Real Estate Refresh Crichel Down Rules – Part 1

What are the Rules?

The Crichel Down rules (“the Rules”) regulate the disposal of government land that has become surplus to requirements and has been identified for disposal by the government.

The Rules only relate to land that was acquired either:

• by or under the threat of compulsory purchase.

• under the statutory blight provisions.

Legal Status of the Rules

Whilst the Rules are non-statutory and are stated to be for guidance only, they are mandatory for government departments and NHS organisations.

The courts have confirmed that it is important that organisations adhere to the Rules. They also assert that former owners of affected land have a legitimate expectation that the Rules will be applied.

On this basis, wherever affected land is disposed of, it is therefore important to consider the application of the Rules and to assess the risk of challenge by former owners on judicial review or human rights grounds. Commercially, the risk of any such challenge is that it could give rise to delay and uncertainty to the seller and any prospective buyer.

When do the Rules apply?

The Rules will apply to the disposal of surplus government land where the land was acquired in the following circumstances:

• under a compulsory purchase order, or under a voluntary sale if power to compulsory acquire the land existed at that time.

• under the statutory blight provisions.

• under a purchase notice.

The Rules

The general rule is that if government land is surplus to requirements and is to be disposed of, it must first be offered to the former owners of the land at the current market value, provided that the land’s character has not materially changed since acquisition.

There is no guidance as to what acts or actions may indicate that a property is surplus to requirements.

A disposal includes all freehold disposals and the grant or assignment of a lease of more than seven years.

The former owners will be any of the following:

• Immediate former freeholder or its successor.

• Immediate former leaseholder (where the land is subject to a long lease and more than 21 years of the term remain at the date of the disposal) or its successor.

• Sitting tenant of a dwelling.

The term Current market value means the best price reasonably obtainable for the property as determined by the disposing department’s professionally qualified valuer.

This will include any special value, for example any additional amount expected from a buyer with a special interest such as a former owner.

The price will also take account of any planning permission that has enhanced the value of the site.

Material change in character of the land since acquisition by the department will include:

• buildings on the land have been constructed or demolished.

• services have been laid on, under or over the property.

• substantial works to a building have altered its character (such as a large extension).

The presence of temporary buildings will not necessarily be a material change.

There is no guidance as to what constitutes a material change, but any disposing body should consider the cost of restoring the land to its original use as part of its assessment of material change.

Where there has been a material change to the character of the land, the obligation to offer the land back to the former owner will not apply. If part of the land has materially changed the part that has not changed should still be offered back.

Exceptions to the Rules

There are a number of exceptions to the Rules, including:

• the disposal is for the purposes of PFI/ PPP projects.

• the land is to be transferred to a body that has taken over some or all of the functions and obligations of the disposing body.

• land has been acquired by agreement when power to acquire the land compulsorily existed, but the land had been publicly or privately offered for sale immediately before negotiations for compulsory acquisition started.

• land has been acquired by agreement in advance of any liability under the statutory blight provisions.

Exceptions to the obligation to offer land back to former owners

Where the Rules do apply, there are a number of exceptions to the obligation to offer land back to the former owners relating to:

1. Types of disposal

The following types of disposal are excepted from obligation to offer land back to the former owners:

• where land is not surplus to government requirements as decided on specific ministerial authority.

• following specific ministerial authority it is decided that for reasons of public interest the land should be disposed of to a local authority or other body with compulsory purchase powers.

• where the area of land is so small that its sale would mean the administrative costs involved in offering the land back are out of proportion to the value of the land.

• where the disposal is beneficial to both the disposing department and a neighbouring landowner to make minor boundary adjustments by exchanging land.

• where the disposal would be inconsistent with the purpose of the original acquisition by the government to offer the land back for example property bought by a local authority for redevelopment that are sold to a private development partner.

• where a disposal is in respect of either of the following and there is a risk of a fragmented sale realising substantially less than the market value for the site as a whole:

• a site for development that has not materially changed and which comprises two or more previous land holdings (unless a consortium of former owners wants to buy the land);
• a site that consists partly of land which has materially changed in character and part which has not.

• where the market value of the land is so uncertain that claw back provisions would be insufficient to safeguard the public purse.

2. Types of land

The obligation to offer land back to the former owners does not apply to the following types of land:

• agricultural land acquired before 1 January 1935.

• agricultural land acquired on or after 30 October 1992, which becomes surplus and available for disposal more than 25 years after the date of the conveyance, transfer or vesting declaration.

• non-agricultural land, which becomes surplus and available for disposal more than 25 years after the date of the conveyance, transfer or vesting declaration.

3. Material changes in character of land

As covered above, land where the character has materially changed since being acquired by the disposing body.