𝐇𝐨𝐮𝐬𝐞 𝐨𝐟 𝐋𝐨𝐫𝐝𝐬 𝐃𝐞𝐛𝐚𝐭𝐞 𝐍𝐞𝐰 “𝐋𝐞𝐯𝐞𝐥𝐥𝐢𝐧𝐠-𝐮𝐩” 𝐂𝐏𝐎 𝐏𝐨𝐰𝐞𝐫𝐬 𝐚𝐧𝐝 “𝐇𝐨𝐩𝐞 𝐕𝐚𝐥𝐮𝐞”

I have spoken about The Levelling-up and Regeneration Bill (“the Bill”) here on LinkedIn before and continue to track its passage through Parliament. For those new around these parts, the Bill aims to make provision for:

“the setting of levelling-up missions and reporting on progress in delivering them; about local democracy; about town and country planning; about Community Infrastructure Levy; about the imposition of Infrastructure Levy; about environmental outcome reports for certain consents and plans; about regeneration; about the compulsory purchase of land; about information and records relating to land, the environment or heritage; for the provision for pavement licences to be permanent; about governance of the Royal Institution of Chartered Surveyors; about vagrancy and begging; and for connected purposes.”

When (in my mind it is highly unlikely at this stage to be an “if”. Watch this space!) the Bill is passed, it will bring colossal reform to the property and planning sectors, amongst others.

As can be seen from the tracker below, the Bill has recently reached Committee Stage in the House of Lords.

As a bill passes through Parliament, MPs and peers may suggest amendments or alterations which they consider will improve the quality of the legislation. It is ordinarily the Speaker that has the power to select which amendments should be debated. Many amendments are proposed as bills pass through committee stage, report stage and third readings in both Houses of Parliament; however, only a handful of amendments will actually be incorporated.  

On 3rd May 2023, on the 12th day of Committee Stage in the House of Lords, it was largely Part 9 of the Bill being debated. Part 9 (clauses 165 to 175) and Schedule 15 concern compulsory purchase orders (“CPOs”), including powers, procedures and compensation arrangements. On 3rd May, Lord Carrington moved to:

• Insert a new clause in the Bill, after existing clause 123, as follows:

"Duty of care:

1. It is the duty of any body using compulsory purchase to act fairly towards the owner of any property being acquired and any claimant of compensation.
2. The Secretary of State must issue a code of practice specifying how the duty in subsection (1) is to be discharged.”

With the aim of ensuring “that legislative provision for compulsory purchase, and the actions of the acquirer, always achieve a correct balance between the interest of the state and that of the property-owning individual”. Lord Carrington went on to explain that the intention of his proposal (known as Amendment 292) is to safeguard property owners against the excesses of acquiring authorities, many of which are large, commercial and profitable companies or government bodies. He used HS2 as an example, citing excessive use of CPO powers in his native Buckinghamshire; and

• Delete – or at least completely redraft – Clauses 174 and 175, as well as government Amendment 412D proposed by Baroness Scott of Bybrook (which proposes to (1) amend the Land Compensation Act 1961, (2) add a new clause after 175 which would allow ministers to disapply the “hope value” (the value attributed to the expectation of development in future) of land obtained via a CPO and see landowners compensated for just the existing use of their land for schemes that include affordable housing, health or education provision).

Lord Carrington stated that the compulsory purchase provisions contained in Clauses 174, 175, and Amendment 412D are “immensely complicated to the layman” and call into question the long-held principle that anyone forced to sell land can expect to be put in the same position as would be the case if his land had not been taken for him, i.e., he should be paid market value for the land (which takes hope value into account). This market value requirement currently applies to any purchaser, whether in a compulsory purchase situation or a commercial sale. However, the proposals suggest that in the case of compulsory purchase, in certain circumstances (e.g., if in the public interest, such as to provide for affordable housing, health, or education facilities) and at the direction of the Secretary of State, any hope value included in the purchase price paid would have to be justified and have sound basis, as it could be challenged at tribunal. Lord Carrington argues that this would lead to a “two-tier system”, with private sales at market value and compulsory purchase sales at less than market value, which could lead to inequity. He went on to say:

“How can it be right that someone who owns land next door to land that is subject to a direction and compulsory purchase can sell at market value whereas his neighbour is capped?” not to make the common mistake that compulsory purchase affects only rich land- owners. Many of those affected will be small householders or businesses. Capping to existing use value denies them the benefit of planning for a change of use or an extension. They will receive only existing use value. Is this fair and justified when those not affected by compulsory purchase will get market value? Suppressing or ignoring market value is a fundamental change, and means that private owners will subsidise public schemes.”,

and suggested that a better way of dealing with the perceived problem would be through planning conditions, such as s106 or CIL, or via the tax system, so that all land sales are treated equally.

Baronness Taylor Stevenage, however, argued:

“Hope value is one of the key factors that make land too expensive. Councils can compulsorily purchase land in order to build much-needed homes for their community, but they are then forced by law to pay that hope value. This is calculated by the amount the land could be worth if it was sold, for example, to build luxury private homes. Because hope value is so lucrative, many landowners will refuse the council’s initial offer because they know that the council has no power to buy the land at a lower price. This is not intended to depress land values, because the land is always subject to a proper valuation process. Rather, it is intended to address the up to 80% that can be added for hope value …

I hope that, before Report [stage], we can work with the Government and other noble Lords to ensure that we identify a detailed amendment in relation to the circumstances in which hope value should not apply. I note that noble Lords during debates on this section of the Bill have concerns about social uses, affordable and social housing, health and education needs and emergency services provision. This is not intended to deprive landowners of the real market value of the land; it is intended to make it viable to build social and affordable housing on that land and not increase the value of the land by 80% or some other high percentage that takes all the viability out of developments.”

The Earl of Lytton commented further on hope value in conjunction with market value, and went on to discuss the impact of equivalence, as below:

“Hope value does not exist in isolation from the umbrella of market value. Market value combines various things; it may be a current use value, an alternative use value and a hope value. Wrapped together, they form this construct of market value. Things such as hope value are not objectively measurable in their own right, which becomes a bit of problem.”

“Pivotal to all this is the concept of equivalence, and it will become apparent why I am talking about this. Equivalence is the ability to buy an equivalent asset from the money gained from the compulsory process. Put another way, the compensation should put the owner in the same position, as near as money can make it, as they would have been but for the compulsory acquisition. That principle was established long ago in a case called Horn v Sunderland.”

Albeit, equivalence in my mind would be a difficult principle to lean on, as ascertaining whether one asset is "equivalent" to another would require extensive due diligence.

It remains to be seen which amendments will be incorporated, and whether further guidance on the inclusion of hope value in determining compensation in compulsory purchase scenarios will be debated and published.