REVIEW OF COMPULSORY PURCHASE AND LAND COMPENSATION Ian H Murning Dundas & Wilson Montagu Evans Scottish Executive Central Research Unit 2001 CRU CRU CRU CRU CRUCRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU Further copies of this report are available priced £5.00. Cheques should be made payable to The Stationery Office and addressed to: The Stationery Office 71 Lothian Road Edinburgh EH3 9AZ Order line and General Enquiries 0870 606 5566 The views expressed in this report are those of the researchers and do not necessarily represent those of the Department or Scottish Ministers. © Crown Copyright 2001 Limited extracts from the text may be produced provided the source is acknowledged. For more extensive reproduction, please write to the Chief Research Officer at the Central Research Unit, Saughton House, Broomhouse Drive, Edinburgh EH11 3XA. CONTENTS Page No TABLE OF STATUTES ii TABLE OF STATUTORY INSTRUMENTS AND CIRCULARS iii TABLE OF CASES iv BIBLIOGRAPHY vi GLOSSARY OF TERMS vi EXECUTIVE SUMMARY vii-x CHAPTER ONE INTRODUCTION 1 CHAPTER TWO SUMMARY OF THE SYSTEM OF COMPULSORY PURCHASE 3 CHAPTER THREE LITERATURE REVIEW 17 CHAPTER FOUR REVIEW OF CURRENT SCOTTISH PRACTICE: 32 • Who has powers of compulsory purchase? • Number, type and use of compulsory purchase orders • Scottish factors 32 32 35 CHAPTER FIVE RESEARCH ANALYSIS: • • • • 37 Survey Results: Acquiring authorities and the Scottish Executive Survey Results: Organisations and professional bodies Symposium Questionnaire responses 37 39 41 42 CHAPTER SIX CONCLUSIONS 48 APPENDIX 1 TERMS OF REFERENCE 54 APPENDIX 2 KEY PROCEDURAL STEPS 60 APPENDIX 3 AUTHORITIES WITH POWERS OF COMPULSORY PURCHASE 61 APPENDIX 4 SUMMARY OF INFORMATION PROVIDED BY THE KEEPER – REGISTERS OF SCOTLAND 63 APPENDIX 5 QUESTIONNAIRE 64 i TABLE OF STATUTES Page Land Clauses (Consolidation) (Scotland) Act 1845 Section 17 Sections 36-49 Section 114 3, 9, 12, 19, 35 6 23 12 Acquisition of Land (Assessment of Compensation) Act 1919 13 Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947 Second Schedule – Section 1(1) 3, 12 12 Land Compensation (Scotland) Act 1963 Section 12 Section 23 Section 40 19, 24 (x), 7 8 24 Compulsory Purchase Act 1965 19, 35 Land Compensation (Scotland) Act 1973 11, 13, 19, 24, 29 12 11 11 12 25 13, 24, 29 Sections 31 to 33 Section 34 Section 35 Section 43 Section 48 Part 1 Roads (Scotland) Act 1984 3 Housing (Scotland) Act 1987 3 Planning and Compensation (Scotland) Act 1991 Schedule 17 8 Town and Country Planning (Scotland) Act 1997 Sections 100 – 107 Section 101 Section 195 Schedule 14, Para 14 Schedule 14, Para 15 3 14 15 6 15 15 ii TABLE OF STATUTORY INSTRUMENTS AND CIRCULARS Page Acquisition of Land (Rate of Interest after Entry) (Scotland) Regulation 1995 (SI 1995 No. 2791). 24 Compulsory Purchase by Public Authorities (Inquiries Procedure) (Scotland) Rules (S.I. 1998 No. 2313) 5 S.D.D Circular 42/76. Compulsory Purchase Procedures (viii), 4, 51 SODD Circular 36/97. Compulsory Acquisition of Land: Land Compensation Rate of Interest. 25 iii TABLE OF CASES Argyle Motors (Birkenhead) Ltd v Birkenhead Corporation [1974] 1 All ER 201; 229 EG 1589 12 Director of Buildings and Lands v Shun Fung Ironworks (1995) 2 AC111, [1995]. All ER 846; [1995] 19 eg 147; [1995] RUR 124; [1995] ECGS 35; [1995] 1 EFLR 19 18 Horn v Sunderland Corporation [1941] 2 K.B. 26; [1941] 1 All E.R. 480; 110 L.J.K.B. 353; 165 L.T. 298; 57 T.L.R. 404: 85 S.J. 212; 39 L.G.R. 367 Metropolitan Board of Works v MacCarthy (1874) L.R. (H.L.) 243; 43 L.J.C.P. 385; 31 L.T. 1982 7, 10, 18 12 Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands [1947] A.C. 565 8 Stirling Plant (Hire and Sales) Ltd v Central Regional Council and the Secretary of State for Scotland. Case Comment. S.P.E.L. 1995, 48, 35 [abbrev]; The Times Feb 9, 1995 4 Strathclyde Regional Council –v- Secretary of State for Scotland (1989) 27 S.P.L.P 5 Standard Commercial Property Securities Limited v Glasgow City Council (22 August 2000) (http://www.scotcourts.gov.uk/opinions/NIMI508.Ltml) iv 38 BIBLIOGRAPHY Adams David, The Use of Compulsory Purchase Under Planning Legislation, (1996) Journal of Planning and Environmental Law 21, 35 Craig, Sarah and Brown, Paul D., (1994), Home Loss and Disturbance Payments: The Law, RICS in Scotland Library, p. 5 36 Compulsory Acquisition and Payment: A New Approach, A Draft CLA Policy Paper, Country Landowners Association, London, Executive Summary, item 9 31 D.E.T.R. Inter Departmental Working Group on Blight. Final Report. December 1997 30 Development and Compensation: Putting People First, Cmnd. 5124 23 Gordon, W. M., (1989), Scottish Land Law, W. Green, Edinburgh, 29-01, 29-02 17, 19 McAllister, Angus, and Guthrie, T. G., (1992), Scottish Property Law, An Introduction, Butterworths, Edinburgh, p. 237 19 McAuslan, Patrick, (1975), Land, Law and Planning, Weidenfield and Nicholson, London, p.697 26 McGregor on Damages 10 MHLG, (1969), Report of the Committee on Public Participation in Planning,(Skeffington Report), HMSO, London 29 Report of the Urban Motorways Committee (HMSO July 1972) 26 RICS, (1995), Compensation for Compulsory Acquisition, RICS, London, p.41-42 29 RICS, Rowan-Robinson, Jeremy, et al, (1995), "Compensation for the Compulsory Acquisition of Business Interests: Satisfaction or Sacrifice?, RICS Research Paper Series, Vol. 1, No. 7 25, 27, 29 The Operation of Compulsory Purchase Orders (1996) (Goodchild) 18 Rowan-Robinson J (1990), Compulsory Purchase & Compensation; The Law in Scotland, W Green, Edinburgh 17, 23 The Report of the Committee on Tribunals and Inquiries. The Franks Report, Cmnd. 218, para, 278 26 Young, Eric, and Rowan-Robinson, Jeremy, (1985), Scottish Planning Law and Procedure, William Hodge, Glasgow, p.404 quoting from The Future of Development Plans (HMSO 1965) 28 v GLOSSARY OF TERMS Betterment: The increase in value of retained land due to the acquisition of adjacent land by a body with compulsory purchase powers. Blight: The reduction in value of land due to the prospect of a scheme of development by a body possessing compulsory purchase powers. Equivalence: The monetary payment required to put the claimant in the same position as he would have been were it not for the compulsory acquisition of his interest. It is therefore neither more nor less than his loss. Injurious Affection: The reduction in value of retained land due to the acquisition of adjacent land by a body with compulsory purchase powers. "Judge Made Impecunionsity Rule": A loss which the claimant cannot mitigate because of his financial position. Pointe Gourde Principle: Any change in the value of the claimant’s interest which is caused by the scheme of the acquisition is to be ignored in assessing compensation, (Pointe Gourde Quarrying and Transport Co. v SubIntendent of Crown Lands) Ryde's Scale: The scale for surveyor’s fees agreed between the RICS and the Valuation Office Inland Revenue accepted by Government Departments and the bodies representing most acquiring and compensating authorities throughout the country. Short Tenancies: Tenancies of less than a year. vi EXECUTIVE SUMMARY • Compulsory purchase has been little used in Scotland recently. This is partly due a lack of public funds and partly as a result of a perception that the Scottish Ministers are reluctant to confirm compulsory purchase orders. However, planning policies now support the redevelopment of brownfield sites, particularly in town centres. Such sites are often in multiple ownership and, in the future, compulsory purchase may be necessary for site assembly. If the compulsory purchase system does not operate effectively, planning policies may be frustrated. There may also be an increase in major infrastructure projects, which may also require compulsory purchase to facilitate site assembly. There is a realistic prospect, therefore, that the use of compulsory purchase powers will materially increase in the future. • Although no statistics are available, most public sector acquisitions of property are carried out under threat of compulsory purchase. Acquiring authorities believe this threat assists them to purchase land by agreement. • The timetable for processing a compulsory purchase order is invariably protracted and uncertain; this can adversely affect both claimants and acquiring authorities. • The open market basis of compensation payable on compulsory purchase, which is directly related to market evidence, is generally perceived to be fair. However, there is significant support, mainly from the private sector, for payment of a premium to reflect the compulsory nature of the acquisition. Some suggest that the additional cost of such a premium could be off-set by the benefits of fewer objections to the compulsory purchase order. • Disturbance payments are often a source of resentment. Some claimants believe that the basis of this payment and the onus of proof to demonstrate a loss, often results in under compensation. However, this must be balanced against the obligation upon the acquiring authorities to satisfy the requirements of public accountability. • The key concerns of the private sector regarding fees/costs are as follows: - If the acquiring authority withdraws the order, the claimant is not entitled to reimbursement of the professional costs incurred by him. The acquiring authority should be under an obligation to reimburse reasonable professional costs in the event of the order being withdrawn. - A review of the Ryde's Scale for surveyors fees is recommended to address perceived current inadequacies of the system. - Claimants are reluctant to apply to the Lands Tribunal for Scotland because they are responsible for all costs, if unsuccessful. Their maximum liability should be restricted to their own costs. However, there is a need for some form of sanction to deter claimants from making frivolous applications or behaving unreasonably. • Very few applications are made to the Lands Tribunal for Scotland notwithstanding the considerable time usually taken to agree compensation. After entry, it often takes years to reach agreement on compensation. vii • There is no evidence of blight being a serious issue in Scotland although this may change with the promotion of major infrastructure projects, such as the guided busways in Edinburgh. • Notwithstanding differences in legislation, the compulsory purchase system in Scotland operates in a similar manner to the system in England and Wales. Fewer orders have been promoted in Scotland and there have been no major Scottish infrastructure projects, such as the Channel Tunnel Rail Link, which aroused so much public opposition. The Scottish differentiating factors relate to custom and administration. RECOMMENDATIONS 1. Short term changes within the existing legislative framework (a) Procedures (i) The Scottish Ministers should provide a clear policy statement on the use of compulsory purchase powers. If orders are to be used to support planning policy objectives, it may no longer be appropriate to restrict their use to cases of "last resort". Acquiring authorities should understand the scope of their powers to exercise compulsory purchase powers in a commercial context to allow them to assist with site assembly for town centre development. (ii) Scottish Development Department Circular 42/76 should be revised and updated. As well as providing a policy statement on the use of compulsory purchase powers, the new circular should include guidance on:- (iii) - The desirability of pursuing a compulsory purchase order in advance of either development plan approval or a grant of planning permission for the project. - Matters to be covered by the acquiring authority in their Statement of Reasons for making an order. - An "Easy Read" guide to compulsory purchase procedures. The acquiring authority should be instructed to serve this guide with the formal notification of the order on affected landowners/interest. - Clarification of the supporting documentation to be submitted by the acquiring authority to the Scottish Ministers on notification of the order. - Target time-scales for Ministerial decisions on confirmation of orders. The Scottish Executive should consider the production of a Best Practice manual. viii (b) (iv) The Scottish Executive should progress towards confirmation of an order as soon as reasonably practicable. In particular, they should not delay the procedure with attempts to reconcile disputes between the parties. The proper forum for consideration of such disputes is a public inquiry. Promotion of the order is the responsibility of the acquiring authority. It is their responsibility to provide evidence to the public inquiry to support confirmation of the order. The independence of the Scottish Ministers, as decision-maker, should not only be preserved, but be seen to be preserved to minimise the risk of a legal challenge of pre-confirmation procedures in terms of the European Convention on Human Rights. (v) The Lands Tribunal for Scotland should be invited to review their procedures to identify possible improvements to make the Tribunal more accessible. Compensation • A review of Ryde's Scale of professional fees should be undertaken as soon as possible. (c) Blight • No short term measures are considered necessary in relation to current provisions of blight. 2. Areas for further investigation for consideration by the Scottish Ministers (probably requiring legislation) (a) Procedures • Consideration should be given to updating and consolidating the legislative framework governing compulsory purchase procedures. • A future review of compulsory purchase procedures should identify opportunities to increase speed. This is of particular importance if local authorities are to respond to commercial pressures when facilitating town centre improvements. • A number of significant issues are currently arising in practice regarding the scope for local authorities to enter into indemnity agreements with private companies. For example, whether a local authority is entitled to enter into an agreement to acquire land compulsorily and then transfer title on to a particular developer, who has agreed to indemnify the authority for the acquisition costs. • As local authorities rarely have the necessary finance or expertise to implement major redevelopment projects, consideration should be given to establishing a centrally funded agency to support authorities in the exercise of compulsory purchase powers. ix (b) Compensation • The costs and benefits of paying a premium should be assessed and, if payment of a premium is considered to be appropriate, there should be guidance on how this should be calculated for all or certain categories of claims. • The rules of disturbance should be reviewed to ensure that there is a fair code for claimants consistent with the requirements of public accountability. • Consideration should be given to the possibility of claimants being entitled to recover reasonable professional fees in the event of an acquiring authority withdrawing an order. • The system of awards of expenses by Lands Tribunal for Scotland should be reconsidered to assess the benefits of restricting a claimants' maximum liability to his own costs, if unsuccessful. However, the risk of encouraging frivolous claims or unreasonable behaviour should be part of such an assessment. • Consideration should be given to whether there is a need for privatised utilities to be required to obtain a "Public Interest Certificate" if they wish to continue to benefit from the application of Rule 3. (Section 12 of the Land Compensation (Scotland) Act 1963.) (c) Blight • The Scottish Executive should monitor the operation of any amendments to the blight provisions in England and Wales and, if appropriate, incorporate those amendments into Scottish legislation. x CHAPTER ONE INTRODUCTION Introduction 1.0 On 20 January 1999 the Scottish Executive commissioned this study into The operation of the system of Compulsory Purchase and Land Compensation with a particular emphasis on the Scottish Dimension. (The detailed terms of reference are included at Appendix 1). 1.1 The objectives of the study are to: • Establish how the system currently operates in Scotland; and • Identify ways of improving its operation; this may comprise:- short-term changes within the existing legislative framework; and areas for further investigation with a view to the Scottish Parliament considering a more fundamental scheme of reform (probably requiring legislation). 1.2 The study has been carried out by practitioners with practical experience of compulsory purchase orders and the report reflects their knowledge of the operation of the system. 1.3 Although the study was commissioned before the establishment of the Scottish Parliament, we have used post Scottish Parliament terminology to avoid confusion. Compulsory Purchase 1.4 Views on the basic concept of compulsory purchasevary. On the one extreme, it may be seen as an unreasonable interference with the individual citizen's right to do with his property as he sees fit. At the other extreme, there is the concept that "ownership" is subject to the overriding right of the State to acquire any property for the benefit of society. However, even in the absence of compulsory purchase, outright ownership is an illusion because all property interests are subject to a wide range of restrictions, such as public health and planning legislation. 1.5 There is, however, general acceptance that it is reasonable for the State and other appropriate bodies to have the power to acquire property by compulsion, where it can be demonstrated that it is for the benefit of "society". It is not, however, possible to measure in wholly objective terms the effectiveness of a system which includes a large measure of subjective judgement about what is "fair" between the needs of society and the rights of the individual. This comparative analysis requires consideration of: • the organisations who should have these powers • the balance between the needs of society and the rights of individual ownership • the basis of compensation where property is acquired by compulsion 1 1.6 There is also the related issue of blight which arises when there is an indication that property might be subject to compulsory purchase and, as a result, the owner cannot sell except at a greatly reduced price. 1.7 There is a general acceptance that "equivalence" is the appropriate basis for compensation so that the person whose property is acquired is in no worse or better position (in monetary terms based on the open market value of the interest) than he would have been but for the acquisition. Some believe that to satisfy the concept of "equivalence" the affected owner should receive a premium to compensate for the compulsory element of the purchase. Key Issues 1.8 This report will assess the following key issues: • Procedures Is there an appropriate balance between the rights of acquiring authorities and an individual's right to oppose the proposed purchase? Are the timescales involved reasonable? • Compensation Are the compulsory purchase financial provisions adequate? Are the timescales for the payment of compensation prejudicial or beneficial to either side? • Blight Where a property is adversely affected by public works, or the threat of public works, does the individual have sufficient rights to force the authority to purchase? Is there an appropriate balance between those rights and the authority's rights to oppose the purchase? "The Fundamental Review of the Laws and Procedures Relating to Compulsory Purchase and Compensation" by The Department of the Environment, Transport and the Regions. 1.9 The DETR appointed an external advisory group to carry out a major study into compulsory purchase and compensation in England and Wales. Following publication of an Interim Report in January 1999, the Advisory Group’s Final Report was published in July 2000. The Scottish Executive were represented on the working group and were, therefore, fully aware of the results of that study. We have taken into account the interim findings but we have not repeated their work. The Minister's stated ambition is to achieve a system of compulsory purchase, which is efficient, effective and fairer to all parties1. 1 DETR. Fundamental review of the laws and procedures relating to compulsory purchase and compensation. Interim Report. January 1999. 2 CHAPTER TWO SUMMARY OF EXISTING COMPULSORY PURCHASE IN SCOTLAND SYSTEM OF Introduction 2.0 The basic legislation in Scotland relating to compulsory purchase is the Land Clauses (Consolidation)(Scotland) Act, 1845, which was enacted during a period of great expansion in public works. The public work projects were usually promoted by private companies. The practice had developed of promoters seeking parliamentary powers to appropriate land. Without such powers, there was a risk of being held to ransom by any one of the landowners whose property was involved. Parliament recognised the public benefits arising from such schemes and was prepared to deprive landowners of their private rights in the public interest, subject to payment of suitable compensation. As a direct result of this activity in the mid-nineteenth century, there was an increasing number of special Acts of Parliament, each setting out powers and procedures for compulsory purchase of land in specific cases. Eventually, Parliament resolved to pass an Act setting out a code for compulsory purchase of land, which would be incorporated by reference in any subsequent legislation granting a general power of compulsory purchase. This Act of 1845 remains the foundation of the law relating to the compulsory purchase of land in Scotland. 2.1 Originally the legislation was enacted to assist private companies. In recent times, powers of compulsory purchase have been mainly exercised by public authorities. However, it is still open to companies or individuals to seek powers of compulsory purchase by promotion of private legislation. 