Part VI            

Particular interests   

Introduction

                    6.1             In this Part we deal with particular categories of interest which require special treatment:

                                            (1)             Lesser interests:

                                                                   (a)              Minor tenancies  We review the rules, under respectively the notice to treat and vesting declaration procedures, for minor tenancies (such as from year to year or less). They enable the authority, rather than “acquiring” such interests, to rely on the contractual provisions for termination. There are some differences between the two procedures. We propose that they should be brought into line, and the archaic language of the 1965 Act restated in modern form; and

                                                                   (b)              Easements and other private rights We make proposals to clarify the law relating to interference with easements or other rights over the subject land, including a new power for the authority to elect whether to “override” the rights (to the extent necessary to allow the proposed works and their use[1]) or to “extinguish” them altogether.

                                            (2)             Divided interests Where part of a building or holding is subject to compulsory purchase, the owner may in certain circumstances compel the authority to take the whole. We review and compare the existing provisions relating to notice to treat procedure (1965 Act, s 8) and vesting declarations (Vesting Declarations Act, s 12, Sched 1), and note the separate rules for agricultural land (1973 Act, ss 53-7). We discuss the comments of CPPRAG and the ODPM on possible reforms. We make proposals for a revised, unified set of rules for a “divided property notice”, applicable to both procedures; and suggest an extension of the existing right to enable such a notice to be served by any owner whose retained land, as a result of the acquisition, cannot reasonably be used for the previous purpose.

                                            (3)             Mortgages and rentcharges  We propose that the existing provisions of the 1965 Act should be retained without substantive amendment, but invite comments.

                                            (4)             Public rights of way We note the existence of a special procedure for extinguishment of rights of way over land subject to compulsory acquisition, but propose no change.

(1) Lesser interests

Introduction

                    6.2             As already explained,[2] two important categories of interest are excluded under the present law from the requirement to serve a notice to treat:

                                            (1)             Minor tenancies; and

                                            (2)             Easements and other private rights.

There are similar rules in respect of Vesting Declarations.[3]

(a) Minor tenancies

Notice to treat procedure

                    6.3             Section 20 of the 1965 Act (headed, misleadingly, “tenants at will, etc”) embodies a special procedure for dealing with an occupant of the land “having no greater interest than as tenant for a year or from year to year”.[4] Such a person is not entitled to notice to treat, although in practice the authority may serve such a notice.[5] The authority may simply await the expiry of the contractual term, or serve notice to quit under the contract.[6] In that case, there is no right to compensation under the 1965 Act, although there may be a right to a “disturbance payment” under the 1973 Act.[7] Section 20 enables possession to be required in advance of the contractual date, by means of a specific demand by the authority and the payment or tender of compensation.[8]

                    6.4             The Act defines the heads of compensation to which a tenant is entitled in such cases:

(1)    the value of the unexpired term or interest in the land;

(2)    “any just allowance which ought to be made to him by an incoming tenant”;

(3)    “any loss or injury he may sustain”;[9] and

(4)    if part only of the holding is taken, compensation for severance or injurious affection.[10]

                    6.5             As originally enacted, the section required to be left out of account any right of a business tenant to a new tenancy under the Landlord and Tenant Act 1954.[11] This was amended in 1973, so that now the rights of both business and agricultural tenants (as well as residential tenants) to statutory protection have to be taken into account.[12]

Vesting declaration

                    6.6             Similarly, the vesting declaration procedure has special rules for land subject to a “minor tenancy”[13] or “a long tenancy which is about to expire”.[14] In respect of such interests, the vesting declaration does not give the authority an immediate right to immediate possession.[15] Instead, section 9 provides for a form of notice to treat and notice of entry:

(2) The right of entry conferred by section 8(1) above shall not be exercisable in respect of that land unless, after serving a notice to treat in respect of that tenancy, the acquiring authority have served on every occupier of any of the land in which the tenancy subsists a notice stating that, at the end of such period as is specified in the notice (not being less than 14 days) from the date on which the notice is served, they intend to enter upon and take possession of such land as is specified in the notice, and that period has expired.

(3) The vesting of the land in the acquiring authority shall be subject to the tenancy until the period specified in a notice under subsection (2) above expires, or the tenancy comes to an end, whichever first occurs.

                    6.7             Thus, the authority must either acquire the minor tenancy by notice to treat, and pay compensation accordingly, or wait for it to expire.

Discussion

                    6.8             As already explained,[16] the advantage of these arrangements is that the acquiring authority does not have to trouble at the outset with minor and expiring tenancies. It may well be more convenient to allow the interests to expire, or to make informal arrangements, as implementation proceeds, to deal with relocation or rehousing requirements. The Policy Statement contains no proposal to change the substance of these provisions. Although the language of section 20 of the 1965 Act is archaic and confusing, its operation in practice does not appear to give rise to difficulty, following the clarification given by the Newham case.[17] We propose that it should be restated in modern terms. There are differences between the two procedures, the reasons for which (other than historical) are not obvious. For example, it might seem sensible for “long tenancies about to expire” to be covered by both procedures. We invite views on that suggestion, and whether any other substantive amendment is required.

