Gill Castorina outlines the circumstances in which an owner or occupier of land may be entitled to compensation because of an adverse planning decision.
It is now a fundamental principle of planning law that an applicant for planning permission is not entitled to compensation merely because permission for a particular type of development has been refused or granted subject to onerous conditions. Having said that, however, there may well be circumstances when it is possible to claim compensation for planning decisions which prevent or impede development of land or cause loss or damage or depreciation in the value of that land. It is also possible in some circumstances to go further and, by a procedure which is effectively compulsory purchase in reverse, require the local planning authority to purchase the affected land.
The principal provisions concerning compensation and purchase are contained in the Town and Country Planning Act 1990 (“the Principal Act”), the Planning (Listed Buildings and Conservation Areas) Act 1990 (“the Listed Buildings Act”) and the Planning (Hazardous Substances) Act 1990 (“the Hazardous Substances Act”).
It must be emphasised that the circumstances in which compensation is payable or in which it is possible to require the local authority to purchase the land are fairly limited, and lengthy procedures often have to be followed.
Revocation and modification of planning permission
Payment of compensation is now generally limited to circumstances where development rights have been withdrawn or modified. Planning permission runs with the land and vests development rights in that land. If, therefore, an extant permission exists, then the planning authority cannot simply decide to withdraw the rights granted by that permission because they have had second thoughts. Such withdrawal or modification has to be the subject of an order and, more important, entitles the owner of the land affected to claim compensation.
Orders for revocation or modification of planning permission are made under section 97 of the principal Act and have to be confirmed by the Secretary of State if opposed. Where an order is made and confirmed, the owner of the land affected is entitled to claim compensation which covers expenditure rendered abortive by the order and any other loss or damage directly attributable to the revocation or modification, including depreciation in the value of the land and any loss of future profits of a business.
Such an order can also be made in respect of a planning permission granted by a development order under section 108 of the Principal Act by the revocation or amendment of the development order itself or by the issue of an Article 4 direction withdrawing the general development rights and making it necessary for an express application to be made to carry out the development. Obviously, where permission is withdrawn the compensation becomes payable only if an application is made for planning permission for development formerly permitted by the order and this is refused or granted subject to conditions different from those in the development order.
Discontinuance orders
A local planning authority is also able, under section 102 of the Principal Act, by order to require the discontinuance of any use of land, the imposition of conditions on the continuance of any use, or the removal or alteration of any works or buildings. Obviously, this power has wider application than section 97 and allows intervention against any land use. Such an order is subject to the payment of compensation and an owner is entitled to compensation for loss suffered as a result of a discontinuance order, expenses in respect of works carried out in compliance with the order, rehousing (an obligation is imposed on the local planning authority under section 102(6) to ensure provision of suitable alternative residential accommodation) and disturbance.
Minerals permissions
There are provisions contained in Schedule 9 of the Principal Act to allow discontinuance orders to be used as a means of prohibiting the resumption of working and imposing restoration and after-care conditions upon existing mineral workings and where such orders are made there are somewhat modified compensation entitlements contained in Schedule 11 of the Principal Act.
Such orders may also prohibit the resumption of operations that have ceased or require steps to be taken for the protection of the environment where operations have ceased temporarily.
Highways orders
Section 249 of the principal Act empowers the Secretary of State to make an order (on the application of the local planning authority) to extinguish vehicular rights over a highway effectively providing the legal basis for the pedestrianisation of one area, enabling it to be converted into a pedestrian precinct. An order under this section does not affect the status of the land as highway, only the right to use vehicles on it, and if an order is subsequently revoked these rights are reinstated. Compensation for loss directly attributable to the making of the order may be claimed by any owner of land having lawful access to the highway at the time the order is made.
Listed buildings
As it is possible to claim compensation for revocation or modification of planning permission, so compensation may also be payable on revocation or modification of listed building or conservation area consent under section 23 of the Listed Buildings Act.
An owner’s compensation entitlement includes the depreciation in the value of the land, but does not extend to works carried out before the grant of the consent or any other loss or damage arising from events before the grant of the consent. Expenditure incurred in carrying out the works rendered abortive by the revocation or modification can also be claimed in addition to preparatory expenditure even when no works have been carried out.
Section 3 of the same Act extends control over works to unlisted buildings on an interim basis by the service of a building preservation notice. Service of such a notice gives immediate protection to the building and remains in force for six months during which period the Secretary of State has the power to list the building. If he does not do so, the notice lapses and the owner may be entitled to compensation for loss or damage directly attributable to the effect of the notice. (If he does confirm the notice, there is no liability to pay compensation, even if listed building consent for any alteration is refused, although it may be possible to serve a listed building purchase notice in some circumstances.)
