Land Compensation Manual - Section 13 : Home Loss, Basic Loss and Occupier's Loss Payments

Section Contents

Land Compensation Manual: Section 13 - Home Loss, Basic Loss and Occupier’s Loss Payments

Part 1: Home Loss Payments

General

13.1 Entitlement to Home Loss Payment

Section 29 Land Compensation Act 1973 (as amended) entitles a person to a home loss payment (HLP) where he is displaced from a dwelling in consequence of:

  • the compulsory acquisition of an interest in the dwelling;
  • the making or acceptance of a housing order or undertaking in respect of the dwelling;
  • where the land has been previously acquired by an authority possessing compulsory powers or appropriated by a local authority and is for the time being held by the authority for the purposes for which it was acquired or appropriated, the carrying out of any improvement to the dwelling or of redevelopment on the land;
  • the carrying out of any improvement to the dwelling or of redevelopment on the land by a housing association which has previously acquired the land and, at the date of the displacement is a registered social landlord within the meaning of the Housing Act 1985 (see section 5(4) and (5) of that Act);
  • the making of an order for possession on ground 10 or 10A in part II of Schedule 2 to the Housing Act 1985

Where an authority, possessing compulsory powers, purchases by agreement the interest of any person in a dwelling, any other person who is displaced will be entitled to a HLP (provided he otherwise qualifies) as if the purchase were compulsory.

A person shall not be treated as displaced from a dwelling in consequence of the acquisition only of part of a garden or yard or of an outhouse or appurtenance belonging to or usually enjoyed with the dwelling.

13.2 Qualifying Interests

The claimant must have been, for one year prior to displacement in occupation of the dwelling, or a substantial part of it, as the sole or main residence; and have been in occupation by virtue of one of the specified interests or rights.

Where the one-year qualifying period cannot be met, discretionary payments may be made provided the occupier's interest and rights could be satisfied at the date of displacement.

Claimants unable to satisfy the one-year qualification because of previous qualifying displacements may qualify on the basis of the cumulative periods.

In the case of compulsory acquisition, occupation must not have been given up before the authority was authorised to acquire the interest.

The specified interests or rights are:

  • any interest in the dwelling;
  • a right to occupy the dwelling:
  • as a statutory tenant within the meaning of the Rent (Agriculture) Act 1976 or the Rent Act 1977, or
  • under a contract to which section 19 of the Rent Act 1977 (restricted contracts) applies or would apply if the contract or dwelling were not excluded by section 19(3) to (5) or 144 of that Act;
  • a right to occupy the dwelling under a contract of employment;
  • a right to occupy the dwelling under a licence where:
  • it is a right to occupy as a protected occupier within the meaning of the Rent (Agriculture) Act 1976, or
  • Part IV of the Housing Act 1985 (secure tenancies) applies to the licence, or the licence is an assured agricultural occupancy within the meaning of Part I of the Housing Act 1988, or
  • Chapter I of Part V of the Housing Act 1996 (introductory tenancies) applies to the licence.

The provisions do not apply therefore to other licensees, lodgers, squatters or trespassers.

13.3 Blight Notice

From 16 November 1990 payments are available to those whose property is acquired following service of a Blight Notice.

There is no provision for HLP to be paid in Discretionary Blight cases.

13.4 Caravan dwellers

By s.33 LCA 1973 a person residing in a caravan on a caravan site who is displaced from the site as a consequence of any of the actions listed in Para 13.1 (a)-(c) above may be entitled to a HLP. The caravan dwellers must have been in occupation of a caravan site by using a caravan stationed on it as their only or main residence for not less than one year (five years prior to 16 November 1990) ending on the date of displacement and must have occupied the site by virtue of an interest or right to occupy the site. No HLP will be made except where no suitable alternative site for stationing a caravan is available on reasonable terms.

The amount of HLP to such persons is the minimum (£4,700 from 1 September 2008).

A home loss payment would not be payable to a person occupying a caravan stationed on land owned by another party (under the Mobile Homes Act 1983) because they would not be occupying by virtue of an interest or right specified in section 29(2) or (4) of the Act.

