France Telecom: lessons for UK employers following 'institutional harassment' ruling
Out-Law Guide | 04 Aug 2011 | 10:21 am | 6 min. read
A compulsory purchase order (CPO) allows certain bodies which need to obtain land or property to do so without the consent of the owner. It may be enforced if a proposed development is considered to be in the public interest – for example, when building motorways on land the owner does not want to sell.
Most CPOs are made under powers given to local authorities. Although these powers are strong, the local authority must be able to demonstrate that taking the land is necessary and that there is a 'compelling case in the public interest'. Similarly, if local authorities wish to develop a town centre they may issue CPOs.
Compensation rights can include the value of the property, the cost of acquiring and moving to a new property and the costs of seeking professional advice. Lack of funding can make it difficult for local authorities to use these powers, as statutory time limits give authorities a limited time to secure procurement and funding arrangements.
A CPO can be exercised either by serving a notice to treat or executing a general vesting declaration. This guide will consider the advantages and disadvantages to each approach, with reference to the time limits each creates for the local authority to exercise its compulsory purchase powers.
CPO powers must be used within three years of the date of the press notice that a CPO has been confirmed. A CPO can be exercised either by the service of a notice to treat (NT), or the execution of a general vesting declaration (GVD).
It is possible to make a GVD in respect of part of the land in a CPO and serve an NT in relation to the remainder. However, a GVD cannot include any 'new' rights over the land - these can only be acquired through an NT.
Notice to treat
A notice to treat is a formal request from a local authority to agree a price for a property.
An NT and a notice of entry (NE) will be served, stating that entry will be taken after the minimum notice period of 14 days. After this date, compensation has to be settled and paid and a transfer taken of the land or a deed completed for new rights.
One of the main advantages of the NT mechanism is that it is a flexible and relatively quick means of exercising powers. Where it is important to secure the possession of the land early, then an NT may be the preferred approach. However, acquisition of title can take many months or even years to complete, so where an authority wants to secure title quickly the GVD process outlined below may be preferable.
An authority may be able to withdraw an NT by agreement, or within six weeks of receipt of a claim for compensation from a landowner or six weeks of a determination of compensation being made. Once a GVD has been made, however, the authority has to proceed with its obligation to purchase - there is no mechanism to withdraw a GVD.
General vesting declarations
A general vesting declaration is a formal procedure that gives a local authority the right to take over the ownership of property. The authority must wait two months after sending out a preliminary notice before it can make a GVD. It will then send all owners and occupiers a notice announcing the GVD and giving them the date when it will formally own and take possession of the property. This date must be at least 28 days away.
Vesting declarations are governed by the Compulsory Purchasing (Vesting Declarations) Act. A GVD enables both title and the right to possession of the land to be secured in a little more than three months – assuming that the minimum vesting period of 28 days is specified – or later if required. The property rights caught up in a GVD will be converted into rights of compensation, which has to be settled and paid following the making of the GVD.
Certain interests cannot vest, and must be served with an NT and NE as above before possession can be taken against them. These are:
This exclusion saves the authority from having to deal with and compensate tenants whose interests may expire before possession is required.
The Compulsory Purchase Act time-limits the giving of an NT and the making of a GVD. However, this time limit is uncertain because it does not properly take into account the later Compulsory Purchasing (Vesting Declarations) Act, which established GVDs.
The original Act, as amended, states that a CPO will no longer be effective after three years from the date on which it is served unless:
If a CPO ceases to have effect, the authority must immediately give notice of that fact to relevant parties and pay compensation.
Where an NT is given within this three-year period, the authority's powers will have been duly exercised within the time limit and the NT will remain valid for a further three years. By serving an NT, an authority can therefore secure up to a six-year validity period in which is can acquire the land.
However, what is the position where the authority chooses to proceed by way of a GVD? In a 1991 case involving Westminster City Council and an occupier, Quereshi, the judge considered whether a preliminary notice counted as the exercise of a CPO for the purposes of the time limit beginning to run. He considered that it did. Two years later, in a case involving the Cooperative Insurance Society and Hastings Borough Council the judge disagreed, saying the a preliminary notice committed an authority to nothing and was simply a warning that a GVD may be made. Due to the conflict between these two cases, the Government has advised in a circular that a GVD should be made within three years of the order becoming operative.
As the law stands the exercise of compulsory purchase powers by the service of an NT extends the life of CPO powers to six years, but where powers are exercised by way of a GVD the powers will last only for a little over three years depending on the vesting date specified by the authority. This inconsistency will affect a local authority who wishes to proceed by GVD. The Law Commission's 2004 final report on Compulsory Purchase and Compensation (217 page / 1MB PDF) considered these issues, but as its recommendations for reform have not been implemented it is generally accepted that the judgement in the Cooperative Insurance case is the correct statement of the law. This is consistent with the later Act, which recognises that the execution of a GVD is equivalent to serving an NT.
Can a GVD be made after an NT has been served?
It is clear from the above that an NT can be served after preliminary notice of a GVD has been given. It may also be possible to switch to the GVD procedure after an NT has been served, to extend the validity period for CPO powers and enjoy the convenience of vesting title and the right to possession – however, there is some doubt in this area.
Many leading textbooks on compulsory purchase state that a GVD cannot take effect where an NT has been served in respect of the relevant property interest. This appears to be based on the later Compulsory Purchasing (Vesting Declarations) Act, which provides that an NT will be deemed as having been served at the same time the GVD is made. This does not apply if an NT has already been served under the older Compulsory Purchase Act, and close reading of the later Act suggests that the execution of a GVD after an NT has been served may in fact be possible. However, there is clearly scope for legal argument and challenge.
In order to reconcile the law on these issues, it is important to establish whether or not executing a GVD is this circumstance merely continues the compulsory purchase process which began when the original NT was served. If the court considers that executing a GVD in this manner does instead act as a fresh attempt to exercise CPO powers, then the GVD would be invalid. The position will remain unclear until the law is clarified by statute or the courts.
As the law stands, if a local authority wants to proceed by a GVD it should ensure that it is made before the three-year compulsory purchase validity period has expired. However, where it is intended that CPO powers should be kept alive as long as possible then it may be preferable to proceed by NT. This will prolong the CPO powers for up to six years, whereas if GVD powers are not available after the expiry of the three-year period transfer of title may be prolonged. This could create difficulty when it becomes time to hand over the property to developers.
France Telecom: lessons for UK employers following 'institutional harassment' ruling