CPO compensation - recent cases

Jen Ashwell considers some of the key recent CPO and compensation decisions and highlights key takeaways that will be of interest to acquiring authorities, claimants (and their advisors) and local planning authorities.

Secretary of State for Transport v Curzon Park Ltd and others [2023] UKSC 30

The Curzon Park case has been making its way through the court system for some time, culminating in the Supreme Court decision which came out just over a year ago. The key points will be relevant to those considering making a compensation claim where appropriate alternative development is on the table, as well as the local planning authorities who are tasked with making decisions on certificates of appropriate alternative development (CAAD) applications.

Before we address the facts of the case it is worth remembering the key valuation principles that underlie this case.

The Land Compensation Act 1961 establishes that a landowner is entitled to compensation on an “open market” basis when their land is subject to compulsory purchase i.e. what would a willing seller have obtained for their land on the open market. To determine that value, account can be taken of actual or prospective planning permission for the development of the relevant land, or of appropriate alternative development.

Section 14 of the 1961 Act deals with this and provides that development is appropriate alternative development if, on stated assumptions, at the relevant valuation date planning permission for the development could reasonably have been expected to be granted on an application decided either on or after that date.

A landowner can seek to prove that planning permission would have been granted for appropriate alternative development under section 14 of the 1961 Act by applying for a CAAD from the local planning authority under section 17. Importantly, as part of the valuation assumptions under section 14, it must be assumed that the scheme underlying the compulsory purchase is cancelled at the relevant launch date (which is the date the scheme goes public, quite often the date the CPO is made).

The main question in this case concerned whether, in determining an application for a CAAD for a particular parcel of land, the decision maker may take into account CAAD applications or decisions which relate to the development of other land.

In 2018, the Secretary of State for Transport compulsorily acquired land at the eastern edge of Birmingham city centre between March and September 2018, in order to construct a new railway station for phase 1 of HS2. This case related to the valuation of four neighbouring sites at this location, each of which was substantial in size and which had already been cleared for development in anticipation of the eastward expansion of the city centre with various planning permissions having been obtained in respect of each plot of land.

Each of the respondents applied to Birmingham City Council (“the Council”), as the local planning authority, for a CAAD. The CAADs were then granted, covering a variety of mixed commercial and residential uses. The applications related to the development of each respondent’s site alone and not in conjunction with surrounding land. The Council rejected the Secretary of State’s contention that the cumulative impacts of all the applications for CAADs should be considered, stating that “there is no requirement or basis for considering cumulative effects of these submissions”.

Upon appeal to the Upper Tribunal, it was held that the decision maker must treat such applications and decisions as what they are, and not as notional applications for, or grants of, planning permission.

The Secretary of State then appealed to the Court of Appeal, where it was decided that the cancellation assumption under section 14 means that the scheme is assumed to be cancelled on the launch date and therefore no CAAD applications would have been made in respect of that scheme. Therefore, the decision maker must disregard any applications or decisions in respect of other sites which may in fact have been made.

Finally, on appeal to the Supreme Court, it was declared that the decision made by the Upper Tribunal was correct and should therefore be restored. The Court made clear that CAAD decisions are not material planning considerations and nor are they grants of planning permission. However, the extent to which nearby CAAD applications are relevant is fact-specific and a matter for the Local Planning Authority to determine – for example, if the CAAD applications in relation to plots of land in the same general area revealed a pattern in terms of the development sought to be reflected in the CAADs, that could provide some evidence to show how market actors would have been likely to respond to known market circumstances at the valuation date for the land in issue in the no scheme world.

This case is a good demonstration of the complexities of CPO compensation law that LPAs are faced with when determining CAAD applications. It serves as a reminder that it is not always straightforward and that there can be a lot to consider when making these decisions.

Bashir v Newham London Borough Council [2024] UKUT 146 (LC); [2024] PLSCS 107

Next, also concerning CAADs, is the Tribunal’s decision in the Bashir case, which was determined in June this year. This case concerns a CPO that was part of a larger acquisition of properties in the Sugar House Lane area of Stratford for a mixed use development known as “Strand East”. The CPO was promoted by the London Borough of Newham (the Council) in 2014, with vesting of the land taking place in 2016.

