PLANNING ASSUMPTIONS

by Christopher Lewsley

1. Often compensation for compulsory purchase is assessed on existing use value, but
where the land acquired has development value exceeding existing use value, it is well
established that compensation can take into account development value, Horn v Sunderland
Corporation [1941] 2KB 26.

2. Compensation for the value of land taken compulsorily is to be assessed at open market
value (s 5, r 2) and in this context “value” means “value to the “owner”. The phrase “value
to the owner” is a shorthand for value disregarding the scheme underlying the acquisition.
When the value of land depends on its potential for development, one relevant factor in
assessing that value is the existence (or otherwise) of planning permission and the likelihood
of obtaining planning permission in the future.

3. This is not the only relevant factor, for example the practicability of implementation and
commercial viability are other factors. The existence of a planning permission is only likely
to influence the value of land if the implementation of that permission would be profitable.
Nevertheless the existence, and likelihood of obtaining planning permission can be an
important factor in valuing land which has been compulsorily purchased. In order to enable
development value to be estimated it is sometimes necessary for the claimant to formulate
with a measure of detail, the development which he contends would have received planning
permission.

4. The law of compensation for the compulsory purchase of land is statutory and so it is to
statute that reference should be made to determine the assumptions which should be made
as to planning permission. The assumptions to be made in valuing the relevant land (ie the
land in which the interest being valued subsists, s 39 (2)) are to be found in the Land
Compensation Act 1961.

5. Section 14 states that for the purposes of assessing compensation such one or more of
the planning assumptions mentioned in ss 15 and 16 of the 1961 Act as are applicable to the
relevant land or any part thereof shall be made, except that in determining whether
planning permission for any development could in any particular circumstances reasonably
have been expected to be granted or whether any of the assumptions mentioned in s 16 are
applicable, regard shall be had to any contrary opinion expressed in a certificate of
appropriate alternative development issued under ss 17 or 18. This is no absolute
prohibition on rejecting that opinion.

ASSUMPTIONS NOT DERIVED FROM THE DEVELOPMENT PLAN

Proposals of the acquiring authority

6. Where the relevant interest was acquired for purposes involving development, and no
planning permission is in force for that development, it is to be assume that planning
permission would be granted for development in accordance with the proposals of the
acquiring authority (s 15(1)). Usually such a permission is in place at the valuation date.

Existing use development

7. It is to be assumed that planning permission would be granted for the categories of

development (rebuilding and alterations) described in sch 10 of the Town and Country
Planning Act 1990 (s 15 (3)). The purpose of this assumption is to ensure that compensation
for the compulsory purchase of land of the relevant land includes compensation for any
value attributable to the right to rebuild and alter buildings within certain defined
limitations. The significance of this assumption is often limited by lack of commercial
viability, see for example Dutton and Black v Blaby District Council [2006] RVR 203, but can
produce a windfall Greenweb Ltd v Wandsworth London Borough Council [2008] EWCA Civ
910; [2008] RVR 294.

ASSUMPTIONS DERIVED FROM THE DEVELOPMENT PLAN

“site defined in the current development plan as the site of a proposed development of a
specified description”

8. The phrase “development plan” has the meaning assigned to it by ss 27 & 54 of the Town
and Country Planning Act 1990 and s 38 of the Planning and Compulsory Purchase Act 2004-
ie unitary plan, local plan and structure plan, and spatial or regional strategies and local
development documents. This includes modern development plans.

9. By s 16 (1) where the relevant land (not being land subject to comprehensive
development) consists or forms part of a site defined in the current development plan as
the site of a proposed development of a specified description, it shall be assumed that
planning permission would be granted for that development.

10. Land is to be regarded as subject to comprehensive development, if it is, or forms part

of, an area defined in the current development plan as an area of comprehensive
development (s 16 (8).

“an area allocated primarily for a use specified in the [current development] plan”

11. Where the relevant land (not being land subject to comprehensive development)
consists or forms part of an area shown in the in the current development plan as an area
allocated primarily for a use specified in the plan, it shall be assumed that planning
permission would be granted for any development which (a) is development for the
purposes of that use, and (b) is development for which planning permission might
reasonably have been expected to be granted (s 16 (2)).

“an area shown in the as an area allocated primarily for a range of two or more uses”

12. Section 16 (3) states that if the relevant land (not being land subject to comprehensive
development) consists or forms part of an area shown in the allocated primarily for a range
of two or more uses, it shall be assumed that planning permission would be granted for
development for a use falling within that range which is development for which planning
permission might reasonably have been expected to be granted.