2.2 The power to exercise compulsory purchase of land is normally contained in a general Act of Parliament, such as the Town & Country Planning (Scotland) Act 1997 or the Roads (Scotland) Act, 1984. This enabling Act will incorporate by reference the provisions of the Act of 1845 and the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947.2 There are separate provisions relating to the acquisition of wayleaves for pipelines, power cables and other services, which generally are exercised by privatised utilities under powers derived from their legislation. As a result, statutory powers in such cases are not all uniform or consistent, which means that the compensation provisions vary depending on which body carries out the compulsory acquisition. Further, there are provisions in the Housing (Scotland) Act 1987 which can affect the amount of compensation payable in certain circumstances. For example, compensation for houses below the tolerable standard is not to exceed the value of the site of the house as a cleared site available for development. 2.3 The procedure for the exercise of powers of compulsory purchase is contained within the Acquisition of Land (Authorisation Procedure)(Scotland) Act, 1947. This Act introduced a standardised procedure, which was considered necessary to allow local authorities to respond more effectively to the problems arising from war damage. In particular, this Act introduced a procedure that allowed early entry to the land in advance of agreement on compensation and/or transfer of title. 2 See paragraph 2.3. 3 2.4 Scottish Development Department Circular 42/76 on Compulsory Purchase Procedures states "In some cases, for example, large urban sites in multiple ownership, it might be appropriate to seek compulsory powers before attempting to purchase by agreement. Those affected, in particular, residential occupiers and small business users should however be given the fullest and earliest possible explanation of the authorities' proposals". Although this might be interpreted to suggest that the acquiring authorities should normally seek to purchase by agreement, as they normally do, they are not under any legal obligation to do so and may, and occasionally do, serve a compulsory purchase notice without prior warning. The courts have observed that "a compulsory acquisition ought to be resorted to only when this is shown to be necessary"3. If there are objections regarding the need for compulsory purchase, the acquiring authority will have to justify their use of compulsory powers at a public inquiry. 2.5 This summary is sub-divided into the undernoted headings. • Procedures. This section describes the procedures that must be followed to obtain approval for a compulsory purchase order and to take title to the land. • Compensation. This section describes the compensation payable to claimants affected by an order. • Blight. This section describes the operation of the blight provisions; they are essentially compulsory purchase in reverse allowing certain categories of affected interests to force an acquiring authority to purchase their interest. Procedures 2.6 The key procedural steps are set out in Appendix 2. Those procedures are applicable when the order has to be confirmed by the relevant Minister, now the Scottish Ministers. The main steps are described in more detail below. Resolution to Make an Order 2.7 Once an acquiring authority has resolved to acquire land under compulsory powers, they must obtain full details of the relevant ownerships and other interests so that appropriate notices can be served on all of the affected interests. 2.8 At this early stage, the Scottish Executive is prepared to comment informally on purely administrative matters and on the draft order but not on the validity or merits of the order (SDD Circular 42/76 Paragraph 13). This informal review is not an obligatory part of the process but it is a service provided by the Scottish Executive to local authorities. In practical terms, it is a valuable service because the local authority may not have had recent experience of making an order and may wish to ensure that the order is procedurally correct from the outset. Importantly, any comments made by the Scottish Executive are made without prejudice to the subsequent consideration of the order when submitted for confirmation. 3 Stirling Plant (Hire and Sales) Ltd –v- Central Regional Council and the Secretary of State for Scotland. SPEL 1995 48, 35 [abrev]. The Times Feb 9 1995. 4 Despite its practical value, this administrative service should now be treated with caution in the context of a potential challenge of the procedures under the European Convention on Human Rights. An objector may perceive any collaboration between the acquiring authority and the Scottish Executive as undermining the independence of the Scottish Ministers. Service of Notices on Affected Interests 2.9 An acquiring authority must advertise their intention to make an order for two successive weeks in a newspaper circulating in the area of the relevant land. They must also serve notices on all of the owners, lessees and occupiers. These notices must include the date of not less than 21 days from service of the notice by which any objections are to be lodged with the Scottish Ministers. Authorities are requested to serve a full statement of their reasons for making the order with those notices. This provides recipients of such notices with a summary of the case, which will be advanced by the authority in seeking to justify compulsory acquisition. Objections to an Order 2.10 If objections are lodged within the statutory period and are not subsequently withdrawn, the Scottish Ministers will generally hold a public inquiry to consider outstanding objections. The inquiry will be held under the 1998 rules.4 A Reporter appointed by the Scottish Ministers holds the public inquiry and then reports to the Scottish Ministers. Objections which relate solely to compensation are irrelevant as any dispute about the amount of compensation is to be decided at the Lands Tribunal for Scotland. Confirmation of an Order 2.11 Following consideration of the outstanding objections, including the Reporter's report, the Scottish Ministers may confirm the order with or without modifications or they may decline to confirm the order. Legal Challenge 2.12 If the order is confirmed, there is a right to apply to the Court of Session within 6 weeks of the date of the decision of the Scottish Ministers to challenge the validity of the order. This right of challenge is only available to parties who fall within the legal category of "a person aggrieved". An acquiring authority is unlikely to be a person aggrieved.5 The grounds of challenge are: • that the order is outwith the powers of the relevant Act; or • that the interests of the applicant have been substantially prejudiced by noncompliance with certain statutory procedural requirements. 4 5 Compulsory Purchase by Public Authorities (Inquiries Procedure) (Scotland) Rules (S.I. 1998 No. 2313) Strathclyde Regional Council –v- Secretary of State for Scotland (1989) 27 S.P.L.P. 5 Entry 2.13 Once an order has been confirmed the acquiring authority have the right to purchase the land within three years but they are not obliged to do so. An acquiring authority may proceed to take entry and title in one of two ways: • By general vesting declaration:6 This procedure is most commonly adopted in Scotland. Its main advantage is that it allows title to transfer in the shortest possible time. If all occupiers' consent, it allows the acquiring authority to take entry and title 28 days after confirmation of the order. Without that consent, the authority must provide a minimum notice of two months of their intention to use this procedure. On expiry of the two month period, they may serve notice on affected parties of their intention to take entry and title after a minimum period of 28 days. So, without occupiers' consent, the minimum period is three months. The effect of a general vesting declaration is threefold: (i) At the end of the specified period, the land vests in the acquiring authority. This includes the right to enter and to take possession. (ii) Compensation provisions are triggered as if a notice to treat (see below) had been served but, in this case, the acquiring authority has no power to withdraw. (iii) The valuation date is the date of vesting. Subject only to certain tenancies, this is a convenient procedure to obtain a single clear title where there might previously have been a number of different interests. • By service of a notice to treat.7 Service of a notice to treat on affected parties provides notice of the acquiring authority's intention to implement the order. Although the authority can take entry in the shortest possible timescale under this procedure, that is, 14 days after service of the notice of entry, title can only be taken after determination of compensation. The procedure is less popular because title may not follow for some considerable time. Service of a notice to treat allows either party to insist upon determination of compensation with the onus on the claimant to deliver particulars of the claim. Failure to do so may result in the matter being referred to the Lands Tribunal for Scotland. The authority may withdraw the notice at any stage within six weeks of receipt of the claim for compensation. Although the authority may take entry in advance of determination of the compensation claim and transfer of title, interest on the compensation will run from date of entry to date of payment. This procedure is little used in Scotland mainly because of the possible delay in obtaining a clear title while the compensation is negotiated/determined. In addition separate title has to be taken to each interest with the possible result of a multiplicity of titles. 6 7 Section 195 of Town & Country Planning (Scotland) Act 1997 Section 17 of Land Clauses (Consolidation) (Scotland) Act 1845 6 Commentary 2.14 At the outset, the procedures and timetable relating to the Resolution and Notices stages are relatively certain and they are within the control of the acquiring authority. 2.15 At the Objections and Confirmation stages, the timetable is primarily in the hands of the Scottish Ministers and it becomes more uncertain. They will normally have regard to requests to sist the public inquiry to allow the parties to seek a negotiated settlement, but this can result in one party delaying the process despite the other party's wish for a speedy resolution. Typical periods involved at this stage are 2/3 years. 2.16 The position on timing is more uncertain if there is a legal challenge to confirmation of an order. For instance, in one case the period between making the order and the vesting date was over seven years. 2.17 At the final stage of Entry, the acquiring authority has control and can take entry to the land on giving only very short notice. The three-year period within which an approved compulsory purchase order can be implemented, when the acquiring authority may take entry at very short notice, can cause considerable uncertainty. As only certain categories of affected owners have the right to serve blight notices, this uncertainty can cause serious difficulties to those who cannot serve such notices. Although acquiring authorities are obliged to make an advance payment on request, it can take a considerable time, in some cases several years, before the compensation is finally determined. Compensation The Rules for Assessing Compensation 2.18 The rules for assessing compensation for the land are contained in section 12 of the Land Compensation (Scotland) Act 1963. There are six statutory rules: 1. No allowance shall be made on account of the acquisition being compulsory. This makes it clear that no additional payment or allowance (apart from other specific provisions) or, indeed, any reduction is to be made because the land is being acquired under compulsion. 2. The value of the land shall subject as hereinafter provided be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise. Most land transactions are carried out on this basis of open market value. This rule provides a clearly understood basis for assessing the monetary compensation, which is directly related to market evidence. It has been said8 that the compensation is meant to put the claimant in, so far as possible in monetary terms, the same position after as prior to the compulsory acquisition. 8 Horn v Sunderland Corporation [1941] 2 K.B. 26; [1941]1 All E.R. 480; 110 L.J.KB. 353; 165 L.T. 298; 57 T.L.R. 404; 85 S.J. 212; 39 L.G.R. 367 7 Compensation for the value of land taken is generally in accordance with the planning position which would have been relevant if the acquisition was not in accordance with the statutory code; the following points are highlighted: • The claimant is paid the full development value, which includes all potential hope value that would be included by the market. Although we are not aware of instances, this could give rise to practical difficulties where planning permission is highly speculative. In those instances, landowners will often sell at or about the current use market value preserving a "clawback" if a materially more valuable planning position is implemented, often within a specified time-scale. If the land is sold without "clawback", the additional hope value is typically only a modest addition to the current market value. Claimants might well be aggrieved that they were forced to sell by compulsion without the benefit of being able to include the possibility of a speculative increase in value. • In addition to the planning position assuming no compulsory acquisition, it is to be assumed, in accordance with section 23 of the 1963 Act, that planning permission would be available for the use proposed by the acquiring authority. 3. The special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers or for which there is no market for that purpose apart from [the special needs of a particular purchaser or] the requirements of any authority possessing compulsory purchase powers. This provision excludes any increase in value due to the "scheme", that is, the proposed development, if that "scheme" could only be carried out in pursuance of statutory powers. The Planning and Compensation Act 1991, Schedule 17, removed the phrase[the special needs of a particular purchaser or]. Accordingly, the special needs of a particular purchaser can be taken into account, if the market would have taken into account those needs. Rule 2 provides for an open market valuation, which includes the value for other potential uses, including the use proposed by the acquiring authority. However, Rule 3 excludes the increase in value attributable to the "scheme". Historically, the inter-relationship between Rule 3 and the Pointe Gourde principle,9 which states that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition, caused considerable difficulties in practice. However, this no longer appears to be a material issue, probably because of the absence of any Scottish acquisitions where this issue has arisen. 9 Pointe Gourde Quarrying and Transport Co –v- Sub-Intendent of Crown Lands [1947] A.C. 565 8 4. Where the value of land is increased by reason of the use thereof or of any premises thereon in a manner which could be restrained by any court or is contrary to law or is detrimental to the health of the occupants of the premises or to the public health the amount of that increase should not be taken into account. If, for example, land were being used without appropriate planning permission, then any additional value attributable to the unlawful use would be excluded from the compensation. 5. Where land is and but for the compulsory acquisition would continue to be devoted to a purpose of such a nature that there is no general demand or market for land for that purpose compensation may if the Lands Tribunal for Scotland is satisfied that reinstatement in some other place is bona fide intended be assessed on the basis of the reasonable cost of the equivalent reinstatement. This provision which applies to subjects such as churches for which there is no general market demand is rarely used in practice. It should be noted that this basis of compensation is payable only where the Lands Tribunal for Scotland is satisfied that reinstatement is bona fide intended and it is for the claimant to demonstrate their intention to do so. Further, the cost is for the equivalent reinstatement (i.e. a similar building) but not an exact replication. The few numbers of CPO’s means it is not possible to state whether the very limited use is because this type of acquisition rarely occurs or if they are avoided by acquiring authorities due to the potential expense. The Rule does nevertheless provide a mechanism which can preserve a use (such as a Church) which would otherwise almost certainly be lost if compensation were assessed on the basis of Rule 2. 6. The provisions of rule (2) shall not affect the assessment of compensation or disturbance or any other matter not directly based on the value of land. This means that the open market value of the land calculated under Rule (2) is established separately from other losses, such as disturbance payments, which are payable in terms of the Lands Clauses (Consolidation) Acts. These payments are based on the subjective " loss to the claimant", which is personal to him and not on the objective "market loss". Certificate of Appropriate Alternative Development 2.19 Where land is acquired by compulsion for a use which does not have a substantial market value, the claimant can apply for a certificate of appropriate alternative development to establish what development might be permitted were it not for the compulsory acquisition. This is to allow the landowner to obtain the same value as he would have had were it not for the compulsory acquisition. 2.20 The application is made to the planning authority. Like an application for planning permission, it will be determined in the context of the statutory development plan. The applicant may apply for a specified use and he may require the planning authority to specify what alternative uses would be appropriate. It is essentially a "fictitious" exercise 9 for valuation purposes. Nevertheless, the planning authority must determine the application in terms of the relevant provisions of the development plan and any other material considerations. If the land is zoned in the plan for the scheme, the development plan appraisal can be problematic. The applicant has a right to appeal to the Minister in a similar way to an appeal against a refusal of planning permission or the imposition of conditions on a planning permission. The terms of the certificate will then be taken into account in assessing the compensation payable. This matter was not raised in our survey as a material issue by either the acquiring authorities or claimants/professional advisors. The respondents appeared to have little or no experience of these certificates. Disturbance 2.21 Disturbance payments can include a wide range of items, such as: • Professional fees for acquiring alternative premises. • Costs of adapting alternative premises, including carpets, curtains and shelving. • Removal costs. • Loss of profits, either temporary or permanent. 2.22 There are three major issues: • The claimant is under an obligation to minimise his loss. This principle is based on the legal proposition in respect of damages that: "The plaintiff must take all reasonable steps to mitigate the loss consequence upon the defendant's wrong and cannot recover damages for any such loss which he could thus have avoided but has failed, through unreasonable action or inaction to avoid. Put shortly, the plaintive cannot recover for avoidable loss".10 • The claim must be consistent with the basis of compensation.11 In particular, a claimant who receives development value under Rule 2 cannot also claim disturbance under Rule 6. He is entitled to the greater of either the development value under Rule 2 or the current use value under Rule 2 and disturbance under Rule 6. • Losses must be reasonably quantifiable. They must be a direct consequence of the acquisition and not be too remote. 2.23 Although, in principle, the basis of disturbance seems to be fair, its operation in practice may sometimes cause resentment. For example, a claimant is likely to have the loss of a fitted carpet assessed to take account of wear and tear and thus only receive a proportion of its replacement cost. If a new carpet is preferred at his alternative house, he will have to make up the difference. In practice, the payment would normally be only the cost of 10 McGregor on Damages Horn –v- Sunderland Corporation [1941] 2 K.B. 26; [1941]1 All E.R. 480; 110 L.J.KB. 353; 165 L.T. 298; 57 T.L.R. 404; 85 S.J. 212; 39 L.G.R. 367 11 10 adapting and refitting the existing carpets and, for example, he may well feel that the colour is unsuitable. 