PROPOSED CPO REFORMS Levelling Up and Regeneration Act 2023

Nyear Yaseen

Nyear is a chartered surveyor and member of the Compulsory Purchase Association.  Having worked in the property sector for nearly 20 years, she started her career working for North West Regional Development Agency helping to deliver regeneration schemes, often backed by compulsory purchase powers.  Over the last 10 years, she has worked in various roles at LSH and is currently the Head of Land Assembly and Compulsory Purchase in the southern regions, supporting a range of clients in both the public and private sector in delivering regeneration and infrastructure.

Nyear delivered a second informative and comprehensive webinar to ACES Eastern Branch and kindly agreed to write an article outlining the reforms which are “seeking to make sweeping changes to the compensation code”. 

Background 

Earlier this year, Nyear delivered another CPD session for members of the ACES Eastern Branch about the recent government consultation on proposals for further reform to compulsory purchase orders (CPOs) [Ed – first CPD presentation reproduced in 2024 Summer Terrier]. 

The previous government brought forward reforms to the Compensation Code through the Levelling Up and Regeneration Act 2023 (LURA).  Those reforms fell into 3 areas of change: reform to enabling powers to make a CPO, procedural reforms altering the way a CPO is publicised and then confirmed, and finally changes to the assessment of compensation, in particular the removal of hope and development value in specific circumstances. 

Specific reforms under the LURA included: 

• Local authorities could not make a CPO where the purpose of doing so was to deliver regeneration 

• CPOs had to be publicised on-line as well as through service of notices in hard copy 

• The Secretary of State could confirm CPOs on a conditional basis, which would ultimately impact the need to demonstrate there was no impediment to delivery at the point a CPO was made 

• A CPO had to be implemented within 3 years of confirmation, this could not be extended beyond that timeframe and allowed a CPO for multi-phased schemes to be introduced 

• If a claimant was relying on development value as a basis to claim compensation, they now had to either have planning permission in place or a Certificate of Appropriate Alternative Development 

• Where a CPO was for the purpose of delivering a hospital, school or affordable housing, then a direction could be sought whereby claims for hope value could be disregarded for the purposes of paying compensation. 

These reforms have now been enacted into law and acquiring authorities (AA) can rely upon them when preparing, making and implementing a CPO. 

Current Parliament 

In its election manifesto, the Labour Party committed to delivering more housing and also speeding up the process of securing compulsory purchase powers where they were needed. 

Within the first 30 days in government, the Labour Party made a commitment to deliver 1.5 million new homes during this Parliament.  They have also committed to firing the economic engine of the country and that means more jobs, more airport development and services required to support these industries.  There is an acceptance that in order to do so, they will need to resort to the use of compulsory purchase powers to assemble the land and rights needed to deliver on their commitment. 

As expected, this has necessitated further reform of the compensation code and a suite of consultation on reforms and bills have been put forward setting out how the government will deliver. 

Consultation to proposed reforms 

The Compulsory Purchase Process and Compensation Reforms was open to consultation from 19 December 2024 for a period of two months. 

These reforms are seeking to make sweeping changes to the compensation code, to make it easier and quicker for acquiring authorities to secure the powers needed to deliver the housing and infrastructure agenda of the government. 

The government says in its consultation document: “Whilst the reforms introduced by the LURA have been implemented, this government wants to go further. In its manifesto for the 2024 General Election, the government committed to further reforming compulsory purchase compensation rules to improve land assembly, speed up site delivery and deliver housing, infrastructure, amenity, and transport benefits in the public interest. It promised to take steps to ensure that for specific types of development schemes, landowners are awarded fair compensation rather than inflated prices based on the prospect of planning permission.” 

While  it is questionable what has led to the conclusion that the current system of compensation is unfair, it is clear the government is seeking to provide acquiring authorities and developers with more certainty at the outset that certain classes of compensation, i.e. development value, hope value, etc will be disregarded because they lead to the most contention when compulsory purchase powers are deployed. However, the land acquisition price, whether it includes hope or development value, is a relatively small component when compared to the overall cost of delivering the final scheme. 

Proposals for reform which have been subject to this consultation include: 

• To broaden the list of CPO powers where it can be assumed there is a public benefit 

• CPOs made under s125 Local Government Act allow for a direction to remove hope value where the schemes are facilitating affordable or social housing 

• Where a CPO is made without a direction to remove hope value (and there is no objection) the AA can make a confirmation decision 

• Where a CPO with direction to hope value and has been objected to the decision is delegated to an inspector.  Where no objection then the AA can make a determination 

• a general power to make a direction to remove hope value from the assessment of compensation for a specific category of sites where justified in the public interest, e.g. brownfield land suitable for housing delivery, but with no extant planning permission for residential development; land allocated for residential development in an adopted plan but which has not come forward for development 

• Technical changes to CPO process, i.e.: 

• Serving notices electronically in specific circumstances 

• Public confirmation notices online 

• Allowing AA to confirm modifications to CPOs (over non-controversial matters). 

While is important to note these are not reforms in themselves, but consultation to possible reforms, they do indicate very much the direction of travel. 

Some issues 

The government wants to remove the administrative barriers that hold up confirmation, therefore where the CPO is non-contentious, then the AA should be able to make a decision to confirm the CPO.  In principle, it is easy to see why this would make sense, but there is a real concern between the blending of roles of the poacher and gamekeeper (to use an understood analogy).  The current legislation already allows for a timely process: where there are no objections then the relevant government department can confirm the order.  This proposed reform appears to remove the role of the government department entirely for reasons that do not ultimately indicate speed of decision, but potentially undermines the check and balances of the process entirely. 

The broadening of purposes of CPO where hope value can be removed is far more challenging.  CPOs are in themselves fairly blunt and draconian instruments to deliver goods and services the market cannot deliver without sacrificing time and cost of delivery.  They are, however, always subject to the public interest argument balanced against the human rights of those with a property interest. 

The erosion of development and hope value for landowners who have invested in property for a variety of reasons, including it being their pension fund, income for family, business investment, etc will be very challenging and ultimately could be deemed very unfair.  If the public interest arguments moves to schemes such as road, infrastructure, services, etc through no fault of their own, where does the argument in the public interest versus human rights sit?  This will be challenging call for many acquiring authorities to make and likely to end up more costly if larger landowners/developers seek to challenge this through the courts and win! In very simple terms, where land and property is concerned, you “cannot buck the market” and create artificial values in certain categories of land and property. It can be very unfair on individual land owners and may well benefit other land owners outside the red line boundary. 

The government is yet to publish the results of this consultation which was with a wide range of parties with an interest at either end of the spectrum who will have responded. 

Planning and Infrastructure Bill 

Since the publication of this consultation, the government has also presented its flagship legislative attempt to promoting the delivery of new homes though the Planning and Infrastructure Bill.  While this bill has far reaching scope and potential to establish a new regime for planning and development in England, it also includes reforms to remove hope value where land was being assembled to deliver development.  Ultimately, it can be seen it is the government’s view that hope value leads to unfair compensation awards being made. 

More details on this Bill can be found here: Fast tracking growth: Planning and Infrastructure Bill unveiled | LSH