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Advance Payments
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What is the Problem | An advance payment made in accordance with statute will only be paid when, or after, possession is taken by the acquiring authority. Claimants therefore commonly have to fund their own relocation costs/mitigation costs etc. before recovering even a portion of them. This can cause undue stress and economic hardship, particularly to individuals and small businesses. In extreme cases it can make relocation impossible. A further aggravating factor is that acquiring authorities do not always make advance payments within the 3 month period required by statute. The explanation often given for delayed payment is that claimants have not provided sufficient information to enable an assessment of compensation upon which an advance payment can be based. |
Aim | To widen the potential to make advance payments in advance of taking possession so that they can provide material funding assistance to claimants. To create a prescribed form of request or claim for advance payments To create a mechanism for enforcing the making of advance payments by acquiring authorities. |
What We Seek | Focused attention on this issue in the light of the above. |
Notes from Discussion | The key issue is re business relocation and generally the information submitted with the claim is incomplete or of too poor a quality in order to be able to make an assessment of the size of the claim. A better way to deal with the disadvantage to the claimant may be to provide for the cost of bridging finance to be included in the claim. There is an ability to make advance payments before vesting of the land but are restricted from doing so. Support expressed for CPA proposals. Reference of any dispute re level or timing of advance payments to the Tribunal is unlikely to be a useful way of resolving such disputes and an alternative (ADR?) is needed. It is the norm that claimants do not provide the necessary information so should have a standardised pack of information that claimants have to provide if they wish to apply for an advance payment – this would help to improve the working of the system. |
Next Steps/Actions | Primary Legislation in next major reform package |
The Problem
The experience of the CPA and its members is that advance payments by acquiring authorities are not made within 3 months as required. In the most extreme case of non-payment which has come to the Association’s attention, a claim for compensation had been made to the (then) Lands Tribunal and the acquiring authority had made a “sealed offer” (in effect an offer of settlement) in the sum of more than £1m but had made no advance payment under section 52 despite being requested to do so.
The purpose of advance payments is to put the claimant in a financial position, so far as is possible and as early as is possible, so that it can re-order its affairs and go about its life with the minimum of disruption. In the majority of cases the claimant will find it necessary either to move to house, if their home is acquired, or to move to other business premises, in order to avoid closure of their business.
In either case, as a move must necessarily take place at the time of dispossession, it follows that the majority of claimants are forced to fund their relocation as best they can before receiving any compensation and indeed in advance of receiving any advance payment. Where residential properties are subject to a mortgage, delay in the making of an advance payment can create further financial difficulties.
In the context of promoting economic growth, which is the fundamental objective underpinning the Growth and Infrastructure Bill, it goes without saying that property owners and businesses should not be subject unduly to unnecessary financial stress and disruption.
The Solution
The legislation should include additional provisions as follows:
Prescribed claim form
The written notice requesting an advance payment under section 52 should be in a prescribed form and have prescribed content such as, for example, claim forms under Part 1 of the Land Compensation Act 1973.
The prescribed content of the advance payment request should balance the needs of the authority for reasonable information with the level of information a claimant can practically be expected to provide in the early stages of a claim. A potential and beneficial side-effect of a prescribed procedure could be that negotiations might be shortened by incentivising claimants to provide a more fully reasoned claim together with supporting evidence earlier on in the process.
Mechanism for enforcing making of payments by acquiring authorities
Section 52 in its current form lacks any “teeth”. There is no mechanism whereby a claimant can require an acquiring authority to pay an advance payment except by seeking a mandatory order in judicial review proceedings which would be likely to take many months to progress through the courts. Section 52 needs to be amended so as to provide an enforcement procedure whereby an acquiring authority can be ordered by, say, the Upper Tribunal (Lands Chamber) to make an advance payment on the Tribunal being satisfied that the acquiring authority has been provided with the required detail identified by the prescribed notice of claim.
Advance payment before taking of possession
As noted above, an advance payment is only made once possession is taken. Where a business is relocating in advance of possession however, it will often be incurring substantial up-front expenditure which the present regime expects the business to fund itself, recovering such items of cost which are compensatable under the statutory compensation code once possession has been taken. But in present economic circumstances, a business may find it impossible to borrow sufficient money to fund its relocation. Home and property owners also face similar problems, although without an interruption of their business.
Section 52 needs to be amended so that acquiring authorities can make advance payments of compensation before possession is taken, thereby assisting those relocating to do so with the minimum of stress and financial burden.
Conclusion
Section 52 of the Land Compensation Act 1973 should be amended to provide for:
- A prescribed form of request or claim for an advance payment of compulsory purchase compensation;
- A mechanism for enforcing the making of appropriate advance payments by acquiring authorities;
- The making of an advance payment in advance of possession being taken.