2.24 Professional fees form part of the disturbance claim and can therefore be recovered as part of the compensation. However, if a purchase does not proceed, acquiring authorities are not under any obligation to pay abortive fees, in the absence of a formal agreement to reimburse fees. This can leave claimants out-of-pocket. In addition Ryde's Scale, on which surveyors fees are based, is often considered to be inadequate and surveyors may well charge claimants a higher fee, which again can leave them out-of-pocket. Injurious Affection 2.25 If a claimant retains land, which is reduced in value as a result of the compulsory acquisition of his other land, he is entitled to claim compensation for this loss. If, however, the compulsory acquisition results in an increase in the value of his remaining land, known as betterment, this is off-set against the compensation. This is the only situation in which betterment is charged at 100%. (if it is equal or less than the amount of compensation). Only owners in this category incur this charge. Other owners, who do not have land taken, but benefit from the works, retain the betterment. Other Payments 2.26 There were concerns that certain proprietors affected by the use of public works suffered losses for which they were not compensated under the 1845 - 1963 statutory provisions. These concerns were addressed in the Land Compensation (Scotland) Act 1973. The main provisions are: Home Loss Payments 2.27 This is an additional payment to the owner/occupier who loses his home. Occupation must have been for a minimum period of 1 year. The payment is presently 10% of the market value, subject to a minimum of £1,500 and a maximum of £15,000. Tenants receive a flat rate of £1,500. Disturbance Payments for Tenants 2.28 Where land is subject to a tenancy, the acquiring authority may purchase the landlord's interest and simply allow the tenancy to expire, in which case the tenant will have no right to any compensation. Sections 34 and 35 of the 1973 Act introduced "disturbance" payments, which are available for all properties and not only houses. The payment covers the reasonable expenses of removal and, if the claimant were carrying on a trade or business, the loss incurred in the cost of having to relocate. 11 Short Tenancies 2.29 A short tenancy is one with no greater interest than for a year or from year to year. If an acquiring authority purchase a landlord's interest and do not then allow a short tenancy to expire before they take entry, the tenant will be entitled to compensation on the statutory basis.12 The compensation payable would historically reflect the short-term nature of the tenancy. However, this was amended by section 43 of the 1973 Act. Section 43 provides that no account is to be taken of the consequences of the acquiring authority's scheme on the value of the interest being acquired. Agricultural Land 2.30 "Farm loss payments" are payable under the 1973 Act.13 They are an additional payment of the average annual profit of the agricultural land that has been acquired. Compensation for the execution of works where no land is acquired 2.31 2.32 The Land Clauses (Consolidation) (Scotland) Act, 1845 made no provision for payment of compensation for injurious affection for the execution of the works in circumstances where no land is taken. The House of Lords considered this issue in 1874 in the English case of Metropolitan Board of Works –v- McCarthy14. The law was subsequently amended by statue in terms of the Acquisition of Land (Authorisation Procedure) (Scotland) Act, 194715 to permit payment of compensation for injurious affection where no land is taken. The statutory rules are complex and they were re-stated in 1974 by Lord Wilberforce in Argyle Motors (Birkenhead) Ltd –v- Birkenhead Corporation16. Each of the following four rules must be satisfied before a successful claim can be made: Rule (i) The injury done must be by reason of what is authorised by Act of Parliament. Rule (ii) The injury must arise from that which would, if done without the authority of Act of Parliament, have been actionable at law. Rule (iii) The damage must arise from a physical interference with some right, public or private, which the claimant, as owner of an interest in property, is, by law, entitled to make use of in connection with such property, and which gives an additional market value to such property. Rule (iv) The damage must arise from the execution of the works and not by their subsequent use. The basis of compensation is the diminution in the value of the claimants land, that is, a payment to put the claimant in the same position as he would have been in without the 12 Section 114 of the 1845 Act. Sections 31 to 33 14 Metropolitan Board of Works –v- MacCarthy (1874) L.R. (H.L.) 243; 43 L.J.C.P. 385; 31 L.T. 1982 15 Section 1(1) of the Second Schedule to the Act 16 Argyle Motors (Brikenhead) Ltd v Birkenhead Corporation [1974] 1 All ER 201 13 12 works. The operation of the rules was not commented on in our study interviews, probably because of their limited application in practice. Compensation for use of works 2.33 Part 1 of the Land Compensation (Scotland) Act, 1973 provides for the payment of compensation due to certain physical factors for the use of public works where no land has been taken. There are detailed provisions regarding those interests entitled to compensation. In summary, the provisions only apply to dwelling houses, agricultural properties or other subjects, the rateable value of which does not exceed £21,500. The basis of the claim is the reduction in value of the interest at the date when the works are first commissioned. Time of Payment 2.34 After an acquiring authority has taken entry and acquired title to the land, the claimant no longer has an effective interest in the land, only a claim for compensation. It can take many years for the compensation to be agreed or determined but claimants are entitled to an advance payment of 90% of the agreed estimated compensation, or, in the absence of agreement, 90% of the acquiring authority's estimate. 2.35 The advance payment is without prejudice to the claimant's compensation claim and interest at the statutory rate is payable from the date of entry until settlement, taking into account any advance payments made to the claimant. Commentary 2.36 Prior to 1919, compensation was based on "value to the owners" and typically included a premium of 10% for urban subjects and 20% for rural subjects to take account of the compulsory nature of the acquisition. This premium was removed by the Acquisition of Land (Assessment of Compensation) Act 1919, which introduced the six basic rules for assessing compensation. 2.37 The debate about the appropriateness of a premium for compulsory acquisition has gone on for 150 years. To some extent, the element of compulsion has been recognised in the Land Compensation (Scotland) Act 1973, which introduced some additional payments, in particular, home loss payments, to reflect the element of compulsion. However, many claimants feel aggrieved that they only receive the open market value for their property without monetary recognition of the fact that they are forced to sell at a time not of their choosing. 2.38 The application of Rule 3 in assessing a claim for compensation means that acquiring authorities, including private utilities, can purchase land compulsorily at a consideration which excludes the value of the Scheme if that scheme could only be carried out in pursuance of statutory powers. This may generate significant profit for shareholders of private utilities. 13 2.39 The requirement for claimants to demonstrate and minimise their losses for a claim for disturbance means that, in practice, acquiring authorities can make it very difficult for claimants to obtain full recompense. If a claimant cannot prove his loss, it is unlikely to be allowed. On the other hand, acquiring authorities require full details of claims to enable them to assess properly the claim for compensation and to demonstrate that public monies have been spent properly. As losses are on an equivalent and not a replacement basis, claimants may suffer a financial loss when they are forced to relocate as a result of the acquisition. This is a difficult area in which to strike a fair balance between claimants obtaining fair compensation and the acquiring authority accounting for public expenditure. Blight 2.40 The term blight can be used to describe a number of different situations. In the context of compulsory purchase, it describes the situation whereby the saleability of property, at its market value, is adversely affected by the prospect of its' compulsory acquisition for a public sector scheme. If the landowner is in a position to wait until the authority acquires his property, he will be compensated for his land on the basis of a value that ignores any blighting effect of the proposal. However, if he needs or wants to sell his property in advance of its' compulsory acquisition, he may find that it can only be sold at a depressed value because of the blighting effect of the prospect of compulsory acquisition. Of course, a public sector proposal could have a positive effect on the market value of a property. A statutory remedy is contained within the Town & Country Planning (Scotland) Act 199717 which contains a power to serve a blight notice in certain circumstances, as described below. Qualifying Interest 2.41 A person wishing to serve a blight notice must demonstrate that he has a qualifying interest in the relevant land on the date of service of the notice. The qualifying interests are as follows: • Resident owner/occupiers of whole or part of the property • Owner/occupiers of non-residential properties, the annual value which does not exceed an amount prescribed by order by the Scottish Ministers, currently £21,500 • Owner/occupiers of whole or part of an agricultural unit. The effect of agricultural de-rating means that farmers are not capped at an annual value, currently £21,500 • Crofters 17 Sections 100-107 14 Qualifying Land 2.42 A blight notice can only be served by someone with a qualifying interest in relation to blighted land. The relevant land must therefore qualify as blighted land. The statutory categories of blighted land are set out in Schedule 14 to the Town & Country Planning (Scotland) Act 1997. The categories are as follows: (i) (ii) (iii) (iv) (v) Land allocated for public authority functions in development plans, etc. New towns and urban development areas Housing action areas Roads Compulsory purchase In relation to compulsory purchase, there are three situations in which a blight notice can be served. 1. In respect of land authorised by a special enactment to be compulsorily acquired.18 2. If a compulsory purchase order is in force and the acquiring authority have the power to serve, but have not served, a notice to treat in respect of the land.19 3. The prescribed notice in two successive weeks in the newspaper circulating in the area intimating the making of the order has been published and the order has been submitted to the Scottish Ministers for confirmation.20 Attempts To Sell 2.43 The claimant must be able to show that the interest in the land falls within paragraphs 14 or 15 of Schedule 14, as described above, and that the powers of compulsory purchase remain exercisable, or, that he has made reasonable endeavours to sell his interest in the land. In either case, however, he must show that he has been unable to sell his interest except at a price substantially lower than would have been expected if there had been no blighting proposal in existence or proposed. The onus is on the claimant to demonstrate, and not merely assert, that this provision has been satisfied.21 Counter Notices 2.44 The acquiring authority can object to a blight notice by service of a counter notice. Their objection may be referred to the Lands Tribunal for Scotland for a determination on whether the blight notice is valid. If no counter notice is served, the counter notice is withdrawn, or if the counter notice is rejected by the Lands Tribunal, the acquiring authority is deemed to be authorised to acquire compulsorily the claimant's interest and to have served a notice to treat. Compensation for the land acquired is assessed on the 18 Paragraph 14 of Schedule 14 to the 1997 Act. Paragraph 15 of Schedule 14 to the 1997 Act. 20 Paragraph 15 of Schedule 14 to the 1997 Act. 21 Section 101 of the 1997 Act 19 15 normal compulsory purchase basis. The order cannot be withdrawn by an acquiring authority following service of a counter notice. Commentary 2.45 Blight has not been a serious issue in Scotland in recent years because of the low incidence of large-scale projects. Nevertheless, the threat of compulsory purchase can have serious consequences on those affected and a reasonable balance should be struck between the rights of the individual and the potential cost to acquiring authorities. 2.46 This issue also raises the question of the appropriate balance to be struck between publicity for public sector projects and the potential blighting effect of such publicity. This is not a new issue. However, it may have to be revisited if current policy support for full public participation in development planning continues in an era of public-private partnership for the delivery of new public projects. The private sector is increasingly involved in the delivery of traditional public sector projects, such as schools, hospitals and bridges. Acquiring authorities are now expected to assist with land assembly for policy preferred town centre development. An earlier requirement that the development plan should designate land required for compulsory acquisition was repealed but there may be merit in alerting communities to the potential effects of urban regeneration projects or major infrastructure projects during the development plan process. Of course, not all such projects would have a blighting effect. Many should result in betterment. 16 CHAPTER THREE LITERATURE REVIEW In this section the various analyses and views in textbook commentaries, articles, legal texts and other studies are brought together and reviewed. Introduction 3.0 The concept of compulsory purchase by the State goes back a long way. Erskine in his Institute says: "It is another legal limitation or restraint on property, that it must give way to the public necessity or utility. This universal right in the public over property is called by Grotius dominium eminens : in virtue of which the supreme power may compel any proprietor to part with what is his own.......The persons deprived of their property ought to have a full equivalent for quitting it."22 3.1 It has been said that "compulsory purchase is one of the harshest impositions by the State upon its citizens".23 A citizen's abstract view of the reasonableness of compulsory purchase in benefiting the wider community may suddenly change with the realisation that it is his own property that is affected. Even worse can be the situation where, although adversely affected by nearby acquisitions, there may be no legal redress or compensation for a reduction in the value of property brought about either by the presence or use of a public scheme. 3.2 This is a continuing controversy. Some commentators suggest fundamental concerns as to the legitimacy of the present system. There is evidence of persistent widespread dissatisfaction with the compulsory purchase process and compensation extending over a long number of years. Anecdotal evidence suggests that land has been taken by compulsion and dispossessed proprietors have remained deeply dissatisfied with the compensation paid. However, this is in stark contrast to the fact that most 'acquisitions', estimated at well over ninety percent, carried out in Scotland by acquiring authorities are, paradoxically, purchases by agreement without recourse to formal compulsory purchase powers. These are the so-called 'purchases in the shadow of compulsory powers', in most cases of which, compensation is assessed as though compulsory powers had been exercised. Against these unfocussed feelings of dissatisfaction, a deeper analysis requires to be made to establish why so many claimants settle the purchase price voluntarily and without duress, if there are serious problems with assessments of compensation under the current compensation code. The studies show that this sub-culture of acceptance operates widely across the country irrespective of the land, nature of the development or purpose of the acquisition. Evidence of this acquiescence might be the very rare need of authorities to resort to formal powers in the absence of agreement or the even rarer recourse to have cases of disputed compensation decided by the Lands Tribunal for Scotland. 3.3 It is possible, perhaps, that the collective attitude of society or the community against compulsory purchase is not mirrored in the attitude of most individuals whose land is purchased for some public purpose, and who are, in fact, content with their deal with the acquiring authority. 22 23 Gordon, W. M., (1989), "Scottish Land Law", W. Green, Edinburgh, 29-01 Rowan Robinson J (1990) Compulsory Purchase and Compensation; The Law in Scotland. 17 3.4 The majority of orders are promoted where an authority requires rights in particular parcels of land. Some orders are made in circumstances where the existing owner has failed to maintain a property, for example, a listed building, and the authority wants to rectify the situation. 3.5 The Goodchild Report found that the vast majority of orders in the first category were pursued to conclusion.24 Commencement of the compulsory purchase procedure for those in the second category usually resulted in the owner taking the necessary repair action and the orders were subsequently withdrawn. So the threat of compulsory purchase can be utilised effectively as pre-emptive action. The Doctrine of Equivalence 3.6 It is clear that the State should pay appropriate and adequate compensation to a claimant following the exercise of compulsory purchase powers. 3.7 If there is one doctrine which pervades and underpins most thinking on compulsory purchase and land compensation it is that of equivalence. This was stated by Scott L.J. in Horn –v- Sutherland Corporation25 [1941] "what it gives to the owner compelled to sell is compensation – the right to be put, so far as money can do it, in the same position as if his land had not been taken from him. In other words, he gains the right to receive a money payment not less than the loss imposed on him in the public interest, but on the other hand not greater" and later: "The statutory compensation cannot and must not exceed the owner's total loss, for, if it does, it will put an unfair burden upon the public authority or other promoters, who on public grounds have been given the power of compulsory acquisition, and it will transgress the principle of equivalence which is at the root of statutory compensation, which lays it down that the owner shall be paid neither less nor more than his loss". Further in Director of Buildings and Lands –v- Shun Fung Ironworks Nicholls stated: 26 [1995] Lord "The purpose of these provisions in Hong Kong and England, is to provide fair compensation for a claimant whose land has been compulsorily taken from him. This is sometimes described as a principle of equivalence. No allowance is to be made because the resumption or acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. Subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his 24 The Operation of Compulsory Purchase Orders (1996) (Goodchild); see below at 2 K.B.26; [1941] 1All E.R.480 Horn –v- Sunderland Corporation [1941] 2 K.B. 26; [1941] 1 All E.R. 480; 110 L.J.K.B. 353; 165 L.T. 298; 57 T.L.R. 404; 85 S.J. 212; 39 L.G.R. 367 26 Director of Buildings and Lands –v- Shun Fung Ironworks (1995) 2 AC111, [1995]. All ER 846; [1995] 19 eg 147; [1995] RUR 124; [1995] ECGS 35; [1995] 1 EFLR 19. 25 18 loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation; a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail". Procedures in Scotland 3.8 Scotland has a distinctive system of law and education as well as its own structure of central and local government, and a rich culture reflecting the historical development of the country. Within the UK it enjoys considerable autonomy in many of these areas, including compulsory purchase and land compensation, which are now devolved to the new Scottish Parliament. Whilst the equivalent and parallel legislation has been consolidated in England and Wales27, the Lands Clauses Consolidation (Scotland) Act 1845, now 155 years old, "remains to this day the basic provision on the procedure for acquisition of land and assessment of compensation. Its first provision is to the effect that it is incorporated, except so far as expressly varied or excepted, in all Acts authorising the taking of lands passed after its date,… ."28 Although consolidation of the legislation in England and Wales means it is easier to follow, nevertheless it does not seem to have made the system any more "user friendly". 3.9 It is worth noting that most statutes authorising compulsory acquisition also authorise purchase by agreement. 3.10 A single body of rules on the assessment of compensation where land is authorised to be acquired compulsorily exists in the Land Compensation (Scotland) Act 1963 as amended and as supplemented by the Land Compensation (Scotland) Act 1973. Disputes as to the proper amount of compensation are referred by either party to the Lands Tribunal for Scotland for determination or on a voluntary reference by agreement of both parties. 3.11 Although the detailed rules may be complex, the rationale behind compulsory purchase compensation is straightforward: its purpose is to put the owner (or other claimant), so far as money can achieve it, in the same position as if the compulsory purchase had not taken place.29 3.12 Alongside, and woven into this doctrine of equivalence, are the other major issues to be addressed, namely the efficiency and effectiveness of compulsory purchase order procedures, and the way in which these procedures assist or hinder the achievement of equivalence, accessibility of appeal procedures including the determination of disputed compensation, and the problems surrounding the application of the blight provisions in major infrastructure projects. 