“comprehensive development”

13. Where the relevant land is subject to comprehensive development, it shall be assumed
that planning permission would be granted for any development for the purposes of a use
falling within the planned range of uses being development for which planning permission
might reasonably have been expected to be granted if (a) the area had not been defined as
an area of comprehensive development and no particular proposals relating to the land had
been included in the plan, and (b) in a case where land in that area has already been
developed in the course of the development of the area in accordance with the plan, no
land in that area had been so developed (s 16 (4), (5)).

Conditions and the future

14. Any permission assumed under s 16 is to be assumed granted subject to such conditions
(if any) as might reasonably be expected to be imposed. If the development plan indicates
that planning permission would be granted at any future time, it shall be assumed that the
permission would be granted at that time (s 16 (6) (a)).

Cancellation assumption

15. Any reference in s 16 to development for which planning permission which might
reasonably have been expected to be granted is a reference to development for which
planning permission might reasonably have been expected to be granted if no part of the
relevant land were proposed to be acquired by an authority possessing compulsory
purchase powers (s 16 (7)). This is now interpreted as requiring the assumption that, in so
far as it requires the acquisition of the relevant land, the scheme is cancelled on the
valuation date, see Urban Edge below.

ACTUAL PLANNING PERMISSION AND HOPE VALUE

Actual planning permission

16. Any permission assumed under the legislation is in addition to any actual planning
permission (s 14 (2)). It is immaterial whether to permission is full or outline or granted by
general development order.

Hope Value

17. Section 14 (3) of the 1961 Act states that “nothing in these provisions shall be construed
as requiring it to be assumed that planning permission would necessarily be refused for any
development for which is not development for which, in accordance with those provisions,
planning permission is to be assumed. This is taken by the courts as indicating that the
statutory code for determining the planning assumptions is not exhaustive. It is open to the
claimant to try to prove by evidence that a planning permission would be granted in
circumstances outside the assumptions of s 15 and 16 and the certification process of ss 17
and 18. If in this way the claimant succeeds in establishing a prospect of planning
permission, it is not converted in to a certainty (see Spirerose below), as occurs with the
planning assumptions mentioned in ss 15 and 16. Where s 14 (3) is mobilised the
cancellation assumption applies. The land is to be valued having regard to the assessed
probability at the valuation date of planning permission being granted.

18. The planning assumptions of ss 15 and 16 of the 1961 elevate a planning permission
falling within those provisions which might reasonably be expected to be granted into a
certainty. The Lands Chamber and the Court of Appeal (until reversed by the House of
Lords) saw the fact that s 14 (3) did not do so where there was a finding of a reasonable
prospect of a planning permission falling outside ss 15 and 16 as an anomaly or unfair. This
may suggest that a relatively broad view might be taken in future of ss 15 and 16. Prior to
Spirerose the distinction in terms of certainty between s 14 (3) and ss 15 - 16 was not so
apparent.

HIGHWAYS

19. In a case where land is acquired for a highway, in determining whether planning
permission might reasonably be expected to be granted if no part of the land were
proposed to be acquired by an authority possessing compulsory purchase powers, it shall be
assumed that no other highway would be constructed to meet the same or substantially the
same need (s 14 (5) - (7)). This provision was made to reverse the effect of Margate
Corporation v Devotwill Investments Ltd [1970] 3 All ER 864.

CERTIFICATION

20. Where an interest in land is proposed to be acquired compulsorily either party may
apply to the local planning authority for a certificate of appropriate alternative development
(s 17). No application may be made after compensation has been referred to the Upper
Tribunal except with the agreement of the other party or the consent of the Tribunal. The
application must state any classes of development which in the applicant’s opinion would be
appropriate in the absence of compulsory purchase. The local planning authority must issue
a certificate identifying the classes of development (if any) for which in their opinion,
planning permission would be granted in the absence of the compulsory purchase. The
certificate shall state any conditions and, where permission would not be granted until a
future time, identify that time. Appeal lies to the Secretary of State (s 18).

21. Section 15 (5) states that where a certificate of appropriate alternative development has
been issued it shall be assumed that planning permission which according to the certificate
would have been granted, would be granted.

22. In Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] RVR
215 the House of Lords held that the assumption which the local planning authority must
make was that the scheme for which the land was proposed to be acquired must be
assumed cancelled on the relevant date. The decision of the Court of Appeal, [1999] RVR 35,
that the relevant date was the date of publication of the notice of the compulsory purchase
order was not appealed.

