Land grabs

Compulsory purchase orders are often a necessary evil when it comes to development. By Katherine Evans

The existence of compulsory purchase powers, as the recent experience of the London Development Agency (LDA) in assembling the land required for the 2012 Olympic Games has shown, is often a necessary part of any regeneration project.

The powers may not actually be exercised, but the fact that an authority may use such powers provides a powerful driver to resolve negotiations with landowners to enable new development to proceed without too much delay. It gives authorities the means to take possession of land where landowners are being particularly intransigent or unreasonable.

However, there is a number of hurdles to be overcome before such powers are obtained and the procedure for obtaining them is often very expensive and time-consuming.

One way around the current difficulties faced by public authorities may be to drop the barriers slightly so it becomes easier and less costly to obtain the powers. Some measures could also be introduced to make sure that such powers are only used as a last resort in order to ensure the interests of landowners are protected.

The existing law and policyCurrently there is a number of statutes making provision for the use of compulsory purchase powers by different authorities. Government guidance in Circular 06/2004 states that authorities should look to use the most specific power available for the purpose in mind and only use a general power where unavoidable.

The unhappy experience of the Urban Regeneration Agency in seeking to secure the regeneration of land under a power in the Leasehold Reform Housing and Urban Redevelopment Act 1993 shows the importance of getting the power right. In this case the order made by the agency was confirmed by the Secretary of State for Communities and Local Government.

The decision to confirm became the subject of a court challenge – Pascoe v First Secretary of State (2006) – on the grounds, among others, that the Secretary of State had misdirected himself as to the application of the power. Specifically, the court held that he was wrong to find that the order land was “predominantly under or ineffectively used” when the power required him to find that all the land was underused or used ineffectively.

ProcedureThe procedure for making an order and seeking confirmation by the Secretary of State is contained in the Acquisition of Land Act 1981 and, apart from some minor tweaking introduced by the Planning and Compulsory Purchase Act 2004, has fundamentally remained the same. The procedure is lengthy and requires detailing, in a schedule to the order, of all the interests in the land. Since the 2004 act, however, this stage has become much more difficult because of the requirement to include in the schedule charges over the land (mortgages) and easements. Where objections to a compulsory purchase order are not withdrawn, the holding of an inquiry before an inspector appointed by the Secretary of State becomes necessary.

Objections are not relevant if they relate to matters of compensation only. A common tactic of landowners and occupiers, however, is to make an objection to secure a higher offer of compensation even though they have no fundamental objection to the scheme. Such tactics, although understandable in the current system, add to the delay and cost of making an order.

Policy testsThe circular contains the policy tests to be met and makes very clear that an order should only be made where there is a “compelling case in the public interest”. It is for the authority to decide how best to justify its proposals and in doing so it has to demonstrate that there is a reasonable prospect of the scheme going ahead and there are no impediments – for example, financial or planning – related to its implementation. One area that has caused confusion is whether, when planning permission is in place, an inspector can refuse to confirm an order because of concerns about the merits of a scheme to achieve the stated objectives of an order. The judgment in Alliance Spring Co Ltd & Others v First Secretary of State (2005) made clear that it is not appropriate for an inspector to take a different view on planning considerations that have already been considered unless there is fresh material or a change of circumstances.

There is, however, a fine line between an inspector judging the merits of a scheme to ensure that there is a “compelling case in the public interest” and the inspector re-examining inappropriately planning considerations that have already been considered.

Public-private partnershipsThe policy hurdles and lengthy and costly procedure means that cash-strapped local authorities wanting to regenerate areas in their jurisdiction have little choice but to enter into partnerships with developers to secure the necessary funding before proceeding to make an order. This in turn may involve the authority having to compromise on the form that a development may take to secure a commitment from a developer in order that some form of development can proceed.

While there is nothing unusual about this in the planning world, in a compulsory purchase inquiry, where the spotlight is on the authority’s justification for the order, this can create difficulties. For example, in demonstrating a compelling case in the public interest the authority needs to demonstrate that there is a reasonable prospect of the scheme going ahead and that it is unlikely to be blocked by financial implications.

However, where a developer is bringing forward the development it will often be extremely reluctant to disclose commercially sensitive information. This creates uncertainty as to the deliverability of a scheme. Furthermore, in the absence of an order being confirmed a developer may face difficulties securing enough interest from potential occupiers of the new development or even a firm commitment to funding.

It was viability issues that recently proved a stumbling block for Plymouth City Council in its promotion of an order to acquire land in a run-down part of the city centre for the development of a new shopping centre. The objective of the development was to secure the regeneration of the area, something the council has been striving to achieve for many years. Planning permission had been granted for the scheme, but uncertainty in the mind of the inspector as to deliverability of the scheme contributed to the order not being confirmed.

Thoughts on reformThe availability of compulsory purchase powers is often necessary to secure regeneration. Unfortunately obtaining such powers is a costly and time-consuming process and few authorities have the resources to start the process themselves.

Authorities are often dependent on the private sector getting involved, with the risk that authorities can find it more difficult to meet the tests in the circular, and in particular the test that a scheme is deliverable. If more regeneration schemes are to come forward then consideration needs to be given as to whether the current procedure could be streamlined. For example, the grant of compulsory purchase powers could be dealt with at the same time as planning permission is granted.

Also, consideration should be given to the usefulness of requiring an authority to show that a scheme is viable. If a scheme is not viable then it will not be implemented and therefore it is unlikely that the powers will be exercised.

To counter the concerns of landowners, measures could be introduced to make sure that such powers are only used as a last resort, requiring the authority to demonstrate that offers to pay compensation have been fair and reasonable.

Katherine Evans is a partner at TLT Solicitors