Advance Payment of Compensation UK — CPO 90% Advance, Interest, and Home Loss

The Right to Advance Payment — s.52 Compulsory Purchase Act 1965

S.52 Compulsory Purchase Act 1965 (as amended by s.20 Planning and Compensation Act 1991 and s.67 Housing and Regeneration Act 2008) gives a claimant the right to receive an advance payment of 90% of the acquiring authority's estimate of the compensation that will ultimately be payable. Key features of the advance payment regime: (i) Who can claim: any claimant who has a claim for compensation in respect of the compulsory acquisition of an interest in land — landowners, freehold owners, long leaseholders, assured shorthold tenants with a claim for disturbance, and business tenants. The right applies to both the owner of the land and to any person with a lesser interest (such as a tenant) who has a claim for disturbance and other non-land compensation; (ii) When the right arises: the right to advance payment arises from the date of entry onto the land by the acquiring authority (the date the authority takes physical possession, following a valid notice of entry or general vesting declaration), or the date of the general vesting declaration (whichever is earlier). For a general vesting declaration, the interest in the land vests in the authority on the vesting date and the right to advance payment arises at that point; (iii) How to claim: the claimant must make a request in writing to the acquiring authority for an advance payment; the authority has 3 months from the date of the written request (or 3 months from the date of entry, if later) to make the payment; (iv) The 90% calculation: the advance payment is 90% of the acquiring authority's own estimate of the compensation payable. The authority makes a reasonable estimate; this is not the amount the claimant believes they are entitled to — the authority typically makes a conservative estimate at the lower end of a likely range. The balance (up to 100% of the final assessed compensation, less the advance payment already made) is paid when the full compensation is agreed or determined; (v) No admission of liability: an advance payment is not an admission by the authority of the full compensation amount — it is merely a payment on account; the final compensation is determined by agreement or (if not agreed) by the Upper Tribunal (Lands Chamber).

• S.52 CPA 1965 right: 90% of the acquiring authority's estimate of compensation, payable within 3 months of the written request for advance payment (or 3 months from date of entry, if later)
• Who can claim: landowners, freehold owners, long leaseholders, assured shorthold tenants with a disturbance claim, and business tenants with a right to compensation all have the right to claim advance payment
• When the right arises: from the date of entry (physical possession by the authority) or the general vesting declaration vesting date — whichever is earlier
• 90% of authority's estimate: the advance payment is 90% of the authority's own (often conservative) estimate — not 90% of the claimant's estimate; the balance is paid when full compensation is agreed or determined by the Upper Tribunal
• No admission: an advance payment is not an admission of liability for the full amount; the authority can still dispute the claimant's full compensation claim before the Upper Tribunal

Interest on Late Payment — Preventing the Acquiring Authority from Delaying

The advance payment regime is underpinned by interest provisions that incentivise the acquiring authority to pay compensation promptly. If the authority fails to pay the advance payment within the 3-month period, or if the final compensation is not paid within the statutory period, interest accrues at the statutory rate. The key interest provisions: (i) Interest on advance payment: if the acquiring authority fails to make the advance payment within 3 months of the written request (or 3 months from the date of entry), interest accrues on the unpaid amount from the end of the 3-month period at the statutory rate under the Land Compensation Act 1961 s.32A (currently 8% — the rate is set by Treasury Order); (ii) Interest on the full compensation: in addition to interest on the advance payment, interest also accrues on the full compensation (less any advance payment made) from the date of entry (or the general vesting declaration date) until the date of final payment. The statutory interest rate is the same — currently 8%. The acquiring authority cannot avoid interest by delaying the compensation process; (iii) Practical impact: a claimant whose property is taken in 2024 and whose full compensation is not agreed until 2027 will receive three years' interest at 8% on the unpaid balance — a very significant sum on a high-value property. Landowners should claim the advance payment as quickly as possible after entry to start the interest clock and to obtain immediate financial relief; (iv) Interest in Scotland: Scotland has its own compulsory purchase interest regime under the Land Compensation (Scotland) Act 1963; the same principles apply but the specific provisions differ. The interest rate in Scotland is also prescribed by statutory order.

• 8% statutory interest rate: interest accrues at 8% per annum on unpaid advance payments (after the 3-month deadline) and on the full compensation from the date of entry until payment
• Interest from date of entry: even where the advance payment is made promptly, interest on the outstanding balance (compensation less advance payment) runs from the date of entry until final payment
• Incentive for prompt payment: the 8% interest rate creates a significant financial incentive for acquiring authorities to pay compensation promptly; it also provides the claimant with meaningful compensation for the delay in receiving their full entitlement
• Claim promptly: to start the 3-month payment clock, claimants should make their advance payment request in writing as soon as the authority enters the land; early action maximises the period over which interest accrues on any default
• Scotland: interest provisions in Scotland are governed by the Land Compensation (Scotland) Act 1963; the same general principles apply but the specific statutory provisions differ