CASE LAW

23. There have been two important decisions recently which are part of the backcloth for
the consideration of planning assumptions.

24. The first is Urban Edge Group Limited v London Underground Limited [2009] UKUT (LC)
103; [2009] RVR 361 in which the Lands Chamber applied the cancellation assumption to the
assessment of compensation for compulsory purchase, which involves the assumption of
cancellation of the scheme at the valuation date with no assumption being made as to what
may or may not have happened in the past in the scheme had never been conceived. In
other words the scheme itself was to be disregarded but everything else was to be taken as
it was at the valuation date. The same approach was taken subsequently by the Lands
Chamber in Persimmon Homes (Midlands) Ltd and Otthers v Secretary of State for Transport
[2010] UKUT (LC) : [2010] RVR 11 and Thomas Newell Ltd v Lancaster City Council [2010]
UKUT (LC) 2 ; [2010] RVR 223.

25. In the Urban Edge case the Lands Chamber made a number of findings about the
operation of s 16. The Lands Chamber rejected the acquiring authority’s contention that in s
16 (2) the phrase development plan was limited to old style development plans and held
that s 16 (2) also applied to a unitary development plan prepared under the Town and
Country Planning Act 1990.

26. The Lands Chamber said that whether “the relevant land consists of or forms part of an
area shown in the current development plan as an area allocated primarily for a use
specified in the plan in relation to that area” falls to be determined by examining how the
relevant land is shown on the proposals map and relating this to the policies and other
provisions of the plan.

27. A policy framework which favoured employment uses within a defined area, could not
be said to be an area allocated primarily for such uses.

28. The Lands Chamber rejected the acquiring authority’s contention that if an assumption
of planning permission is to be made under s 16 (2), the correct assumption was that the
permission did not exist on the valuation date but would be granted after that date
following an application made for it, and held that the correct assumption was that planning
permission was in force at the valuation date.

29. The second important decision forming part of the backcloth for the planning
assumptions is the decision of the House of Lords in Transport for London v Spirerose
Limited [2009] UKHL 44; [2009] RVR 225 in which it was held that the statutory planning
assumptions are a complete code. It was not open to the Lands Chamber to use the Pointe
Gourde rule to justify an assumption of a certainty of planning permission outside the
statutory provisions on the basis that the evidence showed a reasonable prospect that such
a permission would be obtained in the no scheme world which must be converted to a
certainty by analogy with the statutory provisions.

30. In Thomas Newell Ltd v Lancaster City Council [2010] UKUT (LC) : [2010] RVR 223 the
claimants contended that the reference land was defined in the local plan for the purposes
of s 16 (1) as it was identified and delineated on the proposals map and in a policy as part of
a site for housing. The council’s contention was that the sites covered by the policy were
only sites where there was an opportunity to provide housing and this did not preclude
other uses, and therefore the land was not a “site defined in the current development plan
as the site of proposed development of a description specified” as required by s 16 (1). The
policy stated “The following sites identified on the local plan proposals map are allocated as
housing opportunity sites”. The local plan text sought to encourage the development of
housing opportunity sites but stated that the sites were not formally allocated but were
intended to identify that housing was seen by the council as the best and most efficient use
of the site. The text stated that it was intended that the policy should not exclude either
other appropriate uses or the continuation of existing lawful uses. The description of some
sites included reference to other uses that might occur in any redevelopment.

31. The Lands Chamber said that the reference to a “site of proposed development” in s 16
(1) is to be contrasted with an “area allocated primarily for a use” in s 16 (2) and (3). The
former must mean a more definite proposal for development than simply the identification
of land as suitable for a particular use, especially where continuation of existing uses or
redevelopment for other uses as well is not precluded. The Lands Chamber held that the
effect of the policy was to encourage housing development not prescribe a particular
development. A housing opportunity site was therefore not a “site of proposed
development of a description specified in relation thereto” for the purposes of s 16 (1). But
it was allocated as a housing opportunity site

32. The Lands Chamber considered that although the text of the local plan envisaged other
uses may continue or be developed on the housing opportunity sites, the policy allocated
land for a housing opportunity site rather than for a mix of uses. Such sites were therefore
allocated primarily for a single use not a range of two or more uses and the relevant
provision was s 16 (2).

