Compulsory purchase in Scotland: guide for property owners and occupiers

4. What compensation am I entitled to?

4.1. If your property is purchased compulsorily, you will be entitled to a package of financial compensation based upon your interest in the property. You are strongly advised to employ a suitably qualified and experienced professional property Valuer to advise you – the reasonable costs of which can be reclaimed. This Section provides a brief introduction to the types of compensation that you may be entitled to.

4.2. The basic principle applying is that of equivalence – to put it simply, this means you should be put in the same position after the compulsory purchase (as far as money can allow) as you were in before it.

Core Entitlement

4.3. All property owners subject to a compulsory purchase are entitled to the following elements of compensation:

• Market Value of your interest in the property – based on the amount that the property, if sold on the open market by a willing seller (i.e. assuming there is no threat of compulsory purchase), might be expected to realise. This means that any reduction or increase in the value of the property because of the compulsory purchase (and the proposal behind it) is ignored. The market value will be assessed relative to the market conditions prevailing at the time the property is acquired. In addition, the market value of the land can take into account:
  • Any pre-existing planning permissions;
  • Any prospective permission that a planning authority might have granted, but for the compulsory acquisition; and
  • Any marriage value or ransom value provided that these would have existed in the absence of the compulsory purchase scheme.
• Disturbance – for losses caused as the occupier or tenant of a property as a direct result of being disturbed from possession of your property and other losses caused by the compulsory purchase process. This may include removal and relocation costs, temporary/permanent loss of profits, reconnection of services, loss of fittings and certain reasonable professional fees, such as legal fees and the costs of employing a professional to help you assess and negotiate your compensation claim.

Additional Entitlements (based on circumstances)

4.4. In addition, depending on your circumstances and the impact on your property, you may be entitled to the following types of compensation:

• Home loss payment – if you have lived in a residential property for at least one year prior to its compulsory acquisition you may be entitled to an additional payment to recognise the distress and discomfort of having to move out of your home. This only applies if the whole of the property is acquired compulsorily.
• Farm loss payment – if your property is agricultural you may be entitled to an additional payment to recognise the fact that your profits may decrease for a while because of moving to unfamiliar land. This only applies if the whole of the farm is acquired compulsorily and, as such, rarely occurs, as it is much more common for only part of an agricultural property to be acquired.
• Severance – where only part of your property is taken and the value of the part you retain decreases because of its separation from the land taken (e.g. a house becomes less desirable because of the loss of part of the garden, or the loss of part of a field makes the remaining part less cultivatable and, hence, less profitable) you may be entitled to an amount equal to the reduction in the market value of the retained property.
• Injurious affection – where only part of your property is taken and the value of the part you retain decreases because of the construction and use of the compulsory purchase project (e.g. a house becomes less valuable after part of the garden is taken for a new road because of increased noise or fumes) you may be entitled to an amount equal to the reduction in the market value of the retained property.
• Material detriment – where only part of your property is compulsorily acquired but the impact of the compulsory purchase project is such that a) for agricultural land, you consider the remaining land is no longer reasonably capable of being farmed or b) for residential and some other types of property, the project has caused a significant level of detriment to the property you retain. In these particular circumstances, you may seek to force the Acquiring Authority to purchase all of your property. It should be noted that the timescale for serving the relevant notice on the Acquiring Authority after the GVD is served is very short.

4.5. However, if the compulsory purchase project would have the effect of increasing the value of any of the property that you retain (e.g. by improving access or its development potential) then your compensation claim may be subject to a betterment calculation – whereby the value of that increase may be subtracted from the amount you are due.

4.6. Furthermore, you may also be entitled to compensation even where no part of your property is taken for the compulsory purchase project, but the value of your property is affected negatively by either the execution of a project (e.g. the construction of a new road) or the use of the facility (e.g. traffic on a new or improved road).

Other Considerations

4.7. Simple interest is payable on all compensation due to you at a prescribed rate from the date that the Acquiring Authority enters and takes possession of the land until the compensation is paid. The rate of interest payable is currently set at 0.5% percent below the Bank of England base rate and, as such, is currently low, but will increase if the rate rises.

4.8. If your property has been acquired but you have yet to agree with the Acquiring Authority the full amount of compensation due you are, nevertheless, entitled and encouraged to request a payment or series of payments which are known as Advance Payments of Compensation.

4.9. Important: If (and only if) you request it, the Acquiring Authority is required to make a payment of 90% of the compensation agreed to date or of its own estimate of the likely compensation due, together with all professional fees and any statutory interest. A claim for Advance Payment can only be made after the compulsory purchase has been implemented and entry to/possession of the property taken by the Acquiring Authority. Further Advance Payments can be claimed during the negotiation of compensation as appropriate.

4.10. You may also wish to discuss and agree with the Acquiring Authority whether Accommodation Works might help ease the burden of any adverse effects of a project where only part of your property is being acquired. Examples of Accommodation Works include fencing, screening, drainage and watering works, and the provision of new gates/access points.

4.11. Acquiring Authorities are not required to provide Accommodation Works but it is considered good practice, as it is usually cheaper and more time efficient for them to do so, than for the landowner to undertake the work and claim compensation thereafter. Experience suggests that where Accommodation Works are agreed they should be fully specified in writing and shown on detailed maps to minimise the potential for dispute between you, the Acquiring Authority and any contractors.

4.12. If your property has been identified as likely to be affected by a public work but a formal compulsory purchase proposal has not yet been prepared and you have attempted to sell your property (at a reasonable price) without success then the Blight provisions may be relevant.

4.13. In such circumstances you may seek to negotiate the voluntary advance acquisition of the property at its un-blighted price, or (failing that) you may be able to serve the Acquiring Authority with a Blight Notice. This operates, in effect, as a compulsory purchase in reverse and seeks to compel the Authority to purchase your property at its un-blighted market value. It should be noted that the Blight provisions are complex and you are strongly encouraged to seek professional advice if you find yourself in such a situation.

4.14. Where someone holds a security over a property (e.g. a mortgage held by a bank or building society), they will have first call on any compensation due for the market value of the property.

4.15. If the assessed value of your property is less than the outstanding loan then you may be left in a Negative Equity situation whereby the lender may retain the right to recover the outstanding sum and any interest due from you.

If you believe you may find yourself in such a situation you are strongly encouraged to contact the Acquiring Authority as early as possible to discuss potential solutions. Acquiring Authorities are encouraged to adopt a sympathetic approach and to work with the relevant lender(s) to try to find a solution that is mutually acceptable and which minimises hardship.