Full steam ahead for HS2 compensation schemes

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Early April 2014 saw the much-awaited publication by the Department for Transport (DfT) of its proposed compensation schemes for those affected by Phase 1 of the high speed rail link (HS2), extending from London to the West Midlands. This was issued following extensive consultation, including a secondary consultation running from September to December 2013, carried out following a High Court ruling and judicial review challenges to HS2.

For eligible ‘owner-occupiers’ with properties within the ‘surface safeguarded area’ (the SSA), that is generally land within 60 metres of the proposed line, an express purchase scheme will operate. Where more than 25% of the property is within the SSA, the owner-occupier will be entitled to:

  • sell their property to the Government at the full unblighted value – so as if HS2 did not exist
  • a home loss payment equal to 10% of the property’s open market value – with minimum and maximum amounts of £4,700 and £47,000 respectively
  • reasonable moving costs, including surveyors’ fees, legal fees and stamp duty land tax on a replacement property of similar value.

The Government’s offer to buy must be accepted within three years of the relevant blight notice.

Unless the land is specifically required for construction of the railway, where less than 25% of the property is within the SSA, no compensation will be payable. The express purchase option is also not available in areas classed as sub-surface safeguarding areas, such as for properties located over deep-bored tunnels, or along the previously proposed HS1-HS2 link (which is no longer to be built).

Where properties are located outside the SSA and a further distance away, a voluntary purchase scheme will operate. Up to 120 metres from where the route runs above ground, eligible ‘owner-occupiers’ will potentially be able to ask the Government to purchase their property for up to a year after the line’s opening – at 100% of its unblighted open market value. However, this scheme will only be available after further consultation and towards the end of 2014.

A third compensation system comprises the need to sell scheme, designed to assist those living outside the SSA, with strong personal reasons for needing to sell, but where HS2 has made this impossible. This replaces the current Phase One Exceptional Hardship Scheme, but again is to be launched later in 2014 and only subject to further consultation. The intention is that the Government will again buy affected properties at their unblighted open market value, where applicants are able to provide appropriate evidence of the following:

  • property type – showing there is a residential property involved or the applicant is a ‘reluctant landlord’ and being forced to let their home
  • location – demonstrating evidence of HS2’s impact, but with no fixed outer boundary requirement existing
    effort to sell – the property has been unsuccessfully marketed for sale for at least three months
  • no prior knowledge – that the property was purchased before 11 March 2010, when the preferred route was announced
  • a compelling reason to sell – such as due to unemployment, job relocation, ill-health, divorce or the need for capital release ahead of retirement.

Where eligible ‘owner-occupiers’ sell their homes to the Government under any of the applicable schemes, there may be the option for an immediate rent back option under a Crown tenancy agreement. After an initial assessment of feasibility and open market rental value, such an agreement would provide for:

  • the tenant to pay an open market rent
  • over an initial six-month term
  • the landlord to take responsibility for elements such as keeping the structure in good repair
  • the tenant being subject to standard lease covenants, such as responsibility for internal repairs.

However, a key question arises as to who is catered for under the scheme? Who is regarded as an ‘eligible owner-occupier’? In accordance with the provisions of the Town and Country Planning Act 1990, this encapsulates residential owner-occupiers, owner-occupiers of agricultural units and owner-occupiers of small business premises with an annual rateable value of up to £34,800. So for businesses with a greater rateable value or landlords/tenants of commercially-let premises, the minimum statutory provisions remain applicable. In such instances, the compensation payable is calculated on the basis of what will place the affected party in the same position as they were before the compulsory purchase. Elements such as basic loss, loss of profits, reasonable relocation costs and disturbance monies are taken into account.

While the line from Birmingham to Leeds forms part of Phase 2, it is widely expected that the compensation packages for this latter element of HS2 will follow a similar approach to those adopted for Phase 1. However, what remains to be seen is whether any additional arrangements will be made for larger businesses and commercial undertakings along the route. Albeit perhaps not facing as extensive economic hardship as the defined ‘owner-occupiers’, all entities will inevitably suffer disruption and losses as a result of the rail-link and would welcome acknowledgement of this from DfT and HS2 Limited. The only other alternative for affected businesses is to submit a petition to Parliament in the hope this will influence the hybrid bill’s contents as it continues through the legislative process. However, with narrow time-frames for submission and the Government demonstrating little tendency to take into account consultation opinions thus far, whether greater protection will be gained as a result appears questionable.