Episode 4: Compulsory Purchase Orders: Powers, Process and Practicalities

[Music]

Michael

Hi everyone and welcome to this episode of the Sharpe Five podcast series. In today’s episode we're talking about compulsory purchase orders or CPOs. And joining me today is Nick Grundy KC from Five Paper. Nick is a barrister specialising in both public and property law matters. And my colleague Francesca Gallagher, from our real estate team at Sharpe Pritchard. Francesca specialises in compulsory purchase and land assembly.

The first question is particularly interesting to me as a construction lawyer with little knowledge of CPOs. Francesca, what do we actually mean by CPOs?

Francesca

Hi, Michael. So, A CPO is essentially the legal mechanism which allows an acquiring authority to obtain private land from a landowner without the owner's consent and where there's a compelling case in the public interest. In practice, it's essentially a land assembly tool and used to unlock projects that matter to the public, whether that be for regeneration purposes, housing, infrastructure, education or other community purposes.

Important to point out that it's a very draconian power and there is some clear guidance which has been drafted by the Ministry of Housing, Communities and Local Government back in January 2025, which sets out that it should always be intended as a very last resort and negotiation before a CPO is always key.

Michael

And I suppose, can anyone use a CPO? I mean, for example, I quite like the look of my neighbour's house sometimes? Could I go along and say, can I purchase your house, please? Or is it confined to only certain bodies that can use CPOs?

Francesca

Sadly not, I'm afraid. So, CPOs are most commonly something you see used by public bodies, particularly local authorities, but it's really important to remember that a CPO is not just a general power, which any acquiring authority can reach for, but the power has to be conferred by Parliament. So, the real starting point is always identifying the right enabling power. In other words, this would be a specific statute that gives that acquiring authority the legal right to acquire land without the owner's consent. And it's not just local authorities either, central government bodies use CPOs for, for example, big national infrastructure projects. In some cases, private or more arm's length delivery bodies can be involved in promoting or delivering schemes.

Nick

Can I leap in there? So HS2 has been given, HS2 Ltd has been given CPO powers. That's one that we're all very familiar with. And partly a lot of the overspend is a result of them having to use or fund to compensate people against whom they are using their CPO powers.

Michael

Thanks, Nick. And are there any other examples of when a CPO might be used? I mean, HS2 is a good one, but I suppose if you look back at some of the bigger projects for the last 20 years nationwide, what kinds would have used CPO?

Francesca

Yeah, I suppose a good example to point out here would be the London 2012 Olympics. There was obviously a lot of regeneration which went on in the mid-noughties to, you know, 2012. And I believe the acquiring authority for the Olympics was the London Development Agency, and I think they were granted their powers under the Regional Development Agencies Act. So that was their enabling power, which enabled them to go forward and take forward that redevelopment. And yeah, I suppose the Olympic park is the result of that.

Michael

And that's quite a big example, likewise, HS2. Is there any kind of smaller examples where we might use the CPO?

Francesca

Yeah, so local authorities use CPOs, you know, very regularly on a much smaller scale. So, a council for example, may use its housing powers to bring empty or substandard properties back into use or more focused powers to deal with any derelict or neglected lands and improve the condition of an area, for example. So yeah, the thing with the CPO process is it's not a one-size-fits-all. It's a very big range of, different projects, and it's the first legal question is always... What is the purpose of the scheme and what is the most specific and appropriate statutory power for achieving that end goal?

Michael

So, with that in mind, Nick, if you are a public body that's looking to use a CPO for, say, one of the kinds of projects that Francesca mentioned, what should you be doing?

Nick

So as Francesca said, CPOs can be used for a wide range of different projects or schemes. And one of the things you have to do is establish that that is the only way in which the land can be accumulated for the purpose of the project. So, we don't see them quite so often when we're dealing with small local authority projects because they might be able to acquire the land without using a CPO. But once you've decided that you're not going to be able to acquire the land for your scheme, you have to prepare effectively a justification for a CPO.

So, what happens is that the acquiring body, which is the body that has the statutory power to apply for a CPO, has to persuade a minister to confirm the CPO. And you can imagine that there's a lot of political pressure on ministers to only justify those CPOs which are going to be in the public benefit. So, the public body seeking a CPO must prepare a statement of reasons justifying the use of its CPO powers. As Francesca said, there are a wide range of powers in different acts and what the acquiring body has to do is identify the appropriate power for this CPO scheme. Then it must outline its purpose in seeking to acquire the land. So, what does it see as the end result of the project? That's a justification.

