What you need to know about CPO

Used correctly, land acquisition by CPO and DCO can unlock development. Graeme Lawes explores the misconception that these operate at a snail’s pace The process of acquiring land and property by compulsory purchase isn’t renowned for being fast moving or dynamic. Numerous questions exist at the start of the process: what opposition will there be; how long will it take; how much will it cost; what will the outcome be? All of which can result in promoters taking an understandably cautious approach and the development process being stymied. It is important to ensure that statutory powers are used properly and that there is a compelling case in the public interest, but ultimately compulsory purchase, if used correctly, can be a catalyst for social, economic and environmental improvement. If unnecessary caution is exercised, which often stems from uncertainty of the procedural hurdles to be overcome, these benefits are much less likely to be achieved. What follows is commentary on two methods of compulsory purchase: development consent orders (DCOs) under the Planning Act 2008 (the 2008 Act), and compulsory purchase orders under the Town and Country Planning Act 1990 (the 1990 Act). Trends are considered, along with the lessons that can be learnt from recent experience and decisions.   DCOs under the 2008 Act The 2008 Act created the Infrastructure Planning Commission (IPC) to manage, examine and consider applications, known as DCOs, for major infrastructure projects. This process combined the planning application with compulsory purchase powers for qualifying projects (categories of energy, transport, water, waste water and waste) and was intended to speed up the decision making process by having a defined short timetable from submission to decision. The 2008 Act was amended by the Localism Act 2011, which abolished the IPC and replaced its function with the planning inspectorate (PINS) (to consider applications) and the secretary of state (as decision maker). However, the timetable remains defined and the secretary of state is now required to give a decision on whether to grant DCO consent within 15 months of a valid application being submitted.   Recent experience As at January 2013, there are 99 DCO projects registered with the planning inspectorate. Of these, 63 are in the pre-application stage, 17 are in the process of being considered and 19 have been archived. The 19 archived projects include 16 that have been withdrawn by the promoter; and two that PINS rejected as a result of the application not being up to a satisfactory standard. A decision has been given on three DCO applications and in each case development consent has been granted. The only decision of the IPC (prior to being abolished) was in October 2011, when consent was granted for an energy-from-waste facility at Rookery South in Bedfordshire, promoted by Covanta. However, the envisaged streamlining of consent did not succeed in this first case; a post-decision special parliamentary procedure (SPP) was required as Covanta was proposing to compulsorily acquire land from a statutory undertaker, despite not having that status itself. The hearings to consider the SPP commenced in October 2012 and although this process will take longer than it took to get DCO consent, it is expected to clear Parliament in early 2013. Under the current regime there is a risk that SPP may be required more often than not, as many projects are being promoted by new companies that do not have “statutory undertaker” status. However, proposals for legislative change are currently being considered (see below) which, if enacted, will reduce this risk. The story is more encouraging with the other two DCO decisions, which were made by the secretary of state in autumn 2012. These decisions referred to rail connection schemes in Ipswich and Doncaster. Consent for the Ipswich scheme was granted, with minor modifications, in September 2012, 15 months after the application was submitted; and the Doncaster scheme was consented – again, with minor modifications – a month later in October 2012, having also been submitted in June 2011. There are a further six projects where examinations have recently been held and a decision is due in the first half of 2013, meaning this year is shaping up to be the busiest yet for DCO activity.   Growth and Infrastructure Bill The Growth and Infrastructure Bill (the Bill), currently before Parliament, proposes to widen the extent of projects that qualify for the DCO process. Under the current regime, only energy, transport, water, waste water and waste projects qualify for consideration, providing they meet defined size or capacity criteria. Under the proposals, the secretary of state will be able to give direction for “a business or commercial project (or proposed project) of a prescribed description” to qualify for a DCO application. There is no definition of what form of “business or commercial project” might be appropriate, except that the current proposals exclude any development that includes the construction of dwellings. The Bill also includes provisions that will remove the application of SPP in most cases, which should prevent the delays experienced at Rookery South from being repeated.   The future The 2008 Act was intended to streamline the development process and, to some extent, this has been achieved. Initial apprehension by promoters was inevitable as were the changes that followed (the abolition of the IPC was essentially due to political change). The changes that are proposed under the Growth and Infrastructure Bill reflect the wider potential of the DCO process and correct the deficiencies identified from early applications. This should assist in providing a system whereby a suitably prepared promoter is clear about what is needed to achieve DCO consent and how long it will take to get through the system. The pipeline of applications and decisions expected during 2013 should also provide promoters with greater confidence in the practicalities of the system.   CPOs under the 1990 Act Under section 226 of the Town and Country Planning Act 1990, a local authority can acquire land by compulsory purchase if they think it will facilitate the development, redevelopment or improvement that is likely to contribute to the promotion or improvement of the economic, social or environmental well-being of their area. This is often used for town centre regeneration projects where the local authority has a developer partner to whom the land is transferred post acquisition, subject to them building an agreed form of development on the land. In this scenario, there are two parties that need to be comfortable with the process: the local authority, which is also the “acquiring authority” and their development partner, which is delivering the development (and likely to be picking up the costs incurred by the local authority).   The process After a CPO is made by the acquiring authority, objections may be submitted by interested parties. Unless these are resolved quickly, a public inquiry is required and this becomes known as an “opposed” CPO. Following this inquiry, the secretary of state will either confirm the CPO (as submitted or with modifications) or reject it. If no objections are maintained and the CPO is “unopposed”, the acquiring authority is able to self-confirm and avoid the time, cost and potential uncertainty of having to defend their proposals at inquiry.   Recent experience If an inquiry is necessary, each case needs to be considered on its merits and the outcome should not be influenced by decisions elsewhere. However, recent history provides some helpful context and this generally provides encouraging reading for the promoters of CPOs. The table above summarises the outcome of those applications decided in the calendar years 2009 to 2011 (2012 figures are not yet available). In summary, 159 CPOs that were made under the 1990 Act have been through the process during this three-year period, with roughly half opposed and half unopposed. 79% were confirmed and 8% rejected, with the remaining 13% being withdrawn by the promoter prior to a decision being made. Of the 79% of CPOs confirmed, around two-thirds were confirmed without modification. The modifications made to the remainder – either by the acquiring authority to prevent the CPO becoming opposed, or by the secretary of state in making his decision – should not compromise the overriding purpose and objectives of the scheme underlying the CPO and will normally be limited to minor variations to the extent of land or new rights that can be acquired. With the benefit of hindsight there are usually several clear reasons for the outcome of the 8% of the CPOs that were rejected. These are typically: failure to comply with government guidance; failure to engage with landowners; or impediments to delivery of the scheme. These are commonly issues that a more comprehensive understanding of the process and active project management could have avoided. In a difficult economic climate there is greater likelihood of CPOs being withdrawn: better to do this and get it right than to pursue the process – perhaps with questionable viability or a prelet having pulled out – and get the CPO rejected. Of course, more preferable to both these scenarios would be a delayed submission in the first place, rather than to risk costs and reputation by making a CPO and then either withdrawing it or having it rejected. The 79% “success” rate could be significantly improved if all acquiring authorities were aware of the circumstances under which it is appropriate to use compulsory purchase, what their statutory obligations are, and what processes they need to follow. It is inevitable that unforeseen circumstances will sometimes require a CPO to be withdrawn and that there will be the occasional case where a CPO is rejected despite a sound case being made for it to be confirmed, but there is no reason why this rate should not realistically increase to 90% or more.   Graeme Lawes is a director at Deloitte Real Estate