Proposal 9 – Minor tenancies

Section 20 of the 1965 act should be restated in modern language, in accordance with the Newham case,[18] and consistently with section 9 of the Vesting Declaration Act (including provision for “long tenancies about to expire”, as defined in that Act).

Consultation issue (O) – Minor tenancies

(1) Do consultees agree that the current procedures for minor tenancies under (a) the 1965 Act, section 20 and (b) the Vesting Declarations Act, section 9, operate satisfactorily? If not, what amendments should be made?

(2) Should section 20 of the 1965 Act be restated in modern form as proposed above?

(b) Easements and other private rights

Introduction

                    6.9             In the application of the Code to easements and other rights over land, three situations need to be distinguished:

                                            (1)             Acquisition of new rights over the subject land, without acquiring the land itself;

                                            (2)             Acquisition of the subject land (“the dominant tenement”) with the benefit of existing easements or rights over other land (“the servient tenement”); and

                                            (3)             Acquisition of the servient tenement, followed by use so as to interfere with existing easements or other rights attached to other land.

                6.10             The first two raise no special issues in the context of the present project:

                                            (1)             Acquisition of new rights  As explained previously,[19] this is largely a question of powers, rather than procedure. Where powers to acquire new rights are conferred (for example, under the 1976 Act), procedure and assessment of compensation generally follow the ordinary rules for acquisition of land, with detailed modifications specified in the enabling Act.

                                            (2)             Rights attached to the subject land  Where an authority purchases a dominant tenement, ordinarily it acquires the benefit of any rights attached to it in the same way as any other purchaser (subject to the definition of “land” in the enabling statute), without needing to identify them specifically in the notice to treat, or vesting declaration.[20]

The third situation gives rise to more difficulty and is addressed in the following paragraphs.

Interference with existing rights

Notice to treat procedure

                6.11             Where the servient tenement is acquired, the acquiring authority, in carrying out the statutory purpose, is able to interfere with easements, covenants or similar rights, subject to payment of compensation.[21]

                6.12             The right is not acquired or extinguished,[22] but continues to bind the land:

It is, I think, settled law that in all cases where land is subject to a burden which runs with it for the benefit of other land, a purchaser taking under compulsory powers takes the land subject to that burden like any other purchaser; but the covenant cannot be enforced by injunction in the Courts if the breach is attributable to the execution of the works authorised by the statute under which it was taken, or to the exercise of the statutory powers thereby conferred on the purchaser.[23]

                6.13             This principle, though well established, may cause uncertainty, particularly where the authority wishes to dispose of the land for development. In the first place, it may be difficult for the authority, or those dealing with it, to be sure of the extent of such rights. Even where the land is registered, the existence of such rights will not normally be apparent from the register.[24]

                6.14             Secondly, there is some doubt as to the continued effect of the rights following acquisition by the authority. Although the authority itself may (subject to paying compensation) lawfully interfere with the rights by virtue of its statutory powers, it seems that the rights remain in suspension, and may restrict the use of land by third parties if the authority in due course disposes of the land.

                6.15             This is illustrated by Marten v Flight Refuelling Ltd.[25] In that case, agricultural land, which had been requisitioned by the Air Ministry in 1942, had been sold by the then owner in 1943 subject to a covenant restricting it to agricultural use; it was later acquired compulsorily by the Ministry under the Defence Acts in 1958. The issue was whether that covenant still held good when the Ministry let the land to an aviation company. It was held that the covenant could not prevent use by the Air Ministry and its agents for purposes for which it was acquired,[26] nor the use by the tenant company, so far as the company’s activity could be treated, on a “broad approach”, as done “for the purposes for which the airfield may be considered to have been acquired.”[27] On the facts, it was held that the company was protected in respect of its work on flight refuelling for the Air Force; but separate nuclear research work and contract work undertaken for the Belgian Air Force fell outside the statutory protection.[28]

                6.16             It is also uncertain what happens to the rights, once there has been interference for which the authority has paid compensation. Denyer-Green suggests that the rights continue to bind the land, except to the extent of the interference for which compensation has been paid:

The payment of compensation is in lieu of an action for an injunction or damages… If the owner of the third-party right had been awarded damages at common law for an interference with his right, he would not be entitled to make a further claim in respect of the same interference. Neither would he be likely to obtain an injunction after the expiration of a reasonable period of time from the initial interference. There seems no reason why the payment of compensation under statutory provisions should have any different effect. Accordingly, if compensation is paid, no further payment can be made in respect of the same interference. But if the original cause of interference is removed or the scheme terminated, there seems no reason in principle why the third-party right cannot then be potentially enforceable, subject of course to the statutory powers of the acquiring authority. Accordingly, if the acquiring authority were to dispose of land subject to third-party rights, and the cause of the original interference [with] those rights ceases or is removed, it may be possible to argue that the third-party right continues to bind the affected land in the hands of successors to the acquiring authority, even in cases where compensation has been paid: in the latter respect it is arguable that the Marten case is wrong. [29]

                6.17             In principle this analysis seems correct. However, it may create considerable uncertainty for those acquiring land from public authorities following the initial development. In practice, it seems, the authority faced with a claim for compensation may prefer to negotiate the extinguishment or partial extinguishment of the right, thus putting the matter beyond doubt.[30]

