SECTION 3 Compensation
SECTION 3 Compensation
3.1 This Section provides guidance on compensation which is payable for property compulsorily purchased for the scheme. This guidance is not intended to be a complete guide. The statutory provisions and case law that govern the eligibility for and assessment of compensation are complex. It is stressed again that you should seek advice from a professionally qualified person such as a surveyor or solicitor and you are referred to paragraphs 1.3 and 1.4 of Section 1.
3.2 Where the Scottish Ministers do not purchase any of your property, compensation may still be payable for the effects of the actual construction of the new road as well as following its completion. General guidance on this will be available at the relevant time.
3.3 The Scottish Ministers appoint the Valuation Office to assess the level of compensation. The District Valuer, and his staff from the Valuation Office, will discuss the level of compensation with you or your professional advisor.
Compensation when property is purchased
3.4 The assessment of compensation will depend on individual circumstances. The underlying principle is to put you, in financial terms, so far as money can do so, in the same position as if your property had not been taken from you. Basically, the assessment of compensation will take into account the value of your property and the value of related effects (known as Severance, Injurious Affection and Disturbance).
However, the level of compensation is assessed without any increase or decrease in value attributable to the scheme itself.
3.5 The amount of compensation payable cannot exceed your total financial loss. There is a duty on you to mitigate that loss.
3.6 There are 6 basic rules for assessing the value of property compulsorily purchased. These rules are set out in an Act of Parliament. A brief summary of the rules is set out below.
Rule 1:
3.7 In assessing the compensation, no addition to or reduction from the value of the property is made to reflect the fact that it is being compulsorily purchased. The purchase of the property is assumed to be an open market transaction between willing parties.
Rule 2:
3.8 The value of the property is based upon what the property might be expected to realise if sold in the open market by a willing seller.
3.9 In most circumstances the open market value will be based on the existing use of the property, provided proper consents are in place.
3.10 The property may have potential for development if planning permission for that development could be obtained. If the Scottish Ministers accept the property has development potential then this will be taken into account in assessing compensation.
3.11 If the Scottish Ministers do not accept that your property has development potential then you can apply to your local planning authority for a Certificate of Appropriate Alternative Development. This will determine whether or not your proposed development would have received planning permission had the scheme not gone ahead. The rules governing such an application are linked to planning law and are complex and outwith the scope of this guidance. You should refer any query on this aspect to your professional advisor or your local planning authority.
Rule 3:
3.12 This rule applies in special circumstances where certain uses of property can only be undertaken by a statutory authority. In assessing compensation no account is taken of these special circumstances.
Rule 4:
3.13 Any increase in the value of property which is attributable to a use of the property which is unlawful or detrimental to the health of the occupants of the premises or to public health, is not taken into account.
Rule 5:
3.14 It may not be possible to arrive at a market value where the property to be purchased is (and but for the CPO would continue to be) devoted to a purpose for which there is no general demand or market (e.g. a church). In such circumstance, compensation may be assessed on the basis of how much it would cost to reinstate the facility elsewhere.
Rule 6:
3.15 The provisions of Rule 2 do not affect the assessment of compensation for disturbance or any other matter not directly based on the value of the property. The compensation you receive, therefore, may not only reflect the open market value of your property, but may also take into account the value of related effects, as described in the following paragraphs.
Value of related effects
Severance and other injurious affection
3.16 Severance is where only part of your property is purchased for the scheme. Compensation may be payable for the adverse physical effects the severance has on the remainder of your property, e.g. the purchase of part of your property may result in the loss of access to the remainder.
3.17 In circumstances where you consider the effect of severance on the remainder of your property is particularly severe, then you may be entitled to serve a notice of objection to severance. If successful the Scottish Ministers would be required to purchase the whole of your property. There is a strict time limit for formally objecting to severance. The exact time limit depends on factors such as the type of your property and the nature of your interest in it. The time limit can be as short as 28 days. Whatever the extent of the time limit, it starts running from the date you are served with the notice that the Scottish Ministers have made the GVD. If you are concerned about severance you should consult your professional advisor.
