In this Part 4 we examine the key changes the Consumer Rights Act (“CRA“) brings in, in relation to the supply of digital content. Part 1, Part 2 and Part 3 of this series of articles can be found by clicking on Part 1 here, Part 2 here and Part 3 here.

What does the Consumer Rights Act 2015 (‘CRA’) say about supplying digital content?

The CRA brings in new statutory rights and remedies specifically aimed at suppliers of digital content.  This is helpful because traditionally, the law for technology and digital content has been uncertain and slow-moving.

What types of digital content are subject to the CRA provisions on digital content?

The CRA applies, for example, to:

1. all digital content that is paid for;
2. all digital content which comes free with any other good or service purchased and not generally available to consumers unless the consumer has paid for it or paid for other goods, services or digital content; and
3. all digital content paid for using digital currency where the digital currency was firstly paid for using money.

Most of the statutory rights and remedies do not apply to:

1. digital content supplied for free; and
2. digital content supplied in return for a consumer’s personal data instead of money.

The rights and remedies under the CRA for digital content are also not applicable if the trader provides a service and, through that service, digital content can reach a consumer.  This means that internet service providers and mobile telephone providers are not caught by such provisions simply by providing internet service or mobile telephone provider services.

Terms governing the supply of digital content to consumers

Importantly, the CRA has clarified that digital content is not a good nor a service but rather a commodity in its own right.  It adopts a definition of digital content being data produced and supplied in digital form. 

As with the supply of goods generally, digital content must be of satisfactory quality; fit for a particular purpose; and as described.  There will be now be an implied term in consumer contracts that the trader has the right ‘to supply’ digital content.

When it goes wrong…

If the trader is in breach of its right to supply digital content, a consumer has a right of refund.

For any other breach (for example, if the digital content was not of satisfactory quality), a consumer has the right to have the digital content repaired or replaced and if this has failed or if it is impossible then a consumer has the right to a reduction in the price of the digital content.

If the supply of digital content causes any damage to a consumer’s machine or to a consumer’s other digital content (even where this digital content has been provided for free) and the trader has not exercised reasonable skill and care, a consumer has the right to compensation and can request repair within a reasonable time.

There is no prescribed limit as to how many times a trader can attempt repair and replacement before the price reduction kicks in.

There is also no right to reject digital content which is probably because of the logistical issues of returning digital content.  There is also no requirement that a consumer deletes or returns the digital content.

Different remedies may be available to consumers who received the same digital content, but via alternative methods (such as an app being pre-installed on a tablet or downloaded from the app store).

What should I review?

Businesses should be reviewing all consumer facing terms and conditions. These may include:

• consumer sales contracts (for goods, services and digital content)  including website terms and conditions
• contractual clauses that limit your business’s liability
• any pre-contractual information provided to consumers including marketing material
• cancellation and returns policies.

Further guidance for businesses in relation to the CRA is available on the Business Companion’s website, accessible here.

Author: Noor Al Naeme

For further information on compliance with the CRA or any other matter, please contact Tom Torkar, Partner in the Technology & Innovation team at tom.torkar@michelmores.com.

The Academies Financial Handbook has recently been reviewed by the Government (on 23 June 2020), resulting in a number of key amendments which will take effect from 1 September 2020. Academy Trusts must take note of the latest edition of the Academies Financial Handbook 2020 which sets out the main changes regrouped into the following categories: governance, executive team, general controls and transparency, internal scrutiny and annual accounts. These key amendments are as follows:

Governance

1. The Trustees must ensure that the Academy Trust is operated as a going concern (paragraphs 1.14, 2.5 and 2.9). Although this is not a new requirement (since this has always been expected of Trustees as directors under Company Law), this requirement can be supported by the Trust’s finance committee and Trustees may wish to consider the ESFA’s practice guide on Operating an academy trust as a going concern.

2. Although Members have previously been able to be employees or occupy unpaid staff roles where permitted by the Trust’s articles of association, this possibility has now been removed. This change will be effective from 1 March 2021 (paragraph 1.4) and as such Trusts should review the roles of their Members in the near future.

3. The Members must be kept informed about Trust business (paragraph 1.8), which includes being provided with the Trust’s audited annual report and accounts. To comply with this requirement we would recommend a regular dialogue between the Trustees and the Board.

4. The Academies Financial Handbook 2020 now makes it a requirement for a clerk to be appointed to support the Trustees. Trusts must ensure that the appointed clerk is not a Trustee, principal or chief executive of the Trust. Since this requirement was previously a “should” it is likely that many Trusts already have a clerk who assists the Trustees by providing administrative and organisational support amongst other things (paragraph 1.40). However, now that this is a “must” Trusts will need to fill this position.

5. The Trust’s register of interests must be regularly updated (paragraph 5.46). We would recommend that a Trust does this more frequently than on an annual basis, for instance it may decide to do this as an item on the agenda of its meetings.

Executive Team

6. The Trust’s Accounting Officer and Chief Financial Officer (CFO) should be employees of the Trust. Nevertheless, in exceptional circumstances, such as where these roles are filled on an interim or consultancy basis, the Accounting Officer and CFO may be non-employees provided that the Trust has obtained prior ESFA approval before making the appointment (paragraphs 1.26 and 1.36).

7. The Academies Financial Handbook has raised the bar on what is expected from CFOs in large Trusts, such as those with over 3,000 pupils. Trusts are expected to ensure that their CFO and finance staff have the appropriate qualifications and / or experience (paragraph 1.37). As such, a Trust should consider whether its CFO has a business or accountancy qualification and whether they are a member of a relevant professional body such as the Institute of Chartered Accountants of England and Wales, the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants or the Chartered Institute of Public Finance and Accountancy. Nevertheless, possessing these qualifications is not enough on its own, the Trust CFO is expected to maintain their professional development and undertake ongoing training (paragraph 1.38).

General Controls and Transparency

8. Trusts must now maintain a fixed asset register (paragraph 2.7).

9. Trusts are expected to review and challenge pupil number projections on a termly basis (paragraph 2.12).

10. Trusts are encouraged to take an integrated approach to the curriculum and financial planning (paragraph 2.13). The Government has published guidance on this management process with the aim that this integrated approach will provide the Trust with confidence when planning the best curriculum for its pupils and when delivering its educational priorities using its available funding.

11. Trusts must avoid the use of overdrafts on any account to comply with its restrictions on borrowing (paragraph 2.24). It is important to note that where there are concerns about financial management the Trust may be required to report its cash position to the ESFA.

12. The Trust’s website must disclose any employee benefits (including gross pay, other taxable benefits and termination payments, but not the Trust’s own pension costs) which exceed £100,000 in £10,000 bandings as an extract from its financial statements for the proceeding accounting year (paragraph 2.32). Therefore, as of 1 September 2020 where such employee benefits existed in the Trust’s 2019 accounting period these will need to be disclosed until the Trust’s 2020 financial statements are published.