Vesting Declaration procedure

                6.18             As already mentioned,[31] the Vesting Declarations Act contains no express rules dealing with interference with easements and other rights over land acquired under that procedure. The effect of such a declaration is that the land vests in the authority as though under the 1965 Act “any power to execute a deed poll had arisen in respect of all the land and all the interests therein”, and the authority had duly exercised that power on the vesting date.[32] It might be thought that this language is apt to give the authority clear title to the land, free of any interests or rights of any kind. However, since the effect of the declaration is defined by reference to the procedure under the 1965 Act, the vesting seems to be limited to the interests which would vest under that procedure.[33] Thus, under this procedure also, easements and other similar rights over the subject land are not acquired or extinguished, but will give rise to rights to compensation when interfered with.[34]

Special statutory provision

                6.19             Some statutes make special provision for extinguishing or overriding rights over the subject land. An example of “extinguishment” is in the Housing Act 1985. It provides that, where land is acquired (compulsorily or by agreement) within a clearance area, then on completion of the purchase all private rights of way, rights relating to maintaining apparatus, and “all other rights or easements in or relating to the land” shall be “extinguished”.[35] Any person who “suffers loss by the extinguishment of any right” is entitled to compensation “to be determined under and in accordance with the Land Compensation Act 1961”.[36]

                6.20             The 1990 Act does not provide for the extinguishment of rights, but confers an extended power to override easements and other rights,[37] which covers those deriving title from the authority. Where land has been acquired or appropriated by a local authority for planning purposes, the “erection, construction or carrying out, or maintenance of any building or other work”, “whether done by the local authority or by a person deriving title under them”, is authorised if done in accordance with planning permission, notwithstanding interference with interests or rights over the land.[38] The purpose was described in a recent case:

The statutory objective which underlies section 237 of the 1990 Act is that, provided that work is done in accordance with planning permission, and subject to payment of compensation, a local authority should be permitted to develop their land in the manner in which they, acting bona fide, consider will best serve the public interest. To that end, it is recognised that a local authority should be permitted to interfere with third party rights.[39]

                6.21             In Thames Water Utilities v Oxford City Council,[40]the court adopted a narrow interpretation of section 237. In that case, it was held that the erection and operation by the council of a football stadium and associated development was in breach of a covenant limiting its use of the land to “recreational and ancillary purposes”. Although the “erection” of the stadium and other buildings was within the protection of section 237, it was held that this protection did not extend to their “use” by the Oxford Football Club, to which they had been leased. The immunity granted by the section was limited to the “precise immunity” given by the wording of the section, the effect of which was “to set limits upon the exercise of such powers where they involve interference with third party rights”.[41]

Proposals for reform

                6.22             We think the legal position should be clarified in the statute. The original reason for excluding such rights from acquisition under the ordinary notice to treat procedure was that in many cases, until the work was carried out, it would not be clear to what extent interference was required.[42] Although this may be true in some cases, there will be others in which the authority may reasonably prefer to acquire clean title from the outset. Subject to payment of compensation, it seems reasonable for the authority to have that option. The Housing Act 1985 (see above) provides a precedent.

                6.23             In other cases, the authority may prefer to wait until the interference is actually required, as under the present law. We see no objection in principle to that, although, as already discussed,[43] owners of such rights should have the opportunity to object to the use of compulsory powers. For such cases, we provisionally propose that the extended power conferred by section 237 of the 1990 Act (see above) should apply generally to authorities having powers of compulsory purchase. The uncertainty created by the Thames Water case should be removed by providing that the immunity extends to both erection and use.

                6.24             There also needs to be clarification of the position following interference with a right, and payment of compensation. We suggest that, where a claim for compensation is made for such interference, it should be open to either party to elect for compensation to be paid on the basis of extinguishment or partial extinguishment of the right; and that, on payment of compensation on that basis, the right is then treated as extinguished to that extent.

                6.25             We provisionally propose that the law should be restated in accordance with these comments, along the lines suggested below.

Proposal 10 – Easements and other rights

                                           (1)             Where the subject land is or may be subject to easements or other rights,[44] such rights may be overridden in accordance with (3) below, save to the extent that the authority elects to proceed by extinguishment of the rights, or any of them, over all or part of the land.

                                           (2)             Where the authority elects to proceed by extinguishment, it shall proceed as though the rights in question were interests entitling the owners to notice to treat; and, on completion of the purchase or on prior taking of possession by the authority, all rights or easements in the land to which the election relates shall be extinguished.[45]

                                           (3)             In other cases, the rights may be “overridden”: that is, the erection, maintenance or use of any building or other work, whether done by the local authority or by a person deriving title under them, is authorised if done in accordance with planning permission, notwithstanding interference with interests or rights over the land.[46]

                                           (4)             Subject to (5), any person who suffers loss by the extinguishment of, or overriding of, any right, is entitled to compensation to be determined under and in accordance with the Compensation Code.

                                           (5)             Where a claim is made for compensation for rights which have been overridden under (3), either party may elect for compensation to be paid on the basis of extinguishment or partial extinguishment of the right; on payment of compensation on that basis, the right shall to that extent be treated as extinguished or partially extinguished for all purposes. 

