Compulsory Purchase Order (CPO) Reforms – What rural landowners need to know

A Compulsory Purchase Order (CPO) is a legal mechanism that allows certain public bodies to acquire land or rights over land without the owner's consent, typically for public interest projects like infrastructure development or urban regeneration. The acquiring authority must demonstrate a compelling public interest for the acquisition and offer compensation to the affected owner.

The Planning and Infrastructure Bill, which is currently making its way through Parliament, aims to improve the CPO process and modernise compensation rules, making it more efficient and potentially faster, with a focus on balancing public interest with payment of compensation to landowners and occupiers.

Key changes and reforms

The key changes proposed that rural landowners in particular should be aware of are:

Faster decisions: Reforms aim to streamline the decision-making process for CPOs, in order to reduce the time and administrative costs associated with them. 

Delegation of decisions: There is an increase in the delegation of CPO decisions to inspectors or acquiring authorities when there are no objections, with the intention of leading to faster approvals. 

CPO powers for environmental goals: The Planning and Infrastructure Bill also extends CPO powers to support environmental goals, specifically to Natural England for fulfilling its Environmental Delivery Plans. 

Earlier vesting of land: Reforms allow authorities to take possession of land earlier, with a minimum of six weeks under certain circumstances. 

Compensation reforms: Changes aim to ensure landowners receive fair compensation while preventing excessive payouts based on inflated land values. Linked to this is the exclusion of "hope value" from compensation calculations in specific cases, particularly for affordable and social housing. Hope value is the potential increase in land value based on future development.

Loss payments: Reforms include changes to loss payments, which propose to compensate occupiers for the inconvenience and disruption of CPOs. 

Impacts and considerations

Overall, the reforms are expected to more readily facilitate bringing forward land for development projects, especially those focused on housing and infrastructure. 

One of the most controversial reforms which has hit the farming press is the fact the Bill allows "hope value" to be disregarded in more circumstances when assessing compensation for land acquisition, especially for affordable housing, infrastructure, and healthcare projects. This means landowners may only be compensated based on the current use value of their land, rather than its potential future development value. Extending when hope value may be removed could lead to significantly lower compensation for landowners, particularly those whose land is strategically located for development.

Some argue that this is unfair to landowners, as it does not account for the potential future value the land could hold. However, this of course needs to be balanced against the need to accelerate the delivery of new homes and infrastructure projects, addressing the housing crisis. Labour has, of course, set an ambitious target to build 1.5 million new homes over its five-year term – i.e., by the end of 2029- and these reforms are designed to support the delivery of this target.

The compensation element of CPOs is always the most contentious part of the process. However, it is worth highlighting it is expected that an acquiring authority will continue to enter negotiations with the landowner to acquire the land alongside the CPO process. The guidance is very clear that where it is possible to acquire by negotiation, an acquiring authority should do so. These changes, therefore, may act as more of an incentive for landowners to engage in that process but the important point to note is that negotiation is the first step and there is benefits in trying to reach an agreement where possible. There is a concern that if landowners do not come to the table and agree a negotiated figure, when the compensation for the CPO is assessed the hope value is disapplied and they could find themselves in a worse position than attempting to enter into negotiations in the first instance.   

Another element of the Bill that will be of interest to rural landowners and occupiers of rural land is the reforms to loss payments in CPOs. Traditionally, loss payments were primarily allocated to landowners, even if they weren't the ones directly occupying the land. The new legislation shifts the focus, potentially increasing the compensation received by those who are displaced and actively using the land, such as tenants or businesses operating on the land. This is because the disruption and relocation costs are often borne more heavily by the occupier than the landowner. This could be of benefit to agricultural tenants and other businesses operating on land subject to a CPO.

Summary

While the reforms aim to speed up the CPO process and potentially lower development costs, they also carry the risk of reduced compensation and increased uncertainty. There is of course a recognised need to build more homes to tackle the housing crisis and to unlock infrastructure projects to help boost the economy. However, this needs to be balanced against fair compensation payments when land is acquired for these projects. It will be interesting to see if that balance is struck when these reforms pass into law and also how they are applied alongside other planned reforms from the Government such as the production of the Land Use Framework for England.

The Framework is intended to inform and incentivise national and local policy-making and decision-making about land uses and this will include development of land. It is hoped that clarity and guidance from the Government on land use on a local and national level will be helpful to manage competing interests in the countryside and assist landowners in business planning and diversification strategies based on the classification of their land within the Framework. It may also help landowners to more readily discern if CPO powers are likely to be used for projects in their locality.

Needless to say, landowners need to be aware of the changes to CPO powers and the potential impacts and seek legal advice to navigate the evolving landscape of compulsory purchases.

If you would like to hear more about this topic, please listen to the latest episode of our Experts in the Field podcast.

Our Farms, Estates and Rural Land team and Planning and Environmental team frequently advise developers and landowners impacted by CPOs. If you need any advice from our specialist lawyers, please do not hesitate to get in touch.