PLANNING (COMPENSATION, ETC.) BILL
EXPLANATORY AND FINANCIAL MEMORANDUM
INTRODUCTION
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This Explanatory and Financial Memorandum relates to the Planning (Compensation, etc.) Bill. It has been prepared by the Department of the Environment in order to assist the reader in understanding the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.
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The Memorandum needs to be read in conjunction with the Bill. It does not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
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The purpose of the Bill is to repeal various compensation provisions in the Land Development Values (Compensation) Act (NI) 1965 (the 1965 Act), the Planning (NI) Order 1972 (the 1972 Order), and, to correct a drafting error in the Planning (NI) Order 1991 (the 1991 Order).
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The introduction of the 1965 Act followed a change in direction by the Government at that time as regards planning compensation. In recognition that the primary purpose of the planning system was to ensure that decisions were made for the good of the wider community and not the individual, the Government decided that it could no longer justify paying out compensation indefinitely for refusal of planning permission or for granting conditional permissions by reference to land values that had been created by the community rather than the individual.
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The general proposition of Parts One and Two of the 1965 Act was that anyone who had an expectation that their land had a development value would not be denied that expectation insofar that it could be shown to have existed at a fixed date. But, new or increased values deriving from changes in circumstances in the future would not be contemplated for compensation purposes.
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Therefore, landowners were invited to apply for a once and for all 'development value' for their land as at 25 February 1963 - the fixed date. This was the date that the 'Matthew Report', whose recommendations formed the basis of the 1965 Act was presented to Parliament. Applications had to be submitted by 4 February 1968. Once a 'development value' had been established, a landowner who was subsequently refused planning permission for 'new development' - development outside the 'existing use' of the land - or granted permission with conditions, was entitled to be compensated up to a limit of the established 'development value'. All payments were restricted to 1963 prices. No claim for compensation would be entertained if a 'development value' had not first been established for the land in question.
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Provision was also made for recovering any compensation if 'new development' was later permitted on the land.
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With the passage of time, the number of planning refusals on land with a development value diminished. The last record of any payment under Parts One and Two of the Act was in 1988.
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Section 29 in Part Three of the Act also recognised that there may be occasions when restrictions have to be placed on development not regarded as 'new development'. Such development was also described as being within the 'existing use' of the land and largely involved rebuilding work or extensions. As it was thought that there would be a legitimate expectation for a proposal for development within the existing use of the land to be permitted, compensation under section 29 was not restricted to any 'development value' determined for the land under Parts One and Two of the Act, and payments were not restricted to 1963 prices.
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Compensation under section 29 could also be recovered if development was later permitted.
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Payments are still current under section 29 and have been averaging at some £100k per year. Last year almost £200k was paid out and current liability is estimated in the region of £900k.
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As regards section 29 payments, clearly what may have been regarded as 'existing use' in 1965 is not so regarded in the year 2000, and it is difficult to justify continuing to pay compensation in such circumstances when a refusal is based on current planning policy grounds.
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Because a number of significant payments have already been made under Parts One and Two and section 29, it is considered appropriate that the Government retain the right to recover compensation if development is later permitted on the lands in question. It is therefore intended that the right to recover in such circumstances will be retained.
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Similar provisions to those in Parts One and Two and section 29 have already been repealed in England and Wales in the Planning Compensation Act 1991.
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Article 64 of the 1972 Order provides for compensation to be paid for a refusal of consent for alteration or extension of a listed building where the alteration or extension does not constitute development for the purposes of requiring planning permission. There are no recent records of compensation having been paid under these provisions.
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Similar provisions to these have also been repealed in England and Wales in the Planning Compensation Act 1991.
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It is considered anomalous in a modern planning system to award compensation for implementing a control which was introduced to afford additional protection to listed buildings.
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An amendment is to be made to Article 121(1)(c)(iv) of the 1991 Order to correct a drafting error.
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No consultation took place on this Bill as there was a concern that advance notice of these provisions might stimulate claims in an attempt to pre-empt a legislative deadline.
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With regard to Parts One and Two of the 1965 Act, consideration of options was not judged to be relevant as these provisions are now regarded largely as obsolete.
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With regard to section 29 where payments are still current, the options considered were to 'do nothing' or to relax the various planning policies on dwellings in the green belt - most of the compensation being paid relates to refusals in this area. Doing nothing was not considered as a viable option due to the increasing financial liability - currently estimated at £900k. It is difficult to justify this expenditure for reasons already stated, particularly when the statutory provisions which give rise to such claims have been repealed elsewhere in the UK.
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The option of relaxing planning policy on dwellings in the green belt was also rejected. These policies were put in place after widespread consultation and were considered necessary to protect the amenity of the countryside and to prevent ribbon development.
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As regards Article 64 of the 1972 Order, the options of 'doing nothing' and changing policy were also considered. The absence of claims indicates that there is little financial risk associated with Article 64, but it was still considered that in principle its provisions should be repealed as they were also regarded as anomalous in a modern planning system. Compensation should not be payable for legitimate restrictions on development affecting listed buildings.
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Not considered necessary as this is a short Bill.
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Clauses 1, 2, and 3 of the Bill provide that Parts One and Two and section 29 of the 1965 Act, and Article 64 of the 1972 Order shall cease to have effect.
