The first of in a series of articles by the aspireCP team, looking at best practice in compulsory purchase from an acquiring authority’s perspective

Background

With many years’ experience acting on behalf of acquiring authorities, the aspire team have seen various parties call for reform of the compulsory purchase legislation. There is still a very long way to go! Indeed, a leading compulsory purchase solicitor was noted to remark, rather tongue in cheek … “The good thing about CPO legislation is that it has stood the test of time”.  He was referring to the Land and Railways Clauses Consolidation Acts of 1845 which are still at the heart of current legislation.

It seems unlikely that we will see wholesale reform of the compulsory purchase legislation in the foreseeable future. So, whilst the legislation is confusing and complex, we need to learn to live with it.  This article will be the first in a series in which the aspire team use our specialist expertise from client-side management of some of the UK’s most complex compulsory purchase projects to look at best practice in delivering compulsory purchase programmes from an acquiring authority’s perspective. Many acquiring bodies may only use compulsory purchase on a significant scale once in a generation and have to skill up from scratch.  On this basis, most acquiring authorities are learning on the job which can be an expensive way of delivering when there are no mentors or text books on how to identify the risks and manage them.

The aspireCP team aim to take you through the key compulsory processes to explain the risks; identify mitigations; highlight best practice and look at some tools to use, in particular focusing on the role IT can play.  We want to concentrate on practical advice and how to drive efficiencies; not just to save on staff costs but to help reduce compensation budgets by picking up trends early enough to take informed decisions, thereby helping affected parties mitigate their losses.

Compulsory Purchase Powers

Many public bodies and some private companies (e.g. utilities) have compulsory purchase powers conferred by statute. Compulsory Purchase Orders (CPOs) are then granted for specific purposes.  But, there are many variations in the consenting processes and in the compensation legislation between say a CPO promoted under the Highways Act 1980 and a CPO promoted under the Town and Country Planning Act 1990. The utility companies’ powers are different again. Clearly it is right that the purpose for which powers are sought are clearly defined to strike the balance between public need and private loss, but unfortunately there is no unified process nor a single compensation code which applies irrespective of the route through which the powers are sought.

In these articles we will use the term CPO generically, irrespective of which route is used to seek compulsory purchase powers.  As noted in government guidance “It is the acquiring authority that must decide how best to justify its proposal to compulsorily acquire land under a particular act. The acquiring authority will need to be ready to defend the proposal at any inquiry or through written representations and, if necessary, in the courts”. [1]  Given this is a complex and specialist area we want to highlight some of the practical issues to be aware of and look out for. 

Making Your Case

Whilst ‘acquiring authorities’ are able to buy land by agreement at any time, they can only exercise compulsory purchase powers when the appropriate Secretary of State confirms their application for a specific area of land via a CPO. These all:

• permit the taking of land against the owner’s will,
• allow entry onto land without having first agreed compensation;
• legalise activities on that land that may otherwise be unlawful
• supress third party rights such as restrictive covenants
• give the acquiring authority the power to carry out the particular activity proposed.

A strong, evidence-based statement of reasons will be critical as the acquiring authority will need to evidence that there is a compelling case in the public interest and that the purposes for which the CPO is made justify interfering with the human rights of those with an interest in the land affected. This has been held to mean that compulsory purchase is a last resort to secure the land needed for a project.  So, before seeking compulsory powers, the acquiring authority must first demonstrate that they have taken reasonable steps to acquire the land by agreement. Undertaking negotiations in parallel with preparing and making a compulsory purchase order can help to build a good working relationship with affected parties, demonstrating that the acquiring authority is willing to listen and open to alternatives.

Another key consideration is the Public Sector Equality Duty (S.149 Equality Act 2010), which requires public bodies to guard against differential impacts on groups with protected characteristics. On this basis, Government Guidance^[2] now states: “an important use of compulsory purchase powers is to help regenerate run-down areas. Although low income is not a protected characteristic it is not uncommon for people from ethnic minorities, the elderly or people with a disability to be over-represented in low income groups. As part of the Public Sector Equality Duty, acquiring authorities must have due regard to the need to promote equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it.” Protected characteristics are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

In addition, acquiring authorities will need to demonstrate:

• that they have a clear idea of how the land they wish to acquire is to be used;
• that all necessary resources are likely to be available within a reasonable time-scale (to cover CPO Process, acquiring the land and implementing the scheme);
• that the scheme is unlikely to be blocked by any physical or legal impediments to implementation e.g. the programming of infrastructure works or the need for planning permission/other consents;
• whilst planning permission is not essential, the acquiring authority will need to show that there are no obvious reasons why it may be withheld.

Ransom Value

In recent years the use of compulsory purchase has grown exponentially with powers being used to underpin town centre and high street regeneration, revitalisation of local authority estates, to free up land for new homes and to deliver major new infrastructure.  Compulsory purchase is an important risk mitigation measure in any project, providing certainty on availability of land within a statutory timescale and preventing some landowners from demanding ransom values. Practitioners should, however, be aware that ransom value can still be payable where it would have still been payable in the absence of the CPO scheme. So, if for example a developer could have assembled part of the CPO site by agreement by paying sums which deliver a viable scheme then such price would represent the market value and would be payable under rule 2. (S.5 (2)) Land Compensation Act 1961).

