Assessing Development Potential is Not Just Crystal Ball Gazing

Development potential is often a critical factor when it comes to calculating amounts of compensation payable to landowners whose property is compulsorily acquired to make way for public infrastructure projects. As an Upper Tribunal (UT) ruling made plain, assessments of such potential are not merely a matter of crystal ball gazing.

The case concerned a substantial office building on the proposed route of the HS2 railway line that was compulsorily acquired by the Department for Transport (DfT). A consortium of entities holding freehold or leasehold interests in the site duly sought compensation under the Land Compensation Act 1961.

The consortium obtained a certificate of appropriate alternative development (CAAD) from the local authority to the effect that, but for the acquisition, planning consent would have been granted for a mixed-use development of the site, including 116 homes in a tower block of up to 19 storeys. Faced with the prospect of having to pay compensation on that basis, the DfT appealed to the UT.

Ruling on the matter, the UT acknowledged the huge unmet need for housing in the area and the significance of brownfield sites in meeting it. Residential development had been permitted on numerous other sites formerly in office or industrial use. In upholding the appeal, however, the UT noted that the site was in a strategic industrial location, as designated in the local development plan.

The UT accepted the DfT's case that residential development of the site would not have been permitted and that any building erected on it would have been restricted to between eight and 10 storeys. Apart from retail and catering units on the ground floor, any such building would have been restricted to a mix of industrial and office uses. The CAAD was cancelled and replaced with a fresh certificate that reflected the UT's findings. The outcome of the case was likely to greatly reduce the amount of compensation payable by the DfT.