27 Compulsory Purchase Act 1965 Gordon, W. M., (1989), Scottish Land Law, W. Green, Edinburgh, 29-02 29 McAllister, Angus, and Guthrie, T. G., (1992), "Scottish Property Law, An Introduction", Butterworths, Edinburgh, p. 237 28 19 The English and Welsh Experience 3.13 In 1994 the Department of the Environment commissioned a pilot study by Oxford Brookes University on how the compulsory purchase procedure should be researched. This work contained a detailed literature review, based on English law and procedure, but it has remained unpublished. This 1994 report was used as the foundation for a much more extensive and comprehensive study by the Property Valuation and Management Department within the City University Business School. The Department of the Environment also commissioned this later study. The principal findings of that report (the Goodchild Report) can be summarised as follows: • the compulsory purchase process from commencement to the payment of compensation takes a long time. The length of time is dependent on the purpose of the order, but average times for the four main purposes of acquisition were found to be: Highways: Planning (England & Wales): Housing : Public Utilities: 9 years 6 years 4 years 3 Years • the survey of claimants revealed that there was a high degree of dissatisfaction with the compulsory purchase process and with the level of compensation paid, with owners of businesses being particularly dissatisfied. Within the study sample, 60% of claimants found the process to be stressful, with the worst stage being the long wait for the compensation to be settled. • the English Lands Tribunal is not seen as an effective forum for the settling of compensation disputes. Generally, claimants are unwilling to resort to the Tribunal for fear of an unfavourable award having severe cost implications. Whilst professionals hold the Tribunal in high regard, the lack of an effective and more accessible appeals procedure retards negotiation. Less than 1% of all claims are referred to that Tribunal. • most owners take professional advice, but cannot recover the costs incurred at the most critical preliminary stages. The main recommendations were as follows: • All owner occupiers who have their land acquired should receive an element of compensation additional to open market value. This would provide an incentive for owners to co-operate with the acquiring authority as well as protecting them against the uncertainties of valuation practice. • The compulsory purchase process should be changed so that acquiring authorities assume the obligations that they currently take on when they serve notice to treat, at the time of resolving to make the order. Acquiring authorities would need to ensure that they have funding available when they make the order, thereby reducing blight. 20 • On blight, the acquiring authorities should have an option to make annual payment to owners while the property is under threat of compulsory purchase, instead of being required to buy at the time chosen by the owner. • A code of conduct should be drawn up for the negotiation and payment of compensation claims. • An alternative local forum should be established for resolving compensation claims. • Further research should be carried out on the preliminary stages of the compulsory purchase process and the lodging of objections. • A requirement for better data concerning orders should be maintained by government. 3.14 All of these findings and recommendations seem relevant for study in the Scottish context as they are relevant to many of the issues identified earlier. Frequency of Use of Compulsory Purchase 3.15 Some additional background information arises from a national survey of local authorities' use of compulsory purchase powers, which was published in 1996.30 This survey concentrated on the use of compulsory purchase under the planning legislation, and was aimed at authorities throughout Britain. It found that the use of compulsory purchase powers under planning legislation was highest in Scotland. Since the Scottish experience appeared concentrated in the industrialised Central Belt, it was suggested that, perhaps, compulsory purchase under British planning legislation is primarily an urban phenomenon, mainly associated with the process of redevelopment and regeneration. These orders were overwhelmingly used as instruments to promote urban regeneration on brownfield sites rather than urban expansion onto greenfield sites. Authorities were asked to recommend improvements and the most numerous suggestions by far concerned speeding up and simplifying compulsory purchase procedures. References were made to Scottish authorities expressing concerns about procedural delays within the Scottish Executive. Those concerns seemed to focus on the informal service offered to check local authority documentation before formal submission of the order to the Minister. However, as this audit service is not a formal requirement, it understandably receives lower priority than the department's statutory work. Although planning authorities expressed concern about the protracted timescale of compulsory purchase, the single most important reason for the limited use of planning orders was financial. Lack of financial resources was the most stated deterrent to the use of planning orders. DETR Interim Report 3.16 The Interim Report on The Fundamental Review of the Law and Procedures Relating to Compulsory Purchase and Compensation was published in January 1999. The 30 Adams, David, The Use of Compulsory Purchase under Planning Legislation (1996) Journal of Planning and Environmental Law. 21 imperative for the review arose as a result of detailed consideration of compulsory purchase issues in a number of forums: • • • • • The Blight Review Urban Regeneration Environment, Transport and Regional Affairs Select Committee RTPI Study Other Evidence Powerful support for the view that the existing compulsory purchase regime is, for whatever reason, failing to support delivery of essential public benefits came in July 1999 with the publication of the Environment, Transport and Regional Affairs Committee (ENTRAC) report on housing. In the report the Committee said that it was: "… … very concerned about the problems of land assembly and the failure to bring brownfield land into use for housing. The traditional way of dealing with these problems is the Compulsory Purchase Order which has been little used in recent years. It is slow. A streamlined compulsory purchase order would be very helpful and is urgently required". 3.17 A symposium was held in London on 22 February 1999 to review the DETR Interim Report when various papers were presented. 3.18 The major issues emerging from the symposium included the following: 3.19 Procedures tend to be slow and uncertain, creating stress and worry for all those involved, and, in addition, making planning and project management very difficult for acquiring authorities. 3.20 On compensation, broadly speaking the market value basis of compensation is considered to be satisfactory. However, • There is a feeling that an additional payment, probably a percentage of the value, should be paid to all property owners or, perhaps, only to a restricted category, such as owner/occupiers. • If the compensation were seen to be more generous it could be possible to present compulsory purchase positively to the extent that, if it were sufficiently high, owners/occupiers might welcome compulsory purchase. • A Manual of Best Practice should be published. This should promote the objective that acquiring authorities should act (and be seen to be acting) fairly and not be perceived as attempting to purchase on the best possible terms. Further, there should be an obligation on acquiring authorities to include an "easy read" with the statutory notice advising claimants that the cost of professional fees could be included with the claim, subject to certain reservations. 3.21 On blight, serious consideration should be given to a property purchase guarantee and compensation scheme as discussed in the Interdepartmental Working Group on blight. 22 3.22 The DETR Interim Report identifies a Programme of Further Work (Chapter 9, 9.1 – 9.7) where key issues are identified for resolution, examination or further work. The DETR Final Report had not been published at the time of completion of this report and has not therefore been taken into account by us. Compensation 3.23 In the days when Scottish juries31 assessed the compensation for compulsory acquisition, practice seems to have been that the award for urban properties would be market value plus 10% and for rural properties plus 20%, although there were apparently instances of 100% additions.32 3.24 Amongst others, the RICS33 supports the concept of an additional allowance over and above open market value to be paid for all claims in respect of non-residential land to reflect the fact that the acquisition is compulsory. A study in Aberdeen (RICS, RowanRobinson et al 1995) also recommends that a supplement should be paid. The RICS also suggest that a supplementary allowance to compensation should be paid to the occupier of agricultural, industrial and commercial property, when part of his land is taken and there is damage by way of severance and injurious affection. 3.25 Regulating the use of land which stops short of outright acquisition (or expropriation) gives no general right to compensation. This is a long standing principle and represents a policy decision as to the way in which the cost of certain measures is to be borne by society. An example of regulation not giving rise to compensation would be "yellow line" parking restrictions on a street outside a house or the making of a 'one way' order on a road which reduces trade in an adjacent shop. 3.26 The policy is to deny recompense for certain losses on the principle that such are an incident of property ownership. 3.27 Regulation is linked closely to the concept of injurious affection, which is depreciation of land caused by what happens on other land. "Most development, whether public or private, affects other property in its vicinity, sometimes beneficially and sometimes adversely. This is one of the normal hazards of property ownership. Where the development and its use cause nuisance the remedy generally open to those affected is an action at common law. But substantial injurious affection can be caused by the use of public developments where the landowner has no redress because the use is immune from such action. This is particularly true when the use is for a road or an aerodrome......."34 31 Lands Clauses Consolidation (Scotland) Act 1845, section 36-49 Rowan-Robinson J (1990), Compulsory Purchase & Compensation; The Law in Scotland, W Green, Edinburgh 33 Royal Institution of Chartered Surveyors, (1995), Compensation for Compulsory Acquisition, RICS, London, pp. 1-3 34 Development and Compensation: Putting People First, Cmnd. 5124 32 23 Depreciation Caused By The Use Of Public Works 3.28 Some recognition that depreciation caused by public works should be compensated was introduced in the early 1970s and, in that instance, it was the use of the public works rather than their presence which gave rise to compensation. The public backlash resulting from the great urban motorway programme of the sixties was very significant. The use, by very heavy traffic, of the new major motorways and interchanges, like spaghetti junction near Birmingham, created interference with and depreciation to properties nearby. There was no right to compensation from the authority (unless in nuisance) for the intrusive effects of the presence or use of these public works. This caused distress to many thousands of property owners who were bearing the brunt of the effect of improvements to the trunk road and motorway network carried out to benefit the community. Questions were asked about the extent to which the community was benefiting at the expense of these private property owners whose properties had been permanently depreciated in value. The government's response, which can be reviewed in Development and Compensation, Putting People First35, was to appoint a committee and, as a result, legislation followed36. This was the birth of a new right for certain classes of affected proprietor to compensation for depreciation to property caused by the use of public works from one or more of seven physical factors. While Part 1 of the 1973 Act was a welcome extension of rights to compensation, there were surprisingly few claims. There was no provision for loss of view and, accordingly, a substantial part of any depreciation to a dwelling resulting from public works might go unrelieved. This is because the common law offers no protection to landowners for depreciation due to loss of view resulting from private development. It is understood that some public authorities defend these new claims under Part 1 of the 1973 Act, where no land has been acquired, more vigorously than general claims for compensation under the Land Compensation (Scotland) Act 1963, where land has been acquired. After a slow start, large numbers of claims under Part 1 of the 1973 Act were submitted, often by agents specialising in such claims nationwide. 3.29 If there is a delay in payment of compensation by an acquiring authority, the loss is regarded as being one of interest on monetary compensation, although the asset from which it has been derived may be appreciating (or depreciating) in a wholly different way from the interest payment. This can result in unfairness to a claimant who, although receiving interest on the unpaid compensation, may be out of the property market through no fault of his own at a time of steeply rising property values and thereby incur a loss. 3.30 The rate of interest on outstanding compensation payments is prescribed by regulations made by HM Treasury under section 40 of the Land Compensation (Scotland) Act 1963. Until the end of 1995 the interest rate payable was specifically prescribed in a series of Statutory Instruments. With effect from 31 December 1995 a new method of determination was prescribed by the Acquisition of Land (Rate of Interest After Entry) (Scotland) Regulations 1995 (SI 1995 No. 2791). This does not set a specific rate but instead sets out a formula by which authorities may calculate the payable rate for any period or periods after the new Regulations came into force. The rate is bank base less 0.5% on the appropriate reference day. The reference days are 31 December, 31 March, 35 36 Development and Compensation: Putting People First, Cmnd. 5124 Land Compensation (Scotland) Act 1973 24 30 June and 30 September.37 Provision is made for annual payments of interest to a claimant where it exceeds a specified amount (£1,000). Advance Payments 3.31 Because of the potential for unfairness to the claimant, it is essential that any delay in paying compensation be minimised by the use of the advance payment procedure. There is some, if not overwhelming, support for a mandatory advance payment by the acquiring authority immediately on entry or on the making of a general vesting declaration. 3.32 The right to an advance payment of compensation was introduced in 197338 and arises where an acquiring authority has taken possession of any land. In this context 'possession' includes vesting by means of a general vesting declaration. The advance payment, which must be made within three months of a valid claim, is either 90% of the agreed compensation or, if not agreed, the amount of compensation estimated by the acquiring authority. 3.33 The previously mentioned Aberdeen study39 included a reference to advance payments and identified a number of difficulties. Firstly, no advance payment is made until possession is taken. Secondly, the acquiring authorities are very particular about proof of the claimant's title, which delays the statutory three-month period for the advance payment. Statutory interest is payable from vesting date but this is considered to be significantly less than the property investment return. The acquiring authorities' estimate of compensation is invariably extremely cautious compared with the sum eventually agreed. The report recommended that advance payments should be based on a multiplier of annual value and available from the date of confirmation of the order. 3.34 The RICS recommends that statutory interest on unpaid compensation should be paid annually on a compound basis, whether or not it exceeds the current limit of £1,000, if so requested by the claimant. Home Loss Payments 3.35 These are additional payments for certain classes of homeowner who are dispossessed from their property. The thinking behind this is well expressed in the following extract: "12.18....It will not be sufficient to assume that in the case of those who have to move, the cost of compensation or rehousing fully reflects the burden that is put on them. Many individuals are attached to their particular house or their particular neighbourhood and would not freely move simply for the market value of their property. They suffer an additional loss - sometimes called loss of householders surplus - which is real for them but for practical purposes very difficult to value in specific cases. 37 SODD Circular 36/1997 Compulsory Acquisition of Land: Land Compensation Rate of Interest Land Compensation (Scotland) Act 1973, section 48 39 RICS, Rowan-Robinson, Jeremy, et al, (1995)., "Compensation for the Compulsory Acquisition of Business Interests: Satisfaction or Sacrifice?, RICS Research Paper Series, Vol.1, No7. 38 25 .......The non-Departmental members of the Committee recommend the establishment of an additional head of compensation, payable to the occupiers of dwellings, in recognition of the real personal disturbance that is inflicted on them when they are required to move........To attempt to tailor such payments to individual circumstances would be a matter of considerable complexity............the amounts will at present therefore have to be set by some general and fairly arbitrary formula........."40 3.36 After 16 November 1990 and subject to a minimum of one years residence, the home loss payment for qualifying owners is assessed at 10% of the market value of the dwelling acquired, subject to a minimum payment of £1,500 and a maximum of £15,00041. Qualifying tenants receive a flat rate of £1,500.42 In England it has been widely suggested that all property compulsorily acquired should be compensated with a similar additional payment to induce owners to co-operate with acquiring authorities. Views of Scottish practitioners appear to echo those sentiments. Will increased compensation increase public acceptance of development? 3.37 There is a suggestion in the Franks Report43 that there might be a connection between increased compensation and decreased public complaints about development: "One final point of great importance needs to be made. The evidence which we have received shows that much of the dissatisfaction with the procedures relating to land arises from the basis of compensation. It is clear that objections to compulsory purchase would be far fewer if compensation were always assessed at not less than market value....we cannot emphasise too strongly the extent to which these financial considerations affect the matters with which we have to deal(para 278)" 43 Although this Report was concerned with the dissatisfaction with the operation of a two priced market, nevertheless the findings support the assumption that there is a link between the amount of compensation and the public perception of compulsory purchase. 3.38 Notwithstanding that fact, the 1960's saw the public participation explosion in planning and an increase in organised opposition to major public developments.44 Perhaps the improvements in the compensation provisions introduced by the Land Compensation Act 1973 simply did not go far enough: "to bring about a fair balance between provision for the community as a whole and the mitigation of harmful effects on individual citizens, and it does not, as the White Paper claimed it would, put people first. They will still have the same upsetting impact on all our lives. Noises, smells, danger and visual pollution will still be there, even though a little more money 40 Report of the Urban Motorways Committee (HMSO July 1972) Land Compensation (Scotland) Act 1973 - the Home Loss Payment was a multiplier of the rateable value of the house (until abolition) and revised by S.I. following each revaluation by the Assessor 42 Craig, Sarah and Brown, Paul D., (1994), "Home Loss and Disturbance Payments : The Law", RICS in Scotland Library, p. 5 43 The Report of the Committee on Tribunals and Inquiries Cmnd 218 (HMSO 1957) 44 McAuslan, Patrick, (1975), "Land, Law and Planning", Weidenfield and Nicholson, London, p.697 41 26 changes hands. The loss of a beloved home in a cherished spot will still be just as hard to bear under the Bill's proposals."45 3.39 The link between the amount of compensation and claimant satisfaction was examined in the previously mentioned Aberdeen study46 which examined a town centre redevelopment in Aberdeen for which the acquiring authority promoted a compulsory purchase order for the scheme. The findings included: • Bank Charges: All four of the claims for bank charges were resisted by the acquiring authority. Two were alleged to result from the claimants' impecuniosity and thus were too remote. Another claimant had major difficulties in obtaining bridging finance to enable her to minimise her loss. • Total Extinguishment Of Business The acquiring authority resisted a claim for total extinguishment notwithstanding agreement that the claimant had to relocate over one mile away. • Redevelopment Clauses: The landlords of two claimants served notices to quit in accordance with 'redevelopment clauses' in the leases immediately before the properties were vested in the acquiring authority, which had the effect of reducing the compensation to the tenant. Arguably in the absence of the scheme such notices would not have been served but this was not accepted by the acquiring authority or by the Lands Tribunal for Scotland. • Capital Gains Tax: Compulsory acquisition of property counts as a taxable event for CGT which therefore occurs at a time not of the claimants' choosing. The inability to claim retirement relief from CGT on a disposal of a business on or after a 60th birthday because of a compulsory acquisition shortly before that age was said by the acquiring authority to be inadmissible. This has now been overtaken by recent case law. • The Value Of The Heritage: There were widely differing views as to the effect of blight on the value of the heritage, causing delay and anxiety to the claimants. 