PP 2009/95

Where land that has been compulsorily acquired would (but for the proposed scheme underlying the acquisition) have had a reasonable prospect of obtaining planning permission for a specific redevelopment, and the assumptions as to planning permission provided for in sections 14 to 16 of the Land Compensation Act 1961 do not apply, should that prospect be treated as a certainty or should it be reflected merely in hope value? In other words, should the compensation be assessed on the full value of the land with planning permission or should the amount that such an assessment would produce be discounted to reflect the lack of certainty? This may sound a straightforward question but, in answering it, the House of Lords took the opposite view to that taken by the Lands Tribunal (LT) and the Court of Appeal. In Spirerose Ltd (in administration) v Transport for London [2009] UKHL 44; [2009] PLSCS 264, the respondent owned land and buildings that were required for the extension of the London Underground. Public notice was given of a compulsory purchase order in 1993, the order was confirmed in 1997, notice to treat was served in 2001 and the appellant entered later in 2001. The LT found that, in the no-scheme world that the Pointe Gourde principle requires there was, at the valuation date, a reasonable prospect of planning permission being granted for an identified mixed-use development on the land. If the grant of planning permission had to be assumed, the LT assessed the compensation at £608,000. However, if hope value only was to be determined, the compensation would amount to £400,000. The House of Lords pointed out that the underlying principle of compensation for compulsory acquisition was that the owner should receive full and fair compensation and a fair financial equivalent for its land. The prospect of exploiting the property was a relevant element in the value to the owner. Consequently, the valuation could take into account not only the existing purposes to which the land was applied but also any increased value by reason of its potential and possibilities. However, on a principled approach to valuation, a deduction had to be made to take account of the fact that that potential might not be realised, or not realised for a considerable time. The Pointe Gourde principle did not provide a basis for the court to establish an assumption that planning permission would be obtained by analogy with the statutory provisions that already create assumptions. It was not for the court to rewrite legislation by adding additional assumptions. Accordingly, where the LT found, on the balance of probability, that planning permission would have been granted for a specific redevelopment but for the scheme of acquisition and that the permission would have existed at the valuation date, the appropriate approach to valuation was the hope value basis. As in the normal way, the development potential would be valued by discounting for future uncertainties. John Martin is a freelance writer