Compulsory Purchase Reform: Consultation Responses Summary

9. Compensation procedures

Making a claim

Questions 93 to 96 were closed questions about different aspects of the process of making a claim for compensation, and question 97 asked for any comments about the procedure. However, some of those who responded by email gave comments under individual questions, and others clearly commented on separate questions within question 97. We have therefore allocated the comments to the relevant questions where possible.

Question 93: Should acquiring authorities be required to advise owners of their rights to compensation and how to claim it?

Fifty-eight respondents answered this question. 93% agreed that acquiring authorities should advise owners of their right to compensation and how to claim it.

Among the 20 respondents who commented, many felt that giving claimants this information would increase transparency, support them through the process and reduce delays. Those who opposed the proposal, and some supporters, were concerned about a conflict of interest if acquiring authorities gave individual advice to claimants; many comments therefore recommended that there should be standardised wording signposting to Government guidance. Several also suggested that claimants should be advised to obtain appropriate professional advice, and told that reasonable costs of such advice can be covered by compensation.

Question 94: Should a statutory claim form be provided to collect more information about the amount of compensation sought?

Fifty-four respondents answered this question; 91% agreed that a standard form should be provided to collect information relevant to compensation.

Twenty respondents commented on this question. Around half simply agreed with the proposal. Some felt that it would be difficult for a standard form to capture all potential circumstances and meet the needs of different types of development or acquiring authorities. Others were concerned that a detailed form could be intimidating for claimants, or could be used by acquiring authorities to challenge claims on the basis of technical errors.

A group of respondents considered that a standard form would come too early for claimants to know what the impacts of the CPO would be (presumably based on the current Form 9 which is issued with the notice of intention to make a GVD). A couple suggested that there should be two forms – a more detailed investigation form issued at the start of the process to gather information about the property and interests in it, and another issued with the GVD seeking the details needed to assess compensation.

Question 95: Should acquiring authorities be required to provide information on their assumptions relating to compensation, if this is requested by a claimant?

Fifty-four respondents answered this question, of whom 78% agreed that acquiring authorities should be required to provide information on their assumptions relating to compensation, and 22% disagreed.

The main reason given for agreeing with the proposal was that greater transparency could reduce disputes and make the process quicker. On the other hand, several of those who disagreed said either that it was the claimant’s responsibility to provide evidence for their claim, or that both sides should provide their assumptions as part of the negotiation. A couple of respondents said the acquiring authority should be required to provide assumptions in relation to advance payments (which are based only on the authority’s assessment of the compensation). Other comments focused on the complexity of the process and the need for negotiation between professional advisers.

Question 96: Should acquiring authorities be required to offer compensation, rather than requiring owners to claim it?

Fifty-two respondents answered the closed question. Three quarters agreed that the acquiring authority should be required to offer compensation as the first step in the process.

Half of the comments agreed the authority should be required to offer compensation. The key reasons given were that it would be more transparent and fairer to claimants, who generally have fewer resources and less knowledge of the system than the acquiring authority, and could put negotiations on a more positive footing. One respondent suggested that the offer should include an allowance for professional advice to review the acquiring authority’s assessments. Another highlighted that an offer of payment should be made when the authority is exploring whether the property can be acquired by agreement, and only if that negotiation fails should a CPO be promoted.

Slightly fewer comments were in favour of retaining the current system, in which the landowner / occupier is required to make a claim for compensation. Many of these mentioned that the acquiring authority is unlikely to have sufficient information about the claimant’s circumstances to make an accurate offer; one suggested that any offer could only be made in relation to land value, as all other heads of claim require information from the claimant. A couple of respondents felt that it would not be necessary for the acquiring authority to offer compensation if clear advice was given about the right to compensation and the process for claiming it (see question 93).

Question 97: Please provide any comments about the procedure for claiming compensation, if you wish to expand on your responses to questions 93 to 96.

The overriding theme among the general comments made was that the process should be made as transparent and straightforward as possible for claimants. Recommendations included more guidance and simplified procedures, template letters and forms available online, and timelines for both parties to provide information. However, one respondent felt that making the system more formalised could disadvantage claimants. It was suggested that acquiring authorities should help claimants to understand their rights and how the authority has made its assessments in relation to compensation, leading to more meaningful engagement and negotiation. Two respondents proposed that there should be greater use of Alternative Dispute Resolution before, or in place of, going to the LTS.

