The government has an ambitious strategy to improve the country’s infrastructure, but this is not necessarily good news if your farmland is chosen for a project.
Whether the scheme is a new road, pipeline or railway line such as HS2, farmers are likely to be affected and landowners and tenants will need to be fully aware of what to do from an early stage.
Mike Townsend and Sam Kirkness of Savills in Exeter explain how land is acquired for public works and look at the steps you can take to minimise the effect on your business.
How can farmers find out if their land is included in plans for a project?
If you think your land may be affected by a major scheme, contact your local council planning department, which will know if there are proposals for public works or compulsory purchase orders (CPOs) in your area.
There are occasions when the acquiring authority will make direct contact with landowners/occupants and seek to enter into negotiations to acquire land without the need for compulsory powers. However, if this route fails they will usually refer the matter to the secretary of state and follow formal procedures.
What should they do next if their land is included?
Contact the acquiring authority and find out who is responsible for public liaison – maintaining a dialogue with them from the outset is key.
Explain exactly how you are likely to be affected by the proposed scheme, both during construction and afterwards.
Keep a record of all communication and details of expenses incurred and losses sustained, as you may be able to recover these as part of the claim for compensation. This can include everything from time spent at meetings to the cost of additional cleaning of vehicles due to dust created by the works. These records should be provided to your appointed surveyor.
Is there anything tenants can do, or is it down to landowners?
Both the owner of the land and the tenant should be involved as both parties will usually have rights to compensation, unless the tenant is on a very short-term arrangement.
Which professionals should be involved?
Contact a local firm of chartered surveyors with experience in compulsory purchase law and compensation as they will be able to liaise with the authority on your behalf and ensure that your interests are fully protected.
Glossary of terms
Acquiring authority – the public body responsible for acquiring the land needed for works deemed to be for the public good.
Accommodation works – work that the developers carry out to reduce the impact of the scheme on surrounding landowners.
Blight notice – a legal notice that property owners can serve on an acquiring authority to compel them to buy a property if the value will be lowered as a result of the works.
Compulsory purchase order – the legislation that allows the acquiring authority to purchase land without the landowner’s agreement.
Severance – this is when only part of a property is purchased for a scheme and compensation may be payable because of the adverse affect this loss has on the rest of the property.
A claimant is entitled to have all reasonable legal and professional fees paid for by the acquiring authority, but it is important to have this agreed in writing at the outset.
How might a farm be affected practically and financially?
Infrastructure schemes can cause an inconvenience for day-to-day farming activities such as access and management of stock and crops. If a farm is severed by a road or railtrack, moving livestock or accessing fields will take longer and may incur additional labour and fuel costs. However, the authority should mitigate this with accommodation works such as a bridge or underpass.
If land is being taken away, farmers will need to notify the Rural Payments Agency and Natural England, as it will effect BPS and stewardship payments.
Tenants and landowners are therefore equally affected and both will usually be entitled to claim compensation.
Continuing communication with the acquiring authority is key as you are required to mitigate your losses as much as possible – but you should also take the opportunity to flag up any practical concerns.
A property owner is entitled to compensation so that they are left in “no worse position, as far as money can provide”, than they were before the scheme began.
What rights do landowners and tenants have?
The acquiring authority must buy the property or land at its open market value, without any enhancement to reflect the fact that the owner is an unwilling seller.
However, the government is undertaking a review of compulsory purchase and considering whether acquiring authorities should be given more flexibility on the amount of compensation they can offer.
The valuation process is key and depends on experience and knowledge of the local and national markets.
A property owner can compel the acquiring authority to buy their land if it has been “blighted” by the proposed infrastructure scheme. For example, where land is taken for a road and the remaining land is severed and incapable of being farmed, the farmer could consider serving a blight notice.
The acquiring authority will usually propose accommodation works to mitigate any future impact of the scheme. These can include tree planting, boundary fencing, noise-reduction materials and livestock underpasses.
Claimants will have the opportunity to negotiate accommodation works before the details of the scheme have been finalised, so early engagement is again important.
What are the tax implications?
The receipt of compensation on the compulsory acquisition of land is treated as a disposal of the asset and is liable for capital gains tax.
To avoid this, landowners can roll over the capital gain from the sale into other business assets – but these must be part of the trading business, rather than an investment. This must take place within three years of the acquisition, or six years in exceptional circumstances.
The viability of the farm should be considered from the outset because a decision must be made as to whether the property will be “blighted” by the scheme and whether the appropriate notices should be served.
Property owners considering a sale should think about the timing of marketing and whether they will lose their entitlement to claim compensation.
Anything else to be aware of?
Farmers are often surprised by the level of detail required for a successful compensation claim. It is vitally important to keep any paperwork that may relate to the CPO and a log of time. An open book is usually required in order to ensure the best possible claim.