Part 1: Severance and injurious affection
The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.
3.1 Right to compensation
The right of an owner to compensation in respect of severance and injurious affection derives from section 7 Compulsory Purchase Act 1965 (CPA 1965).
Section 7 CPA 1965 states that:
“….regard shall be had not only to the value of the land to be purchased by the acquiring authority but also to the damage, if any, to be sustained by the owner of the land by reason of the severing of the land from the other land of the owner, or otherwise injuriously affecting the other land….”
3.2 Requirement for land to be ‘held with’
Where the injured land is not contiguous to (touching) the land taken, it is necessary for it to be ‘held with’ or the other land of the owner.
Although the words ‘held with’ which appeared in section 49 of the Lands Clauses Consolidation Act 1845 are not repeated in section 7 of the Compulsory Purchase Act 1965, they can be inferred from the wording of the latter. Thus the judgement in Cowper Essex v Acton Local Board (1889) would still be relevant in qualifying the words ‘other land of the owner’ which appear in section 7. In that case Lord Watson said “………..where several pieces of land, owned by the same person, are so near to each other, and so situated that the possession of and control of each gives an enhanced value to all of them, they are lands held together within the meaning of the Act…….”.
If the land acquired were not contiguous to or ‘held with’ the other land of the claimant, no entitlement to compensation for severance and injurious affection could arise in respect of that other land.
A number of factors could be examined to see if the land taken were ‘held with’ the retained land of the claimant.
- Ownership – In order for the retained land to qualify for compensation it must be in the same ownership as the land acquired. However, the title under which the lands are held does not have to be the same. For example, in Oppenheimer v Minister of Transport [1941] KB 242 freehold land was found to be ‘held with’ an option to purchase other land and in Taylor and Taylor v Sutton and Cheam BC (1951) 2 P&CR 53 an equitable interest in land was found to be ‘held with’ a legal interest in other land. However, in Cooper and Another v Northern Ireland Housing Executive [1981] RVR 131 it was determined that an interest held jointly could not be ‘held with’ adjoining land held in only one of the joint owners’ names.
- Proximity – Although the retained land of the claimant does not have to be contiguous to the land acquired, proximity would be a major factor in determining a link between the lands in question.
- Functional or planning connection – Where there is a functional or planning connection between the land taken and the retained land of the claimant this would be of major relevance in determining whether they were ‘held with’ each other.
- Use to which the lands are put – Whilst the use of the several pieces of land for different purposes would not be fatal to a claim that they were ‘held with’ each other, the claimant would have to demonstrate how the ownership of one piece of land gave additional value to the whole.
A question to ask would be ‘in the absence of the acquiring authority’s scheme, would the lands held in the same ownership be worth more to the owner than the aggregate values of the individual parts?’ Circumstances under which the owner may require the authority to purchase the owner’s severed or divided land are dealt with in Section 15.
3.3 Measure of compensation for severance and injurious affection
Whilst the basis of value for ‘land taken’ is ‘open market value’ (section 5(2) LCA 1961), there is no stated basis upon which compensation for severance and injurious affection should be assessed. Cripps ‘Compulsory Acquisition of Land’ (Eleventh edition – 1962) suggests that the measure of compensation should be ‘value to owner’. Various judicial pronouncements in decided cases also suggest that this would be the appropriate measure of value.
It thus follows that when assessing whether lands of an owner are ‘held with’ each other the same measure of value should be used. Thus the question to be asked is ‘in the absence of the acquiring authority’s scheme, would the lands held in the same ownership be worth more to the owner than the aggregate values of the individual parts?’ Thus the basis of value to be used is ‘value to owner’ not ‘open market value’.
However, in most cases the adoption of ‘open market value’ as the basis of value for the retained land, with and without the effect of the scheme, would provide the correct assessment of compensation in cases of severance and injurious affection.
3.4 Tenants from year to year
Where land is in the possession of a tenant for a year, or from year to year, section 20(2) Compulsory Purchase Act 1965 (as amended by Paragraph 4 Schedule 15 to the Planning and Compensation Act 1991) provides that if part only of such land is compulsorily acquired and the tenant is required to give up possession before the expiration of the tenant’s term or interest the tenant shall:
‘…..be entitled to compensation for the damage done to him by severing land held by him or otherwise injuriously affecting it’.