Consultation issue (P) – Easements and other rights

 (1) Where there is to be interference with (and not acquisition of) existing rights, do consultees agree that the position should be clarified in legislation?

(2) If consultees agree with (1), do they consider that the acquiring authority should elect to extinguish or to override and that the status of the interference should be clear from the outset? In the event that rights are to be extinguished, do they agree that those rights should be the subject of notice to treat?

(3) Where rights are simply to be overridden, do consultees agree

(a) that statutory immunity should apply both to erection and to use of any building or other work; and

(b) that either party should be able to elect for extinguishment or partial extinguishment?

 

(2) Divided Interests

Introduction

                6.26             Where the authority only requires part of a building or a holding, the owner in certain circumstances may require them to take the whole. The provisions, derived in the main from the 1845 Act, are complex and archaic, although the main principles are reasonably clear.

                6.27             The main relevant provisions of the existing law are found in:

                                            (1)             1965 Act, section 8[47] (notice to treat procedure);

                                            (2)             1973 Act, section 58 (criteria for establishing ‘material detriment’ under section 8);

                                            (3)             1976 Act, Schedule 1 (adapting 1965 Act, section 8 to the acquisition of rights);

                                            (4)             Vesting Declarations Act, Schedule 1 (procedure for vesting declarations); and

                                            (5)             1973 Act, sections 53 to 57 (part of an agricultural unit).

Outline of the existing law

Buildings and other land

Notice to treat procedure

                6.28             Section 8 of the 1965 Act provides the general rule that: 

(1) No person shall be required to sell a part only – (a) of any house, building or manufactory, or (b) of a park or garden belonging to a house, if he is willing and able to sell the whole of the house, building, manufactory, park or garden.

This does not apply if, following counter-notice by the landowner, the Lands Tribunal determines that the part of the house, building or manufactory to be acquired can be taken “without material detriment” to that structure, or that the part of the park or garden can be taken “without seriously affecting the amenity or convenience of the house”. If it so decides, the authority may acquire part only, and the owner will be entitled to compensation for severance.[48]

                6.29             The words “house, building or manufactory” have been construed so widely that, in practice, they include all types of buildings, domestic or business.[49] The 1965 Act does not provide any definition of “material detriment”. As interpreted in the cases, material detriment implies that the retained land will be “less useful or less valuable in some significant degree”.[50] The 1973 Act provides that in determining this issue, the Tribunal is to take into account not only the effect of the severance but also “the use to be made of the part proposed to be acquired”, and, where it is acquired for works or use extending to other land, the effects of the whole of the works or use.[51]  

                6.30             Section 8(2) has separate provision for land “which is not situated in a town or built upon”.[52] If the intersection caused by the acquisition leaves land measuring less than half an acre,[53] which cannot conveniently be “thrown into” other land in the same ownership, the landowner has the option of requiring the acquiring authority to purchase that land.[54] Conversely, section 8(3) contains provision to enable the authority to purchase an area of less than half an acre, to which it otherwise might be required to provide a bridge or other connection under the empowering Act.

Acquisition of rights

                6.31             A modified version of the same tests under section 8 applies, where a local authority is seeking, under the 1976 Act, to acquire new rights over land,[55] rather than the land.[56] In that case, the authority may be required to purchase the claimant’s interest in the land itself, if the Tribunal is satisfied that the right cannot be taken without “material detriment” or “serious effect”, as the case may be. In that event the order is “deemed to  authorise the purchase of [the claimant’s]  interest in the whole of the relevant land including, where the land consists of such a park or garden, the house to which it belongs”.[57]

Vesting declaration

                6.32             Section 8(1) of the 1965 Act is mirrored in the Vesting Declarations procedure.[58] Where a declaration comprises part only of “any house, building or factory, or . . a park or garden belonging to a house”, the landowner may serve notice on the authority requiring it to purchase his interest in the whole.[59] Once that notice has been served, the procedure follows a similar course to that under the 1965 Act. The authority may serve notice either withdrawing the deemed notice to treat as respects the severed land, or extending the effect of the vesting declaration to the whole; or may refer the matter to the Lands Tribunal. The Tribunal is required to take into account not only the effect of severance, but also “the use to be made of the part proposed to be acquired and, in a case where the part is proposed to be acquired for works or other purposes extending to other land, the effect of the whole of the works and the use to be made of the other land”.[60] 

                6.33             While Schedule 1 to the Vesting Declarations Act specifically disapplies section 8(1) of the 1965 Act,[61] it is silent on section 8(2),(3). That appears to mean that those provisions remain intact, and apply under both the notice to treat and the vesting declaration routes.

                6.34             The Vesting Declarations Act scheme differs from the 1965 Act in some respects, for example:

                                            (1)             It gives the Tribunal power to consider the extent of the owner’s land that the authority should acquire and to substitute for the whole of the land a smaller area, including the portion which was proposed to be severed;[62]

                                            (2)             It provides a normal limit for service of the owner’s notice, of 28 days from the notice of the declaration,[63] and a limit of 3 months within which the authority must respond withdrawing, agreeing or referring the matter to the Tribunal.[64]

Agricultural land

                6.35             Separate provisions relating to agricultural land were introduced by sections 53 to 57 of the 1973 Act. These apply to acquisitions by notice to treat or vesting declaration.[65] There are corresponding provisions for tenancies from year to year or less, following service of notice of entry.[66]

                6.36             Where an acquiring authority serves notice to treat in respect of part of land within an agricultural unit, the recipient[67] may serve a counter-notice[68] on the authority requiring it to purchase the whole of the land on the ground that the other land is not reasonably capable of being farmed, either by itself or in conjunction with other relevant land,[69] as a separate agricultural unit.

