Compulsory Purchase – The Facts
Most of us in Scotland take for granted the developed infrastructure that we have in this country e.g. the availability of fresh water, the provision of electricity and gas supplies, drainage systems to take away our waste as well as the roads, rail and airport facilities which fulfil our transportation needs. The vast majority of such services come from the public sector and have an underlying common theme of compulsory purchase. The construction, development and operation of all of these facilities will have previously resulted by way of the compulsory purchase of privately owned land and buildings by the relevant public bodies. Recent examples in the North East of Scotland involve the AWPR/Fastlink/Balmedie-to-Tipperty road scheme and The Third Don Crossing project.
For the benefit of society and communities there are statutory responsibilities for the provision and sustainability of these services. In many instances this has resulted in the need for privately-owned land to be purchased either by way of free negotiation or by the utilisation of a formal Compulsory Purchase Order process but with both options involving the proper and correct assessment of compensation due. Accordingly, a formal compulsory purchase process and compensation assessment code have developed since the mid-19th Century by way of a number of Acts of Parliament as well as case law. Both the compulsory purchase process and the assessment of compensation is thus strictly regulated and is a complex area of work undertaken by Chartered Surveyors who require a high degree of expertise and experience in this field. Thus, professional advice should be sought immediately if there is a threat of compulsory purchase.
Typically, three different scenarios arise where compulsory acquisition is involved and compensation payments require to be made and the principals behind such acquisition and assessment is the same whether the property be of an agricultural, residential or commercial nature. Firstly, the whole of a privately-owned property may be identified to be required in connection with the development of a public work: secondly, part only of a privately owned property may be required (this is usually the most common scenario) and thirdly, no part of a property may be needed but that property will lie adjacent or very close to the public work once it has been developed and is operational. Obviously, in the first two scenarios there may be a need for a Compulsory Purchase Order to ensure that the relevant lands and buildings are acquired but in all three scenarios the property owner or occupier may be entitled to compensation. In all cases, the fundamental principle of assessing the extent of any financial compensation due is that of equivalence i.e. the claimant, as far as money is concerned, should be left no better or no worse off after the acquisition than before the acquisition. As a consequence, in the large majority of cases, the compensation in respect of the property element will equate to the open market value of the land and/or buildings acquired, with that, value is assessed in “the no-scheme world” whereby any advantageous or disadvantageous effects of the compulsory purchase are disregarded.
In addition, occupiers of affected properties will be entitled to what is known as “disturbance” and this covers all reasonable costs and expenses incurred as a direct consequence of the compulsory purchase of either all or part of the property. Thus, in a situation where the whole of a dwelling-house is compulsorily acquired then the occupier is entitled to the recovery of all the reasonable costs of identifying, securing and moving to a suitable alternative property: removal costs, Land and Buildings Transaction Tax, professional fees, mortgage arrangement costs etc. would all form legitimate parts of the claim. Further, where the property comprised either an agricultural or commercial enterprise then there may also be a claim for loss of profitability, which will be directly related to the profit of the affected business.
Accordingly, Scottish Government instructed the Scottish Law Commission to undertake a root-and-branch investigation of both the compulsory purchase process and the assessment of compensation claims. A Discussion Paper was issued in December 2014 which triggered a consultation exercise which ended in June 2015. The second half of 2015 is being taken up with an analysis of that consultation process with a view to issuing a suitable report and recommendations to The Scottish Ministers in late 2015. Accordingly, it is hoped that the major flaws in the current system will be addressed by way of a new consolidated Act of Parliament which will hopefully result in a much more efficient and effective system in comparison to the existing processes. Lastly, it is our experience that most people affected by compulsory purchase come under considerable stress and pressure and in most cases the financial compensation received does not fully reflect the strains involved. However, the employment of relevant, highly-experienced property professionals who can guide clients through the compulsory purchase and compensation maze helps to reduce the stresses and strains by giving appropriate advice and recommendations with regard to the options available which, in terms of the relevant legislation, usually involve tight timescales: the fees incurred by clients in seeking such advice also forms part of the compensation claim.
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