirmation When it comes to the confirmation of a CPO, the current approach is “all or nothing” – an order must be confirmed or rejected in whole or part. This means that, where a CPO comes forward before planning permission is obtained for the development proposal underpinning it, the confirming authority has to consider whether to confirm “at risk”, knowing that planning consent may never be granted. The Bill would change this, allowing the confirming authority to confirm a CPO subject to the satisfaction of specified conditions by a certain date. Interested parties will be given the opportunity to make representations on any applications to discharge conditions. The CPO will become operative only when the acquiring authority publishes a fulfilment notice confirming that all conditions have been discharged.  A similar – albeit more targeted – approach has been used successfully in development consent orders to ensure that compensation funding is in place before powers of compulsory acquisition are exercised. This seems like a positive change – but more clarity is needed as to the nature of matters which may be conditioned and how long acquiring authorities and their development partners will have to satisfy conditions. It will be imperative to avoid the confirmation of undercooked CPOs under the guise of flexibility, speed and efficiency – only for affected landowners to suffer extended periods of uncertainty waiting for conditions to be discharged. 3. Extension of time limits for implementation The Bill would allow the confirming authority to extend the period for implementing a CPO beyond the standard three years. The implementation period runs from the date that the CPO becomes operative, which, for conditional confirmations, will be the date that the fulfilment notice is published.  While acquiring authorities and developers will welcome the additional flexibility, which will be especially useful in the delivery of large, complex urban regeneration schemes (but will it simply delay the customary last-minute panic to implement the CPO before the ability to do so expires?), those affected by CPOs will face an extended period of uncertainty while they wait to find out whether their land will indeed be taken. Confirming authorities will, therefore, have to balance carefully the needs of those promoting regeneration and those affected by it. What about compensation? For years, the amount of compensation payable has been based on the principle of equivalence – that the affected landowner should neither be financially better nor worse off because of the CPO. Controversial proposals look to change this. A number of heads of compensation make up the final sum due to the landowner. One of these is the open-market value – in the no-scheme world – of the land to be acquired. This is currently the value taking into account any existing planning permissions, as well as the “hope value”, ie the prospect of obtaining planning permission for development of the land were the CPO to be cancelled. The government intends to reform the hope value element of a compensation claim to ensure scheme viability and maximise public benefits. Its most eye-catching proposal is the idea to cap hope value – or even remove it from the assessment of market value altogether. The market value element of compensation would, therefore, be limited to the existing use value or a percentage of hope value above that. This approach would no doubt help scheme viability and, as per the government’s aspirations, give acquiring authorities greater certainty as to their potential compensation exposure.  That being said, the proposals conflict directly with the longstanding and fundamental principle of equivalence. It is unfair that a landowner should receive less than the market value for its interest simply because its land falls under the shadow of a CPO. The proposals may also have some unintended consequences. Some acquiring authorities may be reluctant to apply for a cap on hope value given the risk of having to publicly disclose viability information and, consequently, inviting objections to the CPO on viability grounds. Further, the changes risk giving rise to protracted wrangling on hope value caps and, where caps are introduced, what the hope value is. Landowners faced with a cap may well push even harder for a higher value. These potential pitfalls could undermine the government’s aspirations for a “faster, more efficient” compulsory purchase system. The Bill proposes other changes connected with assessing hope value, including – in another blow to the principle of equivalence – preventing landowners from claiming the costs of submitting applications for certificates of alternative appropriate development. In the absence of a CPO, landowners wouldn’t need to incur such costs and so it seems inequitable that they should have to assume them.  What’s next? The Bill remains in the early stages of its passage through parliament – and the recent government overhaul has the potential to delay its progress. The government has just concluded a consultation on its reforms to the compensation framework, with the refined proposals expected to come forward in an amendment to the Bill. CPO practitioners will be monitoring the Bill’s progress keenly. Improvements to the compulsory purchase system are long overdue and, to that end, it is positive that the government has turned its attention to CPO – but it will be important to ensure that efforts to unlock the system don’t have the opposite effect. David Wood is a senior associate in the planning team at Hogan Lovells International LLP Image: A mature tree felled by HS2 to make way for the high-speed rail link from London to Birmingham. Maureen McLean/Shutterstock