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ALL CARDS FACE UP ON THE TABLE PLEASE

AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

April 2008.

Until the passing of the Land Compensation Act 1973 there was no provision for the making of a payment on account of compensation.  Many claimants suffered as a result and accordingly, Parliament introduced Section 52, which provides that where an acquiring authority has taken possession of any land or has created rights over such land, then that authority shall, if requested by a person entitled to compensation, make an advance payment on account of the compensation payable by it.  Section 52(A) makes provision for the payment of interest, while the Planning and Compulsory Purchase Act of 2004 makes detailed provisions where the land is subject to a mortgage.

  Advance payments are something about which everyone knows; but the system is not working.  It is not unknown, for example, for claimants to refuse a payment on account on the ground that acceptance is seen as agreement to the authority’s view of the case and that such agreement would therefore prejudice settlement of the case at an appropriate figure.

  More seriously, there are constant complaints that some acquiring authorities deliberately pitch their payments well below the amount claimed, or that a payment claimed is either paid unreasonably late or is not made at all.  Acquiring authorities have been known to delay making payments as an incentive to complete a transfer of title, the general problem being further exacerbated by the interest charges which claimants have to pay on costs pending recovery and the recovery of interest available under statute.

  Acquiring authorities, on the other hand, complain that claims are often not sufficiently supported by evidence to enable a proper assessment to be made and therefore they can only make a payment against items accepted in principle.  As negotiations proceed it is not always the practice to reflect any agreement reached in an additional advance payment.  It must also be said in defence of some  authorities’ actions, that where a claimant has received the bulk of compensation there is little incentive for him part to complete the transaction.

  Inevitably, practitioners on both sides will talk about these problems, but more accurate evidence of misuse or abuse is (quite reasonably) required by CLG before it can advise ministers to take remedial action.  A survey among CPA members is currently being conducted to ascertain the extent to which the system is being misused or abused; and if readers are able to produce any evidence of other instances, then CPA would be glad to hear from you (http://www.compulsorypurchaseassociation.org).

  The present procedure is that the claimant must make his request in writing and give particulars of his interest in the land and any other information that the Authority may reasonably require enabling it to estimate the amount of compensation due.  That payment shall be either 90% of the Authority’s estimate of compensation or 90% of any agreed figure and it must be paid, generally, within three months of a request.  There are provisions for the settlement of balances due in either direction depending upon the final assessment of the compensation due.

  The purpose of the advance payment must be to enable the claimant to reorder his affairs and go about his life with the minimum of disruption, whether this may mean moving to other premises and/or the avoidance of business closure .  So any proposal for change must meet these three criteria:

  1.         There must be an enforceable obligation upon an acquiring authority to make an advance payment, provided that the claimant has provided reasonable information to enable the proper level of compensation to be assessed.
2.         The level of payment should be subject to challenge as to reasonableness in all the circumstances of the claim and
3.         The procedure for enforcement needs to be rapid, easy to use and capable of resulting in an easy collection of funds.

  CPA believes that there ought to be a prescribed format for the making of an application, so laid out as, when read together with the original claim form, to give the authority a clear idea of the amount claimed and basis of claim.

  The authority should respond within one month of receipt of the application either rejecting it or giving a proposal for payment.  Any rejection must state how the request fails to meet the prescribed content; and any draft proposed payment would have to be analysed, particularising assumptions employed and accompanied by any request for clarification or additional information which the authority might need to enable it to revise its offer.

  Within one month from the date of the authority’s draft proposal the claimant may submit further information in response or such other information as the claimant feels may be material.

  Within three months of the date of their draft proposal or the date when possession of the land is taken (whichever is the later) the Authority must make a payment to the claimant (assuming of course that it has accepted that a payment in advance may be due).  That payment must be accompanied by a statement explaining how the payment differs from the draft proposal (if it does) and how any information received from the claimant within one month of the draft proposal affected the assessment of the payment.  Any information received from the claimant more than one month after the draft proposal might of course also be taken into account in a later claim.

  This procedure is, on paper, one month longer than that under the present system although CPA feels that the greater amount of information required should be reflected in the claimant’s favour in a payment and on balance it is felt that the extra month should be offset by the greater chance of getting a reasonable interim payment on time.  If the Authority does not make a payment on time then the claimant may refer the matter for third party determination.

  At present such dedicated system is wholly absent and CPA proposed two possible options:

  1.         A procedure similar to that employed in county courts for the fixing of an interim rent in lease renewals under the Landlord and Tenant Act 1954.  This system is simple and well understood, the award could be recovered (with costs) but experience of the county court system is that there are frequently delays of several months before a hearing date can be fixed.
2.         As an alternative, the Lands Tribunal be tasked to provide an interim award based on written submissions incorporating the application for the advance payment and all responses thereto.  CPA suggests that the Tribunal offer this service outside its strict statutory basis as an ancillary function which would have to be self-financing.  In order to avoid any suggestion that one of these “interim awards” could be misconstrued as a decision of the Tribunal, it may be that the Tribunal would wish to subcontract the service to another professional institution, although it seems to CPA to be important that quality control of standards must remain with the Tribunal.

  Any authority would be required to work within this new scheme which should be made a condition of the approval of any CPO or Hybrid Bill.  It is not envisaged that the taking of such a step would need any primary legislative change.  If this particular suggestion is adopted and there were to be no statutory changes, then affected land owners and occupiers would have to opt into the new process and agree to be bound by it, contractually as a condition of making a request under the new system.  Any claimants not wishing to opt in would proceed under Section 52 as it now stands.

  CPA suggests that the revised process outlined above sets out a clear procedure for the improved working of an advanced payment system.  The system proposed is designed to enforce greater transparency in the assessment of advanced payments with the intention of bringing the parties closer together and aiding the overall settlement of compensation.

  As with the other articles in this series, while the labour and thought underlying the proposals described in this article is that of the CPA membership, the phrasing (and any errors) are my own.

Peter Scrafton

©J.P. Scrafton, 2008

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