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Part One of the 1965 Act provided for the determination of a 'development value' for an area of land. Anyone seeking a determination had to make an application before 4 February 1968. The 'development value' was calculated by the (then) Valuation Division of the (then) Ministry of Finance and was based on the difference between the 'unrestricted value' of the land on 25 February 1963 and its 'restricted value' at that date.
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'Unrestricted value' meant what a purchaser would have paid for the land taking into account not only the use then being made of it (i.e., its existing use) but also any potential which it had for more profitable development. 'Restricted value' meant what a purchaser would have paid for the land if only existing use were to be permitted.
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The importance of having a determination of 'development value' was that it represented the first stage in the compensation process - without a determination there was no entitlement to compensation for a refusal or a conditional grant of planning permission under Part Two of the Act. The 'development value' was also important in that it set the upper limit for any future claim for compensation under Part Two of the Act.
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Part Two of the Act deals with the second stage of the compensation process. It provided for the assessment and payment of compensation where planning permission for 'new development' was refused or permitted subject to conditions. It also established the relationship between compensation and the 'development value' as determined under Part One of the Act.
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'New development' is defined as any development not described in Schedule 1 to the Act and in broad terms could be described as development outside the 'existing use' of the land.
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Part Two also sets out the criteria to be satisfied before a claim could be considered. These were that the land in question had a 'development value' as determined under Part One of the Act; that the refusal or conditional permission had resulted in a depreciation in the value of the land in question; and, that previous compensation had not been paid in respect of the land under the Planning (Interim Development) Act (NI) 1944. This Part also provided that compensation could not exceed the 'development value' determined for the land and that it was to be restricted to 1963 prices.
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Both Parts One and Two are now regarded as obsolete.
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Section 29 of the Act provides for compensation to be paid where a planning permission for 'development other than new development' is refused. Schedule 1 to the Act provides several definitions of such development. The definition which has given rise to all recent payments is contained in paragraph (1) (a) of Schedule 1. This is stated as 'the rebuilding, as often as occasion may require, of any building which was in existence at the date of the passing of this Act (4 November 1965), or of any building which was in existence before that date but was destroyed or demolished within the period of five years ending with that date.'
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As a refusal in this area was regarded as a restriction on the 'existing use' of the land, payment did not depend on there being a 'development value' determination in existence, and all payments were to be made at today's prices.
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Payments under section 29 are still current.
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Article 64 of the 1972 Order provides for compensation to be paid for a refusal of consent to alter or extend a listed building where the works do not constitute development. There are no recent records of any payments made under these provisions.
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Clause 4 deals with the application of the Bill. It provides that with the exception of section 5, it shall apply to applications for planning permission referred to in section 14(1) and section 29(1) of the 1965 Act or for listed building consent as referred to in Article 64 of the 1972 Order, made on or after 23 October 2000 - this is the date the Bill is to be introduced in the Assembly.
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This means that after the Bill becomes law no claim for compensation will be accepted in respect of a refusal of planning permission or listed building consent where the application for planning permission or listed building consent was made on or after 23 October 2000. All other claims will be processed in the normal fashion.
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These provisions are necessary as there is a concern that the publicity which the Bill might attract during its legislative stages may stimulate claims that would not otherwise have been received in an attempt to pre-empt the date on which the Bill would normally come into force, ie when it received Royal Assent. It is possible that the increased liability (£900k)) faced by the Department under section 29 of the 1965 Act is due to speculation that these provisions are to be repealed.
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Corresponding provisions to section 29 which were repealed in England and Wales in the Planning Compensation Act 1991 also came into effect on the day that the Bill was introduced in Parliament.
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Clause 4 also has the effect of preserving the recovery provisions in the 1965 Act. This is achieved by virtue of the fact that by only applying the repeal of Parts One and Two and section 29 of the 1965 Act to applications made after 23 October 2000, the recovery provisions in the Bill will still apply to payments made in respect of applications made before that date.
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Clause 5 amends Article 121(1)(c)(iv) of the 1991 Order. This corrects a drafting error in this Order concerned with rights of entry.
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Clause 6 gives effect to the amendments, savings and repeals in the Schedules to the Bill.
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Schedule 1 to the Bill makes mostly amendments to other pieces of legislation as a consequence of the provisions in the Bill.
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Schedule 2 to the Bill provides for saving those provisions of the 1965 Act which are to be repealed but which are required to give meaning and effect to other provisions which are not to be repealed
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Schedule 3 lists all the provisions to be repealed.
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The Bill will produce savings. No further compensation will be paid for planning refusals or conditional permissions for development 'not regarded as new development'. Expenditure has been averaging at some £100k per year. Current liability is estimated at £900k. Manpower savings will also be achieved.
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There is no evidence to indicate that this Bill will disadvantage any one group more than another.
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Legal advice is that this Bill does not contravene Human Rights legislation.
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Not considered necessary.
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Not considered necessary.
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Not required as the Bill does not touch on excepted or reserved matters.
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The Minister of the Environment has made the following statement under section 9 of the Northern Ireland Act 1998:
"In my view the Planning (Compensation, etc.) Bill would be within the legislative competence of the Northern Ireland Assembly."