                6.37               The Lands Tribunal has held that, in deciding this issue, the nature and effect of the authority’s proposed use on the use of the remaining land are relevant, but that a claimant’s financial arrangements (such as the impact of proposed usage on land value and adequacy of security for a mortgage) are not.[70]

                6.38             The acquiring authority may accept the counter-notice or, in default, the matter may be referred to the Lands Tribunal for resolution.[71]  The Tribunal also has jurisdiction to deal with the terms of surrender by the acquiring authority of an acquired lessee’s interest to a lessor[72] (where the lessee but not the lessor has served a counter-notice).

                6.39             A similar procedure applies, under section 55, where notice of entry is served on an occupying tenant with an interest of a year to year or less.[73] The tenant may serve a counter-notice raising the same issue, namely whether the remainder of the holding is “reasonably capable of being farmed . . .as a separate agricultural unit”. If this issue is determined in favour of the tenant, the notice of entry is treated as extending to the whole unit, so far as concerns the tenant.[74] There is special provision for cases where such a counter-notice is successful, but the acquiring authority has not been authorised to acquire the landlord’s interest in the part covered by the counter-notice. If the tenant gives up possession of that land to the authority, the tenancy is terminated, and the authority must give up possession of the land to the landlord.[75]

Rentcharges and unexpired tenancies

                6.40             Special provisions relate to partial acquisition of rentcharges and unexpired tenancies in the 1965 Act and the Vesting Declarations Act. Rentcharges are dealt with below.[76]

                6.41             In the case of unexpired tenancies the provisions in section 19 of the 1965 Act apply to both notice to treat and vesting declarations.[77] If part only of land comprised in a lease “for a term of years unexpired” is required, the rent payable under the lease is apportioned between the subject land and the residue by agreement or (in default) by the Lands Tribunal, on the application of any of the three parties (authority, lessor, lessee).[78] We see no reason to alter this provision.

Government proposals

CPPRAG

                6.42             CPPRAG identified several practical difficulties with the existing statutory provisions in the 1965 and 1973 Acts:

(1)    The statutory terminology, especially in section 8 of the 1965 Act, is archaic and in need of modernisation and clarification;

(2)    The test is “entirely subjective, the residue must be less useful or less valuable in some significant degree”;[79]

(3)    No regard is paid to the compensation which would otherwise be payable for severance or injurious affection; and

(4)    Confusion as to whether an acquiring authority, having withdrawn notice to treat, can then unilaterally serve notice in respect of a smaller area.[80]

                6.43             CPPRAG recommended that the statutory language relating to part acquisition should be updated in a modern codification, and that the position of acquiring authorities in respect of their ability to withdraw notice to treat and to substitute notice on a smaller area should be clarified.[81]

Policy Statement

                6.44             The Policy Statement expresses the Government’s intention:

to improve the provisions which allow for the purchase of the whole of a landholding where that is in the better interests of the owner, even though only a part is actually required, including extending the provisions to include all categories of property.[82]

                6.45             Its response to CPPRAG implied, on its face, a more radical approach than proposed by the Advisory Group:[83]

We see no reason for any restriction on the type of landowner able to require an acquiring authority to acquire the whole of his landholding so long as he can demonstrate that taking only a part would have a materially detrimental effect on the value of the remainder.[84]

                6.46             It was thought that applying the procedure to landowners generally would avoid the need for attempting to modernise the terms “manufactory” and “park”, which were carried forward from the 1845 Act into the 1965 legislation, but would “reinforce the need to establish objective criteria for determining whether or not taking only part of the landholding would be detrimental.”

                6.47             On the other hand, the Government agreed with CPPRAG that the present “material detriment” test had the merit of allowing “important considerations which are difficult to quantify in monetary terms to be taken into account”:

As with most valuation issues, the final decision has to take account of subjective issues: the issue being to determine whether the purchase of the whole of the claimant’s land is necessary to put him in the same position as he would have been in if there had been no compulsory purchase.[85]  

                6.48             The recent Policy Response Document contains no further statement of Government policy on this issue.[86]

Proposals

                6.49             We consider that any new legislation should at least reproduce, in substance, the main features of the existing provisions for divided lands. There appear to be no significant reasons of policy for the differences between the two procedures. The same provisions could be applied to both notice to treat and vesting declaration procedures.[87]  Generally, we would propose that the new provision should be based on the more modern Vesting Declarations Act, which includes detailed procedures, including time-limits.[88]

                6.50             The language can be simplified. For example, the expression “house, building or manufactory” does not reflect the wide interpretation given by the cases.[89] Substantially the same effect would be produced if the procedure were available,  where either any building, or any land attached to and used with a building, is acquired in part.  In spite of the criticisms made of the “material detriment” test, we are not convinced that it causes serious problems in practice. We think it is difficult to define more precise criteria without limiting unduly the scope of the protection.

