Part 2: Betterment
The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.
3.20 General
The term ‘betterment’ in terms of compulsory purchase refers to any increase in the value of a claimant’s retained land resulting from the implementation of a scheme of public works. The recoupment of betterment from landowners has a long history dating back to the rebuilding of London following the Great Fire of London in 1666 and beyond. However, the Lands Clauses Consolidation Act 1845 contained no provisions in respect of betterment although it was referred to in various Housing and Special Acts, and it was not until the Town and Country Planning Act 1959 was introduced that general statutory authority for the recoupment of betterment was established.
General provisions regarding betterment are now set out in the Land Compensation Act 1961. Other Acts contain their own rules (eg Highways Act 1980) and reference must always be made to the particular Act authorising the acquisition to ascertain if special rules apply.
It should be noted that for a compulsory purchase of land that is authorised on or after 22 September 2017 section 32 of the Neighbourhood Planning Act 2017 replaces sections 6, 7, 8 and 9 of the LCA 1961 with revised sections 6A, 6B, 6C, 6D and 6E, and Schedule 1 to the 1961 Act is omitted. Paragraphs 3.21 to 3.22 below refer to the position prior to the coming into force of section 32 of the Neighbourhood Planning Act 2017.
Provisions governing the assessment of betterment (for the compulsory purchase of land authorised prior to 22 September 2017)
3.21 Land Compensation Act 1961
Section 7 of the Land Compensation Act 1961 (LCA 1961) states that there shall be deducted from the compensation otherwise payable the increase in the value of contiguous or adjacent retained land owned by the claimant on the date of service of the notice to treat. The increase is such as described in the first column of Part 1 of the First Schedule to the 1961 Act as is attributable to the carrying out of development specified in the second column of that Schedule.
In order for the betterment provisions of Section 7 to apply, the land acquired and the retained land must be ‘held in the same capacity’. By virtue of Section 39(6) of the 1961 Act this means that the lands in question must both be held by the claimant beneficially, or as trustee of one particular trust, or as personal representative of one particular person.
The words ‘relevant land’ in the first column below refer to the land of the claimant that is to be acquired (ie in respect of which a notice to treat has been served). The development that is to be taken into account is that described in the second column below.
It should be noted that the words ‘other than the relevant land’ where they appear in the second column of Part I of the First Schedule are to be omitted for the purposes of section 7 LCA 1961. Those words are therefore not shown in the Schedule below.
| Case | Development | |
| Case 1 | Where the acquisition is for purposes involving development of any of the land authorised to be acquired. | Development of any of the land authorised to be acquired being development for any of the purposes for which any part of the first mentioned land (including any part of the relevant land) is to be acquired. |
| Case 2 | Where any of the relevant land forms part of an action area or an area of comprehensive development. | Development of any land in that area in accordance with the development plan. |
| Case 3 | Where on the date of service of the notice to treat any of the relevant land forms part of an area designated as the site of a new town by an order under the New Towns Act 1965. | Development of any land in that area in the course of development as a new town, and any ‘public development’ specified under section 51 LCA 1973. |
| Case 3A | Where on the date of service of the notice to treat any of the relevant land forms part of an area designated as an extension of the site of a new town by an order under the New Towns Act 1965 becoming operative after the date of the commencement of the New Towns Act 1966. | Development of any land included in that area in the course of development as part of a new town and any ‘public development’ specified under section 51 LCA 1973. |
| Case 4 | Where any of the relevant land forms part of an area defined in the current development plan as an area of town development. | Development of any land in that area in the course of town development within the meaning of the Town Development Act 1952. |
| Case 4A | Where any of the relevant land forms part of an area designated as an urban development area by an order under section 134 of the Local Government, Planning and Land Act 1980. | Development of any land in the course of the development or redevelopment of that area as an urban development area. |
| Case 4B | Where any of the relevant land forms part of a housing action trust area established under Part III of the Housing Act 1988. | Development of any land in the course of the development or redevelopment of that area as a housing action trust area. |
The effect of the above provisions is that in arriving at the value of the relevant land in the circumstances set out in the first column no account shall be taken of any increase or decrease in its value attributable to the actual or prospective development of such other land as is specified in the second column except to the extent that such development would be likely to take place in the absence of the compulsory purchase order, development area, new town etc. In this context, development includes the clearing of land. The development to be disregarded is only that taking place within the area of the CPO/new town etc.
Section 8(5) of the Land Compensation Act 1961 states that the betterment provisions of Section 7 shall not apply where specific statutory betterment provisions are contained in the particular Act authorising the acquisition (eg Highways Act 1980).
3.22 Date for assessment of betterment
The date for the assessment of betterment in the above provisions is the date of entry (Esso Petroleum Ltd v Secretary of State for Transport (2008) ACQ/143/2006).
3.23 General
Section 32 of the Neighbourhood Planning Act 2017 introduced revised statutory provisions for the assessment of betterment. Section 7 and First Schedule LCA 1961 have been replaced with the new section 6B LCA 1961. The new sections 6A, 6D and 6E governing the definition of ‘the scheme’ are also relevant to the assessment of betterment and these are dealt with in Section 2 of this Manual.
3.24 Lower compensation if other land gains value
Section 6B LCA 1961 applies where:
- (a) a person is entitled to compensation for the compulsory acquisition of land (the ‘original land’) for the purposes of a scheme
- (b) on the date the notice to treat is served in respect of the original land, the person is entitled to an interest in other land (the ‘other land’) which is contiguous or adjacent to the original land
- (c) the person is entitled to the interest in the other land in the same capacity as the person is entitled to the interest in the original land, and
- (d) the person’s interest in the other land has increased in value as a result of the scheme
The amount of compensation to which the person is entitled in respect of the compulsory acquisition of the original land is to be reduced by the amount of the increase in the value of the person’s interest in the other land as at the relevant valuation date (determined in accordance with section 5A LCA 1961).