13.5 Discretionary payment

By s.32 (7) LCA 1973 an authority possessing compulsory powers has a discretionary power to make a payment corresponding to an HLP to a person from whom an interest in a dwelling is being acquired by agreement.

Similar powers apply where by s.32(7B) LCA 1973 (inserted by s.9(4) Housing and Planning Act 1986) a landlord obtains possession of a secure tenancy by agreement in circumstances where it could have obtained a court possession order under Grounds 10 or 10A Part II Sch.2 HA 1985.

Discretionary payments are calculated in the same way as HLPs had possession been the result of compulsory acquisition or a possession order.

13.6 Amount of home loss payment

The amount of HLP payable to an owner occupier having an owner's interest as defined in section 7 of the Acquisition of Land Act 1981 ie freeholders or leaseholders having more than three years to run, is 10% of the market value of the claimant's interest in the property subject to a minimum payment and a maximum payment. In the case of compulsory acquisition the market value will be the value of the interest assessed for that purpose. Where there is no compulsory acquisition (as for example with certain housing orders) the market value will be that which would be assessed if the property were being compulsorily acquired. Such value may be taken to include any development or ransom value present.

In all other cases the amount of home loss payment is a specified amount (usually the minimum amount specified for claimants with an owner's interest). The Secretary of State is empowered to vary, by order, this amount and the maximum and minimum amounts of payment for owner-occupiers.

Where more than one person qualifies for a HLP in respect of the same dwelling, the amount payable to each is to be the total HLP divided by the number of qualified persons.

Where the date of displacement falls between 16 November 1990 and 31 August 2003 the minimum and maximum amounts for claimants with an owner's interest will be £1,500 and £15,000 respectively and £1,500 for all other qualifying interests.

Where the date of displacement falls between 1 September 2003 and 31 August 2004 the minimum and maximum amounts for claimants with an owner's interest will be £3,100 and £31,000 respectively and £3,100 for all other qualifying interests.

Where the date of displacement falls between 1 September 2004 and 31 August 2005 the minimum and maximum amounts for claimants with an owner's interest will be £3,400 and £34,000 respectively and £3,400 for all other qualifying interests.

Where the date of displacement falls between 1 September 2005 and 31 August 2006 the minimum and maximum amounts for claimants with an owner's interest will be £3,800 and £38,000 respectively and £3,800 for all other qualifying interests.

Where the date of displacement falls between 1 September 2006 and 31 August 2007 the minimum and maximum amounts for claimants with an owner's interest will be £4,000 and £40,000 respectively and £4,000 for all other qualifying interests.

Where the date of displacement falls between 1 September 2007 and 31 August 2008 the minimum and maximum amounts for claimants with an owner's interest will be £4,400 and £44,000 respectively and £4,400 for all other qualifying interests.

Where the date of displacement falls on or after 1 September 2008 the minimum and maximum amounts for claimants with an owner's interest will be £4,700 and £47,000 respectively and £4,700 for all other qualifying interests.

13.7 Timetable

Where a claimant is entitled to a HLP it must be made on or before the latest of:

  • the date of displacement;
  • the last day of the period of three months, from the making of the claim; or
  • in a case where payment is based on market value of the property the day this is agreed or determined.
13.8 Advance payments on account of HLP

Such advance payments may be made at any time and must be made if the market value of the property has not been agreed or determined by the date of displacement or three months after the claim is made whichever is the later. DVs should deal with requests for advance payments within six weeks of receipt.

For a claimant with an owner's interest the amount will be 10% of the agreed market value or of the DV's assessment of market value if not agreed, subject to the minimum and maxim limits, with provision for adjustment either by payment of the balance by the acquiring authority or recovery of overpayment from the claimant following agreement of the market value.

Scope of assistance to acquiring authority

13.9 Status of home loss payment

A HLP is not a head of claim but a separate statutory entitlement and thus does not form part of the compensation payable for the acquisition of an interest in a dwelling. Since 16 November 1990 DVs have been required to inform the acquiring authority of the Market Value of the property so that the authority can make the appropriate calculation of the amount of the HLP.

