Current crises in housing and in town centres have placed greater emphasis on the role that local authorities can and should play in compulsorily acquiring land to promote much needed development, whether to implement local plan policies or to help progress consented schemes. In a series of back-to-basics posts we will discuss the various stages of the compulsory purchase process, from deciding what power to use to the payment of compensation, and the relevance to developers.
This post focuses on the implementation stage and in particular the General Vesting Declaration ("GVD") process. In this post we seek to answer the following key questions before going on to identify some important points to note:
- Who implements the powers?
- What options are available to exercise the powers?
- What does the GVD process entail?
- When is compensation payable if using the GVD process?
- What are the applicable time limits?
Who implements the powers?
Compulsory purchase powers in England can be granted either as standalone Compulsory Purchase Orders ("CPOs") made under a wide range of empowering Acts or as part of secondary legislation, eg Hybrid Acts and Development Consent Orders ("DCOs"). The body that is endowed with the powers depends on the legislation pursuant to which the powers exist. Standalone CPOs are exercised by public bodies, commonly local authorities in order to facilitate a scheme promoted by a private entity. In such a case, the local authority will exercise the compulsory purchase powers on behalf of the private entity in return for an indemnity in respect of its costs.
It should be noted that the standard implementation process is sometimes modified, eg a DCO may tweak the relevant time periods or notice procedures. It is therefore important to check the terms of the empowering CPO or legislation carefully before taking steps to exercise the powers. We summarise below the standard procedure pursuant to a CPO.
What options are available to exercise the powers?
Once a CPO has been confirmed, the land may be acquired by following one of two procedures:
- notice to treat; or
- GVD.
The notice to treat procedure involves three separate steps: a notice to treat, a notice of entry and a conveyance. The GVD procedure replaces those three steps with one procedure whereby the title in the land vests automatically with the acquiring authority on a specific date known as the "vesting date" (see below). This means that the acquiring authority can obtain title more quickly and in particular without having to settle the amount of compensation prior to the transfer of title. A GVD is also useful where there is some uncertainty over the ownership of all of the land interests because, provided the correct service of notice procedure is followed, the GVD vests all interests in the land.
For these reasons, the GVD procedure is often the preferred route. However, while acquisition of title may take longer to complete under the notice to treat procedure, it may be possible to gain possession and start development earlier than under a GVD.
It is important to consider both options carefully before deciding which route to pursue. It is also vital that the notice and service provisions are adhered to carefully, and to make sure plenty of time has been built into the acquisition schedule to ensure these requirements are completed satisfactorily.
What does the GVD process entail?
The procedure for making a GVD generally involves the acquiring authority including a prescribed statement describing the GVD process and the effect of the GVD in the notice of confirmation of the CPO, and inviting any persons who would be entitled to claim compensation if the GVD was made to give personal information and details of their interest in the land.
Once the prescribed statement has been made, the acquiring authority will make the GVD after the CPO has become operative (normally on the date of publication of the CPO unless it is subject to special parliamentary procedure). A GVD itself must be in the prescribed form as set out in the relevant legislation and must include details of the CPO land.
As soon as possible after making a GVD, the acquiring authority must serve notice of it on every occupier of the land and on every person who gives the acquiring authority information relating to the land following an invitation to do so (as described above).
A period of at least three months from the date on which this notice is served will be specified in the GVD. The land will vest in the acquiring authority the day after the specified date (the "vesting date"), together with the right to enter and take possession of the land. In some circumstances, such as where a counter-notice is served or where the land is subject to a minor tenancy or a long tenancy about to expire, there may be additional notice requirements and the vesting date will be determined following a different process.
When is compensation payable if using the GVD process?
Compensation for land compulsorily acquired by way of GVD is assessed at the vesting date and interest on the compensation also accrues from this date until the date of payment, even if possession is not taken for some time after the vesting date. This differs from the notice to treat procedure where compensation falls to be assessed at the date of entry and taking possession. If the CPO land is being acquired on behalf of a private entity, these costs will likely be incorporated into a CPO Indemnity Agreement so that the private entity will ultimately be liable for these costs (and other associated costs) rather than the acquiring authority.
What are the applicable time limits?
If the CPO became operative on or after 13th July 2016, a GVD cannot be executed after three years beginning with the day on which the CPO became operative. CPO powers can be lost entirely if the GVD has not been executed in time so it is very important to be aware of the relevant time limits that apply.
Points to note
The law and procedures that govern compulsory acquisition are complex. GVDs are amenable to legal challenge, eg if the proper process has not been followed or if the acquiring authority's purpose for acquiring the land is not within the scope of the CPO. Recent cases have demonstrated that there may be a degree of "wriggle room" where some procedural irregularities have occurred (eg failing to publish notices in the required way), provided that it has not resulted in substantial prejudice. However the courts appear to be taking a stricter approach where the exercise of CPO powers do not fall squarely within the scope of what was originally envisaged by the CPO. Caution must be applied to ensure the GVD is exercised in accordance with the original intention of the CPO.
Author: Julia McKeown, Associate (New Zealand), planning, real estate
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The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.