Home Loss Payments, Basic Loss Payments, and Disturbance

In addition to the advance payment of compensation and the full land value compensation, claimants in compulsory purchase proceedings may be entitled to additional statutory payments: (1) Home loss payment (Land Compensation Act 1973 ss.29–32): a home loss payment is payable to any person who is displaced from a dwelling as a result of compulsory acquisition. The claimant must have been living in the property as their only or main residence for at least 1 year immediately before the displacement. The home loss payment is a fixed percentage of the open market value of the claimant's interest in the property — currently 10% of the market value (subject to a minimum of £7,100 and a maximum of £71,000; 2024 rates, adjusted annually by inflation). For a claimant whose interest is worth £200,000, the home loss payment would be £20,000 (10%). Home loss payments are payable in addition to the full compensation for the land value; (2) Basic loss payment (LCA 1973 ss.33A–33K, inserted by Planning and Compensation Act 1991): payable to owners and occupiers who are not owner-occupiers displaced from their home; payable to freehold owners and leaseholders (where the lease has at least a year to run at the date of displacement). The basic loss payment is 2.5% of the value of the interest acquired (for freeholders) or 2.5% of the value of the leasehold interest (for leaseholders). Maximum £75,000; (3) Disturbance payment (LCA 1973 s.37): payable to any person who moves from land as a result of compulsory acquisition, even where they have no legal interest in the land (e.g. a licensee; a statutory tenant; a person in occupation without legal title). Disturbance payments cover the reasonable costs of moving — removal costs, temporary accommodation, increased costs of alternative premises. There is no fixed cap but the payments must be reasonable and directly caused by the displacement.

• Home loss payment: 10% of the open market value of the claimant's interest (min £7,100; max £71,000; 2024 rates); payable to any person displaced from their only or main residence as a result of compulsory acquisition; must have been in residence for at least 1 year
• Basic loss payment: 2.5% of the value of the interest acquired for freehold owners and long leaseholders (max £75,000); distinct from and in addition to the full compensation for land value
• Disturbance payment (s.37 LCA 1973): payable to persons without a legal interest in the land who are displaced — e.g. tenants on short leases, licensees, statutory tenants; covers reasonable costs of moving, temporary accommodation, and increased costs of alternative premises
• Accumulation: a displaced owner-occupier may be entitled to the full land value compensation + advance payment + interest + home loss payment + disturbance costs — all of these entitlements must be claimed
• Residential tenants: a residential tenant displaced by compulsory acquisition may be entitled to a home loss payment (if in occupation as only/main residence for 1 year), a disturbance payment (removal costs; temporary accommodation; higher rent at alternative property), and a basic loss payment (if the tenancy has at least a year to run)

Interaction with Blight Notice and the Overall Compensation Process

The advance payment regime sits within the wider compulsory purchase and compensation process. Understanding how the advance payment interacts with blight notices and with the Upper Tribunal determination of compensation is important for landlords and property owners affected by compulsory purchase. Blight notice: a blight notice is a mechanism by which a qualifying owner-occupier can require the acquiring authority to purchase the property compulsorily before the acquisition would otherwise take place — effectively the owner initiates the purchase rather than waiting for the authority to acquire. Where a blight notice has been served and accepted (or upheld on appeal), the subsequent acquisition proceeds under the compulsory purchase regime and the advance payment and home loss payment rights apply. The advance payment is claimed after the authority enters the land (or the general vesting date under a GVD) — even where the acquisition was initiated by a blight notice. Upper Tribunal (Lands Chamber): the Upper Tribunal determines disputes about the amount of compensation payable in compulsory purchase cases. The tribunal hears expert valuation evidence from both sides (claimant's and authority's surveyors) and determines the compensation. Proceedings before the Upper Tribunal can be lengthy and expensive — specialist compulsory purchase solicitors and surveyors should be instructed at the outset. The advance payment provides financial relief during the Upper Tribunal process; interest accrues on any unpaid balance throughout. Negotiation: most compulsory purchase compensation claims are settled by negotiation between the claimant's surveyor and the authority's surveyor before Upper Tribunal proceedings are needed. The authority has an incentive to settle promptly (to stop interest accruing on the unpaid balance); the claimant has an incentive to achieve the best possible final compensation while also receiving the advance payment.

• Blight notice: where an owner-occupier initiates the compulsory purchase via a blight notice, the advance payment and home loss payment rights still apply once the authority enters or the GVD vests the land
• Upper Tribunal (Lands Chamber): determines disputed compensation; specialist compulsory purchase solicitors and RICS-registered compulsory purchase surveyors are essential; the advance payment provides financial support during the proceedings
• Interest throughout: interest accrues at 8% on the unpaid compensation balance throughout the Upper Tribunal proceedings; the authority cannot avoid interest by prolonging the dispute
• Negotiated settlement: most compulsory purchase compensation claims are settled by negotiation before Upper Tribunal; the authority has an incentive to settle promptly to stop interest accruing; instruct a specialist compulsory purchase surveyor as early as possible
• Scotland: governed by the Land Compensation (Scotland) Act 1963 and the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947; same advance payment and home loss payment principles apply with Scottish-specific provisions

Frequently asked questions