13.10 Estimates

Acquiring authorities should be alerted at the estimate stage to the extent of their possible liability for HLPs. When sufficient information is available DVs should detail in their reports the interest of the occupier and the market value of the occupier's interest in each dwelling to be acquired when the interest is that of an owner occupier (a greater interest than that of a tenant with three years of a lease unexpired). Where the DV considers that there is likely to be a material sum involved, relative to the total of his estimate, there is no objection to his adding the following statement after his Opinion of Value:

'The authority will be likely to incur home loss payments under Part III of the Land Compensation Act 1973 (as amended) which, on present information, could amount to a sum in the order of £....'.

In other cases, the report should state that any liability for HLPs has not been included in the estimate.

13.11 Market value of claimant's interest

The market value of the claimant's interest in the dwelling should if possible be agreed with the claimant or the claimant's agent (ie apportioned from the compensation payable in respect of any other heads of claim). Where this element comprises part of premises that combine business and domestic uses the residential element would need to be apportioned.

The market value is represented by the value of the claimant’s interest under the compensation code, ie the value assessed under Section 5(2) LCA 1961.

13.12Reports of completed negotiations

DVs' reports to acquiring authorities should include a Paragraph to the effect that:

'For the purposes of calculating the amount of home loss payment in accordance with section 30 of the Land Compensation Act 1973, the market value of the claimant's interest in the dwelling has been agreed/is assessed in the sum of £....'.

13.13 Entitlement to payment

It is the acquiring authority's responsibility to determine the entitlement of a claimant to a HLP. Any recommendations as to the quantum of payment made by the DV would be subject to the proviso that the acquiring authority must satisfy itself as to the claimant's entitlement to payment.

13.14-15 Reserved

Part 2: Basic Loss and Occupiers Loss Payments

General

13.16 New legislation

Sections 106 to 110 of the Planning and Compulsory Purchase Act 2004 introduced 'Basic' and 'Occupiers' loss payments to be paid to claimants other than residential occupiers and residential owner-occupiers. These have been inserted into the Land Compensation Act 1973 as sections 33A to 33K.

It should be noted that the provisions relating to HLPs and BLPs/OLPs are not consistent in that there are different qualifying conditions and minimum/maximum payments.

The new payments apply to displacements in consequence of Compulsory Purchase Orders made or made in draft on or after 31 October 2004. 'Made' in this context refers to the date that the CPO is formally put under seal by the acquiring authority and not to any later date of confirmation eg following a subsequent public inquiry.

Section 120 and Schedule 9 to the Planning and Compulsory Purchase Act 2004 repealed sections 34 to 36 of the Land Compensation Act 1973 (Farm Loss Payments) except in relation to Compulsory Purchase Orders made, or made in draft, before 31 October 2004.

Basic Loss Payments

13.17 Entitlement to payment

The Basic Loss Payment (BLP) is payable to a person

  • who has a qualifying interest in land;
  • whose interest is acquired compulsorily;
  • to the extent that he is not entitled to a home loss payment in respect of any part of the interest.
13.18 Qualifying interests

An interest in land is a qualifying interest if it is

  • a freehold interest or
  • an interest as tenant

and the interest subsists for a period of not less than one year ending with whichever is the earliest of:

(i) the date on which the acquiring authority takes possession of the land under section 11 of the Compulsory Purchase Act 1965;

(ii) the date on which the acquiring authority enters the land if it proceeds under Schedule 3 to that Act;

(iii) the vesting date if a general vesting declaration is made under section 4 of the Compulsory Purchase (Vesting Declarations) Act 1981;

(iv) the date on which compensation is agreed;

(v) the date on which the compensation is determined by the Lands Tribunal.

The provisions therefore do not apply to licensees, lodgers, squatters, trespassers or to the acquisition or creation of an easement or right of way.

