Bishopsgate principle - Compulsory Purchase Association

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Reform of Bishopsgate principle


What is the Problem

The case of Bishopsgate Space Management Ltd –v- London Underground Ltd considered the occupier’s to compensation under section 20 of the Compulsory Purchase Act 1965. It was held that it was necessary to make the assumption  that a  landlord would terminate the tenant's interests at the first available opportunity following notice to treat, whether or not that would happen in reality and thereby severely reducing the compensation to which such an occupier would be entitled. The decision creates a situation where an occupier with no formal interest in the land it occupies may be better off in terms of its compensation entitlement than one occupying under a formal lease.

Aim

Remove apparent unfairness of S20 of the Compulsory Purchase Act 1965 (as recommended by the Law Commission) for short term tenants  and  lessees with a break clause in their leases

   

What we seek

Focused attention on this issue in the light of the above.

Notes from discussion

Is the concern that the AA pays more in compensation to the freeholder?

The real injustice is on the value of the business.
An experienced surveyor should be able to take account of the prospect of lease renewal when valuing the interest.
The problem is that the two different parts of the LCA are in direct conflict on this matter.

The expectations of the business to continue in occupation should be taken into account in valuing the interest.  
Agree with the general principle put forward by the CPA but when you disregard the scheme you also have to disregard the Landlord’s right to terminate the lease so should there not be a consistent approach re the occupier’s right to renew?

Next Steps/Actions

Fairness and consistency require that the law be amended to bring the losses to businesses caused by a CPo into line with other recoverable losses. This topic should be covered in any major reform package


The case of Bishopsgate Space Management (BSM) dealt with the entitlement to compensation under section 20 of the Compulsory Purchase Act 1965. It held that you should assume that the landlord terminates the tenant's interests at the first available opportunity following notice to treat whether or not that would happen in reality. On the face of it a lessee with an excluded lease of 20 years unexpired with a 6 month landlords break clause has a lesser right  to compensation than a licensee.

The President of the Tribunal did comment on section 37 of the Land Compensation Act 1973 comparing the entitlement to compensation under it with the entitlement under section 20 of the Compulsory Purchase Act 1965, with which the case was primarily concerned. At paragraph 67, of the BSM case  the President said:

"We should also note the particular provisions contained in section 37 and 38 of the 1973 Act for payment of compensation for disturbance where no interest is acquired.  There is an entitlement to such compensation where a person in lawful possession is displaced in consequence of the acquisition of the land by an authority possessing compulsory purchase powers.  A disturbance payment covers both removal expenses and, where the person was carrying on a trade or business on the land, the loss sustained by reason of the disturbance of the trade or business consequent upon his having to quit the land.  It is expressly provided that, in estimating such loss, regard is to be had to the period for which the land occupied by the claimant might reasonably have been expected to be available for the purpose of his trade or business."

It is clear, therefore, that the BSM principle does not apply to occupation of land pursuant to a licence for the purposes of section 37 of the 1973 Act.  Section 38(2) provides that regard shall be had to the period for which the land occupied by the claimant may reasonably have been expected to be available for the purpose of his trade or business and there is no such similar wording in section 20 of the 1965 Act

The President in BSM and commented: "section 37(2) gives mere licensees a more generous compensation than is available to holders of short tenancies under section 121 of the Land Clauses Consolidation Act 1845 and since 1965, section 20 of the Compulsory Purchase Act 1965 which replaced it."

 
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