Time limits

Question 98: Do you agree that an application to the LTS should be able to be made from the date of vesting? If not, when should the earliest date for application be?

Fifty respondents answered this question. Only two did not agree that an application to the LTS should be able to be made from the date of vesting, one of whom thought it should be later and one earlier.

A few of those who commented noted that parties should be encouraged to negotiate before applying to the LTS; one of these felt the application date should be later to allow for this, while another said the application should only be allowed providing the claimant had submitted a full claim and supporting information to the acquiring authority.

One respondent felt that application to the LTS should be allowed much earlier, indicating that a claim for compensation and negotiation of it should begin potentially from when the CPO is made or confirmed.

Question 99: Should there be a final time limit for making a claim for compensation? If yes, what should the limit be?

Forty-seven respondents answered this question, and almost all of them (41) also provided a comment. Eighty-seven percent of responses to the closed question said there should be a final time limit for making a claim for compensation, but the comments throw some doubt on this result. Several respondents appeared to confuse the time limit for making a claim for compensation, and the time limit for applying to the LTS over a dispute. The consultation proposal was to maintain the current position: that there should be no final time limit on when claims can be made, and a six-year limit on applications to the LTS. However, for example, one respondent answered ‘yes’ (there should be a time limit) and then commented that they supported the proposal; others said they “agreed with” or would “retain” a six year limit. On the other hand, some said the limit for claims should be six years “in line with” the current period for bringing cases to LTS, showing that they recognised the current difference.

The vast majority of comments supported having a time limit (whether they recognised that as a change or saw it as retaining the current position). Proposed time limits ranged from 12 months to 10 years. However, the most common period suggested was either five or six years. Several comments referred to the Prescriptions and Limitations (Scotland) Act 1973, which allows five years to submit a claim for loss in various other circumstances.

Many respondents stated that a time limit is needed to provide certainty for the acquiring authority and allow budgets to be closed. Others (including many recommending a five or six year limit) highlighted that it can take time for all issues to emerge and losses to be understood. One respondent suggested a limit of six years from the date the loss arose. Only a handful of comments said there should be no time limit at all.

Question 100: Are any other changes needed in relation to the timing of compensation claims?

Fifteen additional comments were received. There were no obvious common themes or recurring issues. Points made included:

• Clear guidance on compensation claims should be provided for all parties.
• It could be helpful to have statutory timeframes for each stage of the process, with incentives for acquiring authorities to act promptly. Digital submission and tracking of claims could give claimants visibility of progress. Case management conferences might be used for complex cases.
• The time limit for compensation claims should be reduced for abandoned and neglected properties.
• Support and flexibility should be afforded to people who may struggle to engage with the process, for example due to ill health or lack of advice. This could include reminders about the right to compensation and deadlines for claiming.
• There were differing views on whether LTS should have broad discretion to accept late applications, or if this should be limited to exceptional circumstances.
• Timelines for compensation claims should run from completion of the project rather than the date of vesting, to capture events that arise later.

It is important to distinguish between losses caused by the acquisition of land, particularly where it is partial acquisition, and losses caused by the development of the project, which could affect any neighbouring land, whether or not it is subject to CPO. Separate provision for compensation applies to the latter.

Advance payments

Question 101: Are any new powers needed to enable acquiring authorities to make discretionary advance payments, if one is sought before they take possession?

Twenty-six comments were made on this question. None identified specific gaps in powers that would prevent acquiring authorities from making advance payments before taking possession, although a few stated that it would be helpful to expressly state that they could do so. The majority simply expressed support for discretionary advance payments. Some noted that if such powers exist, they are rarely used, and recommended that they should be actively encouraged, to support landowners with cashflow for relocation.

A couple of respondents felt that if advance payments before taking possession were sought, purchase by agreement at that stage might be a better solution. One cautioned that such payments might not align with the requirements of the Scottish Public Finance Manual, and that mechanisms must be in place for recovering the payment if the transfer of title was not completed.

Question 102: Would it be helpful to enable advance payments to be made to heritable creditors, with the landowner’s agreement?

Forty-eight respondents answered this question. All but two agreed it would be helpful to enable advance payments to be made to heritable creditors. Among the 13 who commented, there was a difference of opinion over the need for the landowner’s agreement. The majority said the landowner’s agreement would be necessary; one highlighted the situation where only part of the land was acquired and the owner would want to review the proportion of the borrowing being sought by the heritable creditor compared to the proportion of land taken. Others considered that the first charge over the property meant that the heritable creditor may have the right to receive all or part of any compensation.

Question 103: What mechanisms do you think would help to ensure advance payments are made promptly?

• enforcement through the courts
• LTS enforceable valuation
• penalty interest
• other (please explain).

This question allowed respondents to select as many options as they wished. There was a clear majority (37) in favour of using penalty interest to help ensure advance payments are made promptly. Enforcement through the courts (15) and enforceable valuation from LTS (14) received similar levels of support. Although only five respondents selected ‘other’, 27 made comments on this issue.

Almost half the comments expressed support for the use of penalty interest. Several also suggested that clear statutory deadlines would be helpful, possibly with “automatic triggers” for payment; one noted that “this would involve retaining or reinforcing the current three-month timeframe for payment”. A couple of respondents indicated that late advance payments could be due to uncertainty or dispute over the assessment of compensation, and the risk to the authority of being unable to recover overpayment. Several of those who commented favoured enforceable valuation by the LTS where disputes arose. However, others considered that enforcement through the courts or via LTS would be complex and could add delay. There were no comments in favour of enforcement through the courts.

Question 104: Should acquiring authorities have the power to offer advance payments even where one is not requested?

Question 104a: If so, should interest on the amount of outstanding compensation be capped?

Fifty respondents answered the first question, of whom 80% were in favour of enabling acquiring authorities to offer advance payments even where one was not requested. Only 25 answered the follow-up question (104a) about whether, if an advance payment was offered and refused, interest should be capped to what would be the outstanding balance (10% of the estimated compensation) if payment had been made. Eighty-eight percent agreed with capping interest. Only two respondents were in favour of offering advance payments but not capping interest.

No comment box was offered for this question online. Twenty-three of those responding by email made comments but only a few provided justification for their views. Of those opposed to the proposals, one suggested that requiring the claimant to request an advance payment would “ensure a clear audit trail and avoid confusion”. Another suggested the acquiring authority should advise the claimant of their right to request an advance payment, to avoid hardship. Some respondents in favour of offering advance payments also thought this would reduce hardship and uncertainty to claimants. Others focused on the benefit to the acquiring authority and the public purse of capping interest, even if the payment is refused.

A couple of respondents who were opposed to advance payments being offered rather than requested referred to the fact that they are not necessarily based on an agreed level of compensation. However, as noted by another respondent, “In line with existing advance payment legislation, acceptance of any advance payment offered by the acquiring authority would not prejudice future negotiations”.

Interest rates

Question 105: What should be the basis for the interest rate payable on outstanding compensation?

• current rate (0.5% below standard rate)
• average rate for overdrafts
• average rate for loans
• statutory interest
• other (please give details)

Forty respondents answered this question, most of whom were individuals or local authorities. Of those who responded to the question, 35% selected ‘other’ as their preferred option – although none of these were local authorities. By contrast, around two thirds of local authorities who responded to this question favoured retaining the current rate (0.5% below base rate), which contributed to this being the second most popular choice. This was followed by statutory interest (currently base rate plus 8%). Those who selected ‘other’ suggested a variety of options, from base rate or standard rate without any deduction, to “statutory interest minus 1%”. Some recommended that interest should be applied on a compound basis.

In other comments, respondents reflected that either the current rate or the statutory rate are familiar and easier to determine than an average for either overdrafts or loans. Some noted that in the absence of compensation, claimants might need to source other funding at commercial rates, raising questions of equivalence. Others considered the competing incentives: if the interest rate on compensation is low, it does not encourage acquiring authorities to settle quickly, but if it is too high it may incentivise claimants to delay.