13.19 Amount of Basic Loss Payment

The amount of BLP payable to a qualifying claimant is the lower of

  • 7.5% of the value of the interest
  • £75,000.
13.20 Payment

Where a claimant is entitled to a BLP it must be made not later than whichever is the latest of the following dates:

  • the last day of the period specified in section 33A(4) (see Para 3.18 above);
  • the last day of the period of three months beginning with the day the claim is made;
  • the day on which the amount of the payment is determined.

Occupiers Loss Payments - Agricultural Land

13.21 Qualifying conditions

The Occupiers Loss Payment (OLP) is payable to a person if

  • he has a qualifying interest in land (see 13.18 above);
  • the land is agricultural land;
  • the interest is acquired compulsorily;
  • he occupied the land for the necessary period (see 13.18 above).
13.22 Amount of Payment (Agricultural Land)

'Agricultural land' has the meaning assigned to it in section 109 of the Agriculture Act 1947 and means land used for agriculture which is so used for the purposes of a trade or business and includes horticulture, fruit growing, seed growing, dairy farming and livestock breeding and keeping, the use of land as grazing land, meadow land, osier land, market gardens and nursery grounds and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes. It does not include

  • land used as pleasure grounds, private gardens or allotment gardens or
  • land kept or preserved mainly or exclusively for the purposes of sport or recreation.

The amount of OLP payable in respect of agricultural land is the greatest of

  • 2.5% of the value of the interest;
  • the land amount;
  • the buildings amount.

The maximum amount that may be paid is £25,000.

The land amount is the greater of £300 and the amount derived from the following Table:

Area of the land

Amount per hectare

Not exceeding 100 hectares

£100 per hectare or part thereof

Exceeding 100 hectares

(a) £100 per hectare for the first 100 hectares and
(b) £50 per hectare for the next 300 hectares or part thereof

The buildings amount is £25 per square metre (or part of a square metre) of the gross floor space of any building on the land. The gross floor space must be measured externally.

13.23 Agricultural land - dual entitlement

If a claimant is entitled to both

  • an OLP in respect of agricultural land and
  • a payment under section 12(1) of the Agriculture (Miscellaneous Provisions) Act 1968

payment may be made in respect of one entitlement only.

If a claim is made under both provisions the claimant must be paid in respect of the entitlement that produces the greater amount.

Occupiers Loss Payments - Other Land

13.24 Qualifying conditions

The Occupiers Loss Payment (OLP) is payable to a person if

  • he has a qualifying interest in land (see 13.18 above);
  • the land is not agricultural land;
  • the interest is acquired compulsorily;
  • he occupied the land for the necessary period (see 13.18 above).
13.25 Amount of Occupier's Loss Payment (Other Land)

The amount of OLP payable in respect of other land is the greatest of

  • 2.5% of the value of the interest;
  • the land amount;
  • the buildings amount.

The maximum amount that may be paid is £25,000.

The land amount is the greater of

  • £2,500;
  • £2.50 per square metre (or part of a square metre) of the area of the land.

If only part of land in which a person has an interest is acquired, for the figure of £2,500 there shall be substituted £300.

The buildings amount is £25 per square metre (or part of a square metre) of the gross floor space of any building on the land. The gross floor space must be measured externally.

13.26 The ‘Buildings amount’

No definition of what comprises a building is provided. It is suggested that, pending the receipt of judicial or government guidance, a pragmatic approach should be adopted. The Concise Oxford Dictionary defines a building as a ‘permanent fixed thing built for occupation (house, school, factory, stable etc)’. Other dictionaries define a building as a ‘structure with walls and a roof’. It would be reasonable to ignore any building that would be incapable of rateable occupation due to its condition notwithstanding some spurious form of occupation claimed by the owner.

13.27 Payment (OLPs in respect of Agricultural and Other Land)

Where a claimant is entitled to an OLP it must be made on or before the latest of:

  • the date of displacement;
  • the last day of the period of three months beginning with the day the claim is made;
  • the day on which the amount of the payment is determined.

Factors common to basic and occupiers loss payments

13.28 The ‘Value of the interest’

Section 33A(6) defines the value of an interest as ‘its value for the purpose of deciding the amount of compensation payable in respect of the acquisition’.

