CAADs: A valuable development?

Introduction

Certificates of Appropriate Alternative Development (CAADs), commonly also referred to as “section 17 certificates”, are sought under the provisions of the Land Compensation Act 1961 (“LCA 1961”). The purpose is to establish whether planning permission for alternative development might reasonably have been expected to be granted on the vesting date (the date that the land legally transfers to the acquiring authority) or at some later date if the land were not proposed to be compulsorily acquired. A certificate (or an agreement that there is AAD) removes any question mark over planning risk as the value of land compulsorily acquired can be assessed as if planning permission for the AAD had been granted.

‘Positive’ section 17 certificates must:

• identify every description of development (whether specified in the application or not) that in the LPA’s opinion is appropriate alternative development; and
• give a general indication of:
  • any conditions to which planning permission for any AAD could reasonably have been expected to be subject;
  • when the permission could reasonably have been expected to be granted if that would have been only at a time after the relevant valuation date; and
  • any pre-condition for granting the planning permission (for example, entry into a s.106 obligation) that could reasonably have been expected to have to be met.

Background

The appeal focussed on four landowners (Quintain, Birmingham City University, Curzon Park Ltd, The Eastside Partnership) who each held sites in Birmingham with substantial development potential. The sites were all cleared for development in anticipation of the eastward expansion of the city centre, but the emergence of HS2 saw them earmarked for the new station.

All four parcels vested in the Secretary of State for Transport (“SoST”) between 16 March 2018 and 26 September 2018 and, as such, these dates are the valuation dates for determining compensation for the land taken in each case.  Each claimant had applied for a CAAD for mixed use development with student accommodation and each was applied for in isolation without regard to the other sites.  Birmingham City Council (“BCC”) as the local planning authority then determined each in isolation and this led to a number of appeals of the LPA’s decisions to the Upper Tribunal Lands Chamber (“UT(LC)”) under section 18 of the LCA 1961: the SoST appealed two certificates whilst two of the landowners appealed applications not determined in time.

The SoST contended that, had the section 17 applications taken into account the other applications, the CAADs granted would have been likely to describe development of some or all of the sites on a much smaller scale than in the certificates granted by BCC, as development of all of the sites in line with the applications would have resulted in substantial over-development of the area.  As a result, the compensation payable to some or all of the respondents would have been likely to have been reduced.

UT(LC) decision on preliminary issue

https://www.bailii.org/uk/cases/UKUT/LC/2020/37.html

Martin Rodger QC, Deputy President and Mr Andrew Trott FRICS of the UT(LC) determined a preliminary issue formulated as follows: “Whether, and if so how, in determining an application for a certificate of appropriate alternative development under section 17 Land Compensation Act 1961 the decision-maker in determining the development for which planning permission could reasonably have been expected to be granted for the purposes of section 14 LCA 1961 (a.k.a. “the planning assumptions”) may take into account the development of other land where such development is proposed as appropriate alternative development in other CAAD applications made or determined arising from the compulsory acquisition of land for the same underlying scheme.”

The UT answered that question at paragraph 66 of their decision as follows: “… our answer to the preliminary issue is that in determining the development for which planning permission could reasonably have been expected to be granted…the decision maker is not required to assume that CAAD applications or decisions arising from the compulsory acquisition of land for the same underlying scheme had never been made. The decision maker must treat such applications and decisions as what they are, and not as notional applications for, or grants of, planning permission. They are not material planning considerations. Subject to those boundaries, it is for the decision maker to give the applications and decisions such evidential weight as they think appropriate.

CoA decision

https://www.bailii.org/ew/cases/EWCA/Civ/2021/651.html

The Respondents revived an argument around the ‘cancellation’ assumption. In considering AAD there is a requirement to assume the acquiring authority’s “scheme” is cancelled on the “launch date” (the date notice of the CPO is first given).  In this assumed ‘no scheme world’, if no interest was proposed to be acquired by an authority in possession of CPO powers, none of the landowners could have made an application for a CAAD.

Lewinson LJ concluded that “…it is the inevitable consequence of the cancellation assumption that no CAAD applications could have been made…” (para 47)

“In my judgment, the landowners’ point is well-founded. In my judgment the UT was wrong to reject it. I consider that the cancellation assumption requires it to be assumed that no CAAD applications on other sites have been made. It follows, therefore, that in considering an application for a CAAD on one particular site, applications for CAADs (or the issue of CAADs) on different sites must be disregarded.” (para 48)

“As I have said, however, I have accepted the landowners’ primary argument (which the UT rejected). I would therefore answer the preliminary issue as follows: “In determining the development for which planning permission could reasonably have been expected to be granted…in relation to a particular parcel of land, the decision maker is not entitled to take into account CAAD applications or decisions relating to other land arising from the compulsory acquisition of land for the same underlying scheme. They are not notional applications for planning permission and are not material planning considerations.” (para 69)

Thoughts

This is very much a win for claimants who have land with development potential compulsorily acquired from them. The SoST’s / HS2’s concern is that not all of the sites in the circumstances set out above would have realistically obtained planning permission. The ‘principle of equivalence’ is at risk of being offended with all four claimants in this instance, potentially claiming compensation reflecting an overall quantum of development which would have never realistically materialised across all four sites.