Blog: Friday 12th September - Bevan Brittan, Corporate Partner

Disapplying Hope Value in CPOs

There have been many updates to the compulsory purchase system over the past decade, but none have generated as much interest and controversy as the new power introduced by the Levelling-up and Regeneration Act 2023 to disapply, in certain circumstances, “hope value” when making a compulsory purchase order (CPO).

The Act introduced the power for promoting authorities to include a direction in a CPO which has the effect of removing “hope value” from the statutory compensation package to be paid to affected landowners.  The change came into effect on 30 April 2024 but, so far, has been little used.

What is Hope Value and why does it matter?

Traditionally, compensation for land acquired by CPO includes both existing use value and any additional value attributable to the prospect of future planning permission.  It is the extra slice of cash that a purchaser may pay for a site with prospects of achieving planning permission which is the "hope value". 

When making a CPO, the authority may not know if land benefits from hope value, making it hard to predict exactly how much the land will cost until maybe years after it is acquired.   This uncertainty can put authorities off using their compulsory purchase powers.  Along with increased certainty, the reforms are aimed at making CPO cheaper, with promoting authorities able to acquire land for lower values if in the public interest.

When can hope value be disapplied and how do you go about it?

The power currently only applies to public-interest schemes facilitating:

• affordable (social) housing,
• education, or
• healthcare infrastructure.

When drafting your CPO, you must include a direction stating that the statutory provisions to disapply hope value apply.

Your supporting documentation e.g. your Statement of Reasons, must then explain how disapplying hope value will assist in the delivery of public benefits which may not otherwise come forward.  You must also provide a Statement of Commitments outlining the intended use of the land. It is then over to the Secretary of State to decide whether you have sufficiently made out your case to disapply hope value.  If not, they will strike the direction out of the order before it is confirmed.

The new Planning and Infrastructure Bill proposes to further streamline the process by:

• allowing authorities to self-confirm CPOs which disapply hope value (if unopposed) and
• expanding the power to CPOs made on behalf of parish and town councils.

To any promoting authority, this new power will no doubt sound very attractive.  Along with reducing the compensation budget, disapplying hope value may serve as a vital tool in unblocking negotiations by assisting the parties to agree land values at an early stage in the process.

So why aren’t promoting authorities yet rushing to make CPOs which include this new power? 

While the new power may offer considerable advantages for promoting authorities, it also presents legal, procedural and strategic risks that officers and legal teams must manage carefully. 

For example, the payment of reduced compensation may engage the subsidy control regime if it would confer an economic advantage on e.g. its development partner. 

There is also the uncertainty of how to use such a new power.  Even with the Government’s updated Guidance on the Compulsory Purchase Process, it is currently unclear what the Secretary of State will want to see to justify including a direction into a particular CPO. 

There is the added challenge risk to your CPO.  Attempts to exclude hope value will likely be strongly resisted by affected landowners. The risk of well-resourced objections to your CPO at the public inquiry stage, as well as judicial review of your confirmed order, will inevitably be higher.

The power may not assist all schemes.  The power doesn’t apply to land value achieved through an existing planning permission, only a future permission.  Well advised landowners will be quick to submit their planning applications at the first mention of a CPO to secure their land’s value.

Finally, there are reputational considerations.  While legally justified, reducing compensation to below market expectations may be perceived as unfair. The reforms have faced criticism from a range of industry bodies.  The potential impact on farmers has faced particular criticism.

What steps should you take if you want to use the power?

While using the new power may feel like a leap into the unknown, authorities should not be put off.  There are ways to help manage the possible hurdles.

• Get early valuation input: Work closely with your valuation advisors to assess whether hope value is material and whether a direction would really deliver a meaningful financial benefit for your scheme.
• Document your public interest case early: Ensure that all project documentation, reports and consultation materials clearly articulate the public interest in acquiring the land. What are the benefits of disapplying hope value for your scheme and how are you securing those benefits?
• Early engagement with your stakeholders: As with any CPO, early engagement and clear, consistent communication with affected landowners is essential. Building good relationships with all those affected will reduce opposition to your order and help to better manage an inevitably stressful situation for all involved.

The ability to disapply hope value offers promoting authorities a valuable tool in managing the cost and complexity of land assembly for key regeneration schemes.  Authorities should not be afraid to use this power where it can be demonstrated that it is needed to deliver essential public benefits that may not otherwise be realised. 

 

For further support please contact Lucy Thomas.

Lucy.Thomas@bevanbrittan.com