It has been argued that the ‘value of the interest’ is represented by the amount of compensation under all heads of claim. This argument is based on the legal concept that the value of the land and the disturbance loss are no more than two inseparable elements of a single whole that together make up the value of the land to the owner.

Bridge LJ said in Hughes and another v Doncaster Metropolitan Borough Council [1991] 1 EGLR 31 ‘It is well–settled law that whatever compensation is payable to an owner on compulsory acquisition of his land in respect of disturbance is an element in assessing the value of the land to him, not a distinct and independent head of compensation…………. Judicial interpretation of the Act of 1845 held that the value of the land meant its value to the owner, not its value to the acquiring authority…………… This value was to be assessed as including all the loss which the owner suffered in consequence of being dispossessed’.

He went on to say ‘Thus, although compensation in respect of the market value of land acquired and compensation for disturbance must in practice be separately assessed, the courts have consistently adhered to the principle………….that the two elements are inseparable parts of a single whole in that together they make up 'the value of the land' to the owner, which, unless he retains other land depreciated by severance or injurious affection, was the only compensation which the 1845 code awarded to him’.

Thus the open market value of the land acquired and the compensation for disturbance are separately assessed elements that together comprise the ‘value of the land to the owner’.

However, section 33A(2) of the Land Compensation Act 1973 provides that a claimant is entitled to payment of a percentage of ‘the value of his interest’ as the amount of the Basic Loss Payment.

Further, in defining ‘the value of an interest’ section 33(6) refers neither to the ‘value of the land’ nor the ‘value of the land to the owner’ nor 'the value of the land to be purchased by the acquiring authority' but defines the value as ‘its value for the purpose of deciding the amount of compensation payable in respect of the acquisition’. The precision of the language adopted by the Parliamentary draughtsmen naturally leads to the conclusion that the ‘value of an interest’ comprises only one element in the ‘the amount of compensation payable in respect of the acquisition’. The ‘value of an interest’ is thus the value to be ascertained under Rule (2) of section 5 Land Compensation Act 1961.

Pending any judicial authority in the matter, valuers should take the ‘value of an interest’ to be that ascertained under Rule (2) of section 5 LCA 1961.

13.29 Persons excluded from payment

No BLP or OLP shall be made to a person on whom the following notice has been served and not complied with in respect of the land acquired:

  • a notice under section 215 of the Town and Country Planning Act 1990 (power to require proper maintenance of land)
  • a notice under section 189 or 190 of the Housing Act 1985 (require to repair dwelling unfit for human habitation or in state of disrepair)
  • a notice under section 48 of the planning (Listed Buildings and Conservation Areas) Act 1990 (repairs notice prior to compulsory acquisition of listed building).

No BLP or OLP shall be made to a person on whom the following order has been served and not quashed on appeal in respect of the land acquired:

  • an order under section 264 or 265 of the Housing Act 1985 (closure or demolition of dwelling unfit for human habitation)
13.30 Occupation

The degree or nature of occupation required to satisfy the ‘occupation’ requirement for OLP is not set out in the Act. It is suggested that the standard of occupation required for the service of a blight notice should be adopted.

In Minister of Transport v Holland (1962) 183 EG 541 (CA) the leaving of chattels in sheds and a garage in the grounds of a vacant dwellinghouse did not constitute occupation of part of the hereditament for blight notice purposes. In that case the Court held that the test of occupation for blight was the same as that for rateable occupation.

In Segal v Manchester Corporation (1966) 18 P&CR 112, legal argument that the ownership of vacant houses constituted owner occupation for blight purposes was rejected by the Lands Tribunal.

In Holmes v Knowsley BC (1978) 35 P&CR 119 it was held that whilst the occupation of a house for the purposes of preparing it for residential occupation could not be classed as ‘residential owner occupation’ it nevertheless comprised ‘owner occupation’.

13.31 Composite properties

Where an interest in land comprises partly a dwelling in respect of which a person is entitled to a Home Loss Payment, the value of the interest for BLP and OLP purposes is the value of the whole interest less the value of so much of the interest as is represented by the dwelling.

