A Controversial Decision
Any decision later this week to scrap Phase 2 of the HS2 Rail scheme will undoubtedly cause a range of strong emotions.
There will be many business owners, and no doubt several councils, who will be outraged by the decision to pull the plug on the scheme after so many years of planning and investment, and in the case of Phase 2a of the scheme where many properties affected by that section of the project have already been compulsorily acquired.
There will also be a large number of people who, whilst having a huge sigh of relief that the scheme will not go ahead between Birmingham and Manchester, will be angered and upset by the years of mental and financial stress and anguish they have been put through while this section of the project has wended its way through the Parliamentary processes, the planning on the ground and in many cases where people’s homes, farms and other businesses have been compulsorily purchased from them.
To recap, Phase 2a of the scheme (between the West Midlands and Crewe) gained Royal Assent on 11 February 2021 and, since that time, various properties have been acquired along the section.
Phase 2b (the only remaining section north of Crewe) between Crewe and Manchester, has not yet gained Royal Assent but is currently estimated to be granted Royal Assent in December 2025. The Bill for this section was put before Parliament in January 2022 and has been working its way through the Parliamentary processes since. The House of Commons Select Committee is still currently sitting to hear petitions lodged by aggrieved Claimants seeking to minimise the damage and disruption to their properties and businesses.
However, whilst Phase 2b is in its relative infancy in Parliament, the properties affected along that section have been blighted already for a period of 10 years since the proposed route was first announced in 2013. Where Property owners affected by Phase 2b have met the criteria for statutory blight and/or HS2’s discretionary Need to Sell scheme, and couldn’t face the uncertainty of remaining in the location, they may have already sold their property to the Department for Transport (which they may now regret if the scheme is scrapped). There are plenty though who have not been eligible for the discretionary scheme or for statutory blight, who have been forced to remain and in many cases have been:
- unable to sell at full market value, if at all, and without the ability to seek compensation ahead of Royal Assent for the difference in value between the dented price achievable for their blighted property and the unblighted open market value;
- deterred from investing in those properties affected knowing that such expenditure will be wasted if the property is ultimately demolished to pave the way for the railway or used for a different purpose, and with no real certainty that they would be able to recoup all those invested costs from the Acquiring Authority; and
- in many cases holding off from restructuring their business and investing elsewhere out of harms way of the route.
And there they have remained, waiting between a rock and hard place for several years.
These factors may have caused financial losses for those affected by 2b, but those losses will not be recoverable if this section of the scheme does not proceed.
The cancellation of Phase 2b at this stage after so many years of blight will certainly also mean financial losses for those who took an agent’s advice and/or legal advice on the impact of the scheme on their Property or business, and on how to mitigate their losses, and also for those who took their objections to the Bill to the House of Commons Select Committee (where a petitioner’s costs are not recoverable save in exceptional circumstances).
Crichel Down Rules
In the case of those impacted by Phase 2a, where that section of the project has already gained Royal Assent and where many properties, farms, businesses have already been acquired, they will now face the prospect of being offered to purchase their property back from the Department for Transport, if of course they qualify for offer back, under what are known as the Crichel Down Rules. Where the land has been materially changed by HS2 during the course of the period that HS2 Ltd and its contractors have been in occupation or possession of it, there is a risk that the land acquired for what now may be an abandoned scheme will not be eligible for handing back and in which case, the Government will be able to either retain the Property or sell it to other third party purchasers.
It is also important to note that where land is deemed surplus to requirements under the Crichel Down Rules and offered back to the former landowner, that landowner has to buy the land back at the open market value as at the time of the buy back. So for instance, any property acquired from an affected owner say shortly after Royal Assent of Phase 2a in 2021, will have to buy back their property at 2023 or 2024 prices. Added to that, it is highly likely that the affected landowner will not have received full value for the land compulsorily acquired from them under the scheme, before they then need to buy it back.
Land and property owners who have been the subject of compulsory purchase may well have received an Advance Payment of compensation for land value, but that will be 90% of HS2 Ltd’s own assessment of the value of the land acquired, which can be significantly less than what other land and property agents assess the property value to be. Also, invariably that Advance Payment, which is supposed to be a 90% payment of all elements of claim, will not have included any amount for what is called Injurious Affection and Severance (the diminution in value of the property or land owner’s retained land.
So whilst scrapping this second section of HS2 will stop further acquisitions along the route, and halt the progress of the Bill for 2b, the impact of it will endure for there will be much unravelling to be done, and at further cost.
By Sarah Beer – Partner in Compulsory Purchase and Compensation