Consideration can be given to claims for damage done to other land of the claimant in different tenancies and/or other freehold or leasehold land held by the claimant.
(Prior to amendment by the PCA 1991, compensation for severance or injurious affection under section 20 CPA 1965 was restricted to land within the tenancy to which the claim related, and the tenant was unable to claim compensation for damage to land in other tenancies or to other freehold or leasehold land).
3.5 Acquisition of right only
Rights and easements are not interests in land and are not acquired by compulsion. Instead the acquiring authority extinguishes them when it takes entry on the land and the claimant must proceed under section 10 CPA 1965. The claim under that Act would comprise a claim for injurious affection to the claimant’s land caused by the extinguishment of the right.
Some statutes provide the acquiring authority with the ability to create new rights over the claimant’s land. In such cases, the authorising enactment may provide for the adoption of section 7 CPA 1965 as does, for example, the Highways Act 1980. With regard to compulsory acquisition of rights over land generally section 28 of and Schedule 3 to the Acquisition of Land Act 1981 shall apply to enable the compensation for the acquisition of a right to be assessed on the basis of the statutory compensation code.
3.6 No land acquired
See Section 14 as regards compensation for injurious affection in circumstances where no land or right is being acquired from the claimant.
3.7 Valuation date
The same principles apply in respect of the valuation date, and the condition of the land, as are applicable to the valuation of the land taken. For further details see Paragraph 1.3 of Practice Note 1 to Section 2 of this Manual.
3.8 Severance
Severance occurs when part of the claimant’s land is taken. It is not necessary that the claimant’s retained land be divided, although this would possibly serve to increase the damage sustained.
Damage due to severance arises when the land acquired contributes to the value of the retained land and the loss of the land acquired reduces the value of the land retained. The measure of compensation in respect of severance is the depreciation in the value of the claimant’s retained interest arising from the severing of the land acquired from the original whole.
3.9 Injurious affection
Injurious affection to the retained land may arise as a result of the execution and use of the works.
Section 44 LCA 1973 provides that compensation in respect of injurious affection to retained land is to be assessed by reference to the whole of the authorised works and their foreseeable use, not merely those situated on the land taken from the claimant. Where the works comprise a new undertaking, such as a new motorway, there should be little difficulty in giving effect to the provisions. Difficulties may arise in other cases where an existing installation is being altered eg where a highway is being widened. In such cases it is not the intention that the depreciating effects of the existing installation prior to the proposed works should become a fresh source of compensation. In these circumstances the depreciating effect is to be related to the new works to be situated on the land taken and elsewhere.
Because regard must be given to the whole of the new works, it follows that no claimant from whom any land is taken, nor any successor in title, may be paid compensation under Part I LCA 1973.
3.10 Method of assessment
In Abbey Homesteads Group Limited v Secretary of State for Transport [1982] 2 EGLR 198 the Lands Tribunal found that compensation for land taken must, as a matter of law, be assessed separately from compensation for severance and injurious affection to the retained land.
It is the policy of the Valuation Office Agency to have regard to reality so far as possible and not to make assumptions unless specifically required by statutory provisions or decided cases. Accordingly, the value of the land taken under Rule 2 would be properly assessed at the amount which would have been realised if the claimant had sold his interest in the open market as a willing seller. Where only part of the claimant’s land is being acquired the value should therefore be assessed as part of the whole, ie disregarding any diminution in value of the land acquired resulting from its severance from the whole. In this way a claimant will receive, so far as the law allows, compensation for his entire loss.
Compensation for severance and injurious affection should relate to the depreciation in the market value of the claimant’s retained interest. This would be the amount by which the value of the retained land with the scheme is less than the value without the scheme. Although in the Abbey Homesteads case severance and injurious affection were considered as separate heads of claim there is no objection to valuers’ following the normal practice of assessing both together as a single item (by undertaking ‘before’ and ‘after’ valuations).
This more practical approach was adopted by the President of the Lands Tribunal, J H Emlyn Jones FRICS, in Budgen v Secretary of State for Wales [1985] 2 EGLR 203 and was accepted without criticism by the Court of Appeal in R A Vine (Engineering) Ltd v Havant BC [1989] 2 EGLR 15.