3.40 The Aberdeen study proposals include the following: • If a property is occupied, the period between execution of the vesting declaration and entry should be extended to three or four months. • Loans at favourable rates should be available to claimants to ease hardship incurred in relocation. • The "judge made impecuniosity" rule should be abolished. • Acquiring authorities should adopt a helpful and sympathetic attitude to claimants. 45 H.C. Deb., Vol. 847, col. 73 (Mr Whitlock ) second reading on the Land Compensation Bill later enacted as the Land Compensation Act 1973 46 RICS Rowan Robinson, Jeremy, et al, (1995) supra 27 • There is a six year time limit for referring a case of disputed compensation to the Lands Tribunal for Scotland following execution of a general vesting declaration. A swifter automatic referral of disputed claims to the Tribunal or to arbitration after certain periods is recommended. Compensation for Planning and Blight 3.41 Blight requires to be set in an appropriate planning and compensation framework. The fundamental principle is that most of the rights to develop are vested in the State, not in the landowner. This is illustrated by the following: "A planning refusal does not of itself confer any right to compensation. On the other hand, revocations of planning permissions or interference with existing uses do rank for compensation, since they involve the taking away of an existing legal right. In cases where, as a result of a planning decision, land becomes 'incapable of reasonably beneficial use', the owner can serve a purchase notice upon the local authority requiring it to buy the property. In all cases, ministerial confirmation is required. The circumstances in which a purchase notice can be served include: • Refusal or conditional grant of planning permission; • Revocation or modification of planning permission; • Discontinuance of use A purchase notice is not intended to apply in a case where an owner is simply prevented from realising the full potential of his land. This would imply the acceptance in principle of paying compensation for virtually all refusals and conditional permissions. It is only if the existing and permitted uses of the land are so seriously affected as to render the land incapable of reasonably beneficial use that the owner can take advantage of the purchase notice procedure."47 3.42 The circumstances in which blight notices can be served are different as demonstrated by the following: "'Planning blight has been described as 'the depressing effect on existing property of proposals which imply public acquisition and disturbance of the existing use' of the property. The announcement, for example, of the line of a proposed road may well mean that land in the path of that road becomes either completely unsaleable in the open market or saleable only at a price lower than it would otherwise have fetched"48 and further, the following two paragraphs: Cullingworth, J. Barry, and Nadin, Vincent, (12th Edition 1997), Town & Country Planning in the UK, Routledge, London, p.123 48 Young, Eric, and Rowan-Robinson, Jeremy, (1985), "Scottish Planning Law and Procedure", William Hodge, Glasgow, p.404 quoting from The Future of Development Plans (HMSO 1965) 47 28 "210.When a plan shows that land or property is likely to be needed for future use by a public authority possessing powers of compulsory purchase, its value may be greatly affected. In extreme cases, it may be rendered unsaleable, and hardship may be caused to those who need to sell for personal or other reasons....The danger we have to face is that widespread publicity for proposals at this stage may have a serious blighting effect on property.... 212. There is thus a conflict between, on the one hand, the desirability of giving full publicity at an early stage to proposals the planning authority are considering, so as to stimulate informed public discussion and, on the other hand, the need to avoid causing hardship to individuals by the casting of blight over land or property that may not be acquired for many years or, at all." 49 3.43 In 1995 the RICS commented that consideration should be given to ways in which the blight procedures can be speeded up to allow those who, either need to move swiftly, or have an opportunity to relocate to an alternative property, to be able to do so. The RICS found that there were difficulties in persuading the relevant authorities to accept valid notices promptly, rather than waiting until the expiry of the statutory two month period or serving a 'protective' counter-notice. The RICS also commented that the substantial waiting time for a hearing at the Lands Tribunal for cases of disputed compensation defeats the purpose of the blight provisions. The RICS recommend the introduction of a right to serve a notice requiring the purchase of a property in cases where its character or amenity can be shown to have been materially affected. In particular, this should include cases where the character or amenity of the property has changed to such an extent that compensation for diminution in value under Part 1 of the Land Compensation Act 197350 is no longer an adequate remedy. However, character and amenity often refer to or include loss of view, which has never been a right protected under Scottish common law. 3.44 In relation to owner-occupied properties, the RICS recommend the removal of the annual value limit above which no blight notice may be served.51 If retained, they suggested that the limit should be raised for investment properties, which should also be brought within the scope of the blight notice provisions when a certain proportion of the investment property cannot be let. 52 3.45 In the Aberdeen study53, all of the claimants were concerned about the effects of blight caused by the acquiring authority's scheme which had a depressing effect on property values and business profitability. In the event, claimants found it difficult to prove the blighting effects of the scheme. Several of the businesses wanted to use the blight notice provisions but could not do so as the annual value exceeded the statutory limit. Although they had powers to acquire property in advance of requirements, and were given some encouragement to use them to alleviate hardship, the District Council declined to exercise this discretion when requested to do so by one of the claimants. The study 49 MHLG, (1969), "Report of the Committee on Public Participation in Planning",(Skeffington Report), HMSO, London See the equivalent Land Compensation (Scotland) Act 1973 51 £21,500 as at February 1999. 52 RICS, (1995), Compensation for Compulsory Acquisition, RICS, London, p.41-42 53 RICS, Rowan-Robinson, Jeremy, et al, (1995), surpa 50 29 recommends that the annual value threshold for the service of a blight notice should be revised upwards or abolished.54 3.46 It also seems that where an acquisition programme extends over a large area and/ or an extended timescale, there can be serious difficulties in identifying comparisons unaffected by the scheme. As the onus of proof lies with claimants this disadvantages them rather than acquiring authorities. 3.47 The DETR55 examined blight in 1997 following significant public concerns arising from the plans for a high speed rail link from London to the Kent Coast. The Working Group reviewed the operation of the blight and compensation provisions (including 19 suggestions for change) and although they suggested a number of changes they also recommended that many provisions remain unchanged. At the very least the study demonstrated the practical difficulties in obtaining a fair balance between acquiring authorities and claimants. 3.48 Lord Rogers’ Urban Taskforce56 was commissioned to examine the future of England’s towns and cities and to recommend action to reverse the alleged spiral of decline. Their Report has the support of the Right Honourable Mr John Prescott, the Deputy Prime Minister, who has called for "nothing less than an urban renaissance. It is not just a matter of housing, planning or design. It is about jobs, transport, schools, crime and health as well – the whole quality of life in our cities and our communities." Although, perhaps, not central to the main thrust of their Report, it is recognised that effective compulsory purchase will be required to make the necessary land available if urban areas are to be successfully redeveloped. What Can We Learn From Abroad? 3.49 A comparative study57 (published in 1998) which examined Eire, France, Germany, Malaysia, the Netherlands and the USA found two advantages of the UK system: • the recognition of business compensation, and • equity of disturbance payments. 3.50 In relation to the other countries, the study reports: "anecdotal evidence from practitioners in every country studied except the UK indicates that a standard premium is added to the valuation achieved via the statutory basis of compensation in instances where the owner is prepared to allow the state to purchase their property by negotiation indeed, the Dutch municipalities are required to prove that negotiations have failed before leave to proceed through the courts will be granted. The levels of premium have been quoted at 10 - 25% contrasting strongly with 54 RICS, Rowan-Robinson, Jeremy, et al, (1995), surpa DETR. Inter Departmental Working Group on Blight. Final Report. December 1997. 56 Towards an Urban Renaissance, Final Report of the Urban Task Force chaired by Lord Rogers of Riverside. 2000 57 Dowdy, H et al (1998) Suitable Recompense? The operation of the compensation and compulsory purchase system in the United Kingdom – a comparative study London: RICS 55 30 the UK where it is perceived that valuations undertaken by reference to compulsory purchase legislation produce lower than 'open market value'" and, in relation to blight: "The incidence of blight in the other countries studied tends to be reduced because of the greater certainty in their land-use development plans." and, in respect of re-expropriation: "Germany has recourse to the mechanism of re-expropriation if public development is not carried out within statutory timescales on land which has been expropriated. This appears to be a fair procedure and one which perhaps could be imported."58 3.51 Amongst other recommendations, the study concluded that public infrastructure provision needs to be considered at the plan making stage. It has to be capable of implementation during the plan period including committed funds (our italics)59, thus creating a framework of certainty. 3.52 The key points to emerge from Literature Review include: • The doctrine of equivalence is supported. • The timetable for processing an order is extensive causing uncertainty and stress. • The general level of compensation is too low. 58 See also CLA, (1995), "Compulsory Acquisition and Payment: A New Approach", A Draft CLA Policy Paper, Country Landowners Association, London, Executive Summary, item 9 59 Further action on a number of major road schemes being managed by Road Network Management and Maintenance Division of the Scottish Executive Development Department has stalled at various stages following a change of government and withdrawal of funding. This has created enormous uncertainty amongst affected proprietors, although others may regard it as a bonus to occupy what is mainly agricultural land acquired for the road, for a further indeterminate period. 31 CHAPTER FOUR REVIEW OF CURRENT SCOTTISH PRACTICE Who has compulsory purchase powers? 4.0 There is no central list of organisations in Scotland with compulsory purchase powers. The same is true in England and Wales. The bodies with compulsory purchase powers are those within the following categories: • Government departments and most government agencies. • Local authorities • Bodies with statutory obligations • Bodies subject to a regulator • Other miscellaneous bodies who have obtained compulsory purchase powers by way of a Provisional Order. 4.1 Appendix 3 contains an illustrative, but not exhaustive list of bodies with compulsory purchase powers. There is no evidence of bodies who do not have, but require compulsory purchase powers. Nor is there evidence of bodies who should have their compulsory purchase powers removed. 4.2 It should be noted that anybody, including companies and individuals, could promote a compulsory purchase order by way of a Provisional Order. Available information on the number, type and use of compulsory purchase orders 4.3 There is no central register providing information on the number, type and use of compulsory purchase orders. Although some departments of the Scottish Executive maintain their own departmental working lists, there is no standard approach to the collation or analysis of this information. The only source of substantial data is the Keeper of the Registers of Scotland. 4.4 The Keeper provided extracts of the actual sasine minute contained within the Register and a database of information from the Land Register. The extracts confirmed the date of registration, the title of the order, the acquiring authority and a summary of information on the properties and the affected interests. Information has been provided for orders registered from 1994 to 1998 but the last year is incomplete because of delay in registration. 4.5 For the purposes of analysis and to allow for local government reorganisation, the acquiring authorities have been categorised under Scottish Executive, Unitary Authority, Regional Council, District Council, Islands Council and Scottish Power, the only nongovernment body to have used compulsory purchase powers. 4.6 Table 4.1 shows that a total of 134 orders have been registered since 1994 with the majority being promoted by either the Scottish Executive or the former District Councils. 32 The figures for Unitary Authorities and Public Utilities demonstrate that those bodies have made very limited use of compulsory purchase powers. Table 4.1 Breakdown of Number of CPOs Between Acquiring Authorities 1994 – 1998 Acquiring Authority Total No of % CPOs Scottish Executive 42 31.3% Unitary Authority 6 4.5% Regional Council 22 16.4% District Council 57 42.5% Islands Council 6 4.5% Scottish Power 1 0.7% 134 99.9% 4.7 Table 4.2 shows that orders promoted by the Scottish Executive included the greatest number of properties per scheme. This is not unexpected because the majority of orders promoted by the Scottish Executive involved acquisitions for major trunk road projects, which will normally involve a large number of interests. Excluding the Scottish Executive, there were 92 orders involving the acquisition of 602 properties, an average of seven properties per order. Table 4.2 Number of Properties Acquired by Acquiring Authorities 1994 – 1998 Average No of Acquiring No of No of Properties Properties in Each Authority CPOs Acquired CPO Scottish Executive 42 1586 38 Unitary Authority 6 25 4 Regional Council 22 152 7 District Council 57 402 7 Islands Council 6 22 4 Scottish Power 1 1 1 Total 134 2188 16 4.8 A comprehensive analysis of the use of compulsory purchase powers is not possible because there is insufficient data contained within the extract of the sasine minutes. However, there is no evidence from Table 4.3 of orders being used in Scotland to promote significant urban regeneration projects. There is a wide variety of schemes with particular emphasis on roads. The large proportion (53%) of Miscellaneous means it is impossible to assess accurately the main purposes for the exercise of compulsory purchase powers. It would be helpful for future monitoring if additional categories could be defined. 33 Table 4.3 Breakdown of Use of CPOs No of CPOs Purpose of CPO Roads Housing 42 41 6 1 22 10 1 57 1 8 6 1 1 134 54 9 (40%) (7%) Acquiring Authority Scottish Executive Unitary Authority Regional Council District Council Islands Council Scottish Power 4.9 Misc 1 5 11 48 5 1 71 (53%) Although it has to be considered in the context of relatively low numbers, there does appear to be a decline in the use of compulsory purchase powers, as demonstrated by Table 4.4 (Year of Registration) and Table 4.5 (Year of CPO). Table 4.4 Year of Registration 1994 1995 1996 No. of CPO's Acquiring Authority Scottish Executive Unitary Authority Regional Council District Council Islands Council Scottish Power Notes: 1. 2. 41 1990 1991 1 4 3 8 3 2 5 31 31 Table 4.5 Year of CPO 1992 1993 1994 4 7 1 12 5 3 15 1 24 6 7 10 1 1 25 1997 1998 19 12 1995 1996 1997 8 3 16 27 16 2 18 5 1 6 1998 2 1 3 Excludes 4 CPO's with year dates prior to 1990 Excludes 2 CPO's with no year date. 4.10 Further details on the information provided by the Keeper of the Registers of Scotland is contained in Appendix 4. 4.11 This analysis demonstrates that there has been relatively little use made of compulsory purchase orders and the numbers appear to be declining. If acquisitions by the Scottish Executive (all for roads purposes) are excluded, the limited use of compulsory purchase powers is even more striking. Since 1994, the average annual number is 18 affecting 120 properties. 34 Scottish factors 14.12 As our study does not include a detailed comparative assessment of the position in England and Wales, our consideration of Scottish Factors must include an element of judgement and anecdotal comment. • There has been no recent consolidation of the law in Scotland. The Land Clauses (Consolidation) (Scotland) Act of 1845 remains the foundation of the law relating to compulsory purchase of land in Scotland. In England and Wales, the law is consolidated in the Compulsory Purchase Order Act 1965. • Although the Scottish legal system and basis of land tenure is fundamentally different to the system in England and Wales, the operation of compulsory purchase is essentially the same in both jurisdictions. Further, decisions of the Lands Tribunal in England and Wales, which are far more numerous, are generally accepted as persuasive in Scotland. Current proposals for land reform in Scotland include measures to secure the public interest and increase community involvement. However, those proposals should not fundamentally affect the law of compulsory purchase in Scotland. 4.13 The differences identified between the jurisdictions are essentially non-legal differences in custom and administrative practice. • Our survey results indicate that Scottish acquiring authorities currently make little use of compulsory purchase powers. This is partly due to limited need/opportunity to acquire land and a lack of finance and partly due to a perception that the compulsory purchase process is slow and uncertain. This evidence of limited use of compulsory purchase powers contrasts with the findings of the English study undertaken by Adams60 that the use of compulsory purchase powers under planning legislation was highest in Scotland. This may be due to the fact that Adams' survey was undertaken pre 1996 while this survey is post 1996. Also, Adams' findings relate to only planning legislation and not to compulsory purchase for all purposes. • The limited use of compulsory purchase powers in Scotland contrasts with England and Wales where there have been a number of major infrastructure projects requiring large scale acquisition by compulsory purchase, for instance, the Channel Link. This position may change in Scotland if new major infrastructure projects, such as the central Edinburgh guided busways, are brought forward under private finance initiatives or other initiatives. • Scottish surveying practices do not have specialist compulsory purchase departments because of the limited volume of compulsory purchases in Scotland. This contrasts with the position in London where a number of the major practices have such departments. • Chief officials in the Scottish Executive are more accessible than their counterparts in England and Wales. This is a direct result of the comparatively smaller size of the Scottish Executive and the Scottish community. 60 Adams, David (1996) surpa. 35 • The suggestion in the land reform proposals in Scotland that the Government should give explicit support to the use of compulsory purchase powers as a last resort where this will assist implementation of local plan or other strategies is not mirrored in England and Wales. • There is particular legislation in Scotland on crofting. Different bodies assess compensation claims in relation to crofts. If the acquisition is by agreement, adjudication is by the Scottish Land Court whereas claims arising from a compulsory purchase order fall within the jurisdiction of the Lands Tribunal for Scotland. 4.14 Notwithstanding some detailed differences in the respective legislative provisions, we identified no substantial differences in the main thrust of the respective compulsory purchase processes. This is probably a result of the relatively limited use of compulsory purchase orders in Scotland. However, more significant differences may emerge if Scottish acquiring authorities increasingly resort to the exercise of compulsory purchase powers in the future. It would be prudent, therefore, to review and consider the findings of the DETR study to identify any matters which may become more relevant in Scotland in the future. 36 CHAPTER FIVE RESEARCH ANALYSIS Survey results: Acquiring authorities and the Scottish Executive 5.0 A survey was undertaken of acquiring authorities to establish an understanding of their approach to and their experience of the use/non-use of compulsory purchase powers and of compensation. The survey was structured to identify the views of acquiring authorities on the key issues identified in the Literature Review, with particular emphasis on the Scottish dimension. 