New clause 17 - Assessment of compensation: valuation date

Planning and Compulsory Purchase (Re-committed) Bill – in a Public Bill Committee at 6:00 pm on 14th October 2003.

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'(1) The Land Compensation Act 1961 (c.33) is amended as follows.

(2) After section 5 there is inserted—

''5A Relevant valuation date

(1) If the value of land is to be assessed in accordance with rule (2) in section 5, the valuation must be made as at the relevant valuation date.

(2) No adjustment is to be made to the valuation in respect of anything which happens after the relevant valuation date.

(3) If the land is the subject of a notice to treat, the relevant valuation date is the earlier of—

(a) the date when the acquiring authority enters on and takes possession of the land, and

(b) the date when the assessment is made.

(4) If the land is the subject of a general vesting declaration, the relevant valuation date is the earlier of—

(a) the vesting date, and

(b) the date when the assessment is made,

and ''general vesting declaration'' and ''vesting date'' have the meanings given in section 2 of the Compulsory Purchase (Vesting Declarations) Act 1981.

(5) If the acquiring authority enters on and takes possession of part of the land—

(a) specified in a notice of entry, or

(b) in respect of which a payment into court has been made,

the authority is deemed, for the purposes of subsection (3)(a), to have entered on and taken possession of the whole of that land on that date.

(6) Subsection (5) also applies for the purposes of calculating interest under the following enactments—

(a) section 11(1) of the Compulsory Purchase Act 1965;

(b) paragraph 3 of Schedule 3 to that Act;

(c) section 85 of the Lands Clauses Consolidation Act 1845;

(d) section 52A of the Land Compensation Act 1973,

and references there to the date or time of entry are to be construed accordingly.

(7) An assessment by the Lands Tribunal is treated as being made on the date certified by the Tribunal as—

(a) the last hearing date before it makes its determination, or

(b) in a case to be determined without an oral hearing, the last date for making written submissions before it makes its determination.

(8) Nothing in this section affects—

(a) any express provision in any other enactment which requires the valuation of land subject to compulsory acquisition to be made at a particular date;

(b) the valuation of land for purposes other than the compulsory acquisition of that land (even if the valuation is to be made in accordance with the rules in section 5).

(9) In this section—

(a) a notice of entry is a notice under section 11(1) of the Compulsory Purchase Act 1965;

(b) a payment into court is a payment into court under Schedule 3 to that Act or under section 85 of the Lands Clauses Consolidation Act 1845.''.'.—[Keith Hill.]

Brought up, and read the First time.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I beg to move, That the clause be read a Second time.

With this new clause, we return to consideration of the compulsory purchase provisions of the Bill. The new clause is one of several that are intended to clarify or to amend the current compulsory purchase system in order to make it clearer and fairer. As the Committee is aware, the Bill contains various provisions on compulsory purchase in clauses 73 to 77. Clause 73 clarifies the purposes for which local planning authorities can exercise their compulsory purchase powers, while clauses 74 to 77 introduce a new element of compensation for loss. We shall, no doubt, return to those if time permits.

New clauses 17 to 21 concern the operation of the compulsory purchase processes. They form part of a wider package of reforms described in our policy statement of 18 July 2001 with a view to creating a simpler, fairer and faster compulsory purchase system.

Turning to the substance of new clause 17, the introduction of a new section 5A to the Land Compensation Act 1961 is intended to clarify the legal position as to the point in time at which land being compulsorily acquired is to be identified and valued for compensation purposes. The uncertainty has arisen as a result of conflicting case law. By removing that uncertainty, we hope that those having their property compulsorily acquired will find the negotiation for compensation to be quicker and fairer.

Subsections (3) and (4) of new section 5A will determine the date on which land and buildings that are being compulsorily acquired are to be valued. The valuation will reflect the nature, condition and market value of the land on that date. In the case of land being acquired through the notice to treat procedure, the date on which the land is to be valued for compensation purposes will be the date on which the acquiring authority enters the land and takes possession. A notice to treat informs the recipient of the acquiring authority's intention to acquire land and requests details of the recipient's interest in the land. The notice also invites the recipient to enter into negotiations—to treat—for the purchase of the land. The authority then has three years in which to take possession of the land. Alternatively, the authority can

obtain a right of entry by paying into court the sum claimed by the owner and by giving a bond that it will pay the full amount ultimately agreed or awarded to the claimant plus interest.