3.18 Injurious affection can also arise where only part of your property is purchased for the scheme. Compensation may be payable for any injurious affection, the term used to describe the adverse effects (such as noise and vibration) the road and its construction can have on the remainder of your property.
3.19 Any claim for severance or other injurious affection must be consistent with the remainder of the claim. If you claim compensation based on the potential your property would have had for development, that may have an effect on any claim for severance and injurious affection.
3.20 There may be instances where the scheme does not have an adverse effect on your remaining property. On the other hand the scheme may increase the value of your remaining property. In such circumstances, any compensation will take into account any increase in value of your remaining property.
3.21 The compulsory purchase of your property may involve you in costs or expenses such as removal expenses, loss of goodwill, loss of profits, professional fees etc. These items are generally referred to as disturbance. Any disturbance would be included in your overall compensation but any disturbance element of the claim must be consistent with the remainder of the claim. Compensation will normally only include a payment for disturbance if the value of the property is based on existing use and not its development potential.
3.22 In the case of a residential property you can claim reasonable costs and expenses if you have to leave that property. The claim can include the costs associated with purchasing a replacement property (but not the purchase price of the property itself) and the costs of moving into the property. Examples of additional items which may be claimed are legal fees and surveyor fees.
3.23 In the case of a business property depending upon the particular circumstances of the purchase, disturbance compensation may be based on either the costs of relocating the business or extinguishing the business. Normally you would be expected to relocate your business. If this is not possible it may be necessary for the business to close, in which case compensation will be based on the cost of the total extinguishment of the business.
3.24 There may be circumstances where the costs of relocating the business are greater than the value of the business. In these circumstances there is a case that can be made that compensation is based on extinguishment, as no prudent businessman would incur the costs of relocating the business. However each case must be looked at on its own merits.
3.25 If you relocate your business you may be entitled to claim the reasonable costs and expenditure arising, including for example, removal expenses, legal fees, surveyor's fees and architect's fees.
3.26 Every loss will be considered on its merits. The onus is on you to justify your claim. It is up to you to prove that you should be compensated. Accordingly, it is of the utmost importance that you keep a detailed record of losses sustained and costs incurred in connection with the compulsory purchase of your property. You should keep all relevant documentary evidence such as receipts, invoices and fee quotes.
Other issues
3.27 If a loan is secured over your property the lender is entitled to be compensated. All or part of your compensation may need to be paid to the lender to redeem all or part of your loan.
3.28 If you are actually living in the property you may be entitled to a home loss payment in addition to any other compensation due. The home loss payment is an additional sum to reflect and recognise your distress and discomfort at being compelled to move out of your home.
3.29 If you are occupying an agricultural unit and are displaced from that unit, you may be entitled to a farm loss payment in addition to any other compensation due. The farm loss payment recognises that as a result of a move to unfamiliar land, you may be faced with temporary losses of yield.
Planning permission after acquisition
3.30 If during the period of ten years after the purchase of your property by the Scottish Ministers, planning permission is granted for the additional development of that property, you may be entitled to additional compensation to reflect any increase in the value of the property.
Advance payment of compensation
3.31 It is not unusual for final compensation to take a considerable time to be agreed. You are entitled to request an advance on your compensation. The Scottish Ministers are obliged to make the payment within three months of receipt of the request provided they have taken possession of the property.
3.32 The level of advance payment is normally 90% of either the agreed compensation, or where there is no agreement, the Scottish Ministers' estimate. If there are outstanding loans on the property then the advance payment may be reduced.
3.33 Simple interest, at a prescribed rate, is payable from the date the Scottish Ministers take possession of your property until the compensation is paid.
3.34 If the amount of compensation payable for the compulsory purchase of your property is not agreed, then it can be referred to the Lands Tribunal for Scotland for determination.