5.1 A questionnaire, which was prepared in consultation with the Scottish Executive Development Department, (Appendix 5) was sent to a representative sample of acquiring authorities. Circulation of the questionnaire was followed up by interviews. The complexity of the subject and the personal experience and views of those interviewed meant that the questionnaire could only provide a framework for discussion. It was not a vehicle for a detailed structural response. The limited numbers of orders also meant that not all of those interviewed had experience of all of the issues raised in the questionnaire. The interviewers therefore included their own assessment of the Key Comments, which were set out at the front of each questionnaire. 5.2 Of the 10 bodies approached, a response was received from nine. Two of the respondents were from within the Scottish Executive. 5.3 The major issues to emerge from the survey interviews are described below. Procedures • With the exception of acquisitions for road purposes, compulsory purchase powers are comparatively little used. This is partly because acquiring authorities do not presently acquire large amounts of property, due to lack of need and to lack of finance. When they do acquire property, they prefer to try to purchase by agreement because confirmation of an order is perceived to be slow and uncertain. • In cases where the owners cannot be identified, often because they cannot be traced and/or the interest in the land is of a nominal value, an order is required to obtain a clear title. In such cases, the procedure is perceived to be slow, cumbersome and expensive compared with the value of the land. • Historically, local authorities were able to commit to major redevelopment projects, for example, a comprehensive development area, finance the land acquisitions, and thereafter, implement the development either in partnership with the private sector or on the basis of a subsequent disposal to the private sector. The new unitary authorities are less likely to be able to underwrite such projects without the support of the private sector. If compulsory purchase is necessary, the uncertainty and delay inherent in the system could deter private sector commitment to a project. • In addition to professional/staff expenses, the local authority may also have spent considerable sums purchasing property in advance by agreement. If the scheme does 37 proceed, the local authority may suffer a loss or make a profit dependent on market conditions. Although development always involves some risk, the uncertain timescales and levels of compensation make it particularly difficult to plan with any certainty. Local authorities may not always be in a position to accept these risks. • There are recent examples of local authorities initiating compulsory purchase procedures on the basis of an indemnity agreement with a developer. The City of Glasgow's attempt to facilitate a redevelopment in Buchanan Street in the context of an indemnity agreement was challenged as ultra vires on the basis of a local authority's duty on disposal of land to tender the site to the highest bidder. However, the Outer House of the Court of Session decided that Sections 189 and 191 of the Town and Country Planning (Scotland) Act 1997 provide a statutory framework within which a local authority may decide to acquire land compulsorily and to sell it to a developer under a back to back agreement provided that proper account is taken of all material considerations.61 • Planning legislation makes it increasingly likely that the development plan will be the vehicle for promoting major town centre regeneration projects and infrastructure projects. Compulsory purchase may be necessary to deliver such projects. This may result in widespread blight, particularly in situations involving alternative routes for transport projects. • These issues, which have recently arisen in practice, have not been previously exposed because of the comparatively limited number of projects and orders in Scotland. However, they are likely to become increasingly significant if the use of compulsory purchase increases as expected. Although these issues are beyond the scope of this study, they should be given consideration by the Scottish Executive. • Acquiring authorities do not share in the procedures for managing orders within the Scottish Executive. This is a perception that there can be unnecessary delay in the confirmation of orders . This is often caused by the Scottish Executive asking for further justification of the order and/or trying to mediate when it is considered that their role should be restricted to processing the order. In the authorities' view, it is "their" order and their responsibility to justify it, if necessary, at a public inquiry. • As local authorities rarely have the necessary finance or expertise to implement major redevelopment projects, consideration should be given to establishing a centrally funded agency to support authorities in the exercise of compulsory purchase powers. • Acquiring authorities consider it to be unreasonable to allow a single objector, who may only have an interest of nominal value, to be able to force a public inquiry. It is suspected that that the real reason for the objection is often to try to increase the compensation. Obviously, the claimant could not explicitly state such a reason because it would be irrelevant in legal terms. 61 Standard Commercial Property Securities Limited –v- Glasgow City Council (22/08/00) 38 Compensation • Acquiring authorities consider the basis of compensation to be generally fair with no need for any significant alterations. The point is made that increased compensation may reduce the likelihood of schemes proceeding. Blight • As there is very little experience of blight notices, those interviewed made no substantive comments. For similar reasons, no substantive comments were made regarding purchase notices and certificates of appropriate alternative development. 5.4 In addition to the survey of acquiring authorities, interviews were conducted within the Scottish Executive with the administrative departments responsible for compulsory purchase case handling, members of the Solicitors Office responsible for advising on compulsory purchase orders and the Inquiry Reporters Unit. 5.5 Although the questionnaire was issued to provide a framework for a subsequent interview, discussion concentrated on the operation of the system within the Scottish Executive. The major issues that emerged were: • Acquiring authorities are not using their compulsory purchase powers as a method of last resort. This is a source of conflict with some authorities. They believe that it is for them to justify the need for the order, if necessary at a public inquiry, and that the role of the Scottish Executive should be restricted to processing the order and not attempting to mediate. • There is support for the idea of the publication of a Manual of Best Practice for issue to all acquiring authorities with compulsory purchase powers. Survey results: Organisations and professional bodies 5.6 Comments were invited from a number of other participants, including acquiring authorities who are not local authorities and a sample of organisations and professional bodies. To widen awareness of the review, a press release was issued inviting comment from any interested party. However, no response was received from this suggesting that either there is little interest in the subject and/or that all those with an interest had been contacted. 5.7 As the numbers involved precluded interviews, comment was invited in writing or by telephone. The questionnaire originally sent to the acquiring authorities was forwarded to each organisation inviting a response in the manner which best expressed their views. Of the 23 organisations approached, a response was received from 14. A number emphasised that their response contained their personal views and not the views of their organisation. 39 5.8 The following major issues emerged: Procedures • An awareness of the need to achieve a balance between protecting the interests of affected owners/occupiers and the requirements of acquiring authorities. • An acknowledgement that, with the exception of roads, the majority of negotiations are done in the shadow of the threat of compulsory purchase. • A general concern about the extended timescales of orders causing uncertainty and stress to claimants. • Some respondents suggested the creation of a "local informal forum" in place of the Lands Tribunal for Scotland. Compensation • There are varying views on the basis of property compensation. Whilst a few consider the existing basis to be fair, the majority advocate payment of a premium to take account of the compulsory nature of the acquisition. • In effect the onus of proof for disturbance on the claimant means that claimants suffer financial loss for which there is no provision in the rules and so are not fully compensated. • As claimants are only entitled to reimbursement of their professional fees as part of their disturbance claim, abandonment of the acquisition by the authority means that the claimant can be substantially out-of-pocket. In addition, Ryde's Scale for surveyors' fees is often insufficient and, as a result, claimants' professional costs are not fully recovered. • If claimants are unsuccessful at the Lands Tribunal for Scotland, they will be responsible for all of the costs, which is a material disincentive to make an application to the Tribunal. It is suggested that the maximum liability for claimants should be restricted to their own costs. Blight • There is no substantial experience of blight procedures being initiated and thus no material comments were made. 5.9 In addition to the survey of organisations who are involved in the compulsory purchase process, further research was undertaken inviting comment specifically from professional advisors to claimants. Four of the eight firms identified by the Scottish Executive as most frequently representing claimants, commented as follows: 40 Procedures • There is limited experience within the private sector of compulsory purchase orders. Most experience involved cases in which rural interests were being acquired for a road scheme. • As a matter of policy, firms normally initially oppose an order either because of a lack of information from the acquiring authority or because the client had no prior knowledge of the proposal. Compensation • To reflect the additional time and stress of compulsory acquisition, a premium should be paid above open market value. • Ryde's Scale is inadequate and professional advisors usually require clients to "topup" their fees. Blight • There is no substantial experience of clients consulting on blight and thus no material comments were made. Symposium 5.10 A symposium was held at the Scottish Executive, Victoria Quay, Edinburgh on 2 July 1999 when the consultants' provisional findings were presented to an audience of 40. 88 invitations had been issued to all parties who participated in the survey and to others who may have had an interest in the subject. Following the presentation, (Appendix 6), the participants were divided into four focus groups and the summarised views of the groups are as follows: • Procedures 5.11 - The procedures should be streamlined with a defined timetable consistent with retaining claimants' rights to object and, in the case of blight notices, the acquiring authority's right to pursue a counter-notice. - A standard "easy read guide for claimants" should be sent to all claimants. - There is support for "Manual of Best Practice". • Compensation 5.12 - The private sector supports an additional payment to compensate for the compulsory nature of the acquisition. Although acquiring authorities do not strongly resist this suggestion, some are concerned that the additional costs will inhibit the promotion/implementation of schemes. All agree that this is an issue that requires further study. 41 - There should be a study on liability for costs at the Lands Tribunal for Scotland and on professional fees. - The private sector would like a review of Ryde's Scale; the acquiring authorities do not see this as a live issue but have no objection to a review. - There is general support for the principle of a review of Rule 3. • Blight Blight is not presently a major issue, but it is recognised that shortcomings in the system may emerge if the use of compulsory purchase increases in the future. It is agreed that the position in England and Wales should be monitored. Questionnaire responses 5.13 The wide ranging nature of the questions and responses means that a simple analysis is not possible. Nevertheless, we have reviewed the common themes under the same key headings, as follows: Procedures 5.14 Generally acquisitions are pursued by agreement, albeit often in the shadow of compulsory purchase, with the exception of Scottish Executive, Transport and Planning Group where all schemes valued above £3m proceed with compulsory purchase powers. A preference for voluntary acquisition was supported by the majority of respondents, who tended to view compulsory purchase as a method of last resort. 5.15 The most common use of compulsory purchase orders is in support of road schemes. Acquiring authorities have limited recent experience of using powers for other purposes, but, in discussion, referred to housing proposals, land assembly for transportation schemes and to enforce a repairs notice served on a listed building. The use of compulsory purchase is normally related to the role of the authority, for example, planning authorities in support of development plan proposals. None of the respondents has any experience of compulsory purchase provisions contained within Scottish private legislation. 5.16 There is no central source of information on how many orders have been submitted to the Scottish Ministers but acquiring authorities' responses ranged from nil to a maximum of seven. There is no information available regarding the classification of the purpose for acquisition. 5.17 Acquiring authorities stated that, due to the varying size and complexity of schemes, it is not possible to generalise on a typical time period involved in compulsory acquisition. Individual examples ranged from six months to 27 years. Professional advisors consider that the average minimum time between vesting and final settlement of compensation is 42 rarely less than five years and from making the order to settlement, rarely less than seven/eight years. 5.18 There is a perception that the confirmation process with the Scottish Executive is slow and uncertain. Acquiring authorities are unaware of the procedures for managing the process within the Scottish Executive, for example, there are no target timetables. 5.19 Acquiring authorities oppose any procedural change that would impose upon them, at the resolution stage, the obligations currently imposed on service of a Notice to Treat. Their opposition is based on the grounds they may be obliged to acquire properties before they are certain of confirmation of the order. The private sector do not have strong views on this point. 5.20 The general practice of agents representing claimants is to object to any order to protect their clients' interest but the objection is normally withdrawn after discussion on the likely amount of compensation. 5.21 When asked what improvements would assist the process, the following points were made: • In general the legislation is considered to require complete revision and consolidation to bring it up to date. • The Scottish Executive should set target timetables for managing their part of the process and the acquiring authority should be kept fully aware of progress. • All of the respondents suggested that a manual of Best Practice would be very helpful. The manual should clearly set out each stage in the procedure and identify the information required from each party. The private sector is very keen that the manual should be available to them. Compensation 5.22 The majority of respondents accept the principle that the claimant is required to mitigate his loss. There is little support for the proposal that the acquiring authority should be obliged to mitigate hardship. 5.23 Advance payments are based on 90% of the acquiring authorities' estimate of compensation. There is no support for the advance payment to be based on the average of the estimate. Although it is accepted that authorities' estimates tend to be cautious, interest is paid on the amount finally agreed. There is little support for fast track arbitration. 5.24 Claimants, who have not moved in anticipation of dispossession, may be given only 28 days notice to move by the acquiring authority. Although there is no experience of any difficulties in this regard, nevertheless, there is general acceptance that the period should be increased to 90 days. 43 5.25 There is little knowledge among respondents of the judge made impecuniously rule. Nevertheless, there is general agreement that the rule is unfair and should be changed by statute. 5.26 The private sector view is virtually unanimous that there should be an additional payment over and above open market value for all claims in respect of non-residential land to reflect the fact that the acquisition is compulsory. However, there are varying views about the amount. For example, it might be a fixed percentage of the property value or a varying scale. Many authorities accept that there is a case for an additional payment but their main reservation is that, if this is excessive, it may prevent some schemes from proceeding. 5.27 The respondents were asked if the method of calculating market value should be amended so that account may be taken of demand from both the private sector, including the needs of a particular non-statutory purchaser, and the public sector. As they have no practical experience of this matter, acquiring authorities have no particular view. The private sector does, however, consider that, if land is particularly valuable to a privatised utility, that value should be taken into account. 5.28 The majority of the respondents believe that the existing compensation code is satisfactory. Although no specific examples were identified, some response from the private sector suggests that the possibility of the payment of a supplementary allowance to the occupier of agricultural, industrial and commercial property, when part of his land is taken and there is damage by way of severance or injurious affection, should be a matter for further investigation. The supplementary allowance would be paid in addition to compensation otherwise payable. 5.29 In situations in which no land is acquired, but, there is entitlement to compensation following the physical interference with a legal right, the majority are in favour of the claimant receiving compensation for all losses, including loss of profits, rather than the compensation being limited to depreciation in the value of the land. However, it is acknowledged that there may be practical difficulties in quantifying the loss. 5.30 The majority of respondents are in favour of the proposition that, in situations where part only of the claimants land is taken, compensation for injurious affection to the retained land should include any loss of profit and costs caused as a direct result of the execution of the works in connection with the scheme for which the land was acquired. Some respondents commented upon the fact that the McCarthy rules already allow for loss of profits, if related to the value of the land, but not temporary loss of profits. 5.31 There is general acceptance of the proposition that interest on a compound basis or accrued interest, whether or not it exceeds the current limit of £1,000, should be paid annually to the claimant if he so requests. However, some acquiring authorities are concerned that the administrative costs could outweigh the benefit. 5.32 The majority agree that interest on surveyors' fees should only be payable from the date of instruction. Some respondents commented that, as the date of entry is historic, the interest payable helps to offset the fact that fees are based on the historic values. 44 5.33 There is general acceptance that advance payments should be payable to all interests being compensated; in particular to interests no greater than yearly tenancies. 5.34 Acquiring authorities are divided almost equally between support and opposition to the suggestion that advance payments should be payable as a right to all claimants when compensation is payable and not just in cases where land is actually taken. The private sector support the proposal. 5.35 The respondents were asked if the owner of a property should be entitled to compensation for any cost directly and reasonably incurred as a result of an indication that the relevant land is to be compulsorily acquired. Acquiring authorities support the status quo but the private sector strongly support the proposal on the grounds that, as orders are initiated by the acquiring authorities, they should pay all of the reasonable costs arising from their actions. 5.36 In relation to Rule 5, the proposition was put that the Lands Tribunal for Scotland should have the power to direct that the whole or part of the compensation awarded should be retained and paid only when reinstatement takes place. All respondents point out that, under the existing Rules, the Lands Tribunal for Scotland has to be satisfied that reinstatement is bona fide intended. The thrust of the difference which is between the Land Tribunal for Scotland being satisfied that reinstatement is intended and it actually having been carried out is only a fairly small move, but might in practice be more material as the proposal would require the claimants to fund the cost of reinstatement. Moreover, claims under Rule 5 are very rare. 5.37 The private sector consider the existing Ryde's scale is almost always inadequate and suggest a comprehensive review. 5.38 The effect of capital gains tax, which may be incurred because the acquisition is at a time not of the landowners' choosing is not seen as a material issue because claimants are able to recover the effect of capital gains tax. 5.39 The following changes to the compensation code were suggested: • Subject to some possible minor adjustments, acquiring authorities consider the existing system to be fair and they would be concerned that any material increase in compensation might be a disincentive to schemes. • The private sector support a fundamental change to increase the compensation (probably as a percentage of the property value) to reflect the compulsion in the acquisition. Other relatively minor adjustments would be of assistance. • In the case of accommodation works, the acquiring authority should accept responsibility for the actions of their contractors. A claimant's loss, arising from the contractors' actions, is not necessarily always accepted by the acquiring authority, leaving the claimant to sue the contractor with whom he has no direct contractual relationship. 5.40 All acquiring authorities say they advise claimants of their compensation rights and this is generally confirmed by the private sector. It is, however, also suggested that the 45 Scottish Executive should publish an "easy read guide for claimants" which would be attached to all order notices. 5.41 With regard to the possible referral of disputes to a more local informal forum, acquiring authorities wish to maintain the status quo because they believe the Lands Tribunal is consistent and independent and seen to be so. They are concerned that a local forum would contain local "experts" who might have conflicts of interest and, in addition, decisions might be inconsistent. While acknowledging these points, the private sector consider the Lands Tribunal to be remote and forbidding to many claimants. A possible compromise may be to make the Lands Tribunal more informal and ready to travel to the locality of the dispute. The use of written submissions could also be encouraged. Blight 5.42 The majority support the proposition that investors, as well as owners/occupiers, should be able to serve a blight notice on the basis of incurring a loss. However, there is a significant minority view that blight is simply another investment risk and there should be no such entitlement to serve a blight notice. 5.43 There is strong support from professional advisors for the removal of the rateable value limit. The views of acquiring authorities tended towards keeping some limit to protect small, more vulnerable businesses balanced against the potential cost to the authorities. 5.44 The majority of acquiring authorities support the retention of current requirements for owner/occupier claimants affected by blight to make reasonable efforts to dispose of their property on the open market before payment of compensation. The private sector consider that blight is normally self evident and this requirement delays the matter unnecessarily often causing hardship. 5.45 The respondents were asked if adjoining property owners should be given the right to serve a purchase notice in cases where the character and amenity of their property can be shown to have been materially affected to such a degree that compensation in value is not an adequate or appropriate remedy. Acquiring authorities consider the status quo should be retained. In contrast, the private sector support this proposition. It is, however, acknowledged by all parties that there are likely to be difficulties of definition and implementation. 5.46 Consideration was given to the possible imposition of a duty on local authorities to advise owners of notifications of schemes received from the Scottish Executive as well as adopted road schemes initiated by roads authorities. Acquiring authorities believe that responsibility for notification lies with the promoter of the scheme. Some of the private sector believe it is the duty of local authorities to advise all parties regarding potential schemes, at the earliest possible date. 5.47 Although some respondents, particularly the acquiring authorities, saw no need to speed up the blight notice procedure, there is broad consensus that the matter should be subject to further consideration. 5.48 There is no direct experience of purchase notices. 46 5.49 There is no direct experience of certificates of appropriate alternative development General conclusions drawn from the survey results: 5.50 The results of the survey lead to the following general conclusions: • The legislation is historic and complex and requires consolidation and updating. • To assist with the development of consistency and understanding, the Scottish Ministers should make some clear policy statements of general application on the use of compulsory purchase powers. It should be noted that the Scottish Ministers did write to acquiring authorities in September 1999 to remind them of their compulsory purchase powers and of the potential value of those powers. • Although both parties may use the procedural difficulties as negotiating ploys, there is general acceptance that the procedure is uncertain and unsatisfactory. Acquiring authorities consider themselves to be responsible for their own orders, which they may have to justify at a public inquiry. The role of the Scottish Executive should be to manage the process and not to attempt to mediate/negotiate with the parties. • While acquiring authorities are concerned about the costs of increasing compensation, there is general support for an additional payment to reflect the compulsory nature of the purchase. • The liability for professional fees, their amount and costs at the Lands Tribunal for Scotland should all be reviewed. • Although blight is not presently a serious issue, if the use of compulsory acquisition increases, it is probable that a number of difficulties will become apparent. 47 CHAPTER SIX CONCLUSIONS 6.0 How Does the System Operate Currently? • The number of compulsory purchase orders is relatively limited. This is partly due to the limited number of projects, which, in turn, is directly linked to the lack of funding particularly for local and central government. There also appears to be a belief that there is a reluctance within the Scottish Executive to confirm orders. • Notwithstanding the relatively limited use of compulsory purchase, acquiring authorities are in no doubt that having powers in reserve enables them to negotiate by agreement. Although no statistics are available it is apparent that the majority of purchases are by agreement in the shadow of compulsory purchase powers. • It seems probable that the use of compulsory purchase will increase in the future. This is partly due to current planning policies, which support the redevelopment of brownfield sites preferably in town centre locations. Such sites are often in multiple ownership. There is also an increase in infrastructure projects. If these projects are to be delivered, compulsory purchase procedures will have to operate efficiently, effectively and fairly. • There is a general lack of expertise in most acquiring authorities, and in the private sector, in the use of compulsory purchase powers. This is due to the low numbers of compulsory purchase orders in recent times. The main exception is the Scottish Executive Transport and Planning Group who use compulsory powers as a matter of practice and operate the system efficiently and effectively. • There are concerns about the delay and uncertainty in the timetable for confirmation of orders, which can adversely affect both claimants and acquiring authorities. • There is a broad acceptance that open market value is the appropriate basis for compensation for land taken. Although it is by no means universal, nevertheless, there is also a general feeling that a premium (10% is the most often suggested) should be paid to compensate the claimant for the compulsory nature of the acquisition. The costs and benefits of any alteration should be the subject of a separate study. • There is a general belief amongst claimants and their advisors that acquiring authorities tend to take a "difficult approach" to claims for disturbance payments. The onus of proof for each item of claim is usually insisted upon, but this may not always be possible. A fair approach to disturbance payments should be balanced against the need to ensure that public funds are properly spent. • There is a concern, mainly from the private sector, that the limitations on professional fees can adversely affect claimants. It is suggested that the acquiring authorities should pay reasonable fees, whether or not the acquisition proceeds and irrespective of the outcome of any compensation dispute. There is also concern that the potential costs arising if the claimant is unsuccessful, deters applications to the Lands Tribunal for Scotland (David against Goliath!) 48 • Rule 3 should not apply to acquisitions by privatised utilities unless they have obtained a "Public Interest Certificate" confirming that the proposed use is for the public interest and not for commercial purposes. • The present position of "no blight" in Scotland may change if more major redevelopment/infrastructure schemes are brought forward. The Findings 6.1 In relation to the criteria of finance, time and certainty in the context of fairness between parties, the findings on the key issues of the Study are as follows: • Procedures 6.2 There is a consensus view that the procedures are complex, time-consuming and uncertain. Although these defects can adversely affect both parties, each may exploit the complexities/delays to their advantage. 6.3 In terms of the stated criteria: 6.4 - Finance. The procedures can be expensive in terms of costs and delay. - Time. The extended timescales create uncertainty and can cause stress to those affected. Such difficulties also affect acquiring authorities in planning and delivering projects. - Certainty. The lack of certainty creates serious difficulties for both groups. Those affected have to live (often in their home/business) with the threat of compulsory purchase. On the other hand, acquiring authorities face uncertainty about whether or not they will be able to proceed with the scheme. We therefore recommend the following action: - That the current procedures should be reviewed with a view to reducing timescales and increasing certainty, where possible. • Compensation 6.5 The key issue is whether there should be provision for an additional payment over and above open market value, as a result of the compulsory nature of the acquisition. If so, what would be an appropriate amount and which categories should receive this payment? The views vary from apprehension by acquiring authorities on the grounds that increased costs will reduce the viability of projects to general support on the part of the private sector, who advocate a premium of up to 30%. The private sector, in particular, are concerned that: • As the cost of professional fees are usually only recoverable as part of the disturbance claim, if the acquisition does not proceed, usually through no fault of 49 the claimant, these costs are not recoverable. It is suggested that the acquiring authority should bear any reasonable costs arising from their actions. • Ryde's Scale rarely cover the full cost of surveyors fees and should be reviewed. • Claimants are deterred from making applications to the Lands Tribunal for Scotland because they will have to pay all of the costs, if unsuccessful It is suggested that their liability should be limited to their own costs. 6.6 6.7 In terms of the stated criteria: - Finance. Acquiring authorities are not totally opposed to an additional premium payment but their main concern is the potentially adverse effect that may have on the prospects of schemes proceeding. - Time. Nowithtanding the procedural complexities, the time taken to settle claims for compensation, typically six years, is unacceptable. - Certainty. The wide range between claims and offers and the uncertainty about the amount of compensation, coupled with delays in receipt/payment, creates serious difficulties for both parties. We therefore recommend the following action: - A study to assess the costs/benefits of provision for a premium in addition to the open market value. This should consider the appropriate amount and the categories who should be entitled to receive the premium. - The regulations should be amended to make the acquiring authority liable for reasonable fees incurred by claimants. Consideration will have to be given to an appropriate trigger date for such liability. - Ryde's Scale should be reviewed. - Consideration should be given to limiting the claimants' maximum liability for costs on application to the Lands Tribunal for Scotland, subject to provisions to deal with unreasonable behaviour on the part of the claimant. Blight 6.8 As there is little evidence of blight in Scotland, no firm conclusions can be drawn. There is, however, clear evidence in England (for instance, the Channel Rail Link) that blight can be a major issue with large-scale infrastructure projects. It would be wrong to assume that similar difficulties could not arise in Scotland; they have not so far occurred simply because there have been no large scale Scottish projects. 6.9 We therefore recommend the following action: - The conclusion of the DETR Study on this subject should be carefully considered to assess whether or not any proposed changes would be appropriate in Scotland. 50 Identify Ways of Improving the Operation of Compulsory Purchase 6.10 We recommend the following: Short term changes within the existing legislative framework. 6.11 6.12 Procedures (i) The Scottish Ministers should provide a clear policy statement on the use of compulsory purchase powers. If orders are to be used to support planning policy objectives, it may no longer be appropriate to restrict their use to cases of "last resort". Acquiring authorities should understand the scope of their powers to exercise compulsory purchase powers in a commercial context to allow them to assist with site assembly for town centre development. (ii) Scottish Development Department Circular 42/76 should be revised and updated. As well as providing a policy statement on the use of compulsory purchase powers, the new circular should include guidance on: - The desirability of pursuing a compulsory purchase order in advance of either development plan approval or a grant of planning permission for the project. - Matters to be covered by the acquiring authority in their Statement of Reasons for making an order. - An "Easy Read" guide to compulsory purchase and compensation procedures. The acquiring authority should be instructed to serve this guide with the formal notification of the order on affected landowners. - Clarification of the supporting documentation to be submitted by the acquiring authority to the Scottish Ministers on notification of the order. - Target timescales for Ministerial decisions on confirmation of orders (iii) The Scottish Executive should consider the production of a Best Practice manual. (iv) The Scottish Executive should progress towards confirmation of an order as soon as reasonably practicable. In particular, they should not delay the procedure with attempts to reconcile disputes between the parties. The proper forum for consideration of such disputes is a public inquiry. Promotion of the order is the responsibility of the acquiring authority. It is their responsibility to provide evidence to the public inquiry to support confirmation of the order. (v) The Lands Tribunal for Scotland should be invited to review their procedures to identify possible improvements to make the Tribunal more accessible. Compensation • A review of Ryde's Scale of professional fees should be undertaken as soon as possible. 51 6.13 Blight • No short-term measures are considered necessary in relation to current provisions of blight. Areas for further investigation by the Scottish Ministers (probably requiring legislation) 6.14 Procedures • Consideration should be given to updating and consolidating the legislative framework governing compulsory purchase procedures. • A future review of compulsory purchase procedures should identify opportunities to increase speed. This is of particular importance if local authorities are to respond to commercial pressures when facilitating town centre improvements. • Consideration should be given to assess the significant issues currently arising in practice regarding the scope for local authorities to enter into indemnity agreements with private companies. For example, whether a local authority is entitled to enter into an agreement to acquire land compulsorily and then transfer title onto a particular developer, who has agreed to indemnify the authority for the acquisition costs. • As local authorities rarely have the necessary finance or expertise to implement major redevelopment projects, consideration should be given to establishing a centrally funded agency to support authorities in the exercise of compulsory purchase powers. 6.15 Compensation • The costs and benefits of paying a premium should be assessed and, if payment of a premium is considered to be appropriate, there should be guidance on how this should be calculated for all or certain categories of claims. • The rules of disturbance should be reviewed to ensure that claimants have a fair code consistent with the requirements of public accountability. • Consideration should be given to the possibility of claimants being entitled to recover reasonable professional fees in the event of an acquiring authority withdrawing an order. • The system of awards of expenses by Lands Tribunal for Scotland should be reconsidered to assess the benefits of restricting a claimants' maximum liability to his own costs, if unsuccessful. However, the risk of encouraging frivolous claims should be part of such an assessment . • Consideration should be given to whether there is a need for privatised utilities to be required to obtain a "Public Interest Certificate" if they wish to continue to benefit from the application of Rule 3. 52 6.16 Blight • The Scottish Executive should monitor the operation of any amendments to the blight provisions in England and Wales and, if appropriate, incorporate such amendments into Scottish legislation. 53 APPENDIX 1 TERMS OF REFERENCE 54 REVIEW OF COMPULSORY PURCHASE AND LAND COMPENSATION: RESEARCH INTO THE OPERATION OF THE SYSTEM WITH A PARTICULAR EMPAHASIS ON THE SCOTTISH DIMENSION Background 1. In July 1998 Scottish Office Ministers announced that there was to be Scottish participation in a wide ranging review of the law and practice of compulsory purchase, land compensation and related matters being led by DETR. They also confirmed that there was to be separate work to ensure that the distinctive Scottish context was taken fully into account in drawing up proposals for change, which would be for the Scottish Parliament to consider. Professor Jeremy Rowan-Robinson of the University of Aberdeen has been appointed as an external advisor to the Department for the review of compulsory purchase, land compensation and related matters. 2. The initial phase of the GB review is designed to identify interim measures to improve the effective, efficient and fair operation of the system within the existing legislative framework along with the areas for further investigation as part of a programme of work for the second phase, which could involve more fundamental change. Research Aims and Scope 3. As part of the separate Scottish work programme, the Scottish Office Development Department wishes to commission research aimed at establishing how the system operates in Scotland currently and identifying ways of improving its operation. Any proposals for change should encompass short-term changes within the existing legislative framework and areas for further investigation with a view to the Scottish Parliament considering a more fundamental scheme of reform. The overall objective of the research is to provide an informed basis for a Scottish Office working group to draw up proposals for consideration by Ministers. The research should be wide ranging in its scope from the possibility of the use of compulsory purchase powers through to the settlement of compensation including negotiations on the amount of compensation; any public local inquiry into the compulsory purchase order; proceedings before the Lands Tribunal for Scotland; the confirmation of the order and subsequent vesting process. The research should encompass the full range of public and private sector bodies with compulsory purchase powers including privatised utilities and other "commercial" organisations such as the BAA plc. Research Programme 4. It is envisaged that there would be 3 distinct phases to the research. These can be summarised as follows: - Firstly an analysis of previous research and literature to include those listed at Annex A. The analysis to include a summary of the key issues, benefits and problems in the operation of the compulsory purchase and land compensation system together with an assessment of the extent of knowledge of the distinctive Scottish context from the existing literature and research. 