                6.51             This leaves the issue of small parcels of land which remain after the subject land has been taken. At present, that is dealt with by section 8(2), (3) of the 1965 Act. In essence these sub-sections make provision for plots of land less than half-an-acre in size. If the plot does not adjoin other usable land the owner can require the authority to purchase it. By the same token if the enabling statute requires some form of accommodation works to be executed by the authority (eg building a bridge) but the land falls below the half-acre threshold or its value is exceeded by the cost of the works, the authority can require the owner to sell that plot.

                6.52             The practical need for the former of these provisions (section 8(2)) has been reduced by the enactment of a comprehensive code for agricultural land in the 1973 Act.[90] As to the latter, (section 8(3)), we doubt whether many modern statutes impose specific requirements for accommodation works, which would cause problems if applied to small parcels of land.[91]  Accordingly, we do not propose to reproduce these provisions, but invite comments.

                6.53             The provisions of the 1973 Act relating to agricultural land are complex, but they represent a modern scheme, and we are not aware of any strong case for altering it. Subject to what follows, we would provisionally propose that it be left unamended. The provisions for  apportionment of rent under unexpired tenancies[92] may also be retained without substantive amendment.

                6.54             As has been seen, the Government has made a more radical proposal, to remove any restriction on the type of landowner able to require an acquiring authority to acquire the whole of his landholding; the only criterion would be whether he could “demonstrate that taking only a part would have a materially detrimental effect on the value of the whole.”[93] Although we welcome views, our provisional view is that this would be too wide. There are many cases where it would be an undue burden on the authority to have to acquire land which it does not need, and where any material detriment can be adequately redressed by compensation for injurious affection. Buildings, and land held with buildings, are in a special category because of the direct impact of the taking on the activities of the owner.

                6.55             On the other hand, it might be more appropriate to extend the rights, given to owners of interests in agricultural land by the 1973 Act, to other categories of owner/occupier.[94] The criterion would be, not material detriment, but whether the remaining land is “reasonably capable of” continuing to be used for the occupier’s purpose. It might be appropriate to limit the general right to those who have substantial interests, or at least more than a “minor tenancy”.[95] If so, if would be necessary to preserve the special provision for agricultural occupiers with lesser interests.[96] If this approach were adopted, it should be possible to rationalise and simplify the existing provisions of the 1965 Act, the Vesting Declarations Act, and the 1973 Act, into a single provision based on “material detriment”, in respect of buildings and land held with buildings; and “reasonable capability of use” for other categories of land. In the following proposal, the latter suggestion is shown in italics.

                6.56             Although the following proposal offers a unified provision applicable under both notice to treat and vesting declaration procedures, an alternative first step would be selective amendment of the existing provisions of the 1965 Act and the Vesting Declarations Act, to modernise the former and to bring the two into line with each other. Substantive  changes would be made by way of amendment of Schedule 1 to the Vesting Declarations Act, which, as we have said, represents a reasonably detailed modern code. At the same time a new section, embodying the same procedure (as amended), could be substituted for section 8 of the 1965 Act.  The precise mechanics of this are matters for consideration at the drafting stage.

Proposal 11 - Divided interests (unified procedure)[97]

(A) Divided property notice

                                           (1)             If the land specified in a notice of acquisition comprises part only:

                                                                   (a)              of any building; or

                                                                   (b)              of any land attached to and used with a building;

any person who is able to sell the whole of the land, may by notice (“a divided property notice”) served on the acquiring authority require them to purchase his interest in the whole.

[(1A) A divided property notice may also be served by the owner of any interest in the subject land (greater than a tenancy from year to year) if, as a result of the acquisition, his retained land[98] or any part of it, is no longer reasonably capable of being used for the purpose for which he was using it at the time of the notice of acquisition.][99]

                                           (2)             In this proposal “notice of acquisition” means, as the case may be, a notice to treat or a preliminary notice of a vesting declaration; and the “relevant property” means the building or land to which the divided property notice relates.

                                           (3)             Except as provided by regulations under this section, a divided property notice shall be served within 28 days of the notice of acquisition.

                                           (4)             Where a divided property notice has been served, the authority may, within 3 months of the notice:

(a) serve notice withdrawing the notice to treat (or deemed notice to treat);

(b) serve notice to acquire the whole; or

(c) refer the matter to the Lands Tribunal;

If it fails to act within 3 months, it is deemed to have served a notice under (a).[100]

                                           (5)             The Lands Tribunal (on an application, as under (4)(c) above, made in accordance with regulations under this proposal) may determine that:

                                                                   (a)              in the case of a building, the part proposed to be acquired can be taken without material detriment to the building or its use; or

                                                                   (b)              in the case of land attached to a building, the part proposed to be acquired can be taken without seriously affecting the amenity or use of the building;

                                                                   (c)              [in the case of other land, the part proposed to be acquired can be taken without the effect mentioned in (1A)].

                                           (6)             In determining any such reference, the Tribunal:

                                                                   (a)              shall take into account not only the effect of the severance but also the use to be made of the part proposed to be acquired and, in a case where the part is proposed to be acquired for works or other purposes extending to other land, the effect of the whole of the works and the use to be made of the other land; and

                                                                   (b)              may determine the area of the relevant property which the acquiring authority ought to be required to take.

