CLA warn of negative interest rate on compulsory purchases

The Government is currently considering the results of a consultation on compulsory purchase, which finished in May: compulsory purchase orders will affect numerous people affected by HS2.

However, the CLA is concerned about the current system: they say that due to the August cut in Bank of England base rate of interest to 0.25%, there is currently a negative interest rate on payments to people who have been forced to sell their homes or businesses.

They say on their website

The nature of compulsory purchase means that in almost all cases a significant portion of the compensation is paid late. Under current legislation, these late payments attract an interest rate of 0.5% below the Bank of England base rate. There is no floor and so the interest rate effectively becomes negative.

CLA President Ross Murray said: “Owners of land and property affected by compulsory purchase have already suffered serious disruption to their businesses and their lives. Now those waiting for late compensation payments face the patently absurd and unfair prospect that the amount of compensation due reduces over time. The later the payment is made by the acquiring authority, the less compensation becomes due.

The CLA President has asked the Treasury to ensure new legislation to increase interest rates on late payments to well above the Bank of England base rate is in force before the next review on 30 September.

He said: “Earlier this year Ministers committed to fair rates of interest, but the changes have yet to be implemented. The base rate cut reinforces the urgency in effecting this important change.”