New guidance on compulsory purchase orders: key updates for landowners and authorities

The UK government has issued updated guidance on compulsory purchase orders (CPOs), setting out how acquiring authorities can exclude ‘hope value’ from compensation when compulsorily acquiring land. This update follows the introduction of powers under the Levelling-up and Regeneration Act 2023. This article provides key updates for landowners and authorities on the new guidance.

What is hope value?

Hope value refers to an additional component of compensation paid to a landowner where land is compulsorily purchased for housing, education or health facilities. It reflects the potential value of the land if sold on the open market at the time of valuation, considering its future development possibilities. 

There are two different ways for a landowner to claim hope value:

1. The prospect of a planning permission being granted on the land for an alternative use or development or; or
2. Appropriate alternative development being established on the land for which planning permission may be assumed. 

Removal of hope value: new powers

Under the Levelling-up and Regeneration Act 2023, acquiring authorities now have the power to include directions in their CPOs to remove hope value from the assessment of compensation. This power applies to sites providing a high level of public benefit.

Updated guidance on removing hope value

On 3 October 2024, the Ministry of Housing, Communities and Local Government (MHCLG) published updated guidance detailing the requirements for acquiring authorities seeking to avoid hope value. The key points from the guidance are as follows:

1. Seeking a direction
   
   Authorities can include a direction to remove hope value in their CPO when submitting it for confirmation to the secretary of state, for land in England, or Welsh ministers, for land in Wales. They must justify the direction by demonstrating compelling public interest.
   
   
2. Justifying public benefits
   
   Acquiring authorities must provide a clear and detailed ‘statement of commitments’ outlining the public benefits to be delivered through the assessment of compensation for land without hope value.
   
   Where appropriate, the acquiring authority must set out the public needs they will meet, the impact on affected landowners and how a fair balance between public and private interests will be reached.
   
   
3. Evidence of preparedness
   
   Acquiring authorities must also show they have a clear plan for the land’s use. The guidance acknowledged that it will not always be possible for acquiring authorities to have detailed proposals for the land beyond a general planning framework. If this is the case, the confirming authority will expect the statement of reasons accompanying the submission of the CPO to include a summary of the planning framework for the land.
   
   Additionally, the acquiring authority must confirm that the required funding is available at the outset or will be available early in the CPO process. There must also be no physical or legal impediments that would block the schemes implementation. These tests are par for the course in CPO terms, and will already be firmly on the radar of any would be acquiring authority.
   
   
4. Engagement with landowners
   
   As before, the guidance emphasises the importance of meaningful negotiations and engagement with affected landowners before pursuing a CPO with direction to exclude hope value, and in fact the same approach should be adopted when pursuing any CPO. 

Future changes: Planning and Infrastructure Bill

The changes made by Levelling-up and Regeneration Act 2023 may not be the end of attempts to make compulsory purchase more straightforward and effective, especially when there is great public benefit to be obtained. 

In the King’s Speech on 17 July the Labour government announced plans to introduce a Planning and Infrastructure Bill. This bill may reform CPO compensation rules, ensuring landowners receive compensation that is 'fair but not excessive', particularly for projects delivering critical infrastructure and affordable housing. 

What can authorities take away from this?

The updated guidance on CPOs represents a significant step in balancing the rights of landowners with the need to deliver projects of public benefit. Acquiring authorities must navigate these new requirements carefully, providing evidence to justify the removal of hope value and ensuring transparent engagement with landowners.

For further information on the guidance or assistance with CPO-related matters, please contact Louise Smith or David Richardson.