                                           (7)             If the authority does not so refer the notice to the Tribunal within 3 months, or if, following a reference, the Tribunal determines it against the authority, the notice to treat or (as the case may be) the declaration shall be treated as having effect as though the whole of the relevant property (or the part determined under (6)(b)) were included.

(B) Agricultural land

The provisions of 1973 Act ss 53-57[101] will continue to apply [so far as not superseded by (1A)]].

(C) Unexpired tenancies

1965 Act, section 19 (apportionment of rent) will continue to apply.[102]

Consultation issue (Q) – Divided interests (unified procedure)

(1)     Do consultees agree with our view that, in respect of divided interests, the same provision should apply to both notice to treat and vesting declaration procedures, and that the provisions of the Vesting Declaration Act should be taken as the model?

 (2)     Should the right to serve a divided property notice be extended (as proposed in (1A) above) to all categories of land, in cases where the owner’s retained land or any part of it is no longer reasonably capable of being used for the purpose for which he was using it at the time of the notice of acquisition? If so, what, if any, limitations or qualifications should there be?

(3)     Do consultees agree our provisional approach that the provisions of the 1965 Act (s8(2),(3)) relating to small parcels of separated land can be dispensed with?

(4)     Should any changes be made to the provisions of the 1973 Act, in respect of divided agricultural interests?

(3) Mortgages and rentcharges

Existing law

Mortgages

                6.57             When an acquiring authority compulsorily purchase land, that land may be subject to a variety of encumbrances. A mortgagee (lender) has an interest in land upon which his loan is secured and is entitled to a notice to treat under section 5 of the 1965 Act.[103] However, failure to serve a notice on the mortgagee means no more than that his interest cannot be prejudiced by exercise of the compulsory powers.[104]

                6.58             Section 14 of the 1965 Act[105] provides that an acquiring authority may purchase or redeem a mortgagee’s interest either:

                                            (1)             immediately, by paying the mortgagee the principal (the outstanding capital sum of the loan) and interest due on the mortgage plus any costs and charges incurred, together with 6 months’ additional interest; or

                                            (2)             by giving 6 months’ notice to the mortgagee that the authority will pay to the mortgagee all the principal and interest due at the end of the notice period, plus any costs and expenses incurred.

                6.59             In the event that the mortgagee fails to release his interest in the mortgage or fails to make good title, the acquiring authority may pay the composite sum (principal, interest, costs) into court and then execute a deed poll transferring the mortgagee’s interest to the authority and authorising the lawful taking of possession.[106]

                6.60             The mortgagor (borrower) has no right to compel the authority to exercise this power, nor does the Lands Tribunal have jurisdiction to determine the date when an acquiring authority should have exercised their power. This may leave the mortgagor in a difficult position if his own interest has been acquired, but compensation has not yet been paid to enable him to pay off the mortgage. Substantial arrears may accrue for which the claimant, and not the authority, is liable. The power in section 14 is not a duty to redeem, and it exists for the benefit of the authority and not for the mortgagor.[107] The mortgagor’s only remedy in such a case is to expedite the compensation procedure:

A person whose property is being compulsorily purchased can do a number of things to hurry along the process of acquisition. If he cannot agree a price, he can refer the dispute to the Lands Tribunal… If he needs money to pay off the mortgage he can, after the authority have taken possession, ask for compensation on account.[108]

                6.61             Section 15 deals with the situation where the mortgage debt exceeds the land value. It provides that the value of the compensation shall be assessed by tripartite agreement (mortgagor, mortgagee and acquiring authority) and, failing that, the matter will be determined by the Lands Tribunal. The Tribunal’s jurisdiction is limited to determination of valuation. As with the section 14 procedure, if the mortgagee fails to transfer his interest or to make good title the authority can make payment into court and execute a deed poll to vest the interest in itself.[109]

                6.62             Compensation is not payable if the value of the mortgaged land does not exceed nil, e.g. where the remediation costs of contaminated land, or the costs of demolition and clearance of derelict buildings (either of which would fall to the authority) exceeds its present value.[110]

                6.63             Section 15(7) continues to protect the mortgagee where the mortgage has been discharged but the compensation only reflects the lower land value. In this circumstance the mortgagee does not lose his remedy to sue the mortgagor on his personal covenant to pay the balance of the full mortgage debt. The mortgagee obtains no form of charge on the compensation or other assets; in other words, his debt becomes unsecured.