33. The Lands Chamber held that the s 16 assumptions are to be made at the valuation date,
which is the same date at which the cancellation assumption is to be made.
34. It should be noted that s 16 (7) requires the assumption that “no part of the relevant
land were proposed to be acquired” and this does not expressly justify the assumption that
there are no proposals to acquire any land pursuant to the scheme.

35. In Newell the claimant contended that the assumption to be made was that the whole of
the scheme had been cancelled, whereas the acquiring authority contended that the only
assumption to be made was that arising out of s 16 (7) , namely that only the acquiring
authority’s proposals to acquire the reference land had been cancelled. The Lands Chamber
held that reliance on the Pointe Gourde principle could not justify the conclusion that the
whole scheme is to be disregarded for the purposes of determining the planning
assumptions. Whether the assumption that the relevant land was not to be acquired, would
lead to the further assumption that the acquiring authority’s proposals for the rest of the
order lands were also cancelled is a question of fact and judgment depending on the
circumstances of the case.

36. The council’s case was that despite the allocation as a housing opportunity site (para 32
above), planning permission would not reasonably have been expected to be granted for
retention, conversion, extension and change of use of the buildings to provide about 150
flats (the claimant’s proposal).

37. The Lands Chamber considered the planning issues and evidence in some detail before
conclusion that planning permission would not have been granted Further the Lands
Chamber considered that there was no hope of any planning permission for the claimant’s
proposal for at least five years after the valuation date and a 40% chance thereafter.

38. In Graham v Newcastle upon Tyne [2009] UKUT (LC) 281 ; [2010] RVR 144 the Lands
Chamber said that since Spirerose it had been clear that the Pointe Gourde rule does not
affect the planning assumptions that can be made. Under s 14 (2) of the 1961 Act two
outline planning permissions were to be taken into account together with detailed
approvals under one of them. But it was agreed that these permissions could not have been
implemented in the absence of compulsory purchase powers because of land assembly
difficulties. The claimants produced a potential alternative layout which would have
required the purchase of only seven freehold and long leasehold interests compared with 16
interests required for the scheme world development. The Lands Chamber held that what
had created the development value in the land was the grant of planning permission for a
superstore. That planning permission, whether for the actual development or the potential
alternative layout development, would not have been granted in the absence of the
scheme. There would not have been demand for the potential alternative layout in the no
scheme world.

39. In Potter and Potter v Hillingdon London Borough Council [2010] UKUT (LC) 212 : [2010]
RVR 271 the Lands Chamber said that the starting point in assessing compensation consisted
of determining the planning assumptions. Two planning permissions were in force at the
date of service of the notice to treat, and therefore fell to be taken into account under s 14
(2). In addition such hope as there might have been that the land might achieve planning
permission of a use associated with a possible third runway at nearby Heathrow could be
taken into account under s 14 (3). It was not suggested that the Pointe Gourde rule (or any
other non statutory principle) could be invoked to generate additional or more certain
assumed planning permissions in that case. Nevertheless, there may yet be some utility left
in the Pointe Gourde rule in this respect. The Lands Chamber said at p 281, para 73. The
Lands Tribunal said,

“The House of Lords decision in Spirerose is a reminder to practitioners and those

deciding claims for compensation that for the compulsory purchase of land that
valuation for this purpose is to be made by applying the provisions that are
contained in the Land Compensation Act 1961.

40. And after referring to the council’s approach in the Potter case, which was described as
“to take an initial leap into the no scheme world and to proceed from there”,

“We think that in future valuers and their advisers will need to adopt a more
methodical approach, considering the potentially relevant statutory assumptions
and applying them to the facts of the case and only moving on to consider whether
some additional assumption is required under Pointe Gourde when those earlier
steps have been taken.”

41. In Abbey investments Ltd v London Development Agency [2010] UKUT (LC) 325 : [2011
RVR 18 the Lands Chamber considered in detail the operation of s 16 (3). The claimants case
was that the reference land and the site of the larger scheme formed part of a site known as
m7 in the urban development plan which was allocated for mixed uses. There ws no specific
policy which underpinned the ‘m’ sites which appeared in the Urban Regeneration chapter
of the plan. The acquiring authority’s case was that the m7 site covered a wide area and the
proposal did not indicate what uses would be acceptable on what sites or the balance or
quantum of uses overall. The development plan envisaged that this would be undertaken
through a detailed development framework. Therefore, the acquiring authority said, m7 did
not allocate land, and even if it did, the allocation was not ‘primarily for a range of two or
more uses specified in the plan. The policy simply indicated that favourable consideration
would be given to a range of employment uses.

