How Much Do You Get for a Compulsory Purchase Order? An In-Depth Analysis

Picture of Quiyue Zhao, Ph.D.

Quiyue Zhao, Ph.D.

Compulsory Purchase Orders (CPOs) are powerful legal tools used by government entities and certain authorised bodies to acquire property without the owner’s consent, typically for public benefit projects such as infrastructure development, urban renewal, and environmental conservation.

How Much Do You Get for a Compulsory Purchase Order?: While the notion of a CPO can be unsettling for property owners, understanding the compensation framework can provide clarity and assurance.

This article delves into the complexities of how much you can get for a compulsory purchase order compensation under CPOs, the factors influencing the amount received by property owners, and the rights of those affected.

How Much Do You Get for a Compulsory Purchase Order Understanding Compensation in CPOs

The cornerstone of CPO compensation is to ensure that property owners are no worse off financially after the compulsory purchase than they were before.

This principle is manifested in several key components of compensation, which include the market value of the property, disturbance costs, and other consequential losses.

The CPO compensation process is governed by the Land Compensation Acts of 1961 and 1973, which ensure that losses are assessed and compensated under the ‘Compensation Code’ to prevent the affected party from being financially worse off or better off due to the compulsory purchase

1. Market Value

The market value represents the amount the property would have sold for on the open market at the time of the acquisition.

This valuation takes into account the property’s current use, condition, and any potential for future development.

It is crucial for property owners to obtain an independent valuation to ensure that the compensation reflects the true market value of their property.

2. Disturbance Costs

Beyond the market value, property owners are entitled to compensation for disturbance costs.

These costs cover the expenses directly related to the compulsory purchase, such as moving costs, legal fees, and other professional services.

For businesses, this can also include loss of goodwill, the cost of finding and fitting out a new premises, and potential loss of trade.

3. Severance and Injurious Affection

When only part of a property is acquired, the remaining part may decrease in value—a phenomenon known as severance.

Additionally, the value of the remaining property might be negatively affected by the development, known as injurious affection.

Property owners can claim compensation for both severance and injurious affection.

4. Special Considerations

In some cases, property owners might be eligible for additional compensation due to specific circumstances surrounding the compulsory purchase.

This can include payments for home loss or farm loss, where individuals are forced to relocate from their homes or agricultural businesses.

Factors Influencing Compensation

Several factors can influence how much you can get for a compulsory purchase order, including:

  • The property’s development potential: If there’s evidence that the property had a realistic prospect of being developed in a way that would increase its value, this potential can be factored into the compensation.
  • Statutory blight: Properties affected by planned developments can suffer from statutory blight, decreasing their market value before the CPO is enacted. Compensation aims to address this by providing a fair market valuation unaffected by the development plans.
  • The urgency of the project: In urgent cases, the acquiring authority may offer a premium to expedite the process, although this is at their discretion and not a legal requirement.

Navigating the Compensation Process

The process of determining and negotiating compensation can be complex. Property owners are advised to seek independent legal and professional advice to ensure that their claim encompasses all aspects of compensation to which they are entitled.

This includes preparing detailed evidence of the property’s value and the impact of the compulsory purchase on the owner.

Read article: Who Pays Legal Fees in a Forced House Sale?

Challenges and Appeals

Property owners have the right to challenge the amount of compensation offered by the acquiring authority.

Challenges can be made on various grounds, including the basis of the valuation, the inclusion of disturbance costs, and the calculation of severance and injurious affection.

If an agreement cannot be reached through negotiation, property owners can appeal to the Lands Tribunal or a similar legal body, which has the authority to make a binding determination on the compensation amount.

Real-World Compensation Outcomes

Compensation outcomes can vary widely depending on the specifics of each case.

For residential properties, owners often receive the market value of their home plus additional costs for moving and disturbance.

In the case of businesses, the calculation becomes more complex due to the inclusion of loss of profits, relocation expenses, and potential loss of goodwill.

Read post: What is Compulsory Purchase Order (CPO): Public Development & Owner Rights

Conclusion: How Much You Can Get for a Compulsory Purchase Order?

Compulsory Purchase Orders, while serving the public interest, can have profound implications for affected property owners.

The compensation framework is designed to ensure fairness, providing property owners with the market value of their property and covering additional costs incurred due to the compulsory purchase.

References

Picture of Quiyue Zhao, Ph.D.

Quiyue Zhao, Ph.D.

Quiyue possesses an undergraduate degree in Law with International Relations, an LLM in International Law and Doctorate in Human Rights and Legal Technology. Her PhD thesis was based on the impact of crypto-assets regulation on financial inclusion for women in emerging markets. Quiyue is a senior research fellow in London and has an interest in Constitutional Law, Economic Crime, European Union Law and Family and Child Law.

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