Section 41 of the Land Acquisition and Compensation Act 1986 (‘the Act’) sets out the general principles on which compensation to claimants is based. These include:
Market value at the date of acquisition.
Any special value (pecuniary advantage which is incidental to ownership) to the claimant on the date of acquisition.
Any loss attributable to disturbance, meaning any pecuniary loss suffered as the natural, direct, and reasonable consequence of the service of a notice of intention to acquire. For example:
Relocation costs
Legal, valuation, and other professional expenses incurred by reason of the acquisition.
Solatium
The amount of compensation may be increased by up to 10% of the market value to compensate for intangible and non- pecuniary disadvantages resulting from the acquisition. Section 44 of the Act sets out the various factors to be taken into account, which include:
Any inconvenience likely to be suffered by reason of removal from the land.
Length of time the claimant has occupied the land.
Age and circumstances of the claimant.
The period of time the claimant was likely to have continued to occupy the land if it weren’t for the acquisition.
Section 45: Provision for Additional Compensation
If the compensation payable is insufficient to enable the purchase of a similar interest in land to be used as the principal place of residence, there is a provision for the claimant to receive a loan to enable the claimant to purchase comparable accommodation.
CGT Main Residence Exemption
The CGT Main Residence exemption can be applied by the claimant to ignore any capital gain or loss. The exemption for compulsory acquisitions of part of the main residence can apply to all the relevant CGT events, which is broader than the CGT events that the ordinary main residence exemption can apply to.
A partial CGT exemption may apply where the dwