Compensation

Compensation and the Constitution

The Constitution protects property rights.  Generally, compensation is required to be paid for the taking by governmental authorities of property rights.  The extent to which compensation is required by the Constitution is a matter of controversy. Compensation is generally payable for direct takings of property.  Where, however, a property is devalued due to zoning or the indirect effect of Government action, compensation is not generally payable.

Formerly, the Planning Acts provided a much more generous scheme of compensation, where the effect of planning permission conditions or refusal was to restrict significantly, the permitted use of a property.  This led to severe criticism and in cases where Councils had to pay out a significant proportion of their annual budgets to developers, consequent on the refusal of permission.  Substantial reforms were enacted in 1990, which restricted the availability of compensation for refusals of planning permission.

Where land is compulsorily acquired by a planning authority, compensation will be payable under general principles as there is a direct taking.  Where the use of a property is restricted, compensation may be payable in certain circumstances. Where measures significantly impact on the land, such as by the creation of a public right of way is required, compensation is likely to necessary. Where, under planning legislation, authorised developments are required to be removed, compensation is to be paid.

Availability of Compensation

A right of compensation arises in certain limited cases, where planning permission is refused on appeal by An Bord Pleanala. Compensation is not available in the case of a refusal by the planning authority only.  In theory, the default position is that compensation is payable.  However, in practice, the overwhelming majority of refusals will not attract compensation

The right of compensation is severely restricted where the refusal is based on “non-compensatable” reasons.  They are listed in the legislation.  Similarly, in the case of conditions which restrict development, compensation is excluded if they fall into certain categories, which are set out in the legislation. When the planning authority refuses planning permission on non-compensatable grounds, it must act in good faith.  It may not refuse the application for a reason which is a non-compensatable reason, but which is not the true reason for refusal.

Compensation when paid,  may be recovered where land is later significantly developed.  This includes residential, commercial and industrial development.

Exclusion of Compensation I

Compensation is excluded where development is premature by reason of deficiencies in services or infrastructure. This includes insufficient capacity in water, sewerage and roads  The proposal may be premature by reason of the order of priority of development, provided by the Development Plan or local plans or proposed local area plans.

A number of bases of non-payment of compensation are based on possible nuisance to or adverse effect on adjoining land or on land in the vicinity.  This includes the bases that the traffic development may endanger public safety by reason of traffic, may cause air pollution or water pollution, may injuriously affect amenities or depreciate the value of property in the vicinity.

Compensation is excluded in respect of an application for development in contravention of the zoning of the lands concerned in the Development Plan. The refusal of compensation for zoning reasons does not permit compensation.  There is no presumption that lands should stay zoned in any particular way.

The landowner takes the risk that the land may be de-zoned or varied on making of the Development Plan.  There is an exception where the de-zoning or variation occurs during the current development plan i.e. by a rezoning). The application for planning permission must be made prior to the change in zoning. Compensation is not paid where the refusal of permission is due to change in the zoning due to a new Development Plan.

Exclusion of Compensation II

Compensation is excluded where a development would endanger public safety, interfere with aircraft navigation or cause pollution or the area is in risk of flooding. Compensation is not available where the development would interfere with the landscape or with views.  Compensation is not available where the refusal is based on interference with the character of the landscape or view or of special amenity value or of natural interest or beauty, which it is necessary to preserve.

Compensation is excluded where a structure or an addition to a structure would injure amenities, depreciate the value of the property in the vicinity, or where development is in an area where a special amenity area order is in force.

Compensation may arise where onerous conditions are imposed.  The legislation lists reasons which are non-compensatable, notwithstanding that they may be onerous.  Social and affordable housing conditions, as well as a range of other conditions, are not compensatable. Compensation is not payable where the refusal or onerous conditions arise from special planning designations such as preservation orders.

Compensation does not apply where permission is refused for retention of unauthorised works or breach of conditions. No compensation is payable in respect of the use of land or structures contrary to law, or which are detrimental to public health, safety, or the environment.  There is also disregarded, the value of property, attributable to any unauthorised structure or unauthorised use. Accordingly,  compensation is restricted even though the use or works may be immune from enforcement by reason of non-enforcement for the requisite period

Where Generally Payable

Where structures which have been destroyed by fire or an equivalent risk, compensation is payable for refusal of permission to rebuild, save in the case of certain unauthorised developments and breaches of conditions.  This applies to structures which are demolished or destroyed by fire.  The new building must substantially replace the other, in order to attract compensation.