Hazardous substances
A hazardous substance authority also has the power to revoke or modify a hazardous substances consent under sections 14 and 17 of the Hazardous Substances Act. The presence in, over or under any land of any hazardous substance (as defined in that Act) requires the consent of the hazardous substances authority if it exceeds a specified quantity. In certain circumstances the revocation of that consent may give rise to a liability to pay compensation. This occurs where the authority, by order, revoke or modify a consent or where an application has been made to continue the consent (because there has been a change of person in control of the land) and the authority decide on that application to revoke or modify the consent.
The compensation entitlements in the two cases differ. Where the general power to revoke or modify the consent is exercised, then any person who has suffered damage in consequence of the making of the order, or who has carried out works in compliance with the order, is entitled to claim. The claim may include damage sustained in consequence of the making of the order by depreciation in the value of any interest in the land and disturbance.
Where an order is made consequent upon an application to continue a consent on a change of person in control of the land, compensation is payable to the person in control of the land prior to the revocation or modification, but is limited to loss or damage sustained by him directly attributable to that modification or revocation.
Tree preservation orders
The general principles behind an entitlement to compensation are changed slightly in respect of tree preservation orders. Any person who has suffered loss or damage in consequence of any refusal of consent required under a tree preservation order (including modification of conditions imposed on a consent) may recover compensation for it under section 203 of the Principal Act).
The entitlement to compensation is incorporated in the order itself, subject to such exceptions and conditions as are specified in the order. The purpose of an order is to preserve and prevent damage to any trees which the local planning authority feel should be preserved, and no compensation is payable in the case of any tree where a certificate has been issued under Article 5 of the Principal Act to the effect that the refusal or condition is in the interests of good forestry or that the trees have special or outstanding amenity value.
In addition, where consent is given for an order for the felling of any part of a woodland a direction requiring replanting is usually given. Section 204 of the Principal Act provides that compensation is payable where such a direction is given but where no grant or loan is payable by the Forestry Commission in respect of that replanting. Compensation is for loss or damage suffered in complying with the direction. (No compensation is payable in respect of the duty to replace where any tree is removed or destroyed in contravention of an order).
Stop notices
Stop notice procedures under section 183 of the Principal Act allow a local planning authority to impose a ban with almost immediate effect on activities being carried out in breach of planning control. A stop notice directs that any activity (with some statutory exceptions) being carried out on land in respect of which an enforcement notice has been served shall stop, despite the fact that the enforcement notice has not come into effect.
If the stop notice is then withdrawn, or the enforcement notice upon which it is dependent is quashed, varied or withdrawn, then any person who has an interest in, or occupies, land where a stop notice is served is entitled to compensation in respect of loss or damage directly attributable to the prohibition contained in the stop notice.
The potential liability for compensation makes local planning authorities very cautious in the exercise of the power to issue a stop notice, although in practice there are considerable restrictions on what compensation can be claimed.
Advertisements
The Town and Country Planning (Control of Advertisements) Regulations 1992 empower a local planning authority by order, with the approval of the Secretary of State, to modify a grant of express consent to display an advertisement.
This is subject to the payment of compensation suffered to the extent that the claimant has incurred expenditure in carrying out abortive work, including the preparation of plans or similar materials, or has otherwise sustained loss or damage directly attributable to the order (other than loss or damage consisting of any depreciation in any interest in the value of the land), but excludes any work done or loss or damage arising out of anything done or not done before the grant of consent.
Purchase notices and blight notices
In some circumstances an owner can go further than to seek compensation in respect of an adverse planning decision and can require a district or borough council to acquire his interest in the land. The circumstances when this arises fall into two main categories.
Where an owner of land considers that he has suffered adversely because of a particular planning decision and considers that the land is incapable of reasonably beneficial use he may serve a purchase notice to require the purchase of his interest. Equally, where an owner-occupier has tried to sell his property and failed to do so because of the blighting effect of certain planning proposals in his area, he may serve a blight notice requiring the purchase of his interest in the land. The purchase and blight notice provisions are contained in Part VI of the Principal Act.
Purchase notices
Purchase notices may be served where the land has become incapable of reasonably beneficial use because of one of three main types of planning decision:
- the refusal, or the revocation, of planning permission;
- the granting of planning permission subject to conditions or the making of a modification order imposing conditions on an existing planning permission;
- the making of a discontinuance order.