An amount by which the other land increases in value may not be set off against compensation payable to the person (for the original land or otherwise) more than once.
If the other land is subsequently subject to compulsory acquisition for the purposes of the scheme, the compensation to which the person is entitled for the other land includes the amount which was deducted from the person’s compensation for the original land (2) (despite the no-scheme principle).
If part only of the other land is subject to compulsory acquisition, the compensation to which the person is entitled is to be reduced accordingly.
‘In the same capacity’ in (c) above means that the lands in question must both be held by the claimant beneficially, or as trustee of one particular trust, or as personal representative of one particular person (section 39(6) LCA 1961).
These provisions apply in relation to a successor who derives title from the original claimant as if the original land had been acquired from the successor.
3.25 Highways Act 1980
Please note that the betterment provisions of 261 of the Highways Act 1980 are specifically excluded from the changes to the betterment regime made by section 32 of the Neighbourhood Planning Act 2017.
The betterment provisions contained in the Highways Act 1980 are more restrictive than those of the Land Compensation Act 1961. Section 261 of the Act provides that in assessing the compensation payable in respect of the compulsory acquisition of land by a highway authority, regard shall be had to the extent to which the remaining contiguous lands belonging to the same person may be benefited by the purpose for which the land is authorised to be acquired. It should be noted that the remaining lands of the claimant must be contiguous to the land acquired in order to come within the scope of the provisions. The section does not state (unlike section 7 LCA 1961) that the claimant’s contiguous land must have been held on the date of service of the notice to treat but this would appear to be a reasonable assumption.
In the case of Cooke v Secretary of State for the Environment (1974) 27 P&CR 234 the Lands Tribunal determined that betterment could only be offset under (what is now) section 261 where the remaining contiguous lands of the claimant were benefited as a direct result of new or improved access from the highway. This was followed by Portsmouth Roman Catholic Diocesan Trustees v Hampshire CC (1979) 40 P&CR 579 in which the Tribunal stated that the grant of planning permission was not the kind of benefit to which regard should be had in such cases. However, the subsequent decision of the Lands Tribunal in Leicester City Council v. Leicestershire County Council [1995] 2 EGLR 169 significantly widened the application of set off for betterment under section 261. In that case the Tribunal’s composite dictum ran as follows: “….the purpose of..the..Act was to set off any value which the land would have, particularly for development purposes, by reason of having a new or improved access to it…..or any enhanced capacity in the local highway network to facilitate development of the retained land”.
This means for example, that if the provision of the new highway directly resulted in the grant of planning permission for the development of the remaining contiguous land of the claimant (for example, where the planning permission contained a condition that development could not commence until the highway had been completed), even though there was no new access directly from the highway to that land, the provisions of Section 261 would apply.
In cases where Section 261 does not apply, eg where the claimant’s remaining land is not contiguous to the land acquired, it would be appropriate, in assessing the extent of injurious affection to the other land of the claimant under Section 7 of the Compulsory Purchase Act 1965, to have regard to any benefit arising from the scheme, even if such benefit did not fall within the provisions of section 261 (see Practice Note 1 of Section 3 to this Manual). This would be taken into account automatically where a ‘before and after’ valuation of the claimant’s retained land took place.
3.26 Part I Land Compensation Act 1973
Section 6 of the Land Compensation Act 1973 provides that the compensation payable on a claim shall be reduced by an amount equal to any increase in value of the land in respect of which the claim is made and of other contiguous or adjacent land to which the claimant was entitled in the same capacity on the relevant date that is attributable to the existence of or the use or prospective use of the public works to which the claim relates.
‘In the same capacity’ in the above paragraph means that the lands in question must both be held by the claimant beneficially, or as trustee of one particular trust, or as personal representative of one particular person (section 6(5) LCA 1973).
The extent of the ‘public works’ or scheme will be a matter of fact in each case. In Clarke v Shropshire CC (LT REF/128/94) it was held that works carried out in the first phase of a scheme under separate funding and under a separate contract three years before the second phase, formed part of ‘the public works to which the claim relates’, but only insofar as those works were necessary for the construction of the road as subsequently built.
It should be noted that the betterment to be taken into account is not merely that due to changes in the ‘physical factors’ as defined in the Act but also that resulting from the existence (ie physical presence) of the public works.
In Hallows v Welsh Office [1995] 1 EGLR 191 the Lands Tribunal determined that, although the property in question suffered ‘new’ noise from a newly constructed bypass, its changed situation, formerly on a through-road but by reason of the public works now in a cul-de-sac, meant that overall it had suffered no depreciation in value, and accordingly no compensation was awarded.
The ‘relevant date’ means the date that the highway was first open to public traffic or in respect of other public works, the date on which they were first used after completion.
3.27 Subsequent acquisition of land previously subject to betterment under Land Compensation Act 1973.
Section 6(3) LCA 1973 provides that where land is acquired in respect of which an increase in its value was previously taken into account under section 6 LCA 1973 (betterment), that increase shall not be taken into account by virtue of section 6 LCA 1961 or left out of account by virtue of section 7 LCA 1961 (or any corresponding enactment).
In respect of the compulsory purchase of land authorised on or after 22 September 2017 reference to section 6 LCA 1961 and section 7 LCA 1961 in section 6(3) LCA 1973 has been replaced by ‘section 6A’ and ‘section 6B’ respectively. This change was made by virtue of section 32 of the Neighbourhood Planning Act 2017.