HS2: Government launches new property compensation plan

An earlier set of proposals had to be disregarded after the process used to determine them was ruled illegal following a Judicial Review brought by opponents of HS2.

Many of those affected by HS2 have been shocked by the extremely limited scope of the statutory compensation code.

Apart from those whose properties are needed for the construction and operation of the line, compensation claims for loss of value caused by the physical effects of the line – noise, vibration and pollution – cannot be made until one year after the line becomes operational.

However, given the scale and longevity of the HS2 project and

its impact on local property markets, the government knows that it has to offer much more to those affected.

At the same time, it cannot spread the compensation net too far as that would be unfair to tax payers and lead to an escalation in costs.

Although the latest package contains many of the government’s original measures, a number of new proposals – including a property bond and sale-and-rent-back option – are included.

A consultation on the proposed compensation package closes on 4 December 2013 and the government hopes to have the new measures in place by summer 2014.

The proposed compensation schemes are listed below, along with some comments from James Del Mar, Head of Knight Frank’s HS2 Property team.

"Until the results of the consultation are known it is impossible to advise those affected as to which scheme might be right for them."

James Del Mar

Properties within the Safeguarding Zone (generally 60m either side of the centre of the track)

Express Purchase

The government says the owners of properties that are wholly within the Safeguarding Zone, but not generally above a tunnel, will be able to serve a Blight Notice regardless of whether the property is needed for the construction or operation of the railway. They will also not need to “demonstrate reasonable endeavours” to sell their property.

Compensation will include the full un-blighted value of the property, reasonable moving costs and a Home Loss Payment (10% of the property’s value up to £47,000).

JDM: This slight loosening of the official Statutory Blight regulations will make it easier for those wishing to make a claim. For those with property partially within the Safeguarding Zone the government has said it will consider applications on a case-by-case basis.

Sale-and-rent-back scheme proposal

This would operate using a bespoke tenancy agreement and be available to those eligible to serve a Statutory Blight notice and whose homes need to be demolished to build and operate HS2. In addition to the un-blighted value of their homes, successful applicants would receive a home-loss payment and reasonable moving costs at the end of the tenancy.

However, the government says any applications would need to pass a “value for money test”. This, for example, might not be the case if a substantial sum of money was required to bring a home up to the minimum legal letting requirements; only for it to be demolished later.

The government is also considering whether to introduce an alternative scheme where anybody selling their home to the government can remain as a tenant under a standard Assured Shorthold Tenancy.

JDM: For some, the option to continue living in their houses may be attractive, especially if they won’t be needed for the construction of HS2 for a number of years. Others, however, may want to make a clean break and rebuild their lives elsewhere as quickly as possible. Some properties may not pass the value-for-money test.

Properties within a new Rural Support Zone (RSZ)

>The government is proposing to establish a new zone that would cover properties a certain distance from the centre of the proposed route, but not in the Safeguarding Zone. The RSZ would not apply within the urban area of Greater London or past Water Orton on the approach to Birmingham.

>There are two compensation options being considered for properties within the RSZ.

Voluntary Purchase Scheme option

>This will apply to qualifying residential, commercial and agricultural properties within 120m of the centre of the proposed track. Owners will be able to ask the government to purchase their property for its un-blighted value, but no other compensation, such as a home-loss payment will be paid. Properties partly within the RSZ will be considered on a case-by-case basis.

Property Bond option

>This will be available for eligible properties within a yet-to-be-defined distance from the centre of the track. A transferable, inflation-linked bond reflecting an agreed value would be issued to property owners. If they want to sell their property and redeem the bond, the government would guarantee to buy it back if the property fails to sell for a price equivalent to or more than the value of the bond.

JDM: Both of these options will offer some comfort to property owners within the RSZ. I know that there will be disappointment that they will not be available for properties further away, but given its guarantee that the budget for HS2 will not go beyond current estimates, the government will have been keen to limit its exposure to potential compensation claims. As stated, the government has not decided on the limit for the property bond option so the consultation is a good opportunity for people to state their case.

>Outside the Safeguarding and Rural Support Zones

Long-Term Hardship Scheme (LTHS)

This will apply to those who can prove they will suffer genuine hardship because they cannot sell their homes due to HS2 and do not qualify for any of the other schemes. The government will buy the homes of successful applicants for 100% of their un-blighted value. There is no limit on the distance homes can be from the proposed route of HS2, but applicants will need to publicly market their homes for at least six months to prove they cannot be sold for within 15% of their un-blighted value.

JDM: It is good news that the government is planning to replace the existing Exceptional Hardship Scheme and that there are no limits on the distance from the line for claims. However, to avoid costs spiralling out of control I expect the government to police this scheme quite strictly. Potential applicants will therefore need to put together a solid case before making a claim.