Last year, a legislative amendment designed to solve an anomaly whereby tenants with unprotected, or minor, tenancies receive less ‘disturbance’ compensation under a CPO than either licensees or tenants with protected tenancies has, for HS2 compensation claimants, ended up creating a two-tier compensation system. The change, effective from 22 September 2017, is not retrospective which means that the compensation claims of tenants affected by Phase 1 of HS2 (which has already had CPO powers granted by Royal Assent) and those who are affected by Phase 2 (which has not) will be treated differently.
Principle assumes landlords would terminate lease at first opportunity
The original anomaly dates back to the 1960s when a case, Bishopsgate Space Management Ltd v London Underground Limited, led to a decision which became known as the Bishopsgate Principle. This rested on the assumption that a landlord would terminate a lease at the first possible opportunity, regardless of whether or not they had any intention of doing so. So for a tenant whose lease could be terminated on six months’ notice, compensation would only be calculated on the basis of that six month period regardless of how long the lease had left to run. Conversely, licensees received compensation for the entire period during which they could reasonably expect the land to be available for the purpose of their trade, and tenants with a protected tenancy had their right to renew taken into account when calculating compensation due.
Tenants affected by HS2 subject to two-tier compensation system
However, having solved one problem, the government has created another. By not applying the legislation retrospectively, those people directly affected by Phase 1 of HS2 will have their compensation calculated under the old rules because their land will already have been subject to CPO powers granted in the Act for Phase 1 before 22 September 2017. By contrast, those tenants whose land falls within the safeguarded area of Phase 2 will have their compensation calculated under the new rules because the Act of Parliament authorising compulsory purchase for Phase 2 has yet to be passed.
Level playing field in name only
The obvious intention was to create a level playing field for all claimants by taking into account the likely longevity of the lease, regardless of its status. However, it is unfortunate that the legislators sidestepped the issue of the country’s single largest infrastructure project when deciding that it would not be applied retrospectively. If HS2 served a compulsory purchase notice on 21st September, a tenant with an unprotected, or minor, tenancy would be looking at a potentially significantly lower compensation rate to that of a tenant, in exactly the same circumstance, served a compulsory purchase notice on 22nd September. Clearly, the cost of treating every tenant equitably, in terms of compensation received, will increase and one can only assume that this is the motivation behind the decision to impose a cut-off date.
This is a complex area of compulsory purchase law and, although there may be steps you can take to protect your position if you think you are adversely affected, we would advise you to take legal advice before embarking on compensation claim. Our HS2 team would be delighted to discuss which options may be open to you.