Where a planning permission is revoked under the Planning Act, the planning authority is generally required to pay compensation in respect or expenditure incurred in undertaking the abortive works and certain preparatory works.  It is deemed a refusal for the purpose of compensation.

Where persons are required to undertake works to land for the restoration, demolition, removal, alteration or replacement of a structure or the discontinuation of use, by reason of the special planning control scheme, compensation may be paid.  Compensation is payable where the applicant’s interest in the land has been reduced in value or where he has suffered damage by disturbance as a result of complying with the special planning control notice.  The planning authority is obliged to pay the expenses incurred in taking steps to comply with such notices.  This does not apply to steps required in relation to unauthorised development.

A claim may be made to the local authority on the basis that the action of the authority in placing, renewing, or removing of cables, wires, pipelines, brackets, fixtures, or fixing any notice has affected the value of the interest of any person in the land or structure. Where the value of the interest has been reduced or where he has suffered damage by being disturbed in his enjoyment of the property, that person affected is entitled to compensation in the amount of the reduction of the value.  There are similar provisions where public rights of way are created.

Social and Affordable Housing Conditions

Historically, it was assumed that where land was required to be transferred for the purpose of social and affordable housing, compensation might be required. When general provision for social and affordable planning condition requirements were introduced in 2000, the Bill was referred to the Supreme Court by the President.  A limited form of compensation was allowed where land had been purchased before the announcement of the proposals in 1999, provision.

The Supreme Court took the view that restrictions on land imposed by planning permission, do not generally require compensation under the property protection provisions of the Constitution.  Under the Bill, developers were required to cede part of the land (or its value) in return for the enhancement arising from the planning permission, in order to meet a desirable social objective, the provision of social housing. The Supreme Court emphasised planning permission as an enhancement of land value, rather than an interference with rights and upheld the Bill as constitutional.

Basis for Compensation

The claim for compensation must be made within six months of the Bord Pleanala decision on the matter.  It is made in writing to the planning authority (the relevant Council), in accordance with procedures set out in regulations. Compensation is based on the diminution in value of the applicant’s interest in the land.  It is not lawful to assign or purport to assign rights to compensation. In default of agreement, the matter is referred to a property arbitrator, under general compulsory acquisition legislation.

The reduction in value of the land between the open market value prior to the decision and subsequent open market value provides the basis for calculation of compensation. Regard is to be had to a range of other considerations and matters, including

• contributions which the planning authority might have required as a condition of development;
• restriction on the development which might have been imposed in the permission without requiring a right of compensation;
• the fact that the exempted development might be carried out in the land;
• the open market value in the vicinity

There is to be disregarded any part of the value of the land, which is due to grants or subsidies arising from public monies, or tax allowances which might benefit the land. The special suitability or adaptability of the land for a purpose which can only be applied in pursuance of statutory powers or where there is no market other than for special needs for a particular purchaser are also disregarded.  Bona fide offers for the purchase of the property may be taken into account by the arbitrator.

No account is taken into the depreciation or increase in value attributable to land or land in the vicinity being reserved for a particular purpose under the Development Plan.  This is intended as being in aid of the applicant, in that designations for the benefit of the public generally are disregarded.

Compensation Issues and Alternative for Council

The existence of proposals for the development of land, the probability of lands being subject to a scheme of development taken by a statutory body is not taken into account.

The property assessor may have regard to the declared values of the land in tax returns. In appraising the prior value of land, account is taken of the reasonable possibilities for development.  This includes the likelihood of obtaining planning permission under the Development Plan and conditions that might reasonably be imposed, including non-compensatable conditions.

A planning authority, having refused a planning application may serve a notice specifying that the land is capable of other specified development for which permission ought to be granted.  It may specify that notwithstanding refusal for this proposal applied for, planning permission would in principle be available for an alternative development.

The development must be residential, industrial or commercial.  The notice must be served within 12 weeks of the application for compensation.  It continues in force for five years.  Compensation is precluded in this case.