With fewer than 100 days to go until the opening ceremony, the Olympic Coordination Commission has praised London for having all facilities in place months ahead of the athletes’ arrival. During a recent visit of IOC president Jacques Rogge, the government used the occasion to underline its legacy plans hailed by Mr Rogge as a “blueprint for future Games’ hosts”. The remarkable regeneration of east London is acknowledged; however, for some of the 200 businesses displaced to make way for the Games, the accolade leaves a bittersweet taste.
Most notably, five years after the Olympic compulsory purchase order (CPO) came into force, around 70 landowners still have not agreed compensation settlements.
For many, the negotiation revolves around the assessment of compensation for the potential development value of the land were it not for the CPO proposals. Sections 14-17 of the Land Compensation Act 1961 (LCA) contain complex provisions to deal with assumptions about planning permissions to be made in the valuation process. However, these have long been in need of reform and the Localism Act 2011 introduces some welcome amendments.
Section 17 complexity
The section provides a mechanism for landowners to resolve the issue of appropriate alternative development, which, ultimately, can have a substantial impact on land values. This procedure seems a simple one, but in practice it has proved to be far from straightforward.
The statutory provisions required that Section 17 certificates were determined on the basis of what planning permissions were likely to be granted at the date the CPO was first published, rather than the date that the land was to be valued (usually the date of vesting or entry).
In the case of the Olympic landowners, this generally equates to a difference of two years (2005 compared with 2007) and case law has highlighted discrepancies of greater periods causing substantial variations in value. Appeals against a certificate were made under Section 18 to the secretary of state and heard by appointed inspectors.
Such applications and appeals revolve around a hypothetical assessment of historic planning policy on the assumption that the development had not taken place (a ‘no-scheme world’). The concept of the no-scheme world (as demonstrated in the case of Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 1 EGLR 13]) also requires that determinations are made on the basis that the underlying scheme was considered to be cancelled at the relevant date. The cancellation approach assumes that planning policies and development, including the scheme underlying the acquisition, evolve as in the real world up to the relevant date.
The question then is how development of the land would have been determined at this specific point in time, or at a future time, in light of actual and reasonably foreseeable planning policies.
This has proved to be a difficult, abstract and theoretical task for all involved. Flawed decisions could be challenged in the High Court, but a successful challenge did not mean resolution of the planning position. An unlawful decision would be quashed by the court and the matter referred to the secretary of state for redetermination. Even the grant of a positive certificate did not complete the process because final valuations could still be in dispute requiring a reference to the Upper Tribunal for ultimate determination of compensation.
Localism Act reforms
Section 232 of the Localism Act 2011 amends these provisions. The main changes are:
? Section 17 certificates will continue to be issued by planning authorities; however, appeals will be directly referred to the Upper Tribunal. This has a number of advantages: it will substantially reduce the amount of litigation any landowner may face seeking to determine the planning position; it will also allow planning prospects and ultimate value to be determined in one process by the court.
? The scheme to be disregarded for planning purposes will be the extent of the CPO and any disputes in this regard will be dealt with by the Upper Tribunal.
? Section 17 certificates now assess planning prospects at the valuation date, as opposed to the date of first publication of the CPO. This will be far more useful in the valuation process and valuers will need to give careful consideration to prevailing plan policies to ensure these changes are correctly applied.
? The cancellation assumptions remain but now have a clear statutory basis and are consistent for assessments, whether for alternative appropriate development or otherwise, which should help valuers by bringing more consistency to the process.
? Section 16 assumptions in respect of land comprised in the development plan have been removed. The wording of this section was not consistent with the current system’s policy framework in relation to the development plan.
The transitional provisions are such that for any Section 17 application that remains undetermined, the new appeal provisions have applied from 6 April 2012. For Section 18 appeals already lodged, saving provisions allow these to continue under the old regime. For those with appeals lodged that have not moved far along the procedural route, a negotiation with the acquiring authority to seek a direct referral to the Upper Tribunal to determine planning and valuation issues might be a strategy worth considering to speed up the settlement process. The new provisions should make negotiating the statutory CPO process faster and less painful.
Jacqueline Backhaus is a partner at Trowers & Hamlins LLP