If the acquiring authority chooses to use the general vesting declaration method of taking possession of land, the relevant date for valuation purposes will be the date on which title to the land vests in the acquiring authority. This method is an alternative to the notice to treat procedure and it has the advantage to the acquiring authority of enabling it to acquire legal title to the land in the shortest possible time.

The only exceptions to the valuation date falling on the dates to which I referred are, in the case of both the notice to treat and general vesting procedures, where the compensation payable has already been assessed at an earlier date by the Lands Tribunal or where the parties have agreed a figure for compensation between them. The tribunal will normally become involved in compulsory purchase compensation cases only where the parties cannot agree the compensation to be paid. The date of its decision will then not be until some time after the authority has taken possession by either the notice to treat or the general vesting declaration route. The new provisions take account of the fact that the acquiring authority and the claimant may refer the matter to the tribunal at an earlier stage. Of course, it remains open to the parties to agree the compensation to be paid at any time during the compulsory purchase process.

I have mentioned that the date on which an acquiring authority enters and takes possession of land can be up to three years after service of a notice to treat on the owner and others with interests in the land. During that time, property prices may of course have changed considerably, as may the nature and condition of the land and buildings to be acquired. The purpose of clarifying the valuation date by legislation is therefore not only to provide certainty but to ensure that what is paid to the owner reflects property prices at the time he is being displaced and needs to find a replacement property. It will also prevent double compensation being paid—for example, if accidental damage were to occur to the property following service of the notice to treat for which he was entitled to receive insurance compensation.

Subsection (5) of proposed new section 5A also provides that the relevant valuation date for the whole of the land included in a notice of entry is to be the date on which the acquiring authority first takes possession of any part of the area. That means that compensation becomes payable to the claimant from the earlier date, so enabling him to negotiate meaningfully for a replacement site. In addition, in accordance with the provisions of subsection (6), he will be entitled to receive interest on the compensation due to him in respect of the value of the whole of the land to be acquired, pursuant to the notice of entry, from the date on which that first part of his land is taken until full payment is made.

The provisions offer a fairer way of dealing with compensation payable under the compulsory purchase procedure.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government) 6:15 pm, 14th October 2003

I was not looking forward to this part of the Bill, because it deals with a pretty difficult subject. Only those with an everyday involvement in compulsory purchase have a good working knowledge of it. I have not been involved in it for a long time.

I welcome the Minister's explanation and his clarification of the relevant valuation date. The law is at present confused on the subject, but new clause 17 appears to clear up case law. For example, in the 1991 case of Hughes v. Doncaster metropolitan borough council, in All England Law Reports No. 295, it was stated that the value of land includes both its market value and any compensation for disturbance. This is a difficult concept. People often get wind of compulsory purchases and various speculative developers buy up the land with a view to increasing its value merely because it is about to be compulsorily acquired.

A case from 1955—Lambe v. Secretary of State for War, heard in the Queen's bench division and recorded in All England Law Reports No. 386—clearly states that the increase in value due to the scheme is never to be taken into account. It seems that there is some confusion. Indeed, in some notable cases speculators have bought land and made a considerable profit as a result. Although the new clause provides some clarification, I am not sure that it entirely deals with the matter. Nor am I sure how one could do so, because of speculation about compulsory purchase orders long before they are made. I do not know how we can prevent such speculation, but I would welcome further clarification.

I am not entirely clear as to when one would go down the route of notice to treat and when to go down the route of general vesting. I presume that the notice to treat route is an earlier occurrence and therefore less likely to be subject to the speculation that I have described than the vesting route. General vesting occurs when the acquiring authority takes possession; notice to treat occurs when the acquiring authority starts discussion of that land. Again, that gives manipulative speculators the chance to make money at the state's expense, which is not desirable.

I welcome the clarification in new clause 18 on exactly whose interest in land can be taken into account.

Photo of Mr Peter Pike Mr Peter Pike Labour, Burnley

Order. We are not discussing new clause 18 at the moment.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

Thank you, Mr. Pike. I may well come back to the Minister once he has clarified those points.Matthew Green: I welcome the clarification on the date, which there was good reason to seek as the hon. Member for Cotswold said. However, my reading of the provisions leaves one unresolved issue on which I am sure the Minister will quickly put my mind at rest.