13. The Trust must also publish on its website its agreed whistleblowing procedure (paragraph 2.44).

14. The Academies Financial Handbook maintains that the Trust must not use its funds to purchase alcohol for consumption, however there is now an exception where this is for religious services (paragraph 2.35).

15. The Trustees retain overall responsibility for the Trust’s risk register and must review this at least annually (paragraph 2.38). The Trustees must also establish an audit and risk committee who should meet at least three times a year to support the Trustees. It is important to note that the committee may only support the Trustees, responsibility should not be delegated to it (paragraphs 3.6 – 3.8).

16. Trusts must complete the school resource management self-assessment tool by the specified annual deadline to ensure that they are effectively managing resources and that adjustments can be made where necessary (paragraph 6.8).

Internal Scrutiny

17. The Trust’s internal scrutiny should cover both financial and non-financial controls and risk management procedures (paragraph 3.1).

18. From 1 September 2020, a Trust’s internal audit must not be performed by an external auditor in accordance with the Financial Reporting Council’s latest Ethical Standard. As such Trusts review their internal audit arrangements, for instance by appointing an in-house internal auditor, in situations where the internal and external audits were carried out by an external auditor (paragraphs 3.17 and 3.20).

19. A Trust’s internal scrutiny should not be limited to input from persons with financial expertise, rather Trusts are encouraged to call on the non-financial knowledge of additional individuals or organisations (paragraph 3.18). There is a continued obligation for Trusts to submit an annual summary report. As such, when submitting its annual summary report on the internal scrutiny work carried out (including the areas reviewed, key findings, recommendations and conclusions), the Trust should consider the ESFA’s guidance on internal scrutiny in academy trusts. This report should be submitted by 31 December each year (paragraph 3.23).

Annual Accounts

20. The Academies Financial Handbook 2020 provides further detail on the Trust’s audit and risk committee’s role in relation to assessing the effectiveness and resources of the external auditor to provide a basis for decisions by the Members about the auditor’s reappointment, dismissal or rendering. For instance, the audit and risk committee should take into account considerations such as the auditor’s sector expertise, their understanding of the Trust and its activities and the auditor’s use of technology (paragraph 4.17). Furthermore, in June 2020 the ESFA issued the Academies Accounts Direction 2019 to 2020 which is relevant for accounting periods ending 31 August 2020. Trusts should be aware that this direction incorporates some minor updates and additional reporting requirements for large Trusts.

Conclusion

The above changes to the Academies Financial Handbook are not to be ignored by Academy Trusts. There are numerous new obligations imposed following a number of switches from “should” to “must“. As such, we would recommend that all Academy Trusts, if they have not already, should familiarise themselves with the amendments to the governance and financial management obligations and contemplate those which need to be implemented going forward.

If you would like to discuss any of the issues raised in this article, or have other concerns about the impact of Coronavirus, please contact: Hollie Suddards in Michelmores’ Education team.

CORONAVIRUS STOP PRESS – Click here to keep up-to-date with all of our latest articles.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.

The recent Court of Appeal decision in Walker v Co-Operative Group considered the application of the “material factor defence” in equal pay claims. The Court clarified that, where a material factor defence is applicable, an employer does not have an ongoing duty to monitor the continuity of the material factors prior to a further identifiable decision (or omission to decide) about pay. The Court also clarified that a material factor needs to explain, but not justify, the pay disparity in question.

Walker v Co-Operative Group Ltd and another [2020] EWCA Civ 1075

What is the material factor defence and when is it used?

The Equality Act 2010 (EqA 2010) requires that an employee is entitled to contractual terms, such as those related to pay, which are as favourable as those of a comparator of the opposite sex in the same employment if they are employed to do equal work. In the absence of such express terms, a “sex equality clause” is automatically implied into the contract of employment. Essentially, this clause imports into the employee’s contract the more favourable terms of their comparator.

However, an employer can rebut the inclusion of a sex equality clause where they can show that the difference in terms is because of a material factor that is not based, directly or indirectly, on sex. To achieve this, the employer must show that:

1. The reason was genuine and not a sham or pretence.
2. The less favourable treatment was due to that reason and that it was a “material reason”, i.e., a significant and relevant factor.
3. The reason was not because of sex.
4. The factor relied on is a material difference, that is, a significant and relevant difference.

However, a material factor need only be the cause of the difference, rather than providing for a good reason for the difference. Once shown, it will continue to explain a difference unless and until it is shown that (i) a new decision has been taken which is tainted by sex discrimination and has the effect of displacing the prior legitimate decision, and (ii) those factors have ceased to apply and therefore, the defence is no longer applicable.

What are the facts of Walker v Co-Operative Group?

The Claimant was promoted to the role of Group Chief HR in February 2014, during a time when the Co-Op was facing financial difficulties. Employees were placed into tiers, each of which had a salary band. The Claimant was placed into a tier with two men and one other woman, with a salary band of between £350,000 and £550,000.

The Claimant’s salary was lower than the two men in the tier, who worked different roles within the executive committee. Following a period of consolidation, the Co-Op decided that the Claimant’s role should be downsized and her salary reduced. In February 2015, following an external Job Evaluation Review (JER), involving a pay grade review to introduce consistent grades across the Co-Op group, the Claimant’s role was rated equivalent to, or higher than, the two men in her tier.

The Claimant was subsequently dismissed on notice in April 2017. She commenced proceedings against Co-Op, including a claim for equal pay. The Co-Op invoked the material factor defence, relying on the following multiple material factors to justify that the differences in pay were not because of sex:

1. Each individual in the tier had a different role. The men’s roles were vital to the immediate survival of the company, whereas the Claimant’s role was important, but not vital.
2. The men were more experienced at executive level.
3. It was crucial to maintain stability and the top team of people to support the CEO.
4. The men’s pay reflected particular market forces, which put pressure on their roles and pay.

What was held by the Employment Tribunal (ET) and the Employment Appeal Tribunal (EAT)?

The ET accepted that, in February 2014, the pay difference was genuine for the reasons put forward by the Co-Op. However, by the time of the external JER, the ET held that these material factors had ceased to apply. As such, at some point between February 2014 and February 2015, when the material factors ceased to apply, an unlawful pay disparity had arisen.

Co-Op appealed the decision to the EAT on the basis that it was not open to the ET to decide that any material factors had ceased in the intervening period, without a basis for doing so. There had been no new decision made by the employer in relation to pay and conditions prior to the JER. The EAT agreed. Until a further identifiable decision (or omission to decide) about pay, at which point the Co-Op would have been required to defend any pay differential, the material factors continued to apply. The Claimant subsequently appealed to the Court of Appeal.

What was held by the Court of Appeal?

The Court of Appeal held that, where a claimant’s job is rated as equivalent with a comparator following a job evaluation scheme, the statutory language looks to the present and the future, but not to the past. As such, the ET was not permitted to look at the period before the JER review took place, to identify when the material factors had ceased.

In addition, it was held that the JER did not mean that all of the multiple factors proposed by the Co-Op then ceased to apply. In this instance, this was not the case and there was at least one material factor which remained causative of the difference in pay.