It is important that an acquiring authority does not put themselves in a situation where it unwittingly exposes itself to this risk by leaving just a handful of interests to be acquired after years of negotiation. Instead, at the outset it should identify the land essential to meeting the public need and if land assembly is unlikely by consent then run a CPO in parallel with such negotiations. If land assembly by consent is likely then this will need to be explored first so as to reduce the risks of a Judicial Review into a decision to apply for a CPO on the basis that it is a “sledgehammer to crack a nut” and thereby fails the European Convention of Human Rights (ECHR) test of proportionality. The acquiring authority’s governance report recommending the decision to use a CPO should be very carefully prepared and have legal input to defining the scheme so as to minimise the risk of challenge and also articulate why the site is unlikely to be assembled in the absence of the CPO scheme.

Commercial Opportunities

Compulsory purchase is a legal power to expropriate land to fulfil a compelling need in the public interest.  There are often many entwined reasons for needing to acquire land and hence clarity on articulating this need is essential early on to clearly evidence the case as the design evolves. Compulsory land assembly will inevitably fail where it is primarily for commercial gain or where land assembly for public need is simply a nice to have. 

At the other end of the spectrum is the laudable optimisation of the commercial returns from surplus land which has been acquired to meet a demonstrable public need. Indeed, all public bodies have a fiduciary duty and must act reasonably with taxpayer’s money. The requirement to offer back sites to the former owners under the Crichel Down rule will not apply where the nature of the site originally acquired has materially changed, such as a result of the demolition of buildings. aspire’s Ian Lindsay put in place 3.5m sq.ft of development on sites acquired for Crossrail which is  currently forecast to bring in £550m of net development profit that will offset the overall cost of the project. Enabling successful ‘land value capture’ of this nature starts at the feasibility stage where the design of infrastructure needs to be integrated with the loading requirements and access to any commercial development and requirements captured in warranties, handover arrangements etc set out in in the project main works contract.

There needs to be a reasonable prospect of a scheme being implemented within three years of the powers being granted. If implementation is conditional on commercial viability of say commercial or residential developments then you can expect such viability to be put under the microscope at any CPO public inquiry. If the inspector believes that on balance the viability or funding conditions are an impediment to implementation then the CPO will fail. It is common for many regeneration projects to be funded by a private developer with development risk passed to the private sector in return for profit. The assertion will inevitably be made that the need for a particular property is driven mainly by profit for the developer and not the public benefit. A test the inspector will apply will be whether the compelling public need for the acquisition of each party’s land more than offsets the private rights of the individual.

Defining the Project

The best defence is a paper trail founded in a well-articulated public need, with a project designed to meet that public need and supportive planning policy.  At each design stage-gate the extent of the proposed land acquisition can be tested against the public needs test for the type of CPO being made. An assessment of the land requirements for different design options should be undertaken on a consistent basis over time. A common mistake is to come up with a final design and then try and justify the need for all the land without considering the other options for meeting that need with a different impact of the private rights of those affected.

The client property team should inform the evolving design process with their assessment of the property constraints and the risks to both cost and programme. In particular to identify land which cannot be acquired, (such as Crown land), the rights of statutory bodies to object and impracticalities of removing operational equipment without it being replaced often on a new for old basis. Early designs are often a desktop exercise and the client property team should identify politically charged acquisitions, or acquisitions which could affect the programme such as burial grounds or sensitive buildings together with the financial impact and quantified risk assessment.  

Applying 21st Century Solutions

As we have seen, the compulsory purchase process has changed little since its design in 1845 as a paper-based system which requires a “Book of reference” listing all reputed owners and occupiers affected by the scheme, together with a paper copy of the order plans identifying the land affected by the scheme. Managing compulsory purchase today can therefore seem like a 19^th century solution to a 21^st century problem. 

But, enlightened acquiring authorities such as Highways England recognise this and are seeking integrated “technology first” solutions rather than relying on historical manual processes. Whilst there are few projects who have yet managed to join all the dots in digital delivery of compulsory purchase, the current best practice standard is a project wide, integrated IT solution of which land and property is a part rather than a stand-alone property solution.

For too long compulsory purchase acquiring authorities have acted in silos, with separate databases on land referencing, compensation case management, stakeholder management, treasury cash flow, risk management and management accounts and all this divorced from project-wide design technology such as Building Information Modelling (BIM). The future is to integrate all project systems as a single source of truth to drive efficiencies and allow leaders to make evidence-based decisions.

Whilst at TfL, aspire’s Adrian Maher led the development of the “Phoenix” IT system. Over a 20-year period more than £1.1bn of compensation was managed and paid to within an average of 1% of the budget, including complex schemes such as the 2012 Olympics and Crossrail. This track record was not an accident. Since leaving TfL, aspire have developed the next generation of compulsory purchase case management system which integrates with other databases to remove the silos and allow an integrated data platform. The Acquisition and Financial Risk Management System (AFiRMS) comes to the market in the first half of 2021 and can be procured through G-Cloud.

In these articles we will explain the benefits of modern technology as part of the wider overall best practice approach that we have developed to delivering land on time and to budget.

If you want to know more, please contact:

Adrian Maher               amaher@aspireCP.com            +44 7976 881 303

Ian Lindsay                  ilindsay@aspireCP.com            +447920 155 779

© Copyright aspireCP LLP 2020

All rights reserved. No part of this article may be reproduced in any form without permission in writing from the copyright owner, except by a reviewer who may quote brief passages in a review providing suitably referenced.

Whilst this article is believed to be correct at the date of issue neither the author nor aspireCP LLP accept any liability for the accuracy or completeness of the information contained in this article.

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[1] MHCLG ‘Guidance on Compulsory purchase process and The Crichel Down Rules’ July 2019 p.8

[2] MHCLG ‘Guidance on Compulsory purchase process and The Crichel Down Rules’ July 2019 p.12