Compulsory purchase compensation for property investors

12 June, 2012

Last year the Lands Chamber considered the recoverability from an acquiring authority of a bridging loan a property investor had used to purchase a new property.

The claimant property investor claimed £10,620 in respect of the bridging loan as well as other compensation following the compulsory acquisition of his property. The claimant had known he was going to lose his property (which was let to a tenant) and in a rising market had been concerned that it would be difficult to find an alternative property for the same price. In April 2006 he bought another property with the help of the bridging loan. The council subsequently took possession of his old property in April 2007.

The claimant argued that he was entitled to the cost of the loan as his main source of income was letting properties and he was not in a position to wait until the completion of one before searching for another investment property.

However the council argued successfully that the cost of the bridging loan was not recoverable under the relevant legislation which provides that where a person (who is not in occupation of a property) buys a replacement property he is only entitled to incidental expenses incurred within the period of a year from when the acquiring authority took possession of the land. In contrast the claimant had taken out the bridging loan over a year before this date. The Lands Chamber further explained that the claimant was not entitled to disturbance compensation either as he was not in occupation of the property and how he chose to invest his compensation money was his own decision. One of his options was simply to put the money in the bank. In conclusion the Lands Chamber described the claimant’s claim for the cost of the bridging loan as ‘wholly unmeritorious’.

A summary of the case can be obtained here: