Compulsory Purchase Reform in Scotland

There is very little legislation about how to make a claim for compensation for compulsory purchase.

When a NTT is served, people on whom they are served are asked to provide details of their interest in the land and their claims. For a GVD, there is a form requesting the person's name and address and information about the land. Some acquiring authorities have created their own forms to collect information to assess the compensation due.

It has been suggested that legislation should clearly require authorities to advise those on whom notices are served of their rights to compensation and the process for claiming it. Updated wording for notices and improved forms to obtain better information could potentially be prescribed in secondary legislation or set out in guidance.

Some stakeholders have suggested that acquiring authorities should be more transparent about the assumptions underlying their own estimates of potential compensation. Greater openness on both sides might enable a more collaborative approach to negotiation.

Another suggestion is that the system could be changed to require the acquiring authority to offer compensation as the first step, rather than requiring the owner to claim it. 

The time limits for claiming compensation and applying to the LTS to resolve any disputes vary between use of NTT and GVD, and some are clearer for one than the other. 

For GVD, a claim for compensation can be made from the date on which the GVD is made, and an application to the LTS, to resolve any dispute, can be made after 30 days from that date. In chapter 7 we have suggested that the new CPVD procedure should allow a minimum of six weeks between making the declaration and the vesting date. To avoid any discrepancies, we suggest that in the new system, the earliest date for application to the LTS should be the date of vesting.

There is no end date for claiming compensation. Although late or missing claims are rare, this could cause difficulties for both parties. The acquiring authority is left with an open ended liability for payment. The claimant could end up with a claim too late to be referred to the LTS, which could remain unresolved indefinitely. (The time limit for bringing cases to the LTS is six years.) However, where a person's property has been taken through compulsory purchase, it may not be appropriate to set a time limit on their right to compensation.

In summary we propose that:

• a claim for compensation can be made from the date on which the CPVD is made
• there should be no final time limit on when claims can be made
• an application can be made to the LTS from the date of vesting
• the last date on which an application can be made to the LTS is six years from the date of vesting
• the LTS should have discretion to allow late applications if the applicant can show that they were not previously aware of the CPVD

When using a GVD, an acquiring authority can take title first and compensation is agreed later. To avoid claimants being out of pocket and allow them to relocate, acquiring authorities are required to make an advance payment of compensation where one is requested. The amount of an advance payment is 90 percent of the level of compensation as either agreed by the parties or estimated by the acquiring authority.

Any advance payment must be made within three months of the date of request, or, if later, on the date on which the acquiring authority take possession. It may be helpful for acquiring authorities to be able to make advance payments before taking possession, on a discretionary basis. It is not currently clear whether all acquiring authorities can do so.

Advance payments cannot currently be made to heritable creditors. If the land is subject to a heritable security (mortgage), the advance payment to the claimant is reduced by the amount the authority considers they would need to pay off the security. This could make it difficult for a claimant to relocate if their property is subject to a security which they cannot pay off. 

We consider it would be helpful to provide that where the landowner and heritable creditor both agree, an advance payment can be made to the creditor, and the landowner receives any balance after the amount needed to release the creditor's interest.

The key concern that has been raised over advance payments is that acquiring authorities may be late in paying them. There is currently no way for the claimant to enforce payment, short of judicial review or taking a case to the Scottish Public Services Ombudsman.

Options suggested include giving the courts a limited statutory power of enforcement, or allowing the LTS to provide an enforceable valuation figure. However, both of these could be considered too slow and cumbersome to be effective. Another option is for penalty interest payments to be made to claimants where an advance payment is not paid within the required timescale.

Interest is payable on the amount of compensation from the date of vesting until the compensation has been paid in full. If an advance payment has been made, it reduces the amount of interest significantly - the advance payment is 90% of the estimated compensation, so once that has been paid, interest is only due on the outstanding 10%.

An acquiring authority's duty to pay an advance payment only arises where it is requested by a claimant. Authorities may wish to proactively offer an advance payment after taking possession. If this offer was made in writing but not taken up, the interest could be capped to the amount payable on 10% of the proposed compensation. This could help acquiring authorities who are willing to make advance payments.

Interest is payable on compensation between the date of vesting and the date when payment is settled. The method for determining the rate of interest is set out in regulations. It is currently 0.5% below the standard rate. The standard rate is the median of the base rates set by the seven largest UK banks.

We are interested in views on whether the general interest rate for compensation should be increased, so that it is at or above the standard rate. Some stakeholders have made reference to the amounts charged on overdrafts and even higher rates charged on loans taken out in the absence of advance payments, or the rate payable under the Late Payment of Commercial Debts (Interest) Act 1998 (“statutory interest”) – currently base rate plus 8%. There has also been support for charging compound interest where payments are late.