A Compulsory Purchase Order can not only be on served homeowners; it can also be served on a business property.
Business owners being served a Compulsory Purchase Order have the same rights as a homeowner in terms of being able to object and challenge the Compulsory Purchase Order, and to claim for compensation for costs and losses as a result of the Compulsory Purchase Order.
For businesses, however, there will be goodwill and numerous assets the business owner will be seeking compensation for. Thus, the negotiations during the compensation stage will be complex as there will bound to be disagreements in terms of what can be compensated and how much compensation the business will receive.
What Compensation Can I Claim For My Business?
You have a right to claim for compensation following a Compulsory Purchase Order under the principle of equivalence. The principle of equivalence holds that you should not be worse off or better off after the compulsory purchase order than you were before.
Your business will receive compensation to account for the expenses and losses as a result of the Compulsory Purchase Order.
Compensation from a Compulsory Purchase Order can be categorised under:
- The value of the land taken
- Severance and injurious affection – Compensation for the depreciation in the value of your land you retain where only part of your land holding is required
- Disturbance – the costs and losses incurred as a result of being disturbed from the occupation of the property, such as, loss of business and relocation costs
- Professional Fees – compensation for reasonable surveyor and solicitor fees
The Value Of The Land Taken
The value of the land is based on the price of the property if it were to be sold in an open market by a willing seller.
Severance And Injurious Affection
Compensation for severance and injurious affection amounts to the depreciation on the part of land you keep hold off when the acquiring authority only requires possession of part of your land, and the depreciation caused as a result of the public use of the proposed development .
In some circumstances, the rateable value of your business property can be used as a threshold and taken into consideration for making compensation claims for depreciation of the value of the business property caused by the physical effects, for example, noise, vibration, and dust, of the public development.
You can also claim compensation in terms of disturbance if your business has been interrupted and have been forced to relocate business to a different premise due to the Compulsory Purchase Order.
The compensation you can claim for relocation include but not limited to:
- Removal fees
- Legal fees from the acquisition of a replacement property
- Stamp duty arising from the acquisition of a replacement property
- Surveyor and architect fees arising from the acquisition of a replacement property
- Special adaptations to your replacement property
- Temporary loss of profit during the relocation
- Loss of goodwill following the relocation
- Depreciation in the value of stock
- Notification of new address to customers
- New stocks of stationary due to change of address
- Loss of customers and market share due to disruption in trading
This is not an exhaustive list as every business will have different circumstances. A businessowner needs to consider whether the losses incurred are a direct consequence from the Compulsory Purchase Order. If so, the business should raise this with the acquiring authority to claim for any loss incurred from the Compulsory Purchase Order.
When claiming compensation from a Compulsory Purchase Order, the onus is on the business to justify their claim for compensation. Hence, it is critical to keep a detailed record and keep evidence, such as receipts and invoices, of all losses sustained and costs incurred, as well as the time spent on relocating due to the Compulsory Purchase Order.
The acquiring authority may either compensate businesses relocating by either reimbursing the relocation costs incurred or by reimbursing through the cost of ‘extinguishment’, which assumes that the business is closed down and compensation is based on the value of the business.
The factors considered when extinguishing a business include:
- The value of the business’ goodwill
- Loss on forced sale of all assets such as stock, vehicles, and plant and machinery
- Redundancy costs
- Administrative costs of winding up the business
If the relocation costs of the business exceed the cost to ‘extinguish’ the business then the acquiring authority will seek to compensate businesses based on extinguishment. This is based on the assumption that no prudent businessman would incur relocation costs that exceeds the value of the business. However, this is only a prudent assumption and does not reflect a rule the acquiring authority has to follow.
Making informed Relocation Decisions
It is important to note that a business has a duty to mitigate losses and are only compensated on reasonable expenses and losses. The acquiring authority would not compensate for increased expenses or losses that have resulted from the actions of the business. For example, a business would need to plan their relocation in a timely manner so as to reduce business disruption and reduce potential loss of profit.
When claiming compensation from a Compulsory Purchase Order there are various elements to consider. It is advisable to seek legal advice before agreeing to any compensation offer by the acquiring authority to ensure you are fully aware of your rights and legal position.