Essentially, in all these circumstances the owner of the land has to prove that the land is incapable of reasonably beneficial use in its existing state and that it cannot be rendered capable of reasonably beneficial use by the carrying out of development for which planning permission has been granted or for which the local authority or the Secretary of State has undertaken to grant permission.
Unhelpfully, the Act itself gives no guidance as to circumstances in which the land is to be taken to be incapable of reasonably beneficial use, although there is considerable case law on the subject. In summary, no account must be taken of any unauthorised prospective use of land although, of course, any development for which planning permission has been granted will be taken into account. In considering what capacity for use the land has, the relevant factors are the physical state of the land – its size, shape and surroundings – and the general pattern of land uses in the area. DOE Circular 13/83 makes clear that a use of relatively low value may be regarded as reasonably beneficial if such a use is common for similar land in the vicinity. It is for the server of the purchase notice to demonstrate that this test has been satisfied.
Most purchase notices are served following a straightforward refusal of permission, although where they are served following a conditional consent the owner must show that the effect of the conditions on the consent is such as to reduce the permission to nil.
A purchase notice must relate to the whole of the land for which the planning permission was refused or conditionally granted. The council then notify the claimant as to whether they are prepared to purchase the land and, if they are not, the reasons for this. Before rejecting a purchase notice, they are required to send the Secretary of State a copy of the purchase notice and their proposed response notice. He may reject the notice, confirm it, with or without modifications, or grant planning permission or that which was originally applied for (with less restrictive conditions). Alternatively, he may direct that planning permission shall be granted for any other development which he considers could render the land, or part of it, capable of reasonably beneficial use (in which case a claimant is entitled to compensation equal to the difference between the value of the land with that planning permission and its value if it had been acquired under the purchase notice).
The purchase notice provisions are also extended to other planning decisions. Where an application for listed building consent or conservation area consent is refused, or granted conditionally, or revoked or modified, there is an entitlement to serve a listed building purchase notice (under section 32 of the Listed Buildings Act). The procedures do, however, differ slightly, as do the conditions of service and powers of the Secretary of State when a notice is served.
The provisions of section 198 of the principal Act empower local planning authorities to apply the purchase notice provisions under a tree preservation order, although the model order contained in the regulations does not contain these provisions. There is also a power under section 220(3)(b) for regulations relating to the control of advertisements to apply the purchase notice provisions, although the current regulations do not apply them.
Blight notices
Where development value of land has been reduced by, for example, a proposal in the development plan or some proposed new public works, an owner of land may find it impossible to sell his land or obtain planning permission to develop it himself.
The blight notice provisions contained in Part VI of the Principal Act, in summary, entitle the owner-occupier of a private dwelling and owner-occupiers of farms or small businesses to require the appropriate authority (as defined) to purchase their interest in the land.
The five main categories of land defined as blighted land are:
(a) land indicated on a structure plan or local plan as required for the purposes of a Government department or local authority or land which may be included in an action area;
(b) land in an area described as the site of a new town or urban development area;
(c) land needed for housing requirements, ie in a clearance area, renewal area or land which the authority propose to acquire for purposes of general improvement;
(d) land identified as on or adjacent to the site of a highway proposed to be constructed, improved or altered; and
(e) land in respect of which compulsory purchase has been authorised (Schedule 13 of the principal Act).
A blight notice may be served only where the claimant has a qualifying interest, has made reasonable endeavours to sell that interest and can prove that because of the blight he is unable to sell his interest or can sell it only at a substantially lower price.
The authority is entitled to serve a counter-notice, specifying the grounds on which they object to it. If they do not serve a counter-notice, the blight notice takes effect. There are specified grounds for a counter-notice and, if such a notice is served, the claimant has two months to refer the counter-notice to the Lands Tribunal. If he does not do so the counter-notice is effective.
Conclusion
The circumstances in which compensation can be claimed are limited and the circumstances in which an owner can require the purchase of his interest in the land are limited still further. Having said that, it is important to be aware of the circumstances when such an entitlement arises and also to have an appreciation of the difficulties surrounding, in particular, the purchase and blight notice provisions contained in the Principal Act.
Some of the circumstances when compensation can be claimed – the revocation of a hazardous substances consent or the modification of a grant of express consent to display an advertisement, for example – will probably occur infrequently. Equally, planning authorities will always be reluctant to make revocation or discontinuance orders because of their potential liability to pay compensation.
It should also be remembered that the right to claim compensation is one thing – assessment of compensation and agreement with the local planning authority is quite another. The procedure may be lengthened considerably if no agreement can be reached and the matter has to be referred to the Lands Tribunal for determination.
Gill Castorina is a member of the environmental and planning law unit at City solicitor Alsop Wilkinson.