Further, it was not for the ET to consider whether the material factors justified the difference, but merely whether they caused the difference. It is likely that a JER would focus more on justification. It was not the case that the JER could be relied upon as definitive evidence that no material factors applied.

What can employers take from this?

For a material factor to apply, an employer must ensure that the reason is genuine. However, it need only be what caused the difference in pay. As such, it is not for a Tribunal to take a view on whether a material factor is a good reason for a difference in pay.

Once established, an employer is not under a continuing duty to review the differences in pay. Material factors that applied at the time of a decision will continue to apply unless and until a new pay decision is taken (or an equivalent omission to decide). Therefore, employers should consider the position at pay review meetings in the usual way, unless reasonably requested to do so at an earlier date. However, it is important to note that, where there is only one identifiable material factor, it may well be the case that more is expected from employers when it comes to monitoring material factors between pay decisions.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd to discuss any issues you are facing.

In recent years the world has witnessed exponential growth of social media use; with the likes of Instagram boasting over 800 million users and Facebook in excess of an astonishing 2 billion. It is therefore unsurprising that we are seeing a vast increase in the number of businesses using social media as a platform to increase brand awareness and customer interaction.

Naturally, therefore, use of social media for competitions and prize giveaways is becoming increasingly popular. No doubt we have all come across the words “COMPETITION TIME” or “RETWEET TO WIN” on the likes of Twitter, Instagram and Facebook. Although such competitions/prize draws are a simple and relatively informal way to interact with customers and followers, it is important to remember that they must still comply with the relevant legal rules and regulations. Unsurprisingly, the internet is awash with social media giveaways and competitions which fail to do this.

The Rules

The most relevant set of rules, when it comes to prize give-aways and competitions on social media, is the CAP Code. This is the rule book for non-broadcast advertisements and direct and promotional marketing communications. It is enforced by the UK’s independent advertising regulator, the Advertising Standards Authority (ASA). Little known to many, the CAP Code applies equally to all prize promotions; including those conducted via social media.

Please do note that there are a raft of other potential compliance requirements for businesses to observe when using social media for competitions and giveaways. For example, due regard must be given to the Gambling Act 2005, the Consumer Protection from Unfair Trading Regulations 2008 and, if personal data of entrants is being collected and/or used to target recipients, the EU General Data Protection Regulations (GDPR) and the Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR) .

In addition, social media sites (including Instagram, Facebook and Twitter) often have their own “promotion guidelines”; intended to further regulate the use of their specific platform for conducting competitions and prize draws.

The CAP Code – What should businesses be thinking about?

The rules relevant to holding competitions and prize giveaways on social media within the CAP Code are relatively comprehensive. Some of the key rules businesses are required to comply with are outlined below:

1. The initial marketing communication (be it an Instagram post or a tweet etc.) should include all significant information that the customer needs to decide whether to participate in the prize draw/competition. This will usually include, for example, how to enter the competition/prize draw; any start and/or closing date and any restrictions on entry. Exemptions may, however, apply where the initial communication is limited by time or space.
2. Businesses must also have a full set of terms and conditions for the competition/prize giveaway; addressing matters such as how and when winners will be notified of the results. Whilst these terms need not be outlined within the social media post itself, customers must be able to access them prior to entering the promotion (for example, via hyperlink within the relevant post/linked post).
3. All entrants should be included in the prize-draw. Having a reliable method of collecting data will be essential here; especially where entry into the competition/prize draw is based on common social media activities such as using hashtags and sharing, liking and retweeting posts.
4. (Although this would seem obvious) Businesses must actually award the prize!

Helpfully, the ASA has produced some guidance on conducting prize draws via social media. This can be accessed here.

Non-Compliance

Non-compliance with the CAP Code can result in enforcement action being brought against offending businesses by the ASA. Where a complaint is upheld, the consequences are often limited to a warning. In theory, however, it is possible for the “penalty” to be much more severe; including the removal of trade privileges, disqualification from industry awards and/or a referral to Trading Standards.

For an example of a complaint which was upheld by the ASA (against Hard Rock Cafe (UK) Limited) for a failure to indicate that terms and conditions would apply, or to indicate how these could be accessed, see here.

Businesses must also be conscious of the ‘downside’ of social media where sanctions have been levied – bad publicity can spread like wildfire over social media where customers feel aggrieved or unfairly treated by a brand.

Conclusion

Social media is a powerful tool, and its use by today’s businesses for holding competition and prize giveaways continues on an upwards trajectory. With the constantly changing environment, it can be difficult to keep up to speed with the myriad of legal requirements that apply; however, if you want to ensure your business is #trending for the right reasons, it is essential that compliance with the relevant rules is not overlooked.

For more information, please contact David Thompson, Partner in the Commercial team on david.thompson@michelmores.com  or 01392 687656.

The Government have been busy recently in the planning arena, with both a heavily strategic planning White Paper being published, as well as legislative changes designed to bring some relief to struggling sectors of the COVID-19 affected economy. Mark Howard, Head of Planning at Michelmores, provides a swift update on the key provisions.

Radical Change

Housing Secretary, Robert Jenrick, has announced a White Paper, Planning For The Future, which outlines details of “radical” and highly strategic changes to the planning system. These changes will see land zoned in Local Plans for renewal, growth, or protection.

• Land designated for “renewal” would require local authorities look favourably on new developments.
• Land in “growth” areas, development including new homes, hospitals and schools will be allowed automatically.
• “Protected” land will include Areas of Outstanding Natural Beauty and land in the green belt.

The White Paper proposes that “all new homes be carbon-neutral by 2050, with no new homes delivered under the new system needing to be retrofitted”.

The White Paper also includes a “first homes scheme”, to provide new homes at a 30% discount for local people, key workers and first-time buyers. There is also a proposal to effectively merge the current Section 106 Agreements with CIL, in order to create a new “Infrastructure Levy” (I think we have been here before).

The White Paper also promises meaningful local consultation to take place early in the development process.

As might be expected, the White Paper has been met with both welcome and scepticism. To identify just two concerns already raised: the pushing back of the date of 2050 for carbon neutral houses has led to despair by environmental groups; further, the prospect of Local Plans securing “protected” status for entire areas looks possible and, doubtless, will lead to cries of NIMBYism that have dogged increased local involvement previously.

The White Paper seems to be regarded as rough and poorly thought out. We will keep you updated as this policy develops.

Getting Businesses Back to Work

Meanwhile, the Business and Planning Act 2020 received Royal Assent towards the end of July and contains a range of provisions that come into effect in July and August. It covers matters that are focused at helping businesses get back to work. We have picked out the main changes for construction and for the hospitality sector.

Construction – Extending Planning Permissions

This is a very welcome provision for the construction sector, finally providing some clarity around the extension of planning permissions in England. It covers both planning permissions and listed building consents.

An extension to 1 May 2021 will automatically apply for permissions that are extant between 19 August 2020 (when this provision comes into effect) and 31 December 2020.

The same extension will apply to permissions that have lapsed since 23 March 2020. These will not be automatic, but will be subject to an additional environmental approval.

