Planning and Compulsory Purchase Act 2004

104 Compensation: advance payments to mortgagees

(1) The Land Compensation Act 1973 is amended as follows.

(2) In section 52 (right to advance payment of compensation)—

(a) after subsection (1) there are inserted the following subsections—

“(1A) If the acquiring authority have taken possession of part of the land—

(a) specified in a notice of entry, or

(b) in respect of which a payment into court has been made,

the compensation mentioned in subsection (1) is the compensation payable for the compulsory acquisition of the interest in the whole of the land.

(1B) Notice of entry and payment into court must be construed in accordance with section 5A of the Land Compensation Act 1961.”,

(b) for subsection (6) there is substituted the following subsection—

“(6) If the land is subject to a mortgage sections 52ZA and 52ZB apply.”

(3) After section 52 of that Act there are inserted the following sections—

“52ZA Advance payments: land subject to mortgage

(1) This section applies if—

(a) an acquiring authority take possession of land,

(b) a request is made in accordance with section 52(2) for an advance payment, and

(c) the land is subject to a mortgage the principal of which does not exceed 90% of the relevant amount.

(2) The advance payment made to the claimant must be reduced by the amount the acquiring authority think will be required by them to secure the release of the interest of the mortgagee (or all the mortgagees if there is more than one).

(3) The acquiring authority must pay to the mortgagee the amount the acquiring authority think will be required by them to secure the release of the mortgagee’s interest, if—

(a) the claimant so requests, and

(b) the mortgagee consents to the making of the payment.

(4) If there is more than one mortgagee—

(a) subsection (3) applies to each mortgagee individually, but

(b) payment must not be made to a mortgagee before the interest of each mortgagee whose interest has priority to his interest is released.

(5) The amount of the advance payment made to the claimant under section 52 and the amount of the payments made to mortgagees under this section must not in aggregate exceed 90% of the relevant amount.

(6) Subsection (7) applies if—

(a) the acquiring authority estimated the compensation,

(b) it appears to the acquiring authority that their estimate was too low and they revise the estimate, and

(c) a request is made by the claimant in accordance with section 52(2).

(7) The provisions of subsections (2) to (5) must be re-applied on the basis of the revised estimate.

52ZB Advance payments: land subject to mortgage exceeding 90% threshold

(1) This section applies if—

(a) an acquiring authority take possession of land,

(b) a request is made in accordance with section 52(2) for an advance payment, and

(c) the land is subject to a mortgage the principal of which exceeds 90% of the relevant amount.

(2) No advance payment is to be made to the claimant.

(3) But the acquiring authority must pay to the mortgagee the amount found under subsection (4), if—

(a) the claimant so requests, and

(b) the mortgagee consents to the making of the payment.

(4) The amount is whichever is the lesser of—

(a) 90% of the value of the land;

(b) the principal of the mortgagee’s mortgage.

(5) The value of the land is the value—

(a) agreed by the claimant and the acquiring authority, or (failing such agreement)

(b) estimated by the acquiring authority.

(6) For the purposes of subsection (5) the value of the land is to be calculated in accordance with rule 2 of section 5 of the Land Compensation Act 1961 (market value), whether or not compensation is or is likely to be assessed in due course in accordance with rule 5 of that section (equivalent re-instatement).

(7) If there is more than one mortgagee, payment must not be made to a mortgagee until the interest of each mortgagee whose interest has priority to his interest is released.

(8) But the total payments under subsection (3) must not in any event exceed 90% of the value of the land.

(9) Subsection (10) applies if—

(a) the acquiring authority estimated the compensation,

(b) it appears to the acquiring authority that their estimate was too low and they revise the estimate,

(c) the condition in section 52ZA(1)(b) would have been satisfied if the revised estimate had been used instead of their estimate, and

(d) a request is made by the claimant in accordance with section 52(2).

(10) The provisions of section 52ZA(2) to (5) must be applied on the basis of the revised estimate.

(11) If—

(a) the acquiring authority estimated the value of the land,

(b) it appears to the acquiring authority that their estimate was too low and they revise the estimate, and

(c) a request is made by the claimant in writing,

any balance found to be due to a mortgagee on the basis of the revised estimate is payable in accordance with this section.

52ZC Land subject to mortgage: supplementary

(1) This section applies for the purposes of sections 52ZA and 52ZB.

(2) The claimant must provide the acquiring authority with such information as they may require to enable them to give effect to those sections.

(3) A request under section 52ZA(3) or 52ZB(3) must be made in writing and must be accompanied by the written consent of the mortgagee.

(4) Subsections (4) and (8) to (9) of section 52 apply to a payment which may be or is made under section 52ZA or 52ZB as they apply to a payment which may be or is made under section 52.

(5) The relevant amount is the amount of the compensation agreed or estimated as mentioned in section 52(3).

(6) If the land is subject to more than one mortgage, the reference in sections 52ZA(1)(c) and 52ZB(1)(c) to the principal is to the aggregate of the principals of all of the mortgagees.

(7) A payment made to a mortgagee under section 52ZA or 52ZB—

(a) must be applied by the mortgagee in or towards the discharge of the principal, interest and costs and any other money due under the mortgage;

(b) must be taken to be a payment on account of compensation and treated for the purposes of section 52(10) as if it were an advance payment made under section 52;

(c) must be taken, with effect from the date of the payment, to reduce by the amount of the payment the amount in respect of which interest accrues for the purposes of section 11(1) of the Compulsory Purchase Act 1965, any bond under Schedule 3 to that Act or section 85 of the Lands Clauses Compensation Act 1845;

(d) must be taken into account for the purposes of determining any payments (or payments into court) which may be made for the purposes of sections 14 to 16 of the Compulsory Purchase Act 1965.

(8) If the amount, or aggregate amount, of any payments under—

(a) sections 52 and 52ZA, or

(b) section 52ZB,

on the basis of the acquiring authority’s estimate of the compensation exceed the compensation as finally determined or agreed, the excess must be repaid by the claimant.

(9) No payment must be made to a mortgagee—

(a) if any of the circumstances mentioned in subsection (10) applies, or

(b) if the compulsory acquisition is only of a right over land.

(10) The circumstances are—

(a) payment has been made under section 14(2) of the Compulsory Purchase Act 1965;

(b) a notice under section 14(3) of that Act has been given;

(c) there is an agreement under section 15(1) or 16(1) of that Act or the matter has been referred to the Lands Tribunal under that section.

(11) The claimant in relation to settled land for the purposes of the Settled Land Act 1925 is the persons entitled to give a discharge for capital money.”

(4) In section 52A (right to interest where advance payment made) for subsection (2) there is substituted—

“(2) If the authority make a payment under section 52(1) to any person on account of the compensation—

(a) they must at the same time make a payment to that person of accrued interest, for the period beginning with the date of entry, on the amount of the compensation agreed or estimated under section 52(3) (the total amount), and

(b) the difference between the paid amount and the total amount is an unpaid balance for the purposes of this section.

(2A) The paid amount is—

(a) the amount of the payment under section 52(1), or

(b) if the land is subject to a mortgage, the aggregate of that amount and the amount of any payment made under section 52ZA(3).”