New section 5A(5) says:

''If the acquiring authority enters on and takes possession of part of the land . . . the authority is deemed, for the purposes of subsection (3)(a), to have entered on and taken possession of the whole of that land on that date.''

I am having a bad attack of the whatiferies, rather as the Minister did earlier, which I stayed well out of. I

can foresee a situation where a local authority decides to take part of a landowner's land, but then six months down the line decides that it is going to extend the scheme that it is bringing forward and take a further part of that landowner's land. I am concerned that the local authority could claim it had previously taken possession of part of that land, and that therefore the date of the valuation was the earlier date, even though the authority had no intent at that time of taking the land later.

I am clearly describing a what-if situation, but it is not entirely implausible that a local authority would acquire further land, discover that it needs to amend its scheme and thus acquire even further land. Since the local authority would have a new intent, the second date should be taken into account rather than the first.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I dare to enter the debate on the new clause for just one reason, on which the Minister can perhaps help me. The new clause is clearly technical, immensely specialist and incredibly important. There cannot be a much more important issue than the assessment of compensation value in certain spheres of government.

As I said earlier, the original Bill was a fast-track Bill, but it then went into the railways sidings for a few months. It has now come out with new carriages and important appendages that we must consider. Frankly, I am not competent to deal with the problem and could not begin to have the expertise to do so. I hope that I am not slandering any colleague on the Committee, but I doubt whether anybody else here could either. However, I would be at least partly reassured if I could be told that on this new clause and one or two to come, which I cannot mention, the Government have consulted relevant organisations or institutions, interested parties or parties that are likely to be affected.

I could support the new clause in good faith only if I could be assured that the Government have consulted. A worry is that it was suddenly produced for public inspection just a few weeks ago, if not a few days ago. It is in the interests of democracy that these specialist organisations write to Members on both sides of the Committee to say that they have an interest in this matter and that they would like us to advocate it, and that they have had an opportunity to consider the proposals, so that we could then be asked to pass legislation in which we may fairly and reasonably have confidence.

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party 6:30 pm, 14th October 2003

I am glad that my hon. Friend has admitted what I believe was going through many of our minds—that we are baffled by the Minister's explanation of what the clause is trying to do. I am certainly baffled. I suppose that the opposite of ''whatifery'' is anecdotalism. I shall therefore go for anecdotalism, because at least that provides me with a firm example. would then be of use to me if the Minister could at least try to deal with it.

My hon. Friend the Member for Cotswold suggested that a consequence of an imminent compulsory purchase order is that the price of the

value of the land can be pushed up. An alternative consequence of an imminent compulsory purchase order is that the value of the land can be depressed. That is particularly the case with agricultural land and with land that is likely to be purchased for highways.

I know of a case in which the ombudsman found a local authority wrongly to have given planning permission for a particular agricultural development, which led to serious damage to neighbouring housing. The ombudsman ordered that compensation should be paid to the residents of that housing, which the local authority decided that it did not want to pay. Instead, it tried to extinguish the planning permission. For reasons best known to itself, it did not go down the route of the revocation order and compensation, but decided instead to buy by compulsory purchase the land on which the development had taken place. The whole process began in 1998 and is still going on. The farmer is a dairy farmer who has seen the value of his herd reduced significantly over that time, yet he has not been able to transfer his business to a longer-term agricultural prospect, as neighbouring dairy farmers have, because he has no guarantee that he will have any land on which to operate in the long term.

We have never reached the point, and I suspect that we never will, where the compulsory purchase order is confirmed—at least, not unless we hand the power to confirm compulsory purchase orders to local authorities, which we may do further down the line. However, I am sure that the Minister will accept that the value of the land has been severely depressed because of the blight of this ill-considered and ill-founded compulsory purchase order.

When discussing whatever these terms mean, it is entirely immaterial whether we talk about a general vesting declaration or, in this case, the notice to treat. The fact of the matter is that the value of the land has declined over five or six years and the farmer is still unsure in which direction he should go. He has done all sorts of things to try to resolve the issue, including applying for planning permission for housing on the land in question, which the local authority rejected. It is widely believed that the local authority wanted to buy the land for housing purposes.

Will the Minister clarify for my benefit, if for no one else's, how these different terms—notice to treat and vesting declaration—would apply if that compulsory purchase order had gone through and if a price had to be fixed?