42. The Lands Chamber held that m7 allocated land for the purposes of s 16 (3) and said
(para 19) :

“It proposes development of a specified area for specified uses. Whilst most
of the ‘m sites’ are relatively small, proposal m7 happens to be one of the larger
ones. It straddled a number of roads and pre-existing development blocks, and does
not specify more precisely the specific location or quantum of development.
However, this is perhaps understandable given that the proposal is intended to
perform a regeneration function rather than to provide a specific quantum of
floorspace or residential units in order to meet a strategic target We do not consider
that an ‘allocation’ must necessarily be confined to a site such as a pre-existing
development block , it may relate to an ‘area’ which includes or amalgamates a
number of existing physical features and development. The ‘m’sites can be
contrasted with the major opportunity zone areas which are much larger and, for
example, the EMP4 sites which are also larger and are the subject of a policy which
seeks to control development rather than propose development.
Given that s 16 (3) refers to allocation of an area for a range of uses, the
original context of which was a requirement for plans to allocate areas for the
purposes of a class of use, we do not consider it necessary for a proposal to specify a
quantum of development as opposed to a particular use. Further s 16 (3) envisages
that the area may be allocated “primarily for a range of uses specified in the plan
(emphasis added) indicating that the specified uses need not be exhaustive.
Therefore the fact that m7 starts ‘Mixed development including .....’ followed by
specified uses does not conflict with s 16 (3), and in our judgment the reference to
‘B1, Live/Work and Residential’ means that the site is allocated primarily for those
uses but does not exclude others which may be appropriate. The fact that the
reference land lies within a much larger town centre area where retail and leisure
are other appropriate uses does not detract from the allocation in m7. .....
We consider that the m7 proposal to be quite different from the SSDEA
[South Shoreditch Defined Employment Area] referred to in Urban Edge. This
covered a very large area (over 100 ac) which included many different uses. The
policies sought to protect and enhance the mixed employment and special land use
character of the area, there was a presumption in favour of B2 uses, B1 development
was supported in principle and favourable consideration was given to employment
generating development. In addition, within the SSDEA, there were smaller sites
which were listed on a proposals schedule and subject to a policy stating they would
be safeguarded for B1, B2 or B8 development. The policies which applied to the
SSDEA sought to control development which might come forward, rather than
specifying that the land should be put to a particular use or uses. By contrast m7 is a
proposal that the land should be developed for particular uses, not a development
control or criteria based policy.
Finally, we do not consider that the unitary development plan envisages that
the ‘m’ sites would necessarily be the subject of development frameworks that
would identify in more detail how much development of what type would go where
on the site. There is no policy in the unitary development plan requiring a detailed
development brief or framework to be prepared to guide development of the ‘m’
proposal sites as opposed to the major opportunity zones areas. ..... There is no
evidence that the local planning authority proposed to prepare a development
framework for m7 beyond the updated masterplan. ..... We also note that planning
permission was granted for [another] site ..... which is also within m7, without the
need for a development framework.”
43. The Lands Chamber then considered whether planning permission could reasonably be
expected to be granted for the claimant’s notional scheme. The acquiring authority
contended that planning permission would have been refused on the grounds that
development of the reference land alone would be piecemeal development prejudicing the
development of the remainder of the order lands for a comprehensive regeneration
scheme. The conclusion of the Lands Chamber was that it would prejudice development of
land to the north and south of the reference land in an unacceptable way, and planning
permission would not be granted by a reasonable planning authority.

44. There was a suggestion that planning permission might reasonably have been expected
to be granted on the valuation date in the absence of compulsory purchase for development
of the reference land together with additional land. The Lands Chamber said,

“The 1961 Act does not specify the level of detail at which a development must be
described for the purposes of s 16. However, in our judgment, it must be
particularised to the extent that (1) a view can be formed as to whether planning
permission might reasonably have been expected to be granted for it, and (2) the
value of the land can be identified. The whole point of making the s 16 assumptions
is ‘for the purpose of assessing compensation’ - s 14 (1) of the 1961 Act.”

45. The suggestion of planning permission for the reference land together with additional
land was insufficiently particularised and was rejected.

This seminar paper is made available for educational purposes only. The views expressed in it are those of the author.
The contents of this paper do not constitute legal advice and should not be relied on as such advice. The author and
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