It has to establish that it's financially viable and the sources of funding. This can often create time problems because funding might be time limited if you're seeking it from a funding body. The authority has to carry out public sector equality duty consultation and other consultation and has to give people an opportunity to object to the making of the CPO. So, in effect it prepares what we as lawyers might think of as a pleading, a pleaded case, which is going to go to a minister and the minister decides whether or not to grant or confirm the CPO power.

Michael

So, you mentioned funding, now obviously a kind of a key determinant of the funding you will need will be how much money you need to actually make the purchase. So how is a purchase price actually determined under a CPO?

Nick

So, there are four aspects to the price that is paid for any particular parcel of land or any interest in land. It's not just freeholders who are entitled to compensation, it is lessees as well. The 4 aspects of compensation, three of them I would describe for lawyers as being like special damages, and one of them is a bit more like general damages.

So, the first is the market value of the land, and that's usually not very difficult to establish, that's done by land value experts.

The second aspect is disturbance payment, and that's a payment for the loss caused by reason of the person who's the owner of the land losing possession of the land at a time at which they hadn't intended to. So that might be removal costs, costs of purchasing other property if the whole of their land is being purchased.

The third aspect of special damages is something which is referred to as severance or injurious affection. This arises where the compulsory purchase order only applies to part of a person's land so that they retain some of the land. A very good example is a farm where the compulsory purchase order, let's say for example, for HS2 requires a strip of land through the farm and therefore separates the retained parts of the farm. It’s easy to see that that could cause additional loss, over and above the market value of the land purchased under the compulsory purchase order. For example, if the farmer was unable to get from one part of their retained land to the other, or if the farm is only economically viable if the farmer has all of the original 200 acres rather than 150 acres split in two, that is a case in which a severance payment could arise.

And then the final element, which we as lawyers might think of as general damages, are loss payments for the distress and inconvenience of being required to sell and or relocate from property. So, what happens is that the compensation payments can be quite significant.

Michael

Yeah, I mean, injurious affection sounds like a painful process, an interesting term to use.

Nick

So, Michael, very often the other elements of the compensation are not really disputable. They're within 10-5% ranges of one another and can be, it's cheaper to agree them than to dispute them.

Michael

Yes.

Nick

The injurious affection often requires significant expert evidence.

Michael

Yes, I suppose appropriately titled in that case then. I suppose on that point, how much can landowners, whether that be a freeholder or a leaseholder, can they contest the CPO? And I suppose by that, I mean, can they resist one entirely? and or can they kind of challenge the purchase price that's proposed or the compensation that's proposed to kind of get themselves a better outcome?

Nick

So, dealing with the first of those, once the CPO has been confirmed by a minister, it is very, very difficult to prevent the CPO from being acted upon.

Michael

Yes.

Nick

You can, landowners can contest the making of a CPO, and this is referred, they're referred to in the CPO jargon as objections. But the problem is that the objections are very similar, there's a very similar test to that in judicial review.

In effect, you have to show that the acquiring authority or the minister has acted outside the range of reasonable decisions in making the CPO. So, once it's made, very, very difficult to contest.

Michael

Yeah, so you're looking more to challenge the amount of compensation offered or purchase price offered?

Nick

Landowners against whom a CPO is effective so that the acquiring authority has the right to purchase their land, pursuant to the CPO, can challenge the price that they're being offered. I've told you about the four elements of the compensation payments that are made. Landowners generally will negotiate and there will be experts on either side, but if the landowner feels that they're not being offered appropriate compensation, they have the right to apply to the upper tribunal, for a determination of what the appropriate compensation is.

Michael

And that process, does it look like kind of most kinds of property litigation or is it very different?

Nick

It's different to other property litigation. It's very expert evidence heavy. In fact, it can be done on the face of the papers, so without a hearing at all. The upper tribunal judges are very good at it. So, it's not a situation in which there is usually any cross-examination of civilian witnesses.

Michael

Yeah, so it's adversarial, but mostly on the kind of expert evidence basis rather than sort of basis of fact.

Nick

Absolutely.

Michael

Okay. And in your experience, Francesca, is there a typical outcome to these kinds of litigation? Does it go the full 12 rounds or do the parties tend to settle before they get to the conclusion of formal proceedings?

Francesca

So ultimately, most CPOs which are confirmed, and even when objections are made, and even if a CPO does go to inquiry because of those objections, it's very rare that the CPO is overturned, and the more likely result is a negotiated settlement. And as Nick pointed out before, in regards to compensation, the compensation is that the individual will get is much larger than the market value. And I think often this is the point which does encourage the parties to settle. And just to go back to the guidance, which I touched on before, the idea of negotiation is key. And even if a CPO does go to inquiry, parties are encouraged to continue that negotiation process. And I think the guidance also mentions that parties should continue to mediate outside of that inquiry courtroom, essentially. And the guidance also encourages early neutral evaluations to help save time, costs and stress.