3.11 Planning assumptions
The Localism Act 2011 amended the provisions relating to making planning assumptions for the claimant’s retained land. Under (the revised) section 14(4) LCA 1961 ‘appropriate alternative development’ may now extend to ‘the relevant land alone’ or ‘the relevant land together with other land’. Thus a claimant can now demonstrate by means of a section 17 certificate that the land to be acquired (‘the relevant land’) could have been developed, in the absence of the acquiring authority’s scheme, in conjunction with other land even if it could not have been developed in isolation.
3.12 Scheme
Notwithstanding the comments in Paragraph 3.3 regarding the assessment of compensation on the basis of value to owner, generally the value of the retained land ‘without the scheme’ should be its open market value as part of the unsevered whole, having regard to Rules (2) and (4) and disregarding any increase or decrease due to the scheme underlying the acquisition. The phrase ‘as part of the unsevered whole’ should not be taken as precluding prudent lotting and the value has to be consistent with the basis of the value of the land taken.
The value ‘with the scheme’ should be the open market value of the retained land as severed, having regard to Rules (2) and (4) and having regard to all foreseeable consequences of the ‘exercise of the powers conferred by the special act’. The factors to be taken into account must flow directly from the exercise of the powers and must not be too remote. They may flow from the use as well as from the construction of the works and would be by reference to the whole of the works (section 44 LCA 1973). These factors may enhance the value of part and depreciate the value of another part. Again prudent lotting is not precluded.
The compensation for severance and injurious affection therefore represents the difference between the value of the retained land ‘with’ and ‘without’ the scheme.
Following the decision in the Privy Council case Melwood Units Pty Ltd v Commissioner of Main Roads [1979] 1 All ER 161 it is permissible to apply the Pointe Gourde principle to the assessment of compensation for severance and injurious affection as well as for compensation for land taken. Therefore any increase or diminution in the value of the retained land due to matters having developed in a different way because of the scheme should be left out of account (see Section 2, Practice Note 2 for more details regarding ‘the scheme’).
3.13 Consistent basis of assessment
The valuation of compensation for the land acquired and compensation for injurious affection for the retained land must be made on a consistent basis. Although the dispute in Horn v Sunderland Corporation [1941] 2 KB 26 was concerned with disturbance compensation, so that its direct application to questions of injurious affection and severance may be open to challenge, it is considered that the underlying principle cannot be treated as irrelevant in arriving at proper compensation in any situation. ‘Horn’ was relied on in R A Vine (Engineering) Ltd v Havant BC [1989] 2 EGLR 15 as authority for the principle.
Thus, for example, a claim for depreciation in the existing use value of the retained land should normally be resisted to the extent that such depreciation would have been an inevitable consequence of dividing the land for the purpose of realising a price for development purposes for the land taken. In other cases the issue may be more complex, as where the authority’s proposals do not match the basis on which they pay for the land (eg a sewage works to be built on land paid for on the basis of a ‘residential’ section 17 certificate). The invariable objective remains unaltered: to ensure that - within what the law allows - the claimant receives in total compensation no less, but no more, than the claimant’s real loss.
3.14 Increased working costs
The effect of the compulsory acquisition may be to increase substantially the costs of working the retained land. The cost of working the land will however be reflected in its open market value. It is therefore not the increased cost of working the land retained that can be claimed but the depreciation in the open market value of that land following the acquisition. Compensation for the liability of a claimant for the increased costs of working the land comprises injurious affection and not disturbance.
Where accommodation works are provided by an acquiring authority, their future maintenance usually (other than in motorway and railway cases) falls on the claimant from whom land has been acquired. The assessment of compensation to reflect this maintenance liability has been the subject of a number of Lands Tribunal cases over the years.
Claimants sometimes demand payment of commuted sums to compensate for the liability for future maintenance and replacement costs of accommodation works and these can be based on the net present value of the estimated future costs or on the necessary capital sums required to be invested to provide a sinking fund for these costs. Their submitted calculations sometimes also reflect future inflation in costs and the tax status of the claimant.
A simple ‘before and after’ approach to the assessment of such compensation in relation to a large agricultural estate would probably not on its own be sufficient due to the lack of any open market comparable evidence of the ‘after’ value and the Tribunal prefers a method that involves a build-up of various items of injurious affection.
