The document discusses compulsory purchase orders and resolving disputes that arise from them. It outlines the typical CPO process, including notifying affected businesses, public inquiries, vesting declarations, and compensation negotiations. Compensation considers land and business property values, relocation or extinguishment costs, and lost profits. Early professional advice can help negotiations. Risks exist for both acquiring bodies and claimants if disputes are not resolved properly. The author's firm provides expertise in valuation, dispute resolution, and acting for both acquiring bodies and affected businesses.

1. Compulsory
purchase orders
Resolving disputes

2. 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 owner’s
consent, is an obligation to pay
full and fair compensation.”
— Lord Nicholls of Birkenhead

3. 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
Post
acquisition
Preandpost
acquisition
Pre-acquisition
Ongoingdiscussionsaimedatreachingasatisfactorysettlement
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.

4. 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

5. 4Compulsory purchase orders Resolving disputes
EY’s 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
extinguishment
Parties 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.

6. 5 Compulsory purchase orders Resolving disputes
Acting on behalf of The Developer
Regeneration, regeneration, regeneration
The 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 UK’s 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 claimant’s store and to assess the claim received. We prepared
a rebuttal of the claimant’s claim and represented our client
in negotiations which resulted in a successful settlement,
substantially below the value of the initial claim.
EY’s credentials (contd.)
Acting on behalf of
The Acquiring Authority
Costs vs. long term benefits
The Acquiring Authority had received a business extinguishment
claim in the region of £2mn.
We undertook a limited review of the claim and identified a number
of areas where the claim was unlikely to stand up to challenge.
Following a meeting between the parties and their professional
teams an all settlement was reached for £875,000.
In this case our fees amounted to approximately 1% of the initial
claim amount. Whilst it will always be possible to obtain cheaper
quotations we believe our expertise, experience and approach
enables our clients to achieve a high return on their investment.
Our experience of acting on behalf of acquiring bodies and
affected businesses is very useful in assisting clients during
negotiations and reaching a commercially sensible outcome.
Full speed ahead?
Red signal?
Find out how EY can keep you
on the right track if you are
implementing compulsory
purchase orders or
development consent orders.

7. 6Compulsory purchase orders Resolving disputes
Contact us
Fraud Investigation Dispute Services
Sara Fowler
Birmingham
T: + 44 121 535 2311
E: sfowler@uk.ey.com
Hannah Griffin
Birmingham
T: + 44 121 535 2948
E: hgriffin@uk.ey.com
Andrew Johnson
Birmingham
T: + 44 121 535 2833
E: ajohnson2@uk.ey.com
Lauren Jones
Birmingham
T: + 44 121 535 2712
E: ljones3@uk.ey.com
David Bell
Glasgow
T: + 44 141 226 7333
E: dbell1@uk.ey.com
Ruth Lawson
Leeds
T: + 44 113 236 4367
E: rlawson@uk.ey.com
Max Mitchell
London
T: + 44 20 7951 0185
E: mmitchell@uk.ey.com
Jack Clitheroe
Manchester
T: + 44 20 7951 8417
E: jclitheroe@uk.ey.com
What our clients say
“EY grasped the issues quickly, the team demonstrated
commerciality and practicality as well as responsiveness.
The team’s knowledge of CPO law and expertise was clear
and instrumental in helping us arrive at a settlement in
our favour.”
“The ability of the team to articulate the case and to
explain, in simple terms, the complexities of business
valuations exceeded my expectations in every respect.”
“Thank you for your efforts — your understanding of
the financial issues surrounding the Company was
first class combined with both the confidence that you
express, your expertise and the sensitivity you showed
in handling the difficult moments. As I have said before,
the quality of your written output is quite superb and I am
looking forward to working with you again following my
recent recommendation.”

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