The appellant, Mr Bashir, owned land that was acquired under the CPO and, to assist with his compensation claim, submitted a CAAD application to the Council in October 2022. In support of his CAAD application, Mr Bashir designed a notional development indicating one way in which the appeal site could be redeveloped at the valuation date. However, in February 2023 the Council issued a ‘Nil’ Certificate against the CAAD application, thereby refusing the grant of the CAAD.

This was appealed to the Upper Tribunal, where Mr Bashir presented further potential designs for appropriate alternative development. The Tribunal was asked to determine various matters in relation to the options for AAD that were being suggested and the interpretation of planning policy, for example in relation to what would classify as a tall building. The Tribunal largely agreed that the scheme of development that was suggested by the Council, subject to some variations, would be appropriate alternative development.

The Tribunal allowed the appeal and cancelled the 'nil' section 17 CAAD issued by the Council and instead substituted an alternative certificate, albeit not with a description of development suggested by the Mr Bashir, but rather with the Tribunal’s own version of the development suggested by the Council.

This case is a helpful reminder that, whilst CAAD applications do not require the same degree of detail as a full planning application, the claimant does need to provide sufficient detail to demonstrate that the proposed scheme would receive planning permission.

Castlefield Property Ltd v National Highways Ltd [2023] UKUT 217 (LC)

Finally, the Castlefield decision, which involves a niche area within CPO compensation, namely injurious affection. This decision was made in September 2023 by the Upper Tribunal.

In this case, National Highways compulsorily acquired a parcel of land which previously provided sole access to the Cheshire Lounge, a derelict pub. The land was acquired by National Highways pursuant to a DCO in November 2014. In 2016, the claimant entered into a conditional purchase contract with a view to redeveloping the pub. The purchase of the pub included any claim for compensation arising from the compulsory acquisition.

National Highways initially stated that no further grants of rights would be necessary for the claimant to access the pub, and instead, that they could rely on the powers under the DCO to use the new right of way. However, more than 6 years after the claimant acquired the land, they still had no documented access to their land. The claimant then made a Tribunal reference at which point National Highways acquired the land in order to grant the claimant an easement. The Tribunal was asked to determine whether the claimant was entitled to compensation for injurious affection.

The main issue in the reference was the claimant’s claim under section 7 of the Compulsory Purchase Act 1965 for compensation for the injurious affection caused to its retained land (i.e. the Cheshire Lounge pub) following the compulsory acquisition of its access land. Under section 7 claims, in determining compensation, regard is had not only to the value of the land to be purchased by the acquiring authority, but also to the damage, if any, to be sustained by the owner of the land by reason of the severing of the land purchased from the other land of the owner, or otherwise injuriously affecting that other land by the exercise of the CPO powers.

The Tribunal ruled in favour of the claimant, with their key points being:

• Injurious affection is calculated on a “before and after” basis, meaning that the value should be determined by deducting the value of the retained land after it was severed from the value of the retained land before it was severed (disregarding the acquiring authority’s scheme).
• In assessing injurious affection, parties can only have regard to matters that were known or anticipated at the valuation date, or those which would have been known or anticipated by a reasonably prudent and properly advised purchaser.
• A frustration with the use of expert compensation surveyors (as opposed to valuation experts) to determine value was expressed by the Tribunal – with concerns being raised about the true impartiality of such expert witnesses.
• Comments were also made about the use of residual valuations for development sites, along with the importance of providing comparables.

This case provides plenty of commentary to keep compensation and valuation experts on their toes – in our view the input from specialist CPO compensation surveyors is completely invaluable in this type of claim. However, if parties want to keep the Tribunal on side then perhaps using a property valuation expert surveyor, most probably supported behind the scenes by a compensation specialist is the way forward.

Jen Ashwell is a Director at Burges Salmon.