Part acquisition

                6.64             Acquisition of part only of mortgage land is governed by section 16 of the 1965 Act. This makes provision similar to that in section 15. Where the part to be taken has less value than the mortgage on the whole, and the mortgagee is unwilling to release that part, then the value of the land to be taken (and the compensation for severance) must be agreed between the mortgagee, the mortgagor and the authority, or determined by the Tribunal;[111] and paid to the mortgagee, upon which he must release his interest to the authority.[112] In default of transferring the compensatable interest or making good title, the authority can make payment into court and execute a deed poll.[113] The mortgagee retains under this provision his right to sue the mortgagor on his original covenant for repayment of any balance due, although that right is no longer secured over the land. [114]

                6.65             If a mortgage is paid off under these arrangements before the contractual date in the mortgage deed, the mortgagee is entitled to be compensated both for the expenses involved in reinvesting the paid-off sum (taxed if necessary[115]) and for any loss resulting from achieving a lower rate of interest on reinvestment than was provided for under the mortgage.[116]

Rentcharges

                6.66             All other forms of “payment or incumbrance” charged on land which is to be acquired compulsorily are grouped together as “rentcharges” and are governed by section 18 of the 1965 Act.[117] The acquiring authority may require the person entitled to benefit of the rentcharge to execute a release and to make good title. If the owner fails to do so, the authority may make payment of compensation (agreed or determined by the Lands Tribunal[118]) into court and execute a deed poll extinguishing the charge.[119]

                6.67             Where only part of the land affected by a rentcharge is required by an authority, the rentcharge will be apportioned between authority and owner and rentcharge beneficiary by agreement or, in default, by the Tribunal. If the remaining (untaken) part of the land is still adequate security for the whole rentcharge, the person entitled to the charge may (with the landowner’s consent) release the acquired part of land from the effects of the charge, and attach the whole charge to the remaining parcel of land.[120] Under the vesting declaration arrangements, similar procedure applies, so that the rentcharge can be apportioned and released as respects the part to be acquired.[121]

                6.68             Section 18 is applied with modifications to acquisitions under a general vesting declaration.[122] 

                6.69             The Rentcharges Act 1977 abolished rentcharges[123] as defined in that Act,[124] by making them redeemable on application to the Secretary of State for a “redemption certificate”.[125] However, the provisions of section 18 are still relevant for cases not covered by the 1977 Act, notably in relation to “estate rent charges” which are not redeemable.[126]

Discussion

                6.70             We are not aware that these provisions have given rise to difficulty in practice. The problems of delay for the mortgagor, highlighted by the Shewu case, seem to have been exceptional, due to the very protracted nature of the procedure in that case, and the absence of the owner abroad.[127] The proposals in the Policy Statement for imposing tighter time-limits on the exercise of compulsory powers,[128] and the proposed amendments to the advance payment procedure[129] should help mitigate such problems.[130]

                6.71             Accordingly, we provisionally propose to retain sections 14-16 (mortgages) and 18 (rentcharges) of the 1965 Act, without substantial amendment (while noting the desirability of simpler statement of the rules, in a future consolidation). However, we invite comments on any practical issues raised by these provisions. For example, it is not clear whether there is any practical advantage in giving authorities the two alternative options in section 14. We would also invite comments on the working of the provisions in relation to mortgagors (having regard to the proposed changes mentioned in the last paragraph).

Consultation issue (R) – Mortgages and rentcharges

(1) Do consultees agree with our provisional proposal to retain the existing provisions in the 1965 Act relating to mortgages and rentcharges?  If not, do these provisions give rise to any practical problems which should be addressed?

(2) What (if any) are the practical benefits of the two alternative options for dealing with mortgages in section 14?

(4) Public Rights of way

Existing law

                6.72             Where a public right of way exists over the land proposed to be acquired by compulsory purchase order, the acquiring authority may seek an “acquisition extinguishment order”, so as to extinguish the right of way.[131] It seems that this procedure is available, whichever method of implementation is adopted.

                6.73             The power to make such an order is subject to the proviso that the acquiring authority be satisfied that a “suitable alternative right of way has been or will be provided, or that the provision thereof is not required”.[132]  Such orders are subject to confirmation by the Secretary of State,[133] and he must consider whether he is satisfied that a suitable alternative right of way has been or will be provided or whether an alternative is required or not.[134]

                6.74             The acquisition extinguishment order cannot be made earlier than:

(a) confirmation of the [compulsory purchase] order, or if the Secretary of  State is the acquiring authority, the making of the order;

(b) if in the exercise of the power conferred by section 11(1) of the Compulsory Purchase Act 1965, or by agreement, the acquiring authority takes possession of the land, the date on which the authority takes possession of the land;

(c) if the acquiring authority does not take possession of the land in exercise of any such power, the date on which the acquisition of the land is completed.[135]

                6.75             Section 32(5) also caters for where a right of way is extinguished before the acquisition of land is completed and after that date there appears to be abandonment of the proposal to acquire the land. In such circumstances, the right of way shall be revived, subject to the making of a new order extinguishing the right.

                6.76             The provisions also provide for protection of the apparatus of statutory undertakers.[136] The procedures for the making of the extinguishment order are prescribed in the Highways Act 1980, Schedule 6.[137] It provides for notices to be served and published,[138] and for objections.[139]

Discussion

                6.77             We have no information as to how often this procedure is used in practice. There appears to be considerable overlap with powers of highway authorities and planning authorities, under the Highways Act 1980 and the 1990 Act, respectively, for stopping up rights of way.[140] However, it seems useful to have a specific power directly relate to compulsory purchase. Accordingly, we provisionally propose that it should be retained without amendment.

Consultation issue (S) – Public rights of way

Can consultees comment on how frequently the Acquisition Act procedure is used in practice, and whether it gives rise to any practical difficulty?