Construction – Site Hours

Again, this is a speeded-up process to get consent to vary existing conditions that limit construction site working hours. This will temporarily amend planning restrictions on construction site working hours until 1 April 2021.

Local authorities have 14 calendar days excluding public and bank holidays to consider these applications.

Hospitality – Outdoor Seating

This is intended to support pubs, cafes and restaurants by introducing an accelerated process for permission to place furniture such as stalls, tables and chairs on the pavement outside their premises. These pavement licences are to be obtained from the local authority. If the licence requires works to be done then the licence grants deemed planning permission. There are enforcement and revocation provisions that ensure the licence does not cause social problems. There should be no safety or amenity issues, and the licenced activity should not block the highway for highway users and the disabled. The application fee is capped at £100 and the consultation and determination periods are speeded-up.

We will keep you abreast of developments in this area of law. But once again, planning is set to become a topical and controversial policy arena.

With the rise in popularity of websites like “Airbnb” and “Booking.com”, home owners and occupiers have increasingly taken opportunities to let (or sub-let) out their homes on very short term lets. This has sometimes given rise to noise and anti-social behaviour problems for neighbours, as guests make the most of their stay.

The recent case of Triplerose Ltd v Beattie [2020] has provided useful guidance on the extent to which a landlord can use lease covenants to control such activity.

The case

In Triplerose the dwelling was a flat, held on a long term lease, containing a covenant not to use the flat for any purpose other than “as a private dwelling house for occupation by one family at any one time”, and not to carry on any trade or business “upon the property”. The lessees lived in the flat 2-3 days a week, but let it out for short term occupation at other times.  A separate company handled advertising, check-ins and laundry.

The First-tier Tribunal found no breach of the lease, but the landlord then appealed. The Upper Tribunal found a breach of one covenant, but not the other as follows:

Private dwelling use

The Tribunal decided the correct approach was to ask whether the occupant of the flat at any given time, was using it for any purpose other than as a private dwelling for occupation by one family at any one time. The individuals who occupied the flat after responding to internet advertisements were not fulfilling this requirement, and thus the lessees were in breach of covenant.

Trade or business prohibition

The Tribunal noted a distinction between using premises as a business resource and carrying on a business upon the premises. The covenant prohibited the lessees from conducting business “upon the property”, but the lessees were not doing that. Although they were using the flat for the business of short-term letting, the business was being carried on from elsewhere. The provision of laundry and check in services by the company did not alter this position. The flat itself was being used for short-term residential purposes (albeit as part of a business); no activity was being carried on “upon” the property, which in itself amounted to a business and thus there was no breach of this covenant.

The latest Electronic Communications Code decision from the Upper Tribunal in the case of Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC) has done little to clarify what is becoming an increasingly uncertain area of law. There is a strong argument that where case law cannot provide legal certainty, then the Code should be amended to deal with the various issues in play.

The Arquiva case

AP Wireless 2 UK Limited (“AP Wireless“) own a site at Queen’s Oak Farm near Towcester, over which Arqiva Services Limited (“Arqiva“) wished to acquire Code rights.

Arqiva were in occupation of the site under the auspices of Schedule 2 of the Telecommunications Act 1984 (“Old Code“) and the Upper Tribunal took, as a preliminary issue, the question of whether Arqiva now has Code rights and if not how it could acquire them.

Arqiva had a twenty year lease of the site which expired in October 2016. The lease was contracted out of the security of tenure provisions of Part 2 of the Landlord and Tenant Act 1954 (“1954 Act“). Arqiva remained in occupation of the site paying rent and various discussions took place about the terms of a new lease, with no agreement being concluded.

The Code

The Electronic Communications Code 2017 (“Code“) came into force on 28 December 2017 and Arqiva gave notice on 2 July 2019 seeking orders under paragraphs 20 and 27 of the Code. Paragraph 20 enables the Tribunal to impose an agreement on an operator and landowner, whilst paragraph 27 provides for the imposition of temporary Code rights. These temporary rights apply where an operator has electronic communications apparatus on land and the landowner has the right to require its removal. The aim, of course, being the maintenance and continuity of the network.

The Code also sets out transitional provisions which apply to operators who had rights under the Old Code, at the point when the Code came into effect. Such agreements are called subsisting agreements and the Code will apply to them with some important modifications. We set out the detail of these modifications in our recent article on the Ashloch case.

It is worth noting that the Ashloch case also confirmed that, where a subsisting lease is protected by Part 2 of the 1954 Act, the operator must seek a new tenancy under the 1954 Act procedure and cannot apply for Code rights using paragraph 20. Any new 1954 Act tenancy ordered by the court will, from that point, be deemed to be a Code agreement following the reasoning in the case of Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] (“Compton Beauchamp“).

Preliminary Issues in Arqiva

1. Did Arqiva occupy the site under a subsisting agreement?
2. Could the Tribunal impose an agreement under paragraph 20 of the Code?

The answer to the first preliminary issue depends upon Arqiva’s status following the termination of the original lease in 2016. Arqiva maintained that it was a tenant at will and there was no subsisting agreement in place as a result. By way of reminder, a tenancy at will is a precarious arrangement, which can be terminated by either party, at any time and which is not protected by Part 2 of the 1954 Act.

AP Wireless submitted that a tenancy at will existed during the negotiations for a new lease, but when those ended, a periodic tenancy was created. This was therefore a subsisting agreement and then subsequent correspondence created a 5-year licence, which conferred Code rights on Arqiva. As such the Tribunal did not have jurisdiction under paragraphs 20 or 27, but Part 5 of the Code would have applied.

Tenancy at will or periodic tenancy?

It is often assumed that when a fixed-term lease expires and the tenant holds over, paying the same rent, a periodic tenancy is created on the same terms as the original agreement. However, there is no such presumption and the conduct of the parties has to be considered objectively, so their intentions can be established.

The Tribunal Judge concluded that work on the travelling draft lease ceased in September 2017, because the Code was about to come into force and a new approach was required. However, the intention remained to grant a new lease of the site and so the tenancy at will continued throughout.

A subsisting agreement?

The consequence of the decision that a tenancy at will existed is that, if it had been a subsisting agreement, the Tribunal could have made an order under Part 5 of the Code. If the finding had been that a periodic tenancy existed, then it would have been protected by Part 2 of the 1954 Act and as per Ashloch, the apparatus of the 1954 Act would have applied to the lease renewal.

In order to be a subsisting agreement, the tenancy at will would have needed to be an agreement in writing, permitting the keeping of apparatus on the site. That presented a problem to AP Wireless, because the tenancy at will was oral. AP Wireless argued that the oral tenancy at will was on the same terms as the original 1997 lease and therefore the permission to keep apparatus on the site remained in force, like all the other terms. The Tribunal Judge was not persuaded and ruled that the permission was time-limited to the 20-year fixed term of the lease.

