My Lords, we now move from natural landscapes and habitats to the man-made ones. Before I go any further, I declare my interest as an almost completely retired chartered surveyor, although I confess that it is a very long time since I dealt with anything in relation to compulsory acquisition. Provided that the Committee chair does not object, I propose to speak to Amendment 5, during which I will incorporate any comments I have in relation to Amendment 10, which covers the same ground to some extent. I will also speak to Amendment 13 before formally moving Amendment 5.
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I start by saying that I am not in any way anti-HS2, but I am pro-efficiency in operation. This amendment is about compensating tenants. That is any tenant, whether they are residential, businesses or neither, but it is of particular relevance to residential and possibly agricultural tenants, because it may also be about their home.
For some time, leases have been getting ever shorter. Business leases in particular have been going that way, also with options to extend or break. In many areas, the rate of turnover may be considerable. This is a response to and a product of the uncertainty of our times. No lease of less than seven years’ duration is required to be registered with HM Land Registry. Apart from perhaps the register of electors, council tax or non-domestic rate records, there may be little to identify an occupier or the nature of their tenant, and none at all if it happens to be agricultural. This gets worse when the tenant may themselves have legitimately entered into a subletting.
My understanding is that HM Land Registry has a fairly substantial backlog of registration cases. I have not had a moment to check with HMLR direct; if I am wrong in that case, I will be very happy to stand corrected. However, if I am right, even a registrable change of ownership and the contact details attached to that may be many months in contemplation before it gets finalised on the register or picked up on a register search. HS2 Ltd is of course charged with giving notice of its intent to compulsorily acquire land
“to all the persons interested in, or having power to sell and convey or release, the land, so far as known to the … authority”—
that is, HS2. The first point is to ask how good it is at picking up these unrecorded tenancies and what sort of contingencies it has in place for what might be a considerable area of doubt.
In addition, there are some very long lead-in periods in the HS2 scheme. The Bill removes the normal three-year time limit on exercising the compulsory rights by the acquiring authority, so the timescales are no longer contained in the way they would be with a conventional compulsory purchase scheme. Moreover, when it comes to taking possession of the land, the Bill cuts the normal three months’ notice to one month for acquisition of subsoil rights, but as subsoil works are likely to be the most potent circumstances of physical damage being caused to buildings, some people might reasonably regard this as a bit alarming.
In another place, the Minister referred to the C15 guide—one of a series of guides produced by the Department for Transport—which relates to short-term
residential tenants. The guide suggests that normally a tenancy by way of an assured shorthold tenancy will not give rise to a compensable legal interest due to the brevity of that tenancy arrangement. I should have thought that a tenancy on a one-year term but with a clear expectation of being able to stay much longer might feel somewhat cheated by such an arrangement.
I therefore turned my attention to the report from the Select Committee on the Bill, which had some comments to make. Here I pay tribute to the noble and learned Lord, Lord Hope, and his committee, for a truly excellent piece of work. Paragraph 115 of that report refers to residential tenants
“who are leaseholders with at least three years of their terms unexpired”
and goes on to say what schemes for compensation they may be entitled to. It says:
“Other residential tenants will be entitled to a home loss payment. This does not however apply to tenants with shorthold assured periodic tenancies, to some agricultural tenancies, or to tenancies of narrow boats. The House of Commons Select Committee took up these omissions with the Secretary of State but does not seem to have made much progress.”
Noble Lords will start to see the issues, and my second query is to invite the Minister to give us a bit of a progress report on what is happening there.
Disturbance payments should be payable to tenants, but C15 contains comments about mitigating losses. That is fair enough in theory, but getting several quotes for removals and possibly for estate agents’ services in circumstances in which the guidance is silent on the question of getting professional advice about the totality of the claim itself, in what is a very demanding technical area of law and practice, seems to cram a lot into a short notice period, part of the costs of which might not be compensable. Bear in mind this is net additional cost, inconvenience, distraction and worry over and above those of the normal lives of tenants of every sort.
A home loss payment is not payable in circumstances where the tenant has been in residence for less than 12 months. Furthermore, disturbance payments may be denied where the tenant leaves voluntarily, is subject to a notice such as a notice to quit, or exercises a break clause, even if the root cause of the move is the threat of compulsion by HS2 Ltd. People in their own homes and businessfolk, even as tenants, do not wait until the last minute before being given the heave ho. Given the level of uncertainty about aspects of HS2 and its programme in particular, one would have to say, who can blame them? Again, I sense that this arrangement is intrinsically unfair.
The Select Committee also looked at business premises. At paragraph 116, it referred to the question of basic loss payments that are
“equal to 7.5 per cent of the open market value of the premises or £75,000, whichever is the smaller.”
That is applicable to owners—the freeholder of the property. It goes on:
“Business tenants who are displaced will be entitled to an ‘occupier’s loss payment’ of 2.5 per cent of the open market value of the premises or £25,000, whichever is the less.”
