Part 1: Dwellings occupied by disabled persons
The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.
10.1 General
Section 45 Land Compensation Act 1973 applies to the compulsory purchase of a dwelling that has been constructed or substantially modified to meet the special needs of a disabled person, and subject to conditions enables the person whose interest is being acquired to elect to have the land treated as if it were ‘devoted to a purpose of such a nature that there is no general demand or market for that purpose’ (Rule (5) section 5 LCA 1961).
10.2 ‘Disabled person’
A ‘disabled person’ means a person who is substantially and permanently handicapped by illness, injury or congenital infirmity (section 87 LCA 1973). Section 6 of the Equality Act 2010 defines a person as having a disability if
- (a) they have a physical or mental impairment, and
- (b) the impairment has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities
There is no longer a ‘register’ of disabled people but it is possible for an individual to register with their local authority for various disabilities eg as blind or partially sighted, as deaf, or as having severe mobility problems (this is usually in connection with an application for a ‘Blue Badge’ parking permit).
However, there is no requirement to register as disabled and a person might not be registered as disabled or receive any statutory assistance and still clearly be a disabled person. Any case in which there was doubt as to whether a person were within the definition should be referred to the acquiring authority for advice unless there is some other local arrangement, but in no circumstances should the valuer become involved in any dispute as to whether any person were within the definition.
10.3 Characteristics of the dwelling
Whether a dwelling has been constructed or substantially modified to meet the special needs of a disabled person depends on the facts in each case but so long as there are recognisably abnormal structural characteristics the valuer should regard the dwelling as being within section 45 LCA 1973. The provision of any equipment or the adaptation of existing fixtures and fittings would not normally be regarded as substantial modifications unless these were of a character and fixed in such a way as to have become part of the land.
10.4 Occupation of dwelling
The dwelling must have been occupied, or last occupied, by a disabled person as their residence immediately before the acquiring authority took possession. If there is reasonable justification for supposing that the dwelling was so occupied the valuer should proceed accordingly but the attention of the acquiring authority should be drawn to the circumstances when reporting completed negotiations if confirmation is considered desirable.
10.5 Relevant date
The provisions of section 45 LCA 1973 do not apply where the relevant valuation date (see Section 2) was before 17 October 1972.
10.6 Who may qualify
Any claimant who has a compensatable interest in such a dwelling whether or not they are the disabled person can make an election under section 45 LCA 1973.
10.7 Who may benefit
Where an election under section 45 LCA 1973 has been made the dwelling is brought within the ambit of Rule (5) section 5 LCA 1961, provided the other criteria governing the application of that Rule are met. It should be accepted that the property would have continued to be used as the residence of a disabled person but for the compulsory purchase unless there were very compelling reasons for the contrary view. The question of whether reinstatement is bona fide intended and by whom should be regarded as matters of fact to be examined on the evidence.
If a claim is made on that basis in respect of more than one interest the valuer should indicate a willingness to recommend the payment of compensation on a reinstatement basis to one claimant only, normally the one who is going to re-house the displaced disabled person. Merely because the disabled person who was last in occupation is not being rehoused by the claimant would not, however, appear to disqualify the owner of a substantial interest if it can be shown that another dwelling with comparable characteristics will be provided to house such a person.
Should more than one claim be pressed on this basis the acquiring authority should be advised and requested to confirm that the claimant who is rehousing the occupier should be allowed compensation on this basis and that any other such claim should be resisted on the grounds that the Upper Tribunal (Lands Chamber) would not be expected to exercise its discretion in the other claimant’s favour in the circumstances. Apart from this kind of situation the assumption should generally be made that the Tribunal would exercise its discretion in favour of the claimant who is reinstating the disabled occupier in another dwelling.
The case of a claimant displaced from a specially adapted dwelling but who has no compensatable interest should be dealt with under sections 37 and 38 LCA 1973 and there is power under section 37(5) LCA 1973 to make similar discretionary payments.
10.8 General
It to be expected that there will be many straightforward cases where the necessary adaptations of another dwelling can be carried out at reasonable cost and no problems will arise. It is however incumbent upon the valuer to be reasonably satisfied that the cost will be borne by the claimant. For example, in considering these claims, particularly of a tenant, the rehousing obligations introduced by section 39 LCA 1973 should be borne in mind. The payment of compensation on the basis of Rule (2) section 5 LCA 1961 where the occupier is to be rehoused by the local housing authority under these provisions would not appear to transgress section 50(1) LCA 1973 since compensation under Rule (5) section 5 LCA 1961 would not be payable on a compulsory purchase if reinstatement by the claimant is not bona fide intended.
Further, should the valuer be satisfied that the works could be carried out with financial assistance from the appropriate authority, the terms of such assistance would need to be carefully considered in deciding whether or not the net cost to be borne by the claimant could properly be taken as representing the ‘reasonable cost’ for the purpose of Rule (5) section 5 LCA 1961.
10.9 Equivalent reinstatement Rule (5) section 5 LCA 1961
As in all cases where compensation falls to be assessed under Rule (5) section 5 LCA 1961 the valuer should consider whether equivalent reinstatement could be achieved by the claimant’s obtaining a suitable existing property and adapting it for the claimant’s special needs. If this were possible it would provide the proper basis by which to measure the reasonable cost. It is considered that it would be exceptional for a claimant to contend successfully for compensation assessed on the cost of providing a purpose-built new dwelling in a case under section 45 LCA 1973.
10.10 VAT on adaptation cost
Group 12 of Schedule 8 to the Value Added Tax Act 1994 provides for the zero rating of certain supplies to handicapped persons. ‘Handicapped’ is defined as chronically sick or disabled.
Zero rated work includes constructing ramps or widening doorways or passages to facilitate entry to or movement within a handicapped person’s private residence; providing, extending or adapting a bathroom, washroom or lavatory in the handicapped person’s private residence where such provision, extension or adaptation is necessary by reason of their condition; installing a lift between floors in their private residence; installing an alarm system for the handicapped person’s private use; and the supply of any equipment and appliances designed solely for use by a handicapped person for their personal or domestic use.
Works of general application would not be zero rated, eg a kitchen, although the supply and fitting of individual items (eg a sink) designed solely for use by a handicapped person would be zero rated.
When recommending the reimbursement of adaptation costs it would be necessary for the valuer to distinguish between the standard rated and zero rated items. In practice the contractor should provide the claimant with separate standard rated and zero rated invoices.
The claimant should provide the contractor with a certificate stating that they were handicapped within the meaning of the Act. The contractor might need to show the certificate to HMRC to confirm the zero rated status of the supply. The certificate would not have to take any particular form.
Any surveyor’s or architect’s fees incurred by the claimant in managing the works would not be zero rated because HMRC deem such fees not to comprise part of the work of construction.
If the claimant were entitled to have the house reconstructed on a replacement site under Rule (5), the whole of the construction cost (excluding fees and other specified incidental items) would be zero rated as comprising a new dwelling.
10.11 Cases of difficulty
Any cases of difficulty should be referred to the PS Professional Guidance Team.