Essentially, the CD Rules are a non-statutory government policy which requires certain bodies to offer to sell back surplus land to the former owner once the land has become surplus to requirements - if the land was originally acquired by, or under threat of, compulsion. The Crichel Down example was land that was compulsorily acquired during times of war for military or national wartime purposes. There are various requirements to be met before the CD Rules will apply, as well as a number of exceptions to the rules. The CD Rules are complicated and legal advice about their applicability should be sought before the disposal of any publicly owned land on the open market.
The recent case of Charlesworth v Crossrail Ltd in 2018, upheld the decision of Crossrail to dispose of compulsorily acquired surplus land on the open market - in circumstances where there was more than one person interested in repurchasing the land. In this particular case, the CD Rules had been supplemented by additional guidance that was introduced specifically for the Crossrail project (The C10 Land Disposal Policy). The C10 Policy states that if there are competing bids for a site from former owners, the land would be disposed of on the open market. In this case, Charlesworth argued that a developer (who was interested in repurchasing the land) did not have a qualifying interest in terms of the CD Rules - on the basis that it had acquired the land with a view to selling it on to the acquiring body. The court decided that, when it came to deciding whether the developer had a qualifying interest under the CD Rules, the motive for its original acquisition of the land was not relevant.
Although the acquiring body won this argument, the case still serves as a reminder to public bodies that they must ensure that they have correctly applied the CD Rules. Failure to do so could result in a judicial review of the basis of the body's decision making.
To whom do the rules apply?
The CD Rules apply to UK Government Departments (such as the Ministry of Defence, Driver and Vehicle Standards Agency), Scottish Government Directorates, Executive Agencies, Non Departmental Public Bodies and other organisations in Scotland that are subject to a power of direction by a Minister.
Local Authorities are also expected to follow the CD Rules and it is recommended that bodies in the private sector, to which public land holdings have been transferred, should likewise follow the CD Rules.
What do the CD Rules require?
Where the CD Rules apply, the relevant public body should, as a general principle, give the previous owner of the land (or their successors) an opportunity to repurchase any land that was previously acquired by, or under a threat of, compulsion. Due to the passage of time, the question of whether or not the public body originally acquired under a threat of compulsion might not be clearly documented. Nonetheless, a threat of compulsion should be presumed (even in the case of a voluntary sale) if the power to compulsorily acquire the land existed at the time. This presumption can be overturned if it can be shown that the land was offered for sale by the previous owners immediately before being acquired by the public body. Practice should be that, if there is any doubt, the public body should proceed as if the land was acquired under a threat of compulsion.
The price for the offer back to the former owner or their successors should be current market value. "Successor" here is any person who would (but for the compulsory acquisition) have acquired the land under the former owner's will or on their intestacy.
If the former owner (or their successor) is not interested in repurchasing the land, then (if applicable) the land should be offered to any former tenant of a long lease where the lease had more than 21 years left to run at the time the land was compulsorily acquired.
Only once the land has been offered back to the former owner and then (if applicable) the former tenant (and both offers have been declined) should the land be offered for sale on the open market.
There are various exceptions to the CD Rules. If any of the exceptions apply, there will be no obligation on the public body to offer the land back to the former owner.
Briefly, the exceptions are:
- It is decided, on specific Ministerial authority, that the land is needed by another department.
- It is decided, on specific Ministerial authority, that for reasons of public interest the land should be disposed of as soon as is practicable to a local authority or other body with compulsory purchase powers.
- The area of land is so small that its sale would not be commercially worthwhile.
- It would be mutually advantageous to the public body and an adjoining owner to effect minor adjustments in boundaries through an exchange of land.
- It would be inconsistent with the purpose of the original acquisition to offer the land back to the former owner.
- There is a risk that a fragmented sale would realise substantially less than the best price that could reasonably be obtained for the site as a whole.
- The market value of land is so uncertain that offering the land back to the former owner would be insufficient to safeguard the public purse and where competitive sale is advised by appointed valuer and specifically agreed by the responsible Minister
Time Limit exceptions
In addition to the above exceptions, the CD Rules will not apply if any of the following time periods exceptions are satisfied:
- Non-agricultural land being disposed of more than 25 years after the date of acquisition.
- Agricultural land that was 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 acquisition.
Material Change in the character of the land exception
In terms of Rule 10 of the CD Rules, there is also no obligation to offer the land back to the former owner where there has been a material change in the character of the land. This is often the exception on which a public body will seek to rely.
Whether there has been a material change in character is a question of fact and degree that will need to be carefully considered on a case by case basis. It has been established that the erection of buildings, the afforestation of open land or substantial works to an existing building might constitute a material change in character.
If only part of the land has materially changed in character, then the offer back obligation will only apply to that part that has not changed - subject to the general exception relating to a fragmented sale realising substantially less than the best price that can reasonably be obtained for the site as a whole.
If the CD Rules apply, the public body must offer the land back to the former owner before offering it for sale on the open market. Given that any decision of the disposing public body in relation to the application of the CD Rules could be challenged by way of judicial review, the CD Rules must be carefully considered before any disposal is even contemplated. If there is any doubt as to whether the CD Rules are relevant, professional advice should be sought.