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11 Aug 2022

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'How Much? – Compulsory Purchase' By Lynch Solicitors Ltd

 “How Much? – Compulsory Purchase” By Lynch Solicitors Ltd

Compulsory Purchase of land – How is compensation assessed?

Where a local authority compulsorily acquires land, any affected person has a right to submit a compensation claim. There are specific headings and rules for assessing compensation.

Severance and injurious affection

Where only part of a person’s land is taken, the part retained may be reduced in value due to the acquisition and use of the land.

In such circumstances, the land is to be valued as part of an unsevered whole unless the landowner elects to have it valued as a separate unit.

Severance

This arises when the loss of the part acquired reduces the value of the part retained.

An example of this would be where a strip of land through a farm is acquired for a by-pass road. This may make the farm less attractive as a unit due to increased working costs and inconvenience.

The damage sustained by the landowner because of severance is fully reflected in the reduced value of the land retained; however, compensation is not limited to such reduction in value and may include disturbance and other matters.


Injurious Affection

Whilst severance is one form of injurious affection; another is the damage to the retained lands because of the exercise of statutory powers on the lands acquired, i.e. the construction of the works.

For example, a new road may obstruct the view from a house on the retained lands and further depreciate the house's value due to loss of privacy, increased noise, dust, fumes etc.

Therefore, the claimant is entitled to compensation for the loss they suffer because of such injurious affection.

How will I be compensated?

Compensation for severance and injurious affection is part of the purchase money and is assessed based on value to the owner.

This means that in addition to compensation for the value of the land taken, additional compensation is provided for disturbance and other matters.

For example, where part of a farm is acquired for a local authority housing development, the claimant may claim for existing use value, compensation for disturbance, severance and injurious affection, or the development value of the land taken. A claimant cannot have both the development value of the land taken and compensation for the depreciation in value of the land retained arising from severance and the development of the housing estate.

Value of the land - the market value

The compensation payable for the acquisition of the land itself is an amount equal to the value of the land or interest at open market value when the land is compulsorily acquired, i.e. the price that a willing seller might reasonably expect to obtain from a willing purchaser.

Factors influencing the market value 

The market value assessment is a matter for a valuer and is often deduced from comparable properties' sales. However, settlement figures agreed with other landowners in a CPO are not evidence of open market transactions.

Factors influencing value will include:

1. Location, area and quality of land;

2. Title and sub-tenure;

3. Market conditions and trends;

4. Type of buildings on land;

5. Size, condition and age of any buildings on the land;

6. Development potential;

7. Availability of services; and

8. Planning history and status

If an agreement as to compensation cannot be reached, the compensation payable is determined by assessment or by arbitration.

The assessment or arbitration process is subject to specific rules.

The “Regard” rules

There are certain matters that arbitrators must take into account when assessing compensation.

* If the acquiring authority enters into a restrictive covenant at the time of acquiring the land, the value of the land is to be calculated concerning that restrictive covenant.

* Where a local authority seeks to acquire un-serviced lands but will ultimately be provided with services, the arbitrator, in assessing the value of the land, would consider the restriction on the possibility of development by the owner resulting from the absence of services.

* Where planning permission was refused or granted subject to conditions, an individual whose interest in the land had been devalued due to the planning decision is entitled to be paid compensation by the planning authority.

The “Disturbance” rule

It has long been established that a claimant has a right to claim compensation for the value of the land to be acquired and compensation for disturbance or personal loss imposed on the owner by the forced sale.

It has long been established that a claimant has a right to claim compensation for the value of the land to be acquired and compensation for disturbance or personal loss imposed on the owner by the forced sale.

The compensation would include all professional fees and outlays incurred for preparing and submitting the claim for compensation and negotiations with the acquiring authority to settle.

Fees incurred after the case has been referred to arbitration are part of the costs of the reference and cannot be included as an additional matter.

The “Equivalent Reinstatement” Rules

In certain circumstances, compensation may be assessed based on equivalent reinstatement plus disturbance rather than open market value plus disturbance.

There are three requirements which must be complied with before the claimant can qualify under this rule:

The land must be devoted to a purpose and but for the compulsory purchase would continue to be devoted to that purpose;

The purpose is one for which there is no general demand or market for land that purpose; and Re-instatement in some other place is intended.

Therefore, properties such as churches, schools and hospitals would be the most common examples of this rule, and arbitrators have the discretion whether to award under this rule.

This is a rather complex area where it is worthwhile to seek the assistance of professionals with experience in compulsory purchase. All property owners have the right to be paid appropriate compensation. While the rules in assessing compensation are not easily applied, they have been the subject of much judicial interpretation and clarification. 

For further advice or if you wish to discuss any other legal area please contact reception@lynchsolicitors.ie or telephone 052-6124344.

The material contained in this blog is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information, we advise you to seek specific advice from us about any legal decision or course of action.

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