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I believe that we all sense that we are dabbling in deep waters with this new clause. We have all expressed a certain amount of caution. I fully vouchsafe my own caution in dealing with such issues.

Let me attempt to deal with the questions raised by the hon. Member for Cotswold about speculation and the anecdotal case of changes in the value of land. The Committee now has another expression: after ''whatifery'' we have ''anecdotalism''. It is difficult for me, in my quasi-judicial capacity, to comment on a particular case, but let me say on the question of how changes in circumstances affect the compensation offered that the compensation is assessed on open-market value, ignoring speculation that may have

resulted from the proposal. How does that prevent speculative gain? It appears that valuation techniques are capable of stripping back in such cases to the original value in what is described as a no-scheme world. I honestly do not know whether the technique would be applicable in the case of the farmer that was cited by the hon. Member for Isle of Wight, but I suggest that it may be a path worth pursuing. I certainly understand the difficulties of the individual concerned.

The hon. Member for Cotswold asked about the effects of a notice to treat under a general vesting declaration. The vesting declaration is a much quicker way of getting title to land that is in unknown ownership, as in the case that he cited. As I indicated earlier, the notice to treat method leaves an opportunity to identify ownership of a period of up to three years.

The hon. Member for Ludlow asked about the situation that would arise with the part and whole, a concept that is a very reasonable proposition. He asked what would happen to the compensation payable if a local planning authority decided to extend the area of compulsory purchase. The answer is as I had expected: entry on to a part of land applies only if a notice of entry has been served on the whole of the land, but it only takes a part. It does not apply to later notices of entry. Therefore, the compensation applies to the order that has been served and not to any later order. That seems entirely reasonable, and we seem to have agreement on it across the Floor.

The hon. Member for Chipping Barnet rightly alluded to the complexities of the provisions. He said that he would feel more confident in embracing them if he were satisfied that a proper process of consultation had been associated with them. I hope that I can carry him with me on the proposals when I tell him that there certainly has been a very thorough process of consultation. The compulsory purchase policy review advisory group, which comprises external experts on the matters, recommended exactly the proposals in a report published in 2000. The Government took account of its comments in the Green Paper of December 2001 and the comments received on that in our policy statement of 18 July 2002. I should enter a slight qualification to what I said. I said that the report recommended ''exactly the proposals'', but it is the gravity of the proposals that were put forward by the external group of experts. They have been further consulted on during the development of the Green Paper and the consultation following the July 2002 policy statement.

The proposals have been subject to a pretty thorough consultation process. External experts are with us on this and, on that basis, I am more than content to commend these fair proposals to the Committee.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I am grateful to the Minister and reassured by his comments. At the risk of being out of order, could he say whether the external group was also consulted on new clauses 19, 20 and 21? If he could say that—if not now, then later—that would help the Committee.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I can respond to that immediately by saying the advisory group was further consulted on most of the proposals.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

I want to press the Minister a little further on the last subject that was raised. I am confused about what was supposed to be in this Bill and what is supposed to be in the next compulsory purchase Bill, which I believe will deal with subjects recommended by the Law Commission. I pressed the former Minister, now the Under-Secretary of State for Transport, the hon. Member for Harrow, East (Mr. McNulty) on that. Will the Minister now comment on how these provisions came to be in this Bill and how they differ from what will be in the subsequent Bill? Will he also confirm that new clause 17 in no way alters the provisions about disturbance and injurious affection?

Photo of Mr Peter Pike Mr Peter Pike Labour, Burnley

Order. Before I call the Minister, I should say that we should be careful that we do not get too far along in discussing what may or may not appear in other Bills later this year.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I am happy to take your advice on that, Mr. Pike. My initial reaction was that the hon.

Member for Cotswold knows a lot more than me about those matters. The Law Commission is examining a range of property issues, including that of tenure, but it would be premature to suggest or assume that a further compulsory purchase Bill is envisaged at this stage. I hope that that reply complies with your request, Mr. Pike.

I want again to offer assurance to the Committee about the source of the proposals on compulsory purchase. They were proposed by the expert group to which I have referred. On the issue of injurious affection and disturbance, I hope that the Committee will indulge me if I say that that is another matter on which I could reasonably write to the hon. Gentleman.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Further consideration adjourned.—[Paul Clark.]

Adjourned accordingly at sixteen minutes to Seven o'clock till Thursday 16 October at ten minutes past Nine o'clock.