Compulsory purchase orders and acquiring authorities: guidance on CPO use

6. Valuation and Compensation

6.1. To comply with the ECHR an Acquiring Authority must adequately compensate landowners affected by compulsory purchase. However, it is worth reiterating that, whilst an Acquiring Authority must, generally speaking, have a fair estimate of the compensation that is likely to be payable at the time the Order is made, the consideration of compensation is an entirely separate matter from the determination of whether the Order is justified and, hence, whether or not it is confirmed by Scottish Ministers.

6.2. Compensation disputes are subject to separate procedures. Consequently, an Acquiring Authority may have an Order confirmed, and take possession of the land in question, before a resolution to the amount of compensation due has actually been reached.

6.3. Compensation for the compulsory purchase of land is normally based on its market value ^[3] at the relevant valuation date (discounting any reduction or increase in value because of the compulsory purchase and the scheme underlying it), unless equivalent reinstatement under Rule 5 of Section 12 of the Land Compensation (Scotland) Act 1963 applies.

6.4. Valuation for CPO purposes can be a complex matter and the Acquiring Authority should therefore consider whether it has sufficient in-house expertise in terms of valuation of land and calculation of compensation, or if it will need to engage external specialists. In determining the market value account is taken of any existing planning permissions and the prospect of permissions that the planning authority might have granted in the absence of the scheme underlying the compulsory purchase, and other appropriate assumptions detailed in sections 22-24 of the 1963 Act Land Compensation (Scotland) Act 1963.

6.5. Acquiring Authorities will also need to consider and assess the likelihood of claims for severance; disturbance or injurious affection from parties directly impacted by the compulsory purchase, and ensure compensation is paid accordingly. Disturbance claims (especially if commercial or agricultural property is acquired) can be a significant component of compensation claims. In some circumstances Home Loss and (rarely) Farm Loss payments may also be necessary.

6.6. Conversely, Authorities should also consider the “betterment” provisions whereby any uplift in the open market value of the retained land can be set-off against any compensation due, if it can be proven that the uplift occurs as a direct consequence of the public work.

6.7. Acquiring Authorities will also need to meet reasonable professional costs (surveyor and/or legal expenses) incurred by landowners as part of the compensation settlement.

6.8. Acquiring Authorities should provide landowners with an indication of when compensation is expected to be paid, subject to all necessary paperwork for their claim being received. The value of compensation payable is not expected to be set out at this time although authorities should provide an indication of their assessment of the market value of the land in question as early in the process as they can.

Compensation related to Listed Building CPOs

6.9. Special provisions under the Planning (Listed Buildings and Conservation Areas) (Scotland) Act 1997 allows an Acquiring Authority, in certain circumstances to pay minimum compensation (excluding development value) if they propose to acquire a listed building and are satisfied that the building has been deliberately allowed to fall into disrepair for the purpose of justifying its demolition and the development or redevelopment of the site or an adjoining site. Further advice is available in Guidance Note CPOGNAA/005.

Certificate of Appropriate Alternative Development ( CAAD)

6.10. In some cases existing planning permissions and assumptions may not be enough to indicate fully the development value that would have existed were it not for the scheme underlying the compulsory purchase. In these cases a CAAD can provide a way of indicating the kind of development (if any) for which planning permission was likely to be granted and which, consequently, should be taken into account in the valuation ^[4] .

6.11. CAADs may be useful in any CPO but particularly in the following circumstances:

• where the development plan covering the land to be acquired is out of date;
• where there is no specific development plan allocation for the land. For example where the development plan shows the land as “open space”; or
• where the development plan allocates the land specifically for some public purpose, such as a new school.

6.12. A CAAD is not a planning permission but, instead, is a tool that can be used to help identify the market value of land in relation to a claim for compensation.

6.13. CPOGNAA/005 provides more detail on estimating market value and other compensation matters.