Just in case your Christmas holiday reading list wasn’t already long enough with the revised NPPF published on 16 December 2024 and all the guidance documents MHCLG has published since then, the Government launched its consultation on reforming the compulsory purchase process and compensation rules today (19 December 2024). The consultation, which you can access here, will now run for 8 weeks. Is this the Nightmare Before Christmas or a Christmas Miracle?

MHCLG tell us that the purpose of the proposed reforms are to make the compulsory purchase process “cheaper, quicker and fairer”. Will they? We will need give that some thought while we’re munching on mince pies and drinking mulled wine. But for now, here is a summary of the proposed reforms. We’ve condensed 41 pages down to less than 3 pages for you. You’re welcome.

Firstly, we are not surprised that the Government is seeking to broaden the power introduced by s190 of the Levelling-up and Regeneration Act 2023 (“LURA”) to allow for the removal of hope value (including the value associated with appropriate alternative development or the prospect of planning permission being granted for other development on or after the relevant valuation date) from the assessment of compensation in certain circumstances. We had suspected that when Labour’s manifesto said that they will “take steps to ensure that for specific types of development schemes, landowners are awarded fair compensation rather than inflated prices based on the prospect of planning permission”, that this meant broadening powers to disapply hope value.

Currently the power introduced by s190 of the LURA to include a “section 14A direction” in CPOs to remove hope value in the manner described above applies to the specific compulsory purchase powers, including:

• Powers authorising acquisitions for development schemes involving improvement, redevelopment and regeneration purposes, which include provision of affordable/social housing. The Government is proposing to expand this so that CPOs made on behalf of parish/town community councils by local authorities under section 125 of the Localism Act 1972 where the schemes underlying the orders are providing affordable or social housing can also include a section 14A direction.
• Powers authorising acquisitions for purposes of the NHS.
• Powers authorising acquisitions for education purposes.

The Government is proposing to allow decisions on the confirmation of CPOs including a section 14A direction and decisions on directing additional compensation to be delegated to an inspector. The Government is also proposing that section 14A directions should not only apply to the assessment of compensation under rule(2) in section 5 of the Land Compensation Act 1961 for land acquired but to apply to other assessments of compensation where market value is a component, such as to claims for home loss (and related) payments under the Land Compensation Act 1973.

So far not hugely drastic. However, in addition to the use of section 14A directions, the Government is considering introducing a general power to enable the Secretary of State in England or the Welsh Ministers in Wales to make a direction to remove hope value from the assessment of compensation for the following categories of sites where a direction is  justified in the public interest:

• Brownfield land in built-up areas suitable for housing but with no extant planning permission for residential development;
• Land allocated for residential development in local plans but which has not come forward for development.

This seems to be targeting “land banking” –  the concept that landowners delay development on land with planning permission in the hope of improved future market conditions  (the assertion that land banking is delaying delivery of housing is contested by many – see for example, Matthew Spry’s analysis). We foresee several issues with these proposals, namely why would a landowner invest a huge amount of money in promoting a site through a local plan only to know that, if it does not progress with the scheme immediately and even if the site is allocated, there is a risk of compulsory purchase without the ability for the landowner to claim compensation for the prospect of planning permission being granted?

That covers the changes in section 2 of the consultation. The technical changes in section 3 of the consultation are perhaps, well definitely, less controversial. They include:

• Allowing notices and documents required to be served under the Land Compensation Act 1961, Compulsory Purchase Act 1965, Land Compensation Act 1973 and the Acquisition of Land Act 1981 (“the ALA 1981”) to be capable of being served electronically if parties agree in writing to receive service in that manner or where the recipient is a public authority. There is already provision for service by electronic means in the Compulsory Purchase (Vesting Declarations) Act 1981.
• Simplifying the information required to be included in newspaper notices required by section 11 of the ALA 1981 given the extent of information now required (since LURA) to be published electronically.
• Amending section 14A of the ALA 1981 to allow acquiring authorities to confirm their own CPOs where non-controversial modifications are required. The consultation lists the types of modifications that will be considered “non-controversial”. These include rectifying discrepancies between the CPO text and map, removing an interest from the CPO where it is no longer required, inserting a new interest in the CPO where the person has agreed for their interest to be included and other grammatical/typographical amendments.
• Allowing the delegation of decisions on the confirmation of CPOs made under the New Towns Act 1981 to an inspector. This is no doubt in anticipation of the activity associated with the Government’s new towns agenda.
• Commencing (at last) the temporary possession provisions in the Neighbourhood Planning Act 2017 but carving out TWAOs and DCOs (which can of course already incorporate temporary possession powers).
• Amending the Compulsory Purchase (Vesting Declarations) Act 1981 to allow acquiring authorities to use an expedited notice process. There is currently a minimum period of 3 months between notice and vesting, which the Government is proposing to shorten to 6 weeks in certain circumstances. Such circumstances include where the land being acquired is not legally occupiable due to its current physical condition as well as where no responses are received to notices served or published relating to a CPO and no objections are received to the CPO.
• Adjusting statutory loss payments in favour of occupiers by reversing the current percentages such that basic loss payments are adjusted to 2.5% (from 7.5%) of the market value of the interest subject to a maximum of £25,000 (from £75,000) and adjusting occupier’s loss payments from 7.5% (from 2.5%) of the market value of the interest subject to a maximum of £75,000 (from £25,000). This will be welcomed by many who consider that occupiers suffer more from compulsory purchase than non-occupying landowners.
• Introducing an exclusion to discretionary home loss payments in circumstances where a property owner has failed to comply with a statutory enforcement notice/order (e.g. requiring repairs to the house) served on them by the time the relevant CPO is confirmed.

There we have it. In an interesting turn of events, MHCLG has beaten (perhaps not coincidentally) the Law Commission, who we hear will be launching their consultation tomorrow, to it. However, we expect the Law Commission consultation paper to include recommendations for much wider ranging reforms than this to the statutory code.

Happy Christmas everyone. We hope you enjoy the break and don’t get too distracted by today’s news. You have until 13 February 2025 to submit your responses after all.