Following the call for land valuation reform by Civitas, Shelter and the Centre for Progressive Capitalism, there has been much debate on the potential benefits of adopting an existing use values (EUVs) rather than ”hope value” model for use with CPOs.

david smithen tlt

By David Smithen, partner at TLT

A well-advised land-owner selling land (on a private treaty basis) without taking the unrealised hope value into account in the sale price would, of course, seek to impose some form of overage. This enables the selling party to share in the hope value upon its realisation at a future time.

Events such as the granting of a planning permission, the completion of a development or the onwards sale of the land would generally lead to the triggering of the overage. That represents a market-driven solution that respects the negotiating position of the vendor and the purchaser. Given how a public authority selling land needs to be seen to ”get value” for the sale, any such a public body will also always impose a form of overage on the buyer or developer of the land.

Thus, it makes sense for the mechanism for any land undergoing a CPO on an EUV basis (whereby the land-owner is not compensated for the hope value at point of sale), for there to be some form of overage payable in future to the land-owner upon the future realisation of that hope value – for example upon the development of the site.


“With the housing crisis not going away, the debate around land valuation needs to keep evolving”


The challenge lies in how to ensure the overage obligation is securely obtained. If a CPO-ing public authority agrees to make a future overage payment to the selling land-owner, then it risks the CPO indemnity it receives from the developer or purchaser being worthless should they refuse to pay or go bankrupt. Whilst this is an issue, it is workable one with a range of solutions possible, including escrow funds deposits, buy-back rights, insurance-backed payment bonds and direct deeds of covenant between developer and vendor land-owner secured by title restriction.

With the housing crisis not going away, the debate around land valuation needs to keep evolving so that all the problems of the current system and of proposals being put forward are taken into consideration. By toeing a line that continues to promote fairness and the protection of land-owners’ rights all the while encouraging housebuilding, we can move in the right direction.