78. Assessing compensation can be complicated and is governed by extensive and continually evolving legislation and case law. This circular does not attempt to provide detailed advice on compensation.
79. The authority should adopt a facilitative approach to the process of negotiating compensation. Whether a person is entitled to compensation, and how much compensation they are entitled to, will depend on the circumstances. But compensation may take account of the following:
- The open market value of the interest
- Compensation for severance and/or injurious affection 42
- Compensation for disturbance and other losses not directly based on the value of the interest. This includes certain reasonable professional fees
- Additionally, a home loss payment 43 or farm loss payment 44 may be made, where applicable
80. Alternatively, where the land is used for a purpose for which there is no general demand or market and the owner intends to reinstate elsewhere, they may be awarded compensation on the basis of the reasonable cost of equivalent reinstatement.
Assessing open market value
81. Open market value is based on what a person could expect to get if they willingly sold their interest in the land on the open market, without the threat of the compulsory purchase. This means that any reduction or increase in value because of the compulsory purchase order (and the scheme behind the compulsory purchase) is ignored.
Certificates of appropriate alternative development ( CAADs) 45
82. The open market value of the land may take into account development value. A CAAD can, in certain circumstances, be a useful way to help establish whether the land being acquired has development value. A claimant or the authority may apply to the planning authority for a CAAD to establish what development would have been permitted on the land if it was not for the scheme behind the compulsory purchase.
The valuation date
83. The date on which the land is valued for compensation purposes depends on the method the authority uses to acquire title. Under the notice to treat procedure the date of valuation is the date of entry or assessment of compensation, whichever occurs first, or the date of reasonable reinstatement (where compensation is being assessed on the basis of equivalent reinstatement). Under GVD procedure the relevant date is the vesting date.
Acquiring part only of a person's land
84. The way compensation is assessed varies considerably depending on whether the authority is acquiring the whole or only part of a person's land. The authority should therefore pay particular attention to assessing compensation when acquiring only part of a person's land. This should include considering the possibility that the owner might serve a notice of objection to severance 46 . The authority should be aware that severance and injurious affection claims can form a significant amount of the compensation due.
Advance payments of compensation
85. If the authority has acquired title using a general vesting declaration it can take legal title and possession before it has agreed with the owner the amount of compensation to be paid. In this situation, if the claimant formally requests it, the authority must in some circumstances make an advance payment of 90% of its estimate of the likely compensation due, together with professional fees and statutory interest. The authority must pay this within three months of receiving the request from the claimant, or within three months of taking possession of the land (if later).
86. The authority might later realise (particularly as a result of negotiations over compensation) that its initial estimate of the compensation due was too low. In this situation the authority should tell the claimant that its initial estimate was too low. The authority should tell the claimant that it will pay the balance of the amount of the revised advance payment valuation on formal request.
87. The authority should make advance payments as quickly as possible to relieve financial hardship and help claimants relocate. Quick and adequate payments may also reduce the amount of statutory interest payable.
88. Interest is payable at the prescribed rate 47 from the date that the authority enters and takes possession until the compensation is paid. The authority should therefore properly record the date of entry.
Abandonment of the scheme
89. The authority might decide to abandon its scheme and not proceed. In all cases where the authority abandons a scheme it should tell the people affected of its decision as soon as possible and consider claims for compensation and/or abortive costs and expenses on their merits, on a case by case basis.
90. The authority should consider the possibility of being served with a Blight Notice. 'Blight' is the reduction in the marketability and value of property because of public sector actions and decisions. The owner of a blighted property may seek to negotiate the voluntary advance acquisition of the land by the authority at its unblighted price, on compulsory purchase terms. Should the authority refuse, the owner can in certain circumstances serve a blight notice on it. 48 If accepted or confirmed, a blight notice operates in effect as inverse compulsory purchase so that the authority is treated as being authorised to compulsory purchase the land and to have served a notice to treat.
91. However, there are limits on the ability to serve such a notice. The person must have a 'qualifying interest' 49 , the land in question must be 'qualifying land' 50 and in certain cases the owner must show that a reasonable attempt has been made to sell the land. The authority may accept a blight notice or serve a counter-notice objecting on prescribed grounds. All disputes go to the Lands Tribunal for Scotland for resolution.