The Levelling-up and Regeneration Act 2023 (the Act) makes a number of changes to compulsory purchase procedure and the way compensation is dealt with. Many of these provisions commenced on 31st January 2024. We have set out below a summary of those changes and what practitioners and others involved in the CPO regime should be aware of.
The provisions which commenced on 31 January 2024
Section 180 – This brings ‘regeneration’ into the definition of ‘improvement’ under section 226 TCPA. Whilst this power has been used frequently by acquiring authorities to bring forward regeneration proposals, it was considered by some acquiring authorities that, without express reference, there was some doubt to the scope of the power. The position has, therefore, been made clear.
Section 185 – This allows a confirming authority to confirm a CPO with an implementation period of longer than three years. This will provide flexibility around phased developments. The acquiring authority cannot include this provision when making the CPO. It is solely a power given to a confirming authority which will need to be requested. There are some template forms needed in relation to this which DLUHC are preparing but the power commenced on 31 January 2024
Section 186 – This allows an acquiring authority, once they have made a GVD, to agree with the owner a different date for the land to vest, ie the stated vesting date can be disapplied. An example would be where the landowner runs a business from the land being acquired and they need to relocate. They and the acquiring authority can agree to postpone the vesting date to allow for that relocation to take place. These provisions will apply to any GVD which is executed after 31 January 2024.
Section 187 – This gives the Secretary of State the power to require acquiring authorities to comply with approved data standards in relation to relevant compulsory purchase data (ie information that is, or is to be, contained in compulsory purchase documentation which is prepared by the acquiring authority, such as the order, notices etc.).
Section 188 – This makes amendments to the no-scheme principle in the Land Compensation Act 1961 to clarify that land acquired for ‘improvement’ is included alongside ‘redevelopment’ and ‘regeneration’ when considering what the scheme is which gets disregarded. Under the amendment, if land is being acquired for a scheme of improvement, if this is facilitated by or made possible by a relevant transport project (ie one which was carried out pursuant to statutory powers and/or by CPO), the scheme to be disregarded for the purposes of assessing compensation will be the scheme of improvement including the relevant transport project. These changes will take effect on 1 May 2024.
Section 189 – This makes amendments to the Certificate of Appropriate Alternative Development (CAAD) process. Currently, there is no requirement to secure a CAAD to establish development value. However, pursuant to the amendment, a CAAD must be applied for and granted for a claimant to establish the appropriate alternative development and determine the associated value of the land. Whilst a CAAD can be applied for after the land has been acquired (so long as compensation has not been agreed or awarded) the amendment prevents appropriate alternative development from being established after the relevant valuation date.
A further change is that currently an applicant can be granted either a positive or negative CAAD. However, the requirement to issue negative CAAD is removed by the amendments. The local planning authority must consider the description of the alternative development in the application and either grant the CAAD (or a lesser extensive form of development within the same description) or refuse it. The section also removes the ability of the landowner to claim its costs of the application from the acquiring authority.
Notwithstanding the amendments, the result of a CAAD remains the same, it becomes an assumption under section 14 of the Land Compensation Act 1961 that the development specified in the CAAD was certain to have been granted planning permission. Notwithstanding commencement, this process will not become live until 31 January 2025.
Section 190 – This is undoubtedly the most controversial change. It makes amendments to the law around compensation and specifies the circumstances within which the prospects of planning permission can be ignored for the purposes of valuation. This would apply to CAADs and to hope value. As noted above, if appropriate alternative development is established, this creates a planning certainty. Hope value is different and it is, by definition, uncertain. However this uncertainty, or hope, is a legitimate part of the value of the land and is compensatable.
Section 190 allows acquiring authorities to include in certain CPOs (affordable housing, education and health) a direction which seeks to disapply section 14 of the Land Compensation Act 1961 and effectively to ignore any CAAD or hope value. Where a direction is confirmed, only existing planning permissions can be taken into account. Whilst the section limits the types of development for which a direction can be sought, it would apply to a mixed-use scheme which includes one or more of these elements. To get a direction confirmed, the acquiring authority will need to meet all the tests for CPO and show a compelling case in public interest, including attempting to acquire the land by agreement.
However, it will also need to demonstrate that disallowing hope value is proportionate and justified in public interest. This will need to be considered on a case by case basis, but if a scheme has, for example, a private sector partner who is funding the scheme, it is likely to be difficult to show proportionality such to disallow CAAD or hope value being payable. Viability will, of course, be a key consideration as a part of this test.
The CPO will need to be accompanied by a statement of commitments which confirms what the acquiring authority is intending to deliver on the land and this will need to support justification of the direction in the public interest. In terms of affordable housing proposals, the number of units proposed need to be specified. Guidance is going to be issued in relation to these provisions by DLUHC in due course.
It should be noted that there are also clawback compensation provisions for a landowner if certain circumstances arise (broadly where the scheme isn’t delivered within 10 years or where it is delivered but less of the public benefit element that the acquiring authority committed to is delivered, such as where less affordable housing as specified in the statement of commitments is provided). Transitional provisions mean that there is a three-month period to allow acquiring authorities to get to grips with the new provisions. There are also some prescribed forms which need changing and the procedure for the clawback (referred to in the Act as additional compensation) needs to be prepared. These provisions will become active on 30 April 2024.
CPO and compensation provisions which will commence later
The Act contains a number of other provisions but these are not going to commence immediately.
Section 181 (the requirement to publish CPO documents on a website) will commence on 30 April 2024.
Section 182 (the ability for the Secretary of State to decide the appropriate procedure for determining a CPO and removal of the automatic right of an objector to require an Inquiry), Section 183 (which allows a confirming authority to confirm a CPO conditionally) and Section 184 (which applies the various process changes to Ministerial CPOs) all commence 31 January 2025.
Conclusions
There are a broad range of changes which those active in the CPO world will need to get to grips with. They will apply to a wide range of schemes and to CPOs under a variety of powers. Clearly the changes made to process and procedure offer some welcome flexibility to acquiring authorities and landowners, such as the extension to CPO implementation periods and the relaxation of vesting dates in GVDs.
In particular, these should help with regeneration or infrastructure proposals where phasing is a key element and aspects of the scheme are not required immediately. However, there are provisions which will inevitably cause concern, especially those around the assessment of compensation and the curtailment of paying development or hope value in particular circumstances. We will need to see how these flow through and work in practice, how far they are relied upon and whether they will achieve the balance of seeing more schemes being delivered whilst protecting the rights of those with an interest in land.