A detailed calculation of the net present value of the estimated future maintenance and renewal costs or of the necessary capital sums required to be invested to provide a sinking fund for these costs is not usually relied upon by the Tribunal. Allowances for inflation in such calculations are not appropriate because the compensation comprises injurious affection, ie a loss in the open market value of land, where inflation has no place. Also the use of dual rate valuation tables with adjustments for tax is not appropriate in such calculations.
Whilst a purchaser of the claimant’s retained land ‘post scheme’ might have regard to calculations concerning the likely future maintenance and renewal costs of the accommodation works, in the end he would make an overall assessment in deciding by how much he would reduce his bid for the land bearing in mind that there could be competitive bidders in the market who might take a more robust approach to the assessment of the reduction in value of the holding due to the scheme.
In Cuthbert v Secretary of State for the Environment [1980] RVR 40, the claimant submitted a ten page calculation to demonstrate that the capitalized future maintenance cost of post and rail fencing (erected as accommodation works) was £418,263 although the claim was ultimately for £225,652 being the cost of erecting stone walls to replace the fencing provided by the acquiring authority. The acquiring authority’s valuer made an overall assessment of injurious affection of £25/acre over 500 acres giving £12,500.
The Lands Tribunal derived no assistance from the claimant’s calculations and said, inter alia, that it did not need to assume any particular rate of inflation and that it was not appropriate to use tax adjusted tables when capitalising the estimated cost of future maintenance. It also stated that it thought that a purchaser of the estate would treat the fencing responsibility as a routine outgoing to be met year by year out of estate income. The Tribunal adopted the acquiring authority’s approach but increased the amount of injurious affection to £50/acre giving £25,000.
In Wilson v Minister of Transport [1980] 1 EGLR 162 the claimant assessed both the future maintenance liabilities for fencing and the increased cost of running the farm by reference to the increased man hours required over a twenty year period. The acquiring authority’s valuer assessed the compensation by reference to lump sums or percentages of value for various parts of the estate. The Tribunal thought that a purchaser, possibly having made some calculations under the different parts of the claim, would make an overall assessment in deciding by how much he would reduce his bid for the land and would have to consider what other competitive purchasers might bid. The Tribunal awarded £7,000 for injurious affection (but provided no breakdown of this figure) against the claimant’s £21,863 and the acquiring authority’s valuer’s £2,441.
In McLaren’s Discretionary Trustee v Secretary of State for Scotland [1987] RVR 159 the claimant assessed the compensation by calculating the capital sum that would need to be invested in index-linked Government stock to pay for the future maintenance and renewal of various accommodation works including fencing, roads, revetments and gates. The required sum was calculated at £147,242. The acquiring authority’s valuer assessed the total diminution in value due to injurious affection (including future maintenance liabilities) by reference to the prime cost of each item of accommodation works which totalled £33,890.
The Tribunal determined that calculations relating to the costs of future maintenance and renewal of accommodation works could be relevant but since the claim comprised injurious affection and not disturbance it rejected the claim based on an inflation-proofed sinking fund. Inflation had no place in the assessment of compensation for injurious affection. The Tribunal stated that it would in the present case be unfair to assess the compensation for injurious affection by reference to the diminution in value of the estate (which covered 10,000 acres and contained a valuable grouse moor) as a whole since this would be simply guesswork. The Tribunal therefore preferred a method that involved a build-up of various items of injurious affection on a ‘before and after’ valuation. The Tribunal ultimately adopted the acquiring authority’s valuer’s approach and, with some adjustments, arrived at £38,100.
3.15 Sound insulation and mitigating works under LCA 1973
a) Sound insulation under section 20 LCA 1933
Section 4(3)(a) LCA 1973 provides that in assessing compensation for injurious affection the valuer should have regard to the mitigating effect of sound insulation under section 20 LCA 1973 as follows:
(i) Mandatory noise insulation under Regulation 3 of the Noise Insulation Regulations should be taken into account in the assessment of compensation under Part I whether installed, offered, or yet to be offered, at the valuation date.
