Community Assets No 6 - Compensation Issues No 1 (Update No1 - 18 November 2011)

With the prospect of local land being listed under the Localism Act 2011 (November 2011) as assets of community value there may develop a market "niche" for those who seek to agree claims for compensation upon the compulsory purchase of a such assets. It may, therefore, become appropriate for the stakeholders to get an idea of the following:

• the approaches to compensation which might arise; and,
• the possible pitfalls along the line.

Firstly it may be noted that community value is not really about open market value (OMV) but the view in section 88 (1),(2), and (3) that a property furthers the social wellbeing or social interests of the local community. "Social wellbeing" is not defined in the section but in section 88(6) "social interests" covers
(a) cultural interests;
(b) recreational interests; and,
(b) sporting interests.


The Act is silent as to whether these interests have to be "lawful"!  As an aside - this aspect of the Localism Act 2011 takes my mind to lawful sports and pastimes of the Commons Act 2006 - one of the "measures" of judging land use when determining land as a prospective village green or town green. Will such land be considered as an asset of community value? The 2006 Act suggests that it could be! [At present the government has a consultation out on heritage greens.]

The basics of compensation for assets of community value are likely to be very similar to (if not the same as) that for other property affected by a compulsory purchase order (CPO). However, a CPO for community property is likely to involve only one parcel of land (or land with building(s)). In other words the surveyors involved may have little in the way of current transactions as comparatives for determining the value of the community asset. Here, however, the post is about the legal framework for determining the basis of value.


The law provides that the owner should be compensated in a manner which means that he or she should not be worse off after the event than before the event - the event is the act of acquisition under the CPO but the date at which compensation is assessed is determined in law. If an interest  happens (in the unlikely event) to be unlawful,  it cannot be reflected in the OMV since the six rules of compensation should be used by the acquiring body to exclude it as being immoral etc (see the Land Compensation Act 1961 (as amended).


Cutting to the bone, broadly and briefly there are statutory rules and assumptions which, in effect, allow two bases of compensation; the owner claims the higher of the following:

• open market value of the property assuming it is in the present use, together with "disturbance" (together with, legal fees and costs and surveyor's fees); and,
• open market value based upon development potential (together with legal fees and costs and surveyor's fees).

By way of illustration, a village shop with a large yard might be valued as a shop at say, £490,000 including disturbance and fees etc: as a redevelopment site it for housing it might be valued at say, £900,000 including fees etc. In this instance owner would be entitled to the latter sum.

However, in a case (Greenweb v London Borough of Wandsworth (2008) (similar to a CPO situation) the claimant company had originally paid £30,000 for a small parcel of land. The land was open space - seemingly available to the public. The acquiring authority and the claimant agreed that its market value was a sum of £15,000 but the company argued that under the statutory rules etc, it was entitled to much more - as a result of the Lands Tribunal decision going before the Court of Appeal the company ended up with £1,600,000!