Conditional CPOs

Thanks for all the positive feedback on the first episode of our blog. Having already summarised the CPO provisions in the Levelling-up and Regeneration Bill (or “LURB” as all the cool kids are calling it).

For our difficult second album, we’re going to look in a bit more detail at clause 143 which introduces the new “conditional confirmation” route for CPOs.

I’m going to accentuate the positives, speculating with dewy-eyed optimism that conditional CPOs might help to facilitate regeneration and provide protection to landowners. I’ll then hand the baton over to Paul Arnett who in time-honoured lawyerly fashion will point out some of the potential risks and downsides with the proposals.

First of all, a quick refresher of the current options for confirming authorities on confirmation and a reminder of what clause 143 does. At present, a CPO may either be confirmed (with or without modifications), rejected, or confirmed in stages (rarely if ever used). Clause 143 seeks to provide confirming authorities (“CA”) with a 4th option in their toolbox of confirming the CPO subject to conditions. It inserts a new section 13BA into the Acquisition of Land Act 1981 which, in summary:

• Gives the CA the power to confirm a CPO conditionally.
• Specifies that the CPO cannot be implemented until the condition(s) has been discharged by the CA following an application by the acquiring authority (“AA”).
• Provides that a CPO confirmed subject to conditions will expire if either (a) the discharge application hasn’t been submitted by the AA within the time specified by the CA or (b) the CA refuses the application.
• Defers the details of the discharge application procedure to be set out in secondary legislation. This is one of many “Henry VIII powers” in the LURB (named after the 1531 Statute of Sewers which controversially delegated “legislative powers, taxing powers and judicial powers” to the King).
• While the discharge application process is very much in the TBD category, we are given some clues on the face of the Bill as to what it may contain. The process must provide for every “relevant objector” (i.e. an objector who hadn’t withdrawn their objection by the time the CPO had been confirmed) to be notified of the discharge application and to be given an opportunity to respond to the application in writing.

Known unknowns

There’s a lot we don’t know yet about these proposals. The Bill is conspicuously silent as to what types of conditions might be imposed on a CPO and I expect we will have to wait for publication the latest iteration of DLUHCs “Guidance on Compulsory purchase process and the Crichel Down Rules” (time to re-label it as simply “CPO guidance”?) to find out.

However, we were privileged to get an insight from Charles Clarke, DLUHC policy lead on compulsory purchase and former chair of the CPA, at the recent “Planning Law Unplanned” Clubhouse discussion on the CPO provisions on 17 May. A recording of the session (hosted by Simon Ricketts and with contributions by myself, Paul, Virginia Blackman, Liz Neate, Caroline Daly and CPA chair Henry Church) can be found here. The session is really worth a listen if you want to understand the rationale behind the CPO provisions in the Bill.

Show me the money

Money may or may not be the root of all evil but it’s certainly the sine qua non of development. Any regeneration proposal needs funding, often from multiple sources. And the availability of funding will be dependent on investors being satisfied (and continuing to be satisfied) that they will get a reasonable return on their investment. We’ve been used to a fairly stable property market for 20 years now with property prices trending upwards while costs have been fairly predictable. As we all know, this can no longer be taken for granted. Moreover, with a much greater emphasis on schemes providing a policy compliant level of affordable housing, there’s often a need for public sector to step in to plug any funding gap.

As Charles made clear during the Clubhouse session, the Government is concerned that acquiring authorities are waiting too long before seeking CPO powers which in turn creates issues in securing funding from investors who are naturally risk-adverse.

At this point, it’s worth reminding ourselves what the current CPO Guidance (as we are going to call it from now on!) says about funding:

“In preparing its justification, the acquiring authority should address:

a) sources of funding – the acquiring authority should provide substantive information as to the sources of funding available for both acquiring the land and implementing the scheme for which the land is required. If the scheme is not intended to be independently financially viable, or that the details cannot be finalised until there is certainty that the necessary land will be required, the acquiring authority should provide an indication of how any potential shortfalls are intended to be met. This should include:

• the degree to which other bodies (including the private sector) have agreed to make financial contributions or underwrite the scheme; and
• the basis on which the contributions or underwriting is to be made.

b)  timing of that funding – funding should generally be available now or early in the process. Failing that, the confirming minister would expect funding to be available to complete the compulsory acquisition within the statutory period (see section 4 of the Compulsory Purchase Act 1965) following the operative date, and only in exceptional circumstances would it be reasonable to acquire land with little prospect of the scheme being implemented for a number of years.”

To be blunt, that’s pretty wishy-washy stuff. In reality, how can the CA be satisfied at the date of confirmation that funding will come forward within the 3 year implementation period (or potentially longer as envisaged by clause 146 of LURB)?

However, the CPO Guidance is basically just recognising reality here. If guaranteed funding was required for every project (regeneration or infrastructure) before the necessary CPO powers were authorised, very few CPOs would be confirmed.