Purposive approach

A further argument was that a purposive approach should be taken to the definition of subsisting leases, which includes these sorts of situations. This argument overlaps with the issue (explained below) of whether Arqiva could have made an application under paragraph 20 when it was already in occupation of the site and did not have Code rights. This loophole (identified in the Compton Beauchamp case) could have been avoided if a purposive approach had been taken, as operators would have been able to use Part 5 of the Code to secure the necessary rights.

Again, this argument did not find favour with the Tribunal, which made the point that the Code was not intended to be retrospective in effect and even Old Code rights did not become full-blown Code rights. Therefore it cannot have been intended to bestow Code rights on operators, who did not even have Old Code rights in the first place.

As such, the finding was that the tenancy at will did not confer rights under the Old Code and was not a subsisting agreement. The same result would have arisen if the arrangement had been an oral periodic tenancy and not a tenancy at will.

Did anything else change Arqiva’s status?

Given the findings that the tenancy at will was not a subsisting agreement, Arqiva was then occupying the site without Code rights, unless something had happened to change its status.

AP Wireless maintained that correspondence between the parties created a 5-year contractual licence, which prevented the grant of temporary rights under paragraph 27 of the Code (because AP Wireless did not have the right to remove the apparatus) and also blocked the paragraph 20 application, as the licence conferred Code rights.

The Tribunal agreed with Arqiva that its status did not change as a result of the correspondence.

Could the Tribunal impose an agreement under paragraph 20?

According to the Tribunal’s findings, Arqiva was on site without Code rights. The final question was a very important one, namely, how could an operator without Code rights, obtain those rights, when occupying a site with electronic communication apparatus in situ?

Arqiva’s case was that the Tribunal had stand-alone jurisdiction under paragraph 20, or alternatively, Arquiva had made an application under paragraph 27. Lewison LJ in University of London v Cornerstone Telecommunications Infrastructure Limited [2019] EWCA Civ 20 described paragraphs 20 and 27 as “inextricably linked” and the Code confirms that a paragraph 27 application can only be made if a notice has been served under paragraph 20.

AP Wireless conceded that the Tribunal had jurisdiction under paragraph 27, but not in accordance with paragraph 20. This was because the Court of Appeal found in Compton Beauchamp that there was no jurisdiction to impose an agreement under paragraph 20 on an operator, already in occupation of the site.

A similar finding in Ashloch required the operator, in occupation of the site, to use the 1954 Act procedure to seek lease renewal, rather than paragraph 20 of the Code. In Ashloch, Part 5 of the Code was not available, because the lease was protected by Part 2 of the 1954 Act. If the Code rights were not so protected, then Part 5 of the Code would have been available.

The Tribunal decided that an occupier of a site without Code rights could not succeed in an application under paragraph 20, whether or not an application was also made under paragraph 27. This decision was reached with some reluctance as being contrary to the policy of the Code. How could it be right that an operator was prevented from obtaining Code rights for a particular site, when it was in occupation and had apparatus in situ providing a service?

Consequences of this decision

A further problem arises because if this decision is correct, an operator with a periodic tenancy, protected by the 1954 Act, can never obtain Code rights. This is because they cannot serve a section 26 notice (as that option is only available for leases granted with an initial fixed term). Therefore the 1954 Act route, with the likelihood of a better rent than the Code, is closed in terms of seeking a new lease. In addition, Parts 4 and 5 of the Code are unavailable as set out above.

Equally if Arqiva’s case was successful, an operator with a protected 1954 Act lease could simply fail to respond to a section 25 notice and allow the lease to expire. It would then have no Code rights and could apply under paragraph 20. That would render the decision in Ashloch of no effect.

One answer to this series of problems is an amendment to the transitional provisions of the Code. The Tribunal was bound by the Court of Appeal’s findings in Compton Beauchamp, but respectfully suggested that the interpretation of paragraph 20 in that case was too restrictive.

The result in Aquiva, was that both paragraph 20 and 27 applications were struck out. Leave to appeal to the Court of Appeal was granted on the second preliminary issue and the strikings out were postponed until the appeal is determined. It was noted that permission to appeal has also been granted in Ashloch and the suggestion was made that the cases might be heard together, as a number of Tribunal cases are backed up, pending the results of the Ashloch appeal. Taking into account the recent news that permission to appeal to the Supreme Court has just been granted in Compton Beauchamp, the telecommunications sector is clearly in desperate need of some judicial or legislative guidance.

Landlords (and practitioners) have been eagerly awaiting the Court of Appeal’s ruling in Trecarrell House Limited v Rouncefield [2020] EWCA Civ 760, on whether a landlord’s failure to provide the tenant with a gas safety certificate (“GSC”) prior to the tenant’s occupation, prevents a landlord permanently from serving a section 21 (no fault eviction) notice to quit.

Gas safety certificates: a reminder

• Landlords must ensure that gas safety checks are conducted every 12 months on all gas appliances and flues by a registered gas safety engineer.
• A copy of the resulting certificate must be given to all tenants before they occupy the premises, or for existing tenants, within 28 days of the date of the gas safety check.
• The cost of the checks must be borne by the landlord.

What did the Court of Appeal decide?

By a 2-1 majority the Court determined that the failure to provide tenants with a GSC prior to occupation does not prevent a landlord serving a section21 notice, as long as the relevant GSC has been provided before service of the notice. The failure to provide the GSC was considered to be a remediable breach.

However what the Judgment does not consider, is whether the position would be the same if:-

• A landlord did not ensure a gas safety check was conducted, resulting in there being no GSC before the tenant went into occupation.
• A landlord does not ensure an annual inspection is carried out, also resulting in there being no up to date GSC.

Whilst the decision has provided some relief, it remains the case that prudent landlords should ensure that they continually comply with the various legislative requirements.

Care should be taken by landlords in deciding who should receive a copy of the certificate as required under the gas safety regulations, and in selecting the correct method of service. The issue of method of service will depend on the wording of the relevant tenancy agreement. Hannah Drew explained this issue in her recent article “Learning the Law: Electronic signatures and email” included in the December 2019 edition of Agricultural Lore.

In the recent case of Keith Fiander and Samantha Brower v The Commissioners for Her Majesty’s Revenue and Customs [2020] UKTT 00190 (TC), the First-Tier Tribunal Tax Chamber has considered the availability of Multiple Dwellings Relief (MDR) against Stamp Duty Land Tax (SDLT) where a property is sold with an annex.

The case

Mr. Fiander and Ms. Brower (the Appellants) purchased Hemingford House, Geddington near Petersfield in April 2016 for £575,000. The Tribunal set out the following features of the property:

• A detached property consisting of: a main house; an annex situated to the rear of the main house and connected with it by a corridor; a garage; and a summer house.
• The annex comprised a sitting room, a kitchen/utility room, a bedroom, and a shower room.
• It could be accessed from the outside via glass “French doors”, separating an outside wood “decking” area from the sitting room. It had a flat roof (in contrast to the pitched roof of the main house).
• A corridor connected the main house and the annex. To use it to walk from the main house to the annex, one had to step down a single step, turn left, walk a few steps (about equal to the length of one of the bedrooms), and then turn right and go up one step.
• There were door jambs in place at the point at which one stepped down from the main house into the corridor (but no door).
• The property was unoccupied at the time of purchase and was in some degree of disrepair – the heating was not working (the boiler needed replacing); there were problems with damp such that some of the flooring needed replacing.
• The annex did not have its own separate postbox, council tax bill, or utility supply.
• The “Rightmove” website described the property as having three bedrooms (“bedroom 1” being in the annex) and two loft rooms. It did not mention the annex as such.
• The local council had sent post addressed to “Geddington annex”.

