If you live or own a business in an around New Road Rainham you may have recently received a letter from Glenny LLP acting on behalf of the London Borough of Havering concerning their invitation to you to enter into discussions to sell your land to the council in advance of any compulsory purchase order being made in this area.
We are already acting for clients in relation to this on other affected sites in the area and if you require any assistance with dealing with these negotiations please contactus. As noted below this will be at no cost to you. We are not acting for the council.
At this stage (November 2016) no formal compulsory purchase order has been put in place however it may still be worth your while in exploring the voluntary sale options if only to discount them. Essentially the council have offered to cover the professional costs of such initial negotiations. You are not therefore exposed to costs or bound to sell to the council even if you take up this offer of advice but it is in your interest to find out the level of compensation being suggested at this point.
How much will I be paid for the Property?
Broadly we would still expect the council to make payments along the lines set out under a normal compulsory purchase claim. On the basis that the council seek to purchase all of your land the heads of claim will be:
- The “Open Market Value” of the land taken; plus
- Any loss caused by losing possession of the land – “Disturbance“.
There is a chance that the council will make a further payment to early adopters but this will only be apparent to those who enter into such negotiations.
You may also be able to negotiate a fixed level of disturbance payment – typically this can be around 10% of the value of the land but your specific circumstances need to be considered because this level of compensation may not be enough to cover your losses (see below on the definition of Disturbance).
There are other potential heads of claim if the council does not acquire all of your land but this does not appear to be their intention at this stage.
What do these terms mean?
Open Market Value
The principle of open market value is that the value of the acquired land should be based on the amount which it would realise if being sold in the open market by a willing seller. This means that a valuer will need to assess the value of the land as it stands in the market at the moment. We can recommend local commercial surveyors who are assisting other clients including our own in this area.
There are special valuation rules which have arisen in the area of compulsory purchase and a specialist valuer will take these into account when advising you.
The main principle upon which compensation is based is that of “equivalence”.
In other words, an owner should not be left worse off than if the land had not been acquired. By the same token, the owner should not gain any undue advantage.
Accordingly, compensation can be claimed for any losses caused to the claimant for being dispossessed of the land by the Compulsory Purchase Order. Compensation can also be claimed for losses caused by being disturbed from possession of the land taken.
Typical disturbance claims include the following:
- Costs incurred in moving stock and/or machinery to new premises.
- Telephone/computer removals.
- Surveyors/Architect’s fees in surveying new premises.
- Costs in maintaining two properties during removal, including payment of rates.
- Loss of goodwill and temporary loss of profit due to the disturbance of your business or trade.
- Costs of refinance.
- Legal and other moving costs including stamp duty on any replacement property.
Persons displaced from, but with no interest in, the land being acquired which would entitle them to compensation in the usual way may claim disturbance payments. This means that any tenants who are holding over after their lease has expired may also have a claim.
What about the legal costs and valuation/negotiation fees – will I have to pay for these?
No. These costs, provided they are reasonable, will be met by the council.
At the initial stage we would expect the council to pay for the costs of deducing title to the land and your costs in obtaining the advice of a lawyer, valuation surveyor and/or accountant in preparing the claim.
If the matter proceeds further to a sale we will be able to include our costs for this aspect also in any claim.
Why would I agree to sell now?
This will be a commercial decision made by you based on a number of factors.
These may include:
- Your view of the market. Market conditions may go up or down in the future and you may decide that it may be better to sell now.
- You may have been looking to sell now in any event.
- If you sell early you may have a better pick of existing replacement sites or properties suitable for your needs. As the other owners in the area sell the demand for such sites will increase and therefore the price for the land may also increase.
- A desire to avoid the “blight” which may apply to the site now that the plans have been formally revealed. If you do not sell voluntarily to the council it may be difficult to sell on the open market as most buyers will not want to buy a site which may be purchased back by the council in a few years.
In any case you are not committed to sell at this point even if you engage with the council in such negotiations. This is the beginning of a process which may take many months or years to come to fruition.
What do I do now?
We can then:
- start the process of co-ordinating your claim against the council.
- provide you with on-going support throughout this process
- introduce you to local commercial surveyors who are able to assist on the valuation aspects.
- assist with the conveyancing of your site and the acquisition of any new land.
If you require any further assistance please do not hesitate to contact us.