CPOs and ‘hope value’
‘Hope value’ of planning permission could now be ignored in some Compulsory Purchase Orders. Alex Dillistone and Libby Neilson look at what this will mean in practice.
As of Tuesday 30 April 2024, certain bodies are able to apply for a Direction that the “hope value” that attaches to planning permission is disapplied in relation to compensation under Compulsory Purchase Orders (CPO’s).
This change comes under section 190 of the Levelling Up and Regeneration Act 2023 (LURA), and inserts new provisions into the Acquisition of Land Act 1981 and the Land Compensation Act 1961. It came into force in England[1] on 30 April 2024[2], and is one of a series of amendments to the compulsory purchase regime that has been made under LURA.
What is hope value?
- Hope value is the value of potential planning permission that attaches to land subject to a CPO. Currently, hope value can be taken into account when calculating compensation for landowners whose land is subject to a CPO.
- For example, if an owner of an empty plot of land in an urban area whose land is subject to a CPO can establish that, but for the CPO scheme, they could have obtained planning permission for a residential development, then the value of that planning permission could be considered in determining compensation under the CPO.
What is the change?
- Firstly, it is important to note that the change is only applicable to acquisitions for the purpose of affordable housing, hospital/health facilities, and provision of education.
- Under this amendment, certain prescribed bodies may seek a section 14A Land Compensation Act Direction when submitting a CPO for confirmation.
- If granted, the effect of the Direction is that the relevant provisions for considering the prospect of planning permission in the Land Compensation Act 1961 are disapplied. This means that the value that attaches to the prospect of a planning permission would not be able to be considered in determination of the land value and subsequent compensation to be paid under the CPO.
How would it work in practice?
To obtain a Direction:
1. The acquiring authority must submit a statement of commitments with the CPO.
2. The statement of commitments must set out the acquiring authority’s intentions as to what will be done with the project land should the acquisition proceed, insofar as their basis for a Direction relies on commitments of that nature. e.g. – how the money saved by granting the Direction would be used towards affordable housing provision. This statement may be amended before the decision as to whether to confirm the CPO is made.
3. The acquiring authority must be able to demonstrate:
a) there is a compelling case in the public interest for use of compulsory purchase powers in accordance with the usual tests; and
b) the benefits of acquiring the land without paying development or hope value is justified in the public interest.
4. If the Direction is granted, in assessing the value of the land, it is to be assumed that no planning permission would be granted for development on the relevant land.
5. The changes under LURA provide that if the statement of commitments has not been fulfilled within the relevant time period (10 years from the CPO being made), or that there is no longer any realistic prosect of the statement of commitments being fulfilled, then additional compensation can be applied for.
Our comments
This change appears to be an attempt to provide a relevant acquiring authority with more certainty as to the viability of the scheme to be delivered by the CPO, because, in theory, the decrease in land value and compensation to be paid will have benefits to their ability to deliver the public interest elements of the scheme.
There is however potentially an increased risk for such authorities, in terms of dispute over whether this “new” law has been applied correctly. Questions also arise as to how much information and evidence will need to be provided with a statement of commitments, to enable a Direction to be issued.
The fact that the removal of hope value is only to be used for education, affordable housing, and hospital/health facilities rightly acknowledges the public benefit that such schemes provide – but what about such developments that also have commercial elements; where will the line be drawn?
Alex Dillistone is a partner and Head of Parliamentary, Planning and Public Law at Winckworth Sherwood. Libby Neilson is a solicitor in the Parliamentary and Public Law team. Visit www.wslaw.co.uk
[1] The amendment came into force in relation to Wales on 31 March 2024.
[2] See Regulation 4 of the Levelling-up and Regeneration Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2024 2024 No. 92 (C. 6).