Michael

Yeah, I mean, we've kind of talked through a process which good views for the lawyers sounds quite complicated and quite drawn out. And I suppose related to that, should authorities be looking at the CPO as kind of a last resort? And if so, what other options can they explore before going down the CPO route?

Francesca

So, the current government guidance says that acquiring authorities should use CPO powers where it is expedient to do so, and where there is a compelling case in the public interest. Acquiring authorities must also take the reasonable steps to understand the impact on affected parties and attempt to acquire the necessary land and rights by agreement. In practice, this essentially means starting engagement early and exploring voluntary acquisitions, land exchanges or other commercial agreements with the landowners.

Acquiring authorities could also consider whether the scheme design or the extent of the land being acquired could be adjusted and whether relocation support, accommodation works or other mitigation could reduce the impact on residents, businesses and landowners. Sensible and realistic offers are also important, and the acquiring authorities can take account of any legal, administrative and delay costs that an early settlement may be able to avoid. However, the acquiring authority does not have to wait until every negotiation has failed before starting the CPO process and because the statutory process can be lengthy, negotiations and CPO preparation can actually run in parallel, provided the authority remains genuinely willing to reach an agreement.

Ultimately, the acquiring authority should be able to demonstrate that it is properly considered realistic alternatives, undertaken meaningful engagement and identified the likely impacts of the proposed acquisition together with appropriate mitigation. And it must also be able to show that the scheme is sufficiently viable and deliverable and that the public benefits justify the interference with private property rights.

I don't know if you've got anything else to add to that, Nick?

Nick

Yeah, I agree with that, Francesca. I would say that the rigour, the process of making your CPO application, preparing your documents that would go to the minister is very, very helpful in determining what your negotiating positions might be before you apply for the CPO. So whilst you don't have to go for the CPO, the process of preparing the documents that you would prepare if you were going to a CPO is very helpful. The guidance also really encourages acquiring authorities to consult with the general population, not just the people who might be subject to the CPO. to tell them about the project that they're doing and try and get public support for it. So that's also something to bear in mind as you're going along. I have come across cases where regeneration schemes for old and tired social housing, rather than going through a CPO route, what the local housing authority has done is offered people housing in the new redeveloped estate and then carried out the redevelopment in a phased way and given people first choice of the new accommodation. And that generally works out as cheaper than all of the costs involved in getting a CPO.

Michael

Yes, that's interesting. So in your experience, there is kind of off ramps, this process that often authorities will go, let's try CPO. And in that process, they kind of think, well, hang on a minute, is there alternatives that we can explore?

Nick

Yes, and you have much more opportunity to be imaginative in the solutions that you think about. All you're going to do in a CPO is give somebody the money, whereas they might If they have bought, say, their flat under the right to buy, so they own a leasehold interest, their leasehold interest might not be worth enough to buy a flat in a similar part of London. But if you're offering them a flat in the new, a leasehold of the new development, then that's something that might be more attractive to them.

Michael

Yeah, and I guess, Francesca, when authorities are thinking about regeneration schemes, it's important to have local residents kind of on board throughout the construction and thereafter. And I suppose, CPO or avoiding CPOs can perhaps create better conditions for those more positive relationships to continue.

Francesca

Yeah, definitely. Yeah, I was working on a CPO recently. And, you know, before the council even got to the point where they made the CPO, there was, you know, a lot of meetings that went on with the leaseholders in this, you know, building, which was going to be knocked down and redeveloped. And, you know, there was a lot of engagement with these individuals on a personal level to understand their needs and the way in which the local authority could help them to the best way possible. So it is a very draconian power and I think that's the overarching thing that needs to be at the forefront of everyone's mind in these sorts of situations and it's connecting with people on that personal level to make sure that you are engaging with them and seeing what works specifically for them. And you don't ignore those points because it's people's lives at the end of the day.

Nick

I just wanted to echo one thing that Francesca said, which is about the guidance which is issued by the Ministry of Housing, Communities and Local Government. Unlike a lot of government guidance, it's really, really good. So do have regard to it if you are thinking of carrying out a CPO. It gives you, it hand holds you through the whole process. and tells you about the things that you have to have regard to in pursuing a CPO.

Michael

Well, a recommendation for further reading is probably a good point to end there. Thank you both, Jessica and Nick. That was really interesting. I certainly learned a lot about CPOs, and I hope those of you listening did as well. Thanks very much. Bye.