13.32 Purchase Notices and Blight Notices

The definition of ‘acquired compulsorily’ encompasses acquisitions made

  • under a Purchase Notice (section 137 Town & Country Planning Act 1990) and
  • under a Blight Notice (section 150 Town & Country Planning Act 1990).
13.33 Equivalent reinstatement

Where compensation is assessed under Rule (5) of section 5 of the Land Compensation Act 1961 (equivalent reinstatement) the ‘value of the interest’ for BLP and OLP purposes shall be nil.

The amount of BLP payable to a qualifying claimant is the lower of

  • 7.5% of the value of the interest; or
  • £75,000

and therefore no BLP would be payable in a Rule (5) case.

However, it would appear that this provision would not preclude the payment of an OLP by reference to the ‘land amount’ or the ‘buildings amount’ since the payment is expressed as comprising the greatest of

  • 2.5% of the value of the interest; or
  • the land amount; or
  • the buildings amount.
13.34 Disputes

Any dispute as to the amount of a BLP or OLP must be determined by the Lands Tribunal.

13.35 Acquisition by agreement

Where an authority that has the power to acquire an interest in property compulsorily acquires it by agreement, the authority may make a payment equal to a BLP or OLP to a claimant who would have qualified for payment had the acquisition been compulsory.

13.36 Advance payments on account of BLP or OLP

Advance payments may be made at any time prior to the determination of the payment.

The amount by which any advance payment exceeds the payment ultimately determined must be repaid to the acquiring authority.

13.37Statutory interest

The BLP or OLP will carry interest at the rate prescribed by regulations under section 32 Land Compensation Act 1961.

13.38 Regulations

The Secretary of State may by regulations alter any amount or percentage figure relating to BLP or OLP. This would be carried out by way of Statutory Instrument

Scope of assistance to acquiring authority

13.39 Status of BLP and OLP

A BLP or OLP is not a head of claim but a separate statutory entitlement and thus does not form part of the compensation payable for the acquisition of an interest in land.

13.40 Estimates

Acquiring authorities should be alerted at the estimate stage to the extent of their possible liability for BLPs and OLPs. When sufficient information is available DVs should detail in their reports the interest of the owner and/or occupier and the market value of the interests in each property to be acquired when those interests are qualifying interests. Where the DV considers that there is likely to be a material sum involved relative to the total of the estimate, there is no objection to adding the following statement after the Opinion of Value:

'The authority will be likely to incur Basic Loss Payments and Occupiers Loss Payments under Part III of the Land Compensation Act 1973 (as amended) which, on present information, could amount to a sum in the order of £....'.

In other cases, the report should state that any liability for BLPs and OLPs has not been included in the estimate.

13.41 Market value of claimant's interest

In cases where a claimant qualifies for payment of a BLP and/or OLP the market value of the claimant's interest in the dwelling should if possible be agreed with the claimant or the claimant's agent (ie apportioned from the compensation payable in respect of any other heads of claim). Where this element were part of premises that combine business and domestic uses the value of any part in respect of which a HLP were payable would need to be apportioned from the remainder.

13.42 Entitlement to payment

It is the acquiring authority's responsibility to determine the entitlement of a claimant to a BLP or OLP. Any recommendations as to the quantum of payment made by the DV would be subject to the proviso that the acquiring authority must satisfy itself as to the claimant's entitlement to payment.

13.43 Reports of completed negotiations

DVs' reports to acquiring authorities should include a Paragraph to the effect that:

'For the purposes of calculating the amount of Basic Loss Payment and/or Occupiers Loss payment in accordance with sections 33A, 33B and 33C of the Land Compensation Act 1973, the market value of the claimant's interest in the property has been agreed/is assessed in the sum of £....'.

Farm Loss Payments

13.44 Repeal of provisions

Sections 34-36 of the LCA 1973, which dealt with Farm Loss Payments, were repealed by the Planning and Compulsory Purchase Act 2004 from 31 October 2004 except in relation to Compulsory Purchase Orders made, or made in draft, before 31 October 2004.

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