The difference in tax with and without MDR was £10,000.

The Law

The Finance Act 2003 (FA03) at section 55 sets out the amount of SDLT due in respect of chargeable transactions. Schedule 6B sets out the relief available for MDR under section 58D.

MDR only applies if more than one dwelling is acquired, and what counts as a dwelling is set out in schedule 6B:

“(2) A building or part of a building counts as a dwelling if –

(a) it is used or suitable for use as a single dwelling …”

The way in which the relief is calculated is rather complex, but the intention is that those purchasing multiple dwellings are not taxed as if they were buying one large property, but given tax treatment more in line with the purchase of a number of single dwellings separately.

Application to this case

The Tribunal considered whether the main house and annex were, at the time of purchase, each suitable for use as a single dwelling. The Tribunal could not consider actual use, since the property was empty.

“Suitable for use”

Suitability for use was approached as an objective determination, to be made on the basis of the physical attributes of the property at the relevant time, from the perspective of a reasonable person, observing the physical attributes of the property, at the time of the transaction.

The Tribunal noted that the annex adequately accommodated sleeping, eating, cooking, and washing and sanitary needs, and a place to sit and relax. The Tribunal also noted that the annex was physically distinct from the rest of the property, enabling an occupant to live there without any loss of privacy, including by having to cross through communal areas.

Distinct separate living

The Tribunal noted that there were circumstances in which it might be possible to have distinct separate living accommodation, despite the lack of any physical secure separation of the two. For instance, where there is a very particular kind of relationship between the occupants of the two parts. The Tribunal hypothesised such as where the annex is occupied by an older relative, grown up children of the occupants of the main house, or a lodger, provided this arrangement gave adequate privacy and security to occupants of both parts of the property, given family or other bonds of trust.

The Tribunal was of the view that these “specific circumstances” would effectively be outside of the remit of the objective reasonable person observing the property, such that they would not consider each part suitable for use as a separate dwelling.

Effect of the corridor

The Tribunal was also of the view that the effect of the corridor, joining the two parts, made them unsuitable for use on a stand-alone basis, and noted that the property was marketed as one single dwelling.

Minor physical adjustments

The Appellants also pursued an argument that with a relatively minor physical adjustment being carried out, the annex could be used separately, even if that was not possible now (in this case, the relatively minor adjustment would be erecting a barrier between main house and annex). As such, given the language of schedule 6B – “used or suitable for use” – the intention of the statute cannot have been to allow HMRC to shut its eyes to such a common sense alternative.

The Tribunal did agree with this line of argument, but not its application. The Tribunal was of the view that new physical features could not be introduced to enable a new and different kind of use, even if the new physical features are relatively easy or quick to install. The (hypothetical) installation of dual locking doors (as in adjoining hotel rooms) was considered not to be easy or quick enough.

The Tribunal was not taken by arguments about the annex having a separate postal address, or no separate services or council tax status, attributing them with little weight.

Conclusions

It appears that it would have taken very little to swing this matter in favour of the Appellants, given that the Tribunal appears to have attributed most of its reasoning to the lack of a door or barrier between the parts of the property, and the manner in which it was marketed. Since a door jamb actually featured in the corridor between the two parts, it may be that a door did actually feature at some point, and it may well have been possible to market the property as two separate parts.

Vendors might consider the tax treatment of property in advance of advertising it for sale, in order to give perspective purchasers a fighting chance of availing themselves of reliefs. It is not being suggested here that building works are undertaken to split up otherwise single dwellings. However, as a minimum, it is certainly the case that the marketing materials have often proved fatal to many appellants against SDLT decisions. Beyond that, simply documenting and recording existing use arrangements is often very helpful, particularly with mixed-use claims.

One final point regarding any HMRC challenge is that in most cases HMRC has only 9 months from the date of filing a return to query it. However, buyers are required to retain transaction documents for 6 years, and HMRC has powers to revisit the assessment for up to 20 years, depending on its reasons for doing so. For those who require more finality, it is possible to make a voluntary disclosure.

What is vacant building credit and where did it come from?

Vacant building credit was introduced to promote development on brownfield sites. It allows the floorspace of existing buildings that are to be redeveloped to be offset against the calculations for section 106 affordable housing requirements (whether financial contribution or provision). It applies to any building that has not been abandoned and is brought back into any lawful use, or is demolished to be replaced by a new building.

It was announced by the Department for Communities and Local Government (‘DCLG’) in November 2014, following DCLG’s consultation on planning performance and contributions, and thereafter made its way into the national Planning Practice Guidance (‘PPG’). Since its introduction, the guidance has been clarified once already (in March 2015). Importantly, it now forms a material planning consideration for undetermined planning applications.

How is it calculated?

The PPG explains that existing gross floorspace (assuming it has not been abandoned) should be credited against that of the new development. Where there is an overall increase in floor space in the proposed development, the local planning authority should then calculate the amount of affordable housing contribution or provision required from the development as set out in their local plan on the basis of that additional floorspace.

The example given in the PPG is as follows: ‘where a building with a gross floorspace of 8,000 square metres is demolished as part of a proposed development with a gross floorspace of 10,000 square metres, any affordable housing contribution should be a fifth of what would normally be sought’.

How has the vacant building credit been applied?

The PPG offers little in the way of guidance as to when a building can be considered ‘vacant’, ’empty’ or ‘unused’ but not ‘abandoned’. It merely states that when considering how the credit should apply, local planning authorities should consider whether the building has been made vacant for the sole purpose of redevelopment, and whether the building is covered by an extant or recently expired planning permission for the same development (in which case the credit should presumably not apply).

No reference is made to time limits, in contrast to how the Community Infrastructure Levy (‘CIL’) operates. For CIL, an offset is available for buildings that have been in lawful use for 6 months out of the previous 3 years.

Some local planning authorities have sought to provide clarity through their own vacant building credit policies, for example adopting an approach akin to the CIL test set out above as per the London Borough of Southwark.

Evidence has already emerged of developers using the credit to achieve substantial reductions in affordable housing payments, not least in relation to the redevelopment of large industrial or institutional sites. It remains to be seen what the overall impact will be on housing supply of the credit. It seems likely that the provision of affordable housing will be hit, severely in some cases. However, it should also see previously unviable sites come forward.

