COMPULSORY READING!

With a number of high profile infrastructure schemes on the go across the east midlands it’s worth looking at how the land for them is put together.  We’ve had a number of enquiries and projects to undertake on this issue over recent months so I thought it would be worthwhile putting a little background information together.

A Compulsory Purchase Order (CPO) is a legal function which can be exercised by a variety of public or statutory bodies.  It basically enables them the right to acquire an estate or interest in property without the need for the owner’s consent in return for a compensation payment.  As such, you may be compelled to sell your property even if you do not wish to do so.

Such powers can be exercised by the likes of Regional Development Agencies, Local Authorities, Highways Agency or Utility Companies and is done to enable them to make use of land or buildings which is outside of their ownership or control, but is needed for the ‘benefit of the public’.  In simple terms, it enables the purchase of privately owned property where it is needed for large schemes such as roadbuilding and other significant developments.

In Derby and Derbyshire this is a topical subject as there are several areas where CPO’s are in place or at the very least a topic for debate.  The Castleward residential scheme between Derby city centre and the railway station, ‘Our City Our River’ flood defences, the controversial HS2 rail line and the A38 improvement works along Kingsway are all current schemes involving CPO’s.  Home owners and businesses alike may be affected by CPO’s and therefore it is important for property owners to understand what options are available.

Firstly, when a CPO is made it does not mean that the acquiring authority can force the owner to sell their interest, but what it does means is that they have made an application to the Government seeking the power to be able force the owner to sell.  The wheels of bureaucracy turn slowly so the process can be protracted and it can take months or even years before these powers are secured.  During this period the acquiring authority must be able to demonstrate a ‘compelling case’ that any CPO is for the greater public good and not for private gain.

A good starting point either prior to or even once a CPO is in place is to understand the Market Value for the property or interest that is, or will be subject to the order.  The Market Value will be determined on the basis of the property/interest ‘as it stands’ and disregards both the original purchase price and whether this was at higher or lower level and importantly the Market Value is calculated assuming the absence of any proposed regeneration scheme.

The Royal Institution of Chartered Surveyors defines the Market Value as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.  This is the definition of value as understood and accepted by the banks, Courts and property professionals and can only be signed off by an RICS registered Chartered Valuation Surveyor.  Therefore, in order to determine the estate or interest’s Market Value an RICS Chartered Surveyor will need to be appointed to undertake an inspection and report.  The costs of this, together with the solicitors fees incurred as part of any conveyance are all recoverable costs as part of the CPO and are in place to prevent any ‘out of pocket’ expenses.

Lastly, aside from the Market Value and professional fees there will also be an entitlement for certain inconvenience or disturbance costs as part of the compensation claim but these may be subject to further scrutiny as to the validity of such claim.  In short, the landowner who is being compelled to sell should not be ‘out of pocket’ but neither should they be profiteering.  This is of course completely different to a scenario where a proposed development is in privately owned hands and the potential seller of the required land can find themselves in a situation where they can ‘ransom’ the developer in order to achieve a price significantly higher than the Market Value. But that is a subject for another article.

Here at BB&J Commercial we are RICS Chartered Surveyors and Registered Valuers and have a team of dedicated professionals specialising in Compulsory Purchase Orders, Arbitration, Expert Witness and Agency Services and should you have an existing CPO problem or a general enquiry about such issues we would be happy to discuss this with you.