55 - Secondly the researchers should seek to establish how far the issues, benefits and problems identified in the first phase literature review are experienced in Scotland and the extent of other distinctively Scottish issues/problems; to identify any patterns of use/non-use of compulsory purchase powers which are distinctively Scottish along with information on what other approaches are used and when; the role of the development plan including issues associated with speed of preparation and review of plans; the relationship between the operation of the system and the wider Government policy framework e.g. on regeneration and provision of social needs housing; and - Thirdly to identify current best practice along with possible solutions in changes in approach together with an assessment of their respective contributions individually and collectively to resolving the key issues/problems overall and in particular in the Scottish context. Research Design and Methods 5. While it is for the researchers to prepare a detailed proposal setting out their recommended design and methods, it is suggested that the following be included: 1. The desk based literature review mentioned above. 2. A listing of Scottish bodies with CP powers including the privatised utilities, the powers themselves and any published guidance on policy on the use of such powers. 3. A survey of key non-local authority acquiring authorities such as NRD, Scottish Enterprise, Highlands and Islands Enterprise, Scottish Power, Scottish Hydroelectric and SNH together with a representative sample of Scottish local authorities to establish an understanding of their approach to and experience of the use/non-use of their compulsory purchase powers and associated issues of compensation. Such a survey should encompass interviews with a representative sample of acquiring authorities including Scottish local authorities. 4. A survey of other key participants in the system to include the Chief Valuer Scotland at the Office of the District Valuer, the Lands Tribunal of Scotland and a representative sample of relevant representative organisations of professional advisers involved in advising "both sides" on the compulsory purchase order and the associated compensation provisions. The following list of such organisations is intended to be advisory and it would be for the researchers to determine the composition of a representative sample. The initial list includes the RTPI, the RICS, the Law Society of Scotland, the Chartered Institute of Housing, Scottish Federation of Housing Associations, Association of Chief Estates Surveyors, Central Association for Agricultural Valuers (CAAV) and Incorporated Society of Valuers and Auctioneers. 56 5. A survey of Scottish Office staff by an agreed semi-structured interview, to include administrative divisions responsible for compulsory purchase case handling (e.g. Planning and Historic Scotland), members of Solicitor’s Office responsible for advising on both CPOs on an all client basis and National Roads Directorate as the acquiring authority; and SOIRU – Reporters and administrative staff in relation to CPO PLIs. 6. Tenders should outline in detail; their proposed methodology including, where appropriate the number of interviews to be undertaken. Tenderers are also invited to specify other approaches to be adopted in support of achieving the aims and objectives of the study. Tenders should provide a detailed breakdown of tasks per member of the study team and how this corresponds to the various stages of the research. 7. While the composition of the research team is primarily for the contractor to determine it is envisaged that the team will have or have access to planning, surveying, property advice and legal expertise on the operation of the compulsory purchase and land compensation system including sufficient knowledge of the distinctive Scottish context. Timetable 8. It is intended that this project should last for approximately 7 months with a start date on award of the contract in December 1998. Outputs 9. The following outputs are required: • • • • An inception report to be produced by 15 January 1999. An interim report to be produced by 26 February 1999. A draft final report to be submitted by 9 April 1999. To convene and contribute to a research symposium in May 1999 (date to be finalised). • A final report by 4 June 1999. • A summary of research findings for the CRU Research Findings Series. 10. The inception report will enable the contractor to develop themes as set out in their proposal and to agree the overall scope of the research with the advisory committee. Included in the inception report will be a review of the literature from which the contractor should draw out important differences between the CPO process in Scotland compared to the rest of the UK. The inception report should also include a complete listing of all bodies or organisations in Scotland identified by the contractors with CPO and related powers. The contractors will be expected to demonstrate how the net phases of the research would be undertaken. 11. The interim report will be based on the preliminary findings of the survey work with non-local authority acquiring authorities, a representative sample of local authorities and interviews with other key participants. These findings will help the researchers identify the relevant context in which to complete the survey analysis with an agreed formal of semi structured interviews with Scottish Office staff. 57 12. The draft report draws on the research outputs together with examples and an assessment of current best practice. It should identify obstacles to effective use of compulsory purchase powers, provisional recommendations on ways of improving the operation of the compulsory purchase and compensation system within the existing legislative framework in Scotland. The draft final report should include the researchers’ views on possible solutions to improving the operation of the system in Scotland and advice on the minimum necessary information to provide in the future an ongoing monitoring framework on the operation of the system together with an estimate of the cost and the sources of information. The monitoring framework should seek to minimise the burden on acquiring authorities and any requirement to collect information not already routinely available would need to be justified. 13. The final report is likely to be in the region of 60-80 pages and should be of publishable standard. The contractor should provide the Department with 5 camera ready copies of the final report and a disk containing the text (compatible with MS DOS). The contractor will also be required to provide a short four-page summary of the research finding from the final report in the style of the CRU Research Findings Series. 14. It is expected that the contractors will contribute to and convene a research symposium. Precise formal of the event will be agreed in advance with the advisory group. The purpose of the research symposium is to provide the contractors with the opportunity to disseminate the research findings to a selected audience of practitioners and to allow for discussion, feedback and comments on the conclusions and recommendations. It is anticipated that the symposium will aid the contractors in drafting the final report. 15. The contractors have the responsibility to submit 8 unbound copies of relevant papers to the Scottish Office one wee before the date of the meeting of the advisory group. This includes circulation of the inception report in January 1999, the interim report in February 1999 and the draft final report in April 1999. The final report and research findings should be submitted within 2 weeks days of receiving the advisory group’s comments or according to a timetable agreed between the advisory group and the contractor. Arrangements and timetable for advisory group will be decided upon at its first meeting soon after the submission of the inception report. Costs 16. The tendered sum for this work should include all liability for all costs including staff, equipment, travel and subsistence and overheads. Payments will be phased and linked to the successful completion of key stages of the research. Tenderers liable for VAT on government funded research projects should indicate this in their proposal. Payments will be phased and linked to the successful completion of the key stages in the research. Ownership and Publication of the Report 17. Ownership of all research data and reports lies with the Secretary of State for Scotland. Decisions on all aspects of publication of the report rests with The Scottish Office Development Department. 58 Responsibilities of the Contractor 18. The contractor will be responsible for ensuring compliance with the Data Protection Act (1984) and must agree to abide by any guidelines issued by their profession. Management of Research 19. The project supervisor and chair of the advisory group will be Mrs Louise Donnelly of Planning Division, the project manager for this research will be Mrs Janice Crerar, Planning Division, and the CRU contact for research will be Mr Mike Chapman. The advisory group will consist of the project management team together with representatives from Planning Services, Land and Property Division, National Roads Directorate, SOIRU and Housing Division together with Professor Jeremy Rowan-Robinson. The contractor will be expected to attend a minimum of three meetings of the advisory group during the course of the research project. Submitting a Tender 20. Responses should be based upon the information given in the specification and on the knowledge and professional expertise of the tenderer. Clarification of particular points can, however, be sought from Mrs Louise Donnelly of Planning Division, telephone 0131 –244 7059 or Mike Chapman, Central Research Unit, telephone 0131 224 0376. 21. Contractors should, in no more than 2,000 words detail their proposed approach to the study and their planning staging of the various elements of work. They should also provide the following information: • Name of applicant and/or organisation with which the contract would be placed. • Relevance of applicant’s previous research or survey experience to current application. • Number, role, inputs and expertise of all staff to be involved in the project. • Costings for the project, set out both by the main components of the work and by fee and expense rates. Where appropriate tenders should include VAT and/or overheads – costed as a separate item. Tenders should be submitted by 11:00 am on 10 December 1998 to: Linda Nicholson Head of Planning Research Branch The Scottish Office Central Research Unit CRU-2J Victorian Quay Edinburgh EH6 6QQ The Scottish Office Development Department November 1998 59 APPENDIX 2 KEY PROCEDURAL STEPS STAGE DESCRIPTION TIMETABLE/COMMENTS Resolution Acquiring authority resolves to make an order to In the hands of the acquiring acquire land compulsorily under relevant statutory authority. power. Public Notice Newspaper advertisement for 2 successive weeks. Notices Notice served on owners, lessees and occupiers Objections to be submitted within advising of date by which objections have to be lodged period not less than 21 days from with the Scottish Ministers. Statement of Reasons the date of notice. should be served with the statutory notice. Objection (Public Local Inquiry) If objections submitted and not subsequently In the hands of the Minister and the withdrawn, public inquiry must be held by Reporter Reporters Unit. Typical period is appointed by the Scottish Ministers. 6/12 months to arrange the inquiry and 6/12 months for a decision on confirmation. Confirmation Following consideration of outstanding objections and In the hands Reporters' report on the public inquiry, the Scottish Ministers. MinisterS may confirm the order with or without modification, or decline to confirm the order. Legal Challenge If order is confirmed, right to challenge the validity of Depends on nature of statutory the order in the Court of Session within 6 weeks. appeal and court time-scales. Entry Entry to land by the acquiring authority may be taken Minimum period to take entry and under general vesting declaration. title is 28 days with occupiers' consent. Otherwise, minimum period is 3 months. of the Scottish Or Notice to Treat followed by/with a Notice of Entry. 60 Minimum period to take entry is 14 days after serving notice. The date of entry fixes the date for assessing compensation but it does not have to be paid on the date (interest will however run from the date of entry). The acquiring authority do not however acquire title which can only be transferred once the compensation is determined. APPENDIX 3 AUTHORITIES WITH POWERS OF COMPULSORY PURCHASE CATEGORY All Government Departments All Local Authorities AUTHORITIES Agriculture, Environment and Fisheries Department of Health Development Department Education and Industry Home Department Social Work Services Group Most Government Agencies Eg. Scottish Natural Heritage Scottish Environmental Protection Agency Scottish Enterprise (and all LECs) Aberdeenshire Council Angus Council Argyll and Bute Council Borders Council City of Aberdeen Council City of Dundee Council City of Edinburgh Council City of Glasgow Council Clackmannan Council Dumbarton and Clydebank Council Dumfries and Galloway Council East Ayrshire Council East Dumbartonshire Council East Lothian Council East Renfrewshire Council Falkirk Council Fife Council Highland Council Inverclyde Council Midlothian Council Moray Council North Ayrshire Council North Lanarkshire Council Orkney Islands Council Perth and Kinross Council Renfrewshire Council Shetland Islands Council South Ayrshire Council South Lanarkshire Council Stirling Council West Lothian Council Western Isles Council 61 APPENDIX 3 Cont. CATEGORY AUTHORITIES Bodies with Statutory Obligations British Coal Health Trusts Scottish Gas Scottish Power Scottish Hydro-Electric Water Authorities Bodies subject to a Regulator British Airports Authority Atomic Energy Authority British Energy Scottish Forest Enterprise Pipelines (Oil Companies) Telecommunications (eg BT) Railtrack 62 APPENDIX 4 SUMMARY OF INFORMATION PROVIDED BY THE KEEPER – REGISTERS OF SCOTLAND Summary of Information on CPO’s Provided by The Keeper – Register of Scotland Type of CPO’s Year of Registration Acquiring Authority 1994 Secretary of State Regional Council (5) District Council (9) Islands Council (1) 1995 Secretary of State Regional Council (3) District Council (7) Islands Council (1) 1996 Secretary of State Regional Council (4) District Council (9) Islands Council 1997 Secretary of State Unitary Authority (2) Regional Council (2) District Council (5) 1998 Secretary of State Unitary Authority (3) Regional Council (1) District Council (5) Scottish Power Total N0. of CPO’s Total No of Properties Acquired Roads Housing Misc 11 6 23 1 41 6 8 13 4 31 14 4 12 1 31 8 2 3 6 19 3 4 1 3 1 12 362 33 256 651 239 54 50 21 364 696 45 36 1 778 250 17 9 46 322 39 8 11 14 1 73 11 3 14 6 4 1 1 12 13 2 15 8 1 1 10 3 3 2 2 1 2 3 2 2 1 1 3 21 1 25 3 10 3 16 1 2 9 1 13 1 2 6 9 4 1 2 1 8 134 2188 48 5 81 Notes: 1. Figures in brackets under Acquiring Authority indicate number of individual Authorities or Councils 2. Figures reflect local government reorganisation at 1 April 1996 63 APPENDIX 5 QUESTIONNAIRE 64 THE SCOTTISH OFFICE REVIEW OF COMPULSORY PURCHASE AND LAND COMPENSATION SURVEY OF ACQUIRING AUTHORITIES AUTHORITY: NAME(S): DATE OF INTERVIEW: INTERVIEWER: 65 The following questions relate to post April 1996 when Local Government was reorganised. The questions are organised under two main headings i.e. procedural issues and compensation issues. PROCEDURAL ISSUES 1. To what extent have acquisitions been pursued: (i) (ii) (iii) By agreement? By agreement under the threat of Compulsory Purchase? In pursuance of Compulsory Purchase? 2. For what purposes have Compulsory Purchase powers been used? 3. What are the sources of Compulsory Purchase action? e.g. 4. Development plans, planning permissions, private legislation, deemed planning permissions, others. To what extent are CPOs opposed (i) (ii) Initially? Objections maintained to inquiry? 5. How many CPOs have been referred to the Secretary of State for Scotland for confirmation – classified into acquisitions purposes? 6. To what extent have Compulsory Purchase provisions been contained within Scottish private legislation? 7. What are the typical time periods for each stage of the process, between the following states: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Identification of possible need for Compulsory Purchase. Authorisation by acquiring authority. Service of Compulsory Purchase Notice. Confirmation of CPO. (a) Un-opposed (b) Opposed Service of Notice to Treat. Entry to Land. Advance payment. Agreement on compensation. 8. Should investors as well as owner/occupiers be able to serve a blight notice? 9. Should the current restrictions which prevent commercial property owners from serving a blight notice if their rateable value is over a certain figure [currently £21,500] be removed in the case of owner/occupied properties? 66 10. Should the current requirements on owner/occupier claimants affected by blight to make reasonable efforts to dispose of their property on the open market before compensation is received be removed? 11. Should adjoining property owners be given the right to serve a notice requiring the purchase of the property in cases where its character and amenity can be shown to have been materially affected to such a degree that compensation in value is not an adequate or appropriate remedy? 12. Should there be a clear duty on local authorities to inform owners about notifications of schemes received from the Secretary of State as well as adopted road schemes initiated by Highway Authorities? 13. Should the blight notice procedure be speeded up? 14. To what extent is the purchase notice procedure used and with what consequences? 15. To what extent is the Certificate of Appropriate Alternative Development procedure used and to what effect? 16. Should the CPO process be changed so that the acquiring authorities assume the obligations which they currently take on when the serve Notice to Treat at the time that they resolve to make the CPO? 17. Would a Manual of Best Practice be helpful? 18. Do Acquiring Authorities explain to claimants their rights to compensation; in particular that the cost of professional fees is included with the compensation? Should they be under an obligation to do so? 19. Should disputes be referred to a more local informal forum (for example an Independent Expert)? 20. What procedural difficulties are experienced by Acquiring Authorities? 21. Are there any improvements which would assist the process? COMPENSATION ISSUES 1. At present claimants are treated as willing sellers and obliged to mitigate their loss. Should this be altered so that acquiring authorities are obliged to mitigate hardship? 2. Advance payments are based on 90% of the acquiring authorities estimate of compensation. Should this be altered to that the advance payment is based on the average of the estimate and claim subject to a fast track arbitration? 3. Claimants who have not moved in anticipation of dispossession may be given only 28 days notice to move by the acquiring authority. To find suitable alternative 67 premises for a business and to relocate within 28 days is virtually impossible. Should this period be extended to say 90 days? 4. The judge-made impecuiniosity rule can cause considerable hardship. Should this be changed by legislation? 5. Should an additional allowance over and above open market value be paid for all claims in respect of non-residential land to reflect the fact that the acquisition is compulsory (in the case of residential property an additional payment over and above market value is now paid to reflect the fact that it is a compulsory acquisition)? 6. Should the method of calculating market value be amended so account may be taken of demand from both the private sector, including the needs of a particular non-statutory purchaser the and the public sector? 7. Should a supplementary allowance on top of the compensation otherwise payable be paid to the occupier of agricultural, industrial and commercial property when part of his land is taken and there is damage by way of severance or injurious affection? 8. Should the claimant from whom no land is acquired but who is entitled to compensation following the physical interference with the legal right receive compensation for all losses, including loss of profits, rather than the compensation being limited to depreciation in the value of the land? 9. Where part only of the claimants land is taken should compensation for injurious affection to the retained land include any loss of profit and costs caused as a direct result of the execution of the works in connection with the scheme for which the land was acquired? 10. Should interest on a compound basis or acrued interest whether or not it exceeds the current limit of £1,000 be paid annually to the claimant if he so requests? 11. Should interest on surveyors fees be payable only from the date on which the surveyor is instructed? 12. Should advance payments be available to all interests being compensated; in particular interests no greater than yearly tenancies. 13. Should advance payments be payable as a right to all claimants when compensation is payable and not just in cases where land is actually taken? 14. Should the owner of a property be entitled to compensation for any cost directly and reasonably incurred as a result of an indication that the relevant land is to be compulsorily acquired? 15. Should the Lands Tribunal have the power to direct that the whole or part of the compensation awarded should be retained and paid only when reinstatement (compensation under Rule 5) takes place? 68 16. Should Ryde's scale be increased to ensure that claimants have appropriate professional advice? 17. Should claimants be able to claim for the effect of capital gains tax which may be incurred because the acquisition was at a time not of their choosing? 18. Do you think there should be any changes to the compensation code and if so what are these? 69