So, at present, a CPO can be confirmed without funding secured and an affected landowner has to wait potentially for up to 3 years (or up to 6 years if the acquiring authority extends the implementation period by serving notice to treat but doesn’t take possession) not knowing when or if her land will be acquired. Or even worse, market conditions change and funding falls away after CPO powers have been exercised and the site has been cleared but before construction contracts have been signed. That doomsday scenario is sadly not all that unusual – ask the residents of Dartford or Bradford.

It’s now standard to have a timetable in place for the consideration of a CPO and that’s a good thing. But, in practice it can mean that there’s insufficient time to get all the voluntary agreements with landowners over the line. Ideally, the AA and landowners will have negotiated in good faith for a reasonable period of time leading up to the making of the CPO. But the reality is that many landowners won’t engage until the CPO is made and some AAs are unable or unwilling to make offers until funding is secured or the details of the scheme are filled out. If a CPO could be made conditional on agreement being secured with a relevant objector that might allow schemes such as the refused Bromley-by-Bow CPO to proceed subject to securing relocation premises to save skilled jobs.

In fairness, Charles gave little indication that the Government envisages conditions being imposed that require AAs to endeavour to reach agreement with objectors (or, to avoid ransom situations, giving unilateral undertakings which would satisfy their concerns). Nevertheless, given the right of remaining objectors to comment on applications to discharge conditions, it seems probable that the Government intends to allow conditions which relate to resolving issues raised by landowners.

What’s the catch Paul?

Well to my mind there’s potentially quite a few possible downsides and risks with the conditional CPO model which will need to be worked through.

In no particular order (oh no, I’ve turned into Dermot on the X Factor!):

• The main risk as I see it is whether the “go early” encouragement that the conditional confirmation route offers will lead AAs, in practice, to promoting under prepared and insufficiently justified CPOs diluting the fundamental requirement that acquiring authorities must demonstrate that CPO powers are necessary, a tool of last resort, and that there is a compelling case in the public interest for the compulsory acquisition. It seems to me that the new conditional confirmation route could potentially enable quite significant impediments to a scheme (e.g. planning and financial) which go to the heart of the justification for the CPO powers sought to now be hived off to conditions after the principle of the CPO has been established. While objectors will have the right to make written reps on the discharge application, there’s no provision for an in-person inquiry or hearing to be held to determine the discharge of condition applications. By this point in the process the principle of the CPO has already been set in stone meaning, in practice, it is likely to be an even more uphill struggle to stop the CPO juggernaut in its tracks.
• Those planners in the audience will know how time-consuming and burdensome it is to discharge the myriad of planning conditions now routinely imposed on planning permissions with unconditional planning permissions a thing of the dim and distant past. In time, will this become the norm for CPOs being confirmed but subject to conditions as long as your arm being imposed by precautionary confirming authorities? Even if the conditions are more focussed in nature, it is unclear (TBD in the regulations) what the notification and representations period will be for the discharge of conditions process. While this will hopefully be clarified in the regulations and updated CPO Guidance, I foresee a potentially burdensome satellite process being created with issues currently ventilated at the confirmation stage being simply moved to the discharge of conditions stage.
• It is currently unclear what will be the scope of CPO conditions (I consider a set of model conditions would be helpful) and what, if any, constraints will be placed on a confirming authority’s very broad discretionary power on the face of the Bill to seemingly impose whatever conditions it thinks fit. Wearing my planning hat (again), should a variation of the Newbury criteria for planning conditions be rolled over to CPO conditions whether on the face of LURB or in the CPO Guidance? (i.e. that the conditions must be for a CPO purpose, that they must fairly and reasonably relate to the scheme and not be manifestly unreasonable) If neither LURB or the CPO Guidance grasp this mantle then we can expect challenges in the courts to decisions to discharge conditions.
• What, if any, appeal mechanism will there be for acquiring authorities if the confirming authority refuses the discharge application given that the stakes are very high (i.e. the CPO lapses) if the application is refused? Does the CPO still expire if the acquiring authority lodges an appeal against refusal or (if no appeal mechanism is built into the process) a judicial/statutory review legal challenge is lodged? On the flip side, does the discharge of conditions application give objectors a second bite of the cherry to oppose the scheme and mount a legal challenge?
• Presumably, the long established and well-trodden “last resort” “no material impediments” and “compelling case” sections of the CPO Guidance will need to be re-visited to accommodate the “get powers earlier” mantra that the conditional confirmation route promotes. If so, would such revamped guidance be compliant with right to hold property in Article 1 of the First Protocol of the European Convention given the judicial requirement that the process strikes a “fair balance” between the public benefits of the acquisition and the property rights being infringed?

All in all, opinions are divided (even within Town!) on the merits of the proposal. It will be really interesting to see how it plays out as the clause goes through Parliament and the secondary regulations are brought forward (will we have sight of these in draft during the Bill process?).