(ii) Discretionary noise insulation under Regulation 4 of the Noise Insulation Regulations should be taken into account if the acquiring authority has agreed to do so at the valuation date.
b) Mitigating Works under section 27 LCA 1973
Section 4(3)(b) LCA 1973 provides that any mitigating works that have been carried out under section 27 should be taken into account. The corollary is that, since the powers under section 27 are discretionary, no account should be taken of any mitigating works if they have not been carried out by the date of valuation, even if the acquiring authority has undertaken to complete them.
Thus account should be taken of any mitigating works as they exist on the date of valuation, if necessary, in their part-completed state.
3.16 Unfit houses
The Local Government and Housing Act 1989 abolished the site value provisions of the Housing Act 1985 with effect from 1 April 1990 and compensation is henceforth to be assessed on the normal compulsory purchase basis.
3.17 Subsequent acquisition of land injuriously affected
Section 8(2) and Schedule 1 LCA 1961 contain provisions to avoid the overpayment of compensation where land being acquired is, in whole or part, land for which compensation in respect of injurious affection has been paid on an earlier acquisition, and such injury would otherwise fall to be disregarded on a subsequent acquisition by virtue of section 6.
For a compulsory purchase of land that is authorised on or after 22 September 2017 section 8(2) and Schedule 1 LCA 1961 have been replaced by the new section 6C which makes provisions regarding the avoidance of double counting where land in respect of which compensation for injurious affection was paid is subsequently acquired.
Section 6C LCA 1961 provides that where:
(a) land (the ‘original land’) belonging to a person is acquired for the purposes of a scheme,
(b) as a result of the acquisition of the original land the person receives compensation for injurious affection in relation to other land, and
(c) the other land is subsequently subject to compulsory acquisition for the purposes of that scheme
the compensation to which the person is entitled as a result of the compulsory acquisition of the other land is to be reduced by the amount which the person received in compensation for injurious affection in relation to the other land as a result of the acquisition of the original land.
This provision applies in relation to a successor who derives title from the original claimant as if the compensation for injurious affection had been paid to the successor.
3.18 Subsequent Part I LCA 1973 claim (section 8 LCA 1973)
Section 8 LCA 1973 provides that land that is severed from land acquired for public works (ie ‘other land of the owner’ within the context of section 7 CPA 1965 and section 63 LCCA 1845) cannot be the subject of the payment of compensation under Part I LCA 1973 in respect of the use of those works whether or not compensation for injurious affection were paid on acquisition.
Since the land might be acquired long in advance of the start of the claim period, and the retained land might have changed hands, or the records might be inadequate, there is a requirement that the acquiring authority shall furnish particulars of the works and the affected land for registration in the register of local land charges. Thus a prospective purchaser is safeguarded against thinking the land carries a right to a Part I claim and should such a claim be made the registered particulars will disqualify it.
Registration is the responsibility of the acquiring authority and is necessary even if no compensation were payable for injurious affection. The Local Land Charges Rules 1977 (SI 1977 No 985) (as amended) prescribe the form to be used for the purposes of registration and every entry must contain:
- sufficient particulars, by reference to a plan or otherwise, of the land affected by the charge
- the name and address of the authority by whom the particulars have been deposited for registration
- the date of registration of the charge
- particulars of the nature and extent of the works for the purposes of which land was acquired by the authority
As there is no question of particulars having to be furnished of any compensation allowed or works or uses taken into account in that connection, there is no need, subject to the following, for the valuer to become involved in the process of registration.
With regard to the information required under (a), the valuer should, upon request from the acquiring authority for whom the valuer has negotiated a settlement, supply the particulars of the retained land which were obtained during the course of the negotiations. Information obtained solely from confidential sources should not be disclosed.
It should be noted that the restriction on the payment of subsequent compensation would apply even if the compensating authority had failed to register the affected land.
Where compensation has been paid for injurious affection section 8(2) LCA 1961 operates to prevent the duplication of compensation that would otherwise occur on a subsequent acquisition of the injured land in that section 6 and Part I of the First Schedule would normally require the diminution in value which gave rise to the injurious affection to be disregarded in ascertaining the value of the land on the second occasion. It should be noted that these provisions are confined to land within the scope of Part I of the First Schedule and do not extend to include other land which might be brought within the common law concept of ‘the scheme’.
In dealing with such cases valuers should first assess compensation on the normal basis and then deduct the appropriate amount already paid for injurious affection on the first occasion.