Restrictions on affordable housing and tariff style contributions

Alongside the introduction of the vacant building credit, the PPG now sets out the circumstances in which affordable housing and ‘tariff style’ planning obligations should no longer be sought, namely for:

• developments of 10 units or less
• developments which have a maximum gross floorspace of not more than 1000sqm (gross internal area)

For designated rural areas, the limit may be lowered to 5 units or less, provided that if the policy is applied at this level, the PPG then directs that obligations in the form of cash payments should be sought for developments of between 6 and 10 units.

Tariff style obligations are those that are pooled into funding pots by the local planning authority in order to provide infrastructure for the wider area, as opposed to contributions for a specific piece of infrastructure required to mitigate the impact of the particular development.

This measure has received little resistance from local planning authorities, again fearful that affordable housing delivery will plummet, but being part of the PPG it is now a material planning consideration much like the vacant building credit. Despite this, some authorities have held firm and are applying their development plan policies for affordable housing in preference to this new national policy, reasoning that it is for them to balance competing policies.

Our Natural Capital hub contains information and resources written by our team of experts as well as papers and online materials authored by a variety of sources including the UK Government, the UN, Conservation International and the World Forum on Natural Capital.

ERA provide support to businesses looking to venture into broader reporting, as well as in other environmental matters. On its website there is a free PDF eBook “The How’s and Why’s of Sustainability”, it includes case studies, steps to help you implement a sustainability program, and information intended to assist in obtaining broad executive buy-in.

To access this resource please click here: ‘ERA Environmental Management Solutions‘.

If you have any questions about Natural Capital our Agriculture team would be pleased to hear from you: please click here for their full contact details.

To access our Natural Capital hub, please click here.

Introduction

Readers will be familiar with the rule that: for the purposes of the valuation of an interest in land following compulsory purchase, the compensation payable should not include any element of value which is attributable to (and only to) the scheme itself. This provision or principle has proved to be something of a bête noire for professionals and the Tribunal in seeking to calculate and agree compensation. Successive governments have been entreated to do something about the problem not least by the Law Commission and the House of Lords or Supreme Court. A recent consultation by the Department for Communities and Local Government and HM Treasury indicates that the current government has some enthusiasm for the idea. This article briefly sets out what the rule is, and its provenance, outlines three relevant cases and then goes on to consider the changes to the law currently being consulted upon. In conclusion the usual remarks are made upon the fact that this is yet another piecemeal adjustment to an incoherent statutory code which is spread over 100 years of legislation and case law.

The Rules of Market Value

The Land Compensation Act 1961 at Section 5 sets out the rules for calculating market value for the purposes of compensation for compulsory purchase. In summary and for convenience, they are as follows:

1. No allowance is made on account of the acquisition being compulsory.
2. Subject to these rules the calculation of market value should be based upon the price that a willing buyer would pay to a willing seller.
3. Any special suitability of the land taken for the purpose of the acquiring authority is not to be taken into account.
4. Any existing use which is contrary to law (and would have the effect of uplifting value) is ignored.
5. No account is to be taken of any increase in value attributable to the scheme underlying the acquisition.
6. Actual planning permissions benefitting the land and where a certificate of appropriate alternative development has been granted may be taken into account in valuing the land.

Rule 3 above is generally known as the ‘Pointe Gourde Principle’ following the case of Pointe Gourde Quarrying Co Limited v Sub Intendant of Crown Lands [1947] PC. In that case a quarry was acquired for the purposes of building a naval base, but that quarry included stone which would be particularly of value or useful to the acquiring authority in building said naval base. Thus, if the naval base were being constructed elsewhere on the Isle of Trinidad the quarry owners might have exploited their strategic market position in selling the stone to the acquiring authority for the construction. However, where the acquiring authority were acquiring the whole quarry the owners of that quarry were unable to benefit from that windfall. In that case it was found as fact that only the acquiring authority, or a similar undertaker would be in a position to avail itself of this benefit, and as such any potential uplift in value as a result did not fall within the definition of market value.

The Pointe Gourde case was decided under the ‘Land Acquisition Ordnance of the Trinidad and Tobago jurisdiction’ which mirrored the similar ‘Acquisition of Land (Assessment of Compensation) Act 1919’. That Act is now substantially reproduced in the Land Compensation Act 1961 at Section 5. Thus the rule or principle has become known as the Pointe Gourde principle, although for reasons which will become apparent shortly, that is probably not the most accurate label (although it is used below for convenience).

The Pointe Gourde principle

A more comprehensive summary of the rule is provided in The Law of Compulsory Purchase second edition at [428] which states:

The purpose of this rule is to eliminate from the compensation any increase in value attributable to the special characteristics of land where:

(a) the land has special suitability or adaptability for a particular purpose; and

(b) that purpose is either of the following:

(i) a purpose which could not be carried out without statutory powers, or

(ii) a purpose for which there is no market apart from the special needs of a body having power to purchase land compulsorily.

In the Law Commission’s report: ‘Towards a Compulsory Purchase Code’: the authors sought to draw out the nuances of the rule, providing the following helpful remarks at D.94:

1. The ‘adaptability’ must be a quality of the subject land itself not a quality of its product or the nature of the interest.
2. That ‘special’ implies something exceptional in character, quality or degree rather than qualities shared with other possible sites.
3. That the purchase requiring new statutory powers must relate to the subject land not to the other land.
4. That the need for general forms of consent, such as planning permission or stopping up orders, is not sufficient to bring the rule into play.
5. That the market may include a mere speculator with no direct interest in the use of the land.

Waters v Welsh Development Agency

The law in this area was explored in detail by the Appellate Committee of the House of Lords in Waters v Welsh Development Agency [2004] UKHL19.

It follows from the above that it is then necessary to work out what the ‘scheme’ is which that ‘special purpose’ relates to. That was the issue in the case of Waters decided in April 2004.

In that case the acquiring authority wished to exercise its rights to compulsorily purchase an area of low lying land adjacent to the Severn Estuary to provide environmental mitigation for the Cardiff Bay barrage project. In brief summary the affected land owner sought their compensation based upon the value of the land consequent upon its indispensable status viz a viz the Cardiff development scheme. This was referred to in the Lands Tribunal by the President as ‘ransom value’. At that time the agricultural value of the predominantly agricultural land was said to be £4,500 per acre whilst the ransom value was said to be £28,000 per acre.

Whilst the subject land had no special suitability or adaptability for the purposes of providing a nature reserve to compensate for the barrage project, the President of the Lands Tribunal took the view that any effect on value of the adoption or implementation of the proposal to provide mitigation land could not be taken into account in assessing market value.

The matter was considered in detail in the Court of Appeal by Lord Justice Carnwath, who is highly experienced and knowledgeable in this area of practice. The Court of Appeal upheld the decision of the Lands Tribunal. The Appellate Committee of the House of Lords considered in some detail the heritage of the particular rule, and came to the conclusion that whilst Pointe Gourde might be of assistance in the interpretation of the relevant statutory provisions, that case and the principles expanded within it are not to be considered as replacing in its entirety the statutory code on special value.

Lord Nicholls accepted the difficulty of deciding the width of the scheme and the potential for inequality between those inside the area covered by the acquisition or scheme and outside, but in his opinion it was necessary to make sure that an acquiring authority did not pay both for the investment in the wider area which may uplift values, and for the interest being acquired. Thus the Appellate Committee were of the view that the extent of the scheme is a question of fact which the Lands Tribunal need to decide before going on to consider whether or not there is a special value. Lord Nicholls set out the following general principles at paragraph 63 of his Opinion:

1. The Pointe Gourde principle should not be pressed too far. The principle is soundly based but it should be applied in a manner which achieves a fair and reasonable result. Otherwise the principle would thwart, rather than advance, the intention of Parliament.
2. The result is not fair and reasonable where it requires a valuation exercise which is unreal or virtually impossible.
3. A valuation result should be viewed with caution when it would lead to a gross disparity between the amount of compensation payable and the market values of comparable adjoining properties which are not being acquired.
4. When applied as a supplement to the Section 6 code, which will usually be the position, the Pointe Gourde principle should be applied by analogy with the provisions of the statutory code. Thus in the Class 1 type of case the area of the scheme should be interpreted narrowly, for instance, so as to embrace the property acquired under the compulsory purchase order and property which would probably have been so acquired had it not been bought by agreement.

Point three above does indicate that the Court is likely to be willing to scrutinise carefully comparables relied upon by acquiring authorities which produce a starkly different result for ‘scheme’ and ‘no scheme’ properties.

The result for the Waters was that the provision of wildlife mitigation measures upon their land was considered to be part and parcel of the Cardiff Bay barrage scheme as a whole, and as such the special suitability of the Waters’ land for that purpose could not be used to uplift market value for the purposes of calculating compensation.

Transport for London (formerly London Underground Limited) v Spirerose Limited (in administration)

Sections 14 to 16 of the Land Compensation Act 1961 provide for certain assumptions about planning permission to be made, for the purposes of the calculation of compensation.

Section 17 of that Act provides that a certificate can be obtained such that the relevant planning authority confirm whether planning permission would have been granted for some alternative development, but for the scheme, thus inflating the potential market value of the acquired interest.

Section 16 of the Act provides rules for specific circumstances or cases in which the overall improving effect of a scheme upon a locality is to be deducted from the market value of an acquired interest. For instance where a residential area is improved because it is part of a Housing Action Trust area, and is considered to be up and coming, and then an area of that same land is subject to a compulsory purchase order in the course of development or redevelopment of the housing action trust area, the Claimant is not entitled to any uplift in the value of that acquired interest which relates purely to the scheme of general improvement of the area.

Thus section 16 might be seen as akin to betterment offsetting which it in theory available under sections 7-8 of the Land Compensation Act 1961. Another disadvantage to those subject to the exercise of statutory powers, in contrast to those who are nearby, but not subject to such powers.

In the case of Transport for London (formerly London Underground Limited) v Spirerose Limited (in administration) [2009] UKHL44 decided by the Appellate Committee of the House of Lords, the Lands Tribunal found that, because the chances of obtaining planning permission for the development of the acquired area were, on the balance of probability, likely; the Claimant’s interest would be valued on the basis that it had planning permission.

This approach was more or less supported by the Court of Appeal. The Appellate Committee of the House of Lords however found that hope value for development should be valued on the basis of a sliding scale, rather than a dichotomous basis. This meant that the more probable it were that planning permission would have been granted, the more hope value was ascribed in the market value. In that case Lord Collins stated that it was plain, that:

1. The value of the land is the open market value;
2. Any depression in the price which the land might be expected to fetch which is caused by the scheme is to be disregarded;
3. The valuation must take into account the potential of the land, including its potential for development; and
4. The development potential must be valued in the normal way, by discounting for future uncertainties.

and if that is right, it provides a clear answer to the question on this appeal, namely that the valuation on the ‘hope value’ basis is the appropriate one.

It is worth noting that in this case, due to some technical difficulties, the Claimant was unable to avail itself of a certificate pursuant to Section 17.

The new proposal

The proposals which are currently being consulted upon are summarised at page 7 of the consultation:

In order to achieve a clearer way to identify a market value of land we propose to establish the principle of the ‘no scheme world’ fairly and effectively in the valuation process by codifying it in statute and introducing a:

• Clearer definition of the project of scheme that should be disregarded in assessing value;
• Clearer basis for assessing whether the project forms part of a larger ‘underlying’ scheme that should also be disregarded;
• More consistent approach to the date on which the project is assumed to be cancelled;
• Broadening of the definition of the ‘scheme’ to allow the identification of specified transport infrastructure projects that are to be disregarded within a defined area, over a defined period of time.

In summary the proposals are that all the previous rules, whether statutory or judge made, relating to disregarding the scheme cease to have an effect.

The statutory project is then defined with more clarity, and potentially at the outset of the compulsory purchase, within the order as a presumption. However, although that presumption may be rebutted in general, the acquiring authority will be stuck with the project as defined in the compulsory purchase order or the documents published with it.

The date for the valuation of the land shall be the launch of the statutory project and something which may be seen as a pound of flesh in return for the reform is the proposal to allow an extension of the definition of ‘the scheme’ in order to prevent land owners availing themselves of any uplift in that market which is attributable to items such as transport infrastructure. For instance a new branch line might facilitate the development of a new town. In that instance the branch line might be added to become part of ‘the scheme’ and thus any market value which is attributable to the branch line and payable by the acquirer of the new town land would be disregarded.

It is probably obvious to the reader that the inherent unfairness of this innovation is that those with interests in land which are not to be compulsorily purchased but nonetheless benefit from the additional transport infrastructure will be able to sell their land or interests with the benefit of any uplift in value, whereas the unfortunate subject of the compulsory purchase order will be stuck with market value in a no (extended) scheme world.

Consultation responses

Generally it would appear fair to state that the proposed simplification of the special value rule has been welcomed, with some reservations expressed as to the technicalities.

On the other hand it might come as no surprise that those representing those with interests in land are less enthusiastic about the inclusion of additional items within the definition of ‘scheme’ which will then water down the magnitude of market value for the purposes of payment of compensation.

Conclusions

Waters and Spirerose are littered with comments of the law lords and those in the Courts below bemoaning the lack of a complete overhaul of the compulsory purchase code. Likewise the consultation responses of the CAAV and the Law Society in particular express disappointment that the legislature are effectively tinkering around the edges, rather than grasping the nettle and reforming a complex area of law wholesale.

It is interesting to note that it would not appear the proposed changes would have had any effect upon the decisions in Waters and Spirerose. One would have expected the acquiring authority in Waters to have been savvy enough to have included the environmental mitigation area within the order and/or documentation; and the Claimant in Spirerose would not have been assisted by a valuation date which was earlier than 1993 (as the problem was that the Section 17 application had been granted erroneously for 2001). Moreover the findings of the Appellate Committee in Spirerose were really focussed upon the quantification of hope value attached to the possibility of planning permission, the principles for which appear undisturbed by the proposals of the Law Commission.

In the next edition of AgricLore we will be looking at the proposals to allow authorities to bring forward compulsory purchase orders for joint purposes.