CPO Team Brochure

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    15-Apr-2017
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Transcript of CPO Team Brochure

  • Compulsory purchase orders

    Resolving disputes

  • 1 Compulsory purchase orders Resolving disputes

    Compulsory purchase of property is an essential tool in a modern democratic society. It facilitates planned and orderly development Hand in hand with the power to acquire land without the owners consent, is an obligation to pay full and fair compensation.

    Lord Nicholls of Birkenhead

  • 2Compulsory purchase orders Resolving disputes

    Whilst HS2 is attracting much media attention, the use of Compulsory Purchase Order (CPO) powers is not limited to major National Infrastructure projects. For example, the use of CPOs has always been, and will continue to be, central to urban regeneration and is likely to play a central role in shaping the UK.

    We have advised on numerous claims following compulsory purchase of business premises, including relocation, extinguishment and hybrid cases, acting on behalf of acquiring bodies and affected businesses.

    The CPO process and considerations

    Compensation considerationsAffected businesses notified of CPO

    Public Inquiry held

    Secretary of State decision

    Notice of Execution given to affected businesses

    General Vesting Declaration Ownership taken

    Compensation negotiations take place in respect of land/property value and business losses

    Relocation or extinguishment of business

    Ability to continue to use property/land through leases once possession has passed to be considered

    Compensation settled

    Value of land and buildings

    Injurious affection reduction in the value of remaining land when only part or no land is taken

    Relocation given due consideration

    Quantification of:

    Flux state business unable to develop as originally planned

    Wasted management time incurred

    Additional labour costs, overtime and redundancy costs

    Disruption through blight

    Additional costs incurred

    Move/build costs incurred

    Risks of delays in relocating

    Lost profits through business interruption

    Lost profits through business relocation or extinguishment

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    For land owners, and acquiring bodies, the process surrounding compulsory acquisition can be a burden for many years.

    In some situations it is possible for the parties to reach an agreement for the land transfer without the need to exert compulsory purchase powers.

    Where this is not possible the CPO process will begin and is likely to follow the steps set out below.

    The opportunity to resolve compensation without the need for litigation remains, and is often preferred by all parties, even when a CPO is used to acquire land.

    Taking professional advice at an early stage can facilitate meaningful discussions, and provide realistic assessments,

    to enable compensation to be agreed through negotiation or mediation. We have extensive experience of advising clients in a range of complex civil matters, providing expert accounting advice and oral evidence in connection with court proceedings and other forms of dispute resolution.

  • 3 Compulsory purchase orders Resolving disputes

    Early assessment We apply a pioneering approach and expert financial knowledge to help assess a fair level of compensation.

    In the Lands Tribunal case of Optical Express (Southern) Limited vs. Birmingham City Council (2004), the evidence presented by EY partner Sara Fowler set a precedent in relation to the basis on which compensation for post-possession loss of profits are calculated.

    We can work as part of a wider team alongside other professional advisors to supplement their work, providing support and ensuring a consistent approach. In more complex cases we can assist with project management of the claim.

    Our commercial experience of valuing businesses for sale is highly useful in negotiating compensation, following the extinguishment of a business, and in calculating lost profits whether the business has been extinguished, relocated or treated as a hybrid of the two.

    We have worked on claims ranging from 1 million to 30 million and our experience includes giving expert oral evidence to the Lands Tribunal on several occasions.

    We will work with you to deal with the claim and will use our extensive experience of this type of work to:

    Provide robust and objective advice

    Offer practical and commercial ideas

    Consider the profile and sensitivities of the claim

    Tailor our approach to the nature and size of each situation

    Our aims are to support a timely resolution to quantum disputes and to provide value for money to encourage future investment and development in public interest projects.

    What are the risks?There are considerable risks for both parties in a CPO; the acquiring body implementing the CPO and the business which is subject to it Some common examples are set out below.

    Acquiring bodies risks Not taking professional advice early enough in the process

    to ensure there is sufficient budget to cover future compensation claims

    Affected businesses over compensated due to insufficient professional advice

    Bad publicity and negativity around future development

    Likely to be liable for the majority of costs incurred by the Claimant

    Claimant risks Not devoting sufficient management time early

    enough in the process

    Not planning for relocation or being unable to demonstrate why relocation has not been possible

    Failing to maintain sufficient documentation to support consequential cost and loss of profit claims and hence inability to recover, in full, costs incurred and profits lost

    Leaving it too late to plan the transition to new business premises when relocation or partial extinguishment occurs

    No reflection of the time value of money. Interest on compensation is currently set at 0.5% below base rate

    Common risks Currently no pre action protocol to assist resolution of disputes, therefore, may be reliant on

    expertise and experience of professional advisors to promote alternative dispute resolution

    Significant costs incurred by both parties if the matter is disputed

    Protracted process which drains cash resources and staff investment

    Not seeking professional advice at crucial times

  • 4Compulsory purchase orders Resolving disputes

    EYs credentials

    Relocation or extinguishment?A claimant should take appropriate action to mitigate losses in the period prior to the closure of the business. Such actions will include seeking alternative premises to which the business at the premises to be acquired could be relocated. Where businesses are unable to find suitable alternative premises, the end result is often the extinguishment of all or part of the business.

    However, often it is not immediately apparent whether the business in question was extinguished or whether it was in fact relocated.

    In one instance, we were asked to investigate whether a new business started by the owner was, in reality, a continuation of the old business which, it was claimed, had been extinguished. Our work included examining the customer base and the business operations of the historical and new businesses.

    Assessing lost profits through extinguishmentParties involved in CPO cases where extinguishment has occurred should seek expert valuation advice.

    An average of the profits over the last three years (the traditional approach) does not usually give a realistic assessment.

    For each situation, the accounting evidence has to be examined and an assessment made of how the business would have performed, but for the CPO.

    In the Lands Tribunal case of Optical Express (Southern) Limited vs. Birmingham City Council (2004), Sara Fowler of EY acted as expert witness for the claimants.

    The decision made by the Lands Tribunal in this case set a precedent in relation to the basis on which compensation claims for post-possession loss of profits of a business as a result of CPOs are calculated.

    Acting on behalf of The Claimant

    Minor detour?

    End of the road?

    Find out how EY can support your business if it is affected by a compulsory purchase order.

  • 5 Compulsory purchase orders Resolving disputes

    Acting on behalf of The DeveloperRegeneration, regeneration, regenerationThe regeneration of towns and cities can often result in developers being subject to claims for loss of profits, as the development works undertaken can have a temporary, or permanent, impact on local businesses.

    In such situations developers should seek expert advice to assess the legitimacy of the claim received.

    We were appointed by the development company behind a major regeneration project in one of the UKs largest cities to provide an assessment of a claim received from a retail business. The claim related to both temporary and permanent loss of profits resulting from the impact on one of its local stores of a newly developed retail complex.

    We worked collaboratively with the developer, and its other advisors, to understand the likely impact of the development on the claimants store and to assess the claim received. We prepared a rebuttal of the claimants claim and represented our client in negotiations which resulted in a successful settlement, substantially below the value of the initial claim.

    EYs credentials (contd.)

    Acting on behalf of The