Crucially, the Select Committee says:
“Some commentators have suggested that these percentages of 7.5 per cent”
to the freeholder, and 2.5% to the occupier or tenant
“should be reversed, but that has not so far”
been recognised. The point is that the tenant is the person in occupation, suffering the greatest disturbance, and the landlord is usually the investor. The Compulsory Purchase Association, with which I have had a dialogue in the distant past but not specifically on this Bill, has long advocated a suggested change so that those percentages are reversed, with the largest percentage going to the tenant or occupier and the smaller percentage going to the freeholder. My next question for the Minister is: why has nothing happened to rectify this?
Complaints have reached my ears that HS2 Ltd’s approach tends to be governed by what it has budgeted for. I suppose there is really no surprise about that, but the budgeting process has to date given the appearance of being somewhat haphazard. I choose my words carefully in the light of what was discussed a short while earlier. However, I have it on what I believe to be good professional authority that its budgets for acquiring interests in land have been particularly wanting and particularly subject to subsequent upward adjustments. Naturally, there will be pressures to limit unplanned or avoidable exposure to claims, but I am told not only that legitimate claims are being questioned with a degree of quite unreasonable rigour, but, more particularly, that payment of compensation at just and proper levels, even under the advanced payment principles, is being curtailed or delayed in what looks to claimants and their advisers rather like a form of coercion.
I will comment on how this arises a little later, but HS2 Ltd has also seemed to have adopted its own interpretations of things, such as assuming that tenants will automatically leave anyway at the first available break clause or the earliest termination date. However, this does not necessarily reflect the reality in all cases, especially where, as I have said before, continuation is the expectation. Will the Minister tell us whether this practice has now ceased?
The frictions that I have outlined are unhelpful. They impede momentum and add to costs; they also create considerable distrust. I am aware that HS2 is a huge organisation, but it has to be less impersonal and do fewer things by rote. That is the background to Amendment 5, but it has to be seen in the context of my later Amendment 12, which is about treating claimants fairly. Will the Minister be prepared to meet noble Lords to discuss these issues?
I turn now to Amendment 13, which relates to compensation for losses suffered by owners. I will not go through the text, but this is a probing amendment. There has been concern in phase 1—when I refer to phase 1, I do so because that is the example we have before us of the way matters have been unfolding and how HS2 Ltd is dealing with them—about the way HS2 Ltd has been handling compensation payments. Normally, claims for compensation are paid at the end of the acquisition process, but there is a provision for the acquirer to pay its assessment of compensation in advance, and acquirers will often accept interim claims where necessary. However, there was a lack of suitable structure to requests for advance payments until the Housing and Planning Act 2016 provided a framework for the payment of compensation in advance. In reality,
“advance” is a misnomer: in fact, very seldom is compensation paid in advance of entry, but the objective was that the payment would be made within three months of receiving a claim for compensation following a general vesting deed or a notice of entry.
The payment of compensation in advance was going to be backed by the application of a punitive rate of interest if it was not made on time by the acquiring authority. However, HM Treasury has not implemented this measure, so the current statutory rate of interest applied to outstanding compensation payable to claimants remains at 0%. This is hardly an incentive to good practice.
HS2 Ltd has, I understand, sought to pay compensation for land it occupies on a temporary basis when the occupier would usually suffer a loss—for example, arable farmers at harvest time, although it might be some other business activity. This could mean that HS2 Ltd, if it accessed the land at the previous harvest, paid nothing for nearly a year for the occupation of that land. In some cases, occupation might be short-lived; for instance, the relocation of power lines might take only a few months. In other cases, however, it could be several years. Either way, this could be highly disruptive to the owner. It is important that, where possible, compensation for temporary occupation is also paid in advance, the best it can be estimated at the time. The difficulty, I understand, is that HS2 tends to try to reduce its exposure by delimiting the amount it will pay in advance.
In phase 1, furthermore, I understand that HS2 has also made much use of the temporary occupation provisions to start early works, and only then serve a general vesting declaration for permanent acquisition at a later stage. This means that the landowner loses the use of the land on day one of the temporary occupation but cannot put in a claim for compensation for any permanent impacts until HS2 Ltd serves the GVD. This means that the permanent impacts of the construction—loss of value of retaining land and value of buildings, increased costs of operations and so on—may not be compensated for several years and, paradoxically, may be easier for HS2 to argue against in retrospect.
So even though HS2 Ltd’s real intention might have been to take land permanently from the outset, it is actually able to do so under a temporary provision. That does not seem right because the business cannot restructure until the main compensation is paid and is therefore in limbo for years. The purpose of the amendment is to address that issue but, as I say, there are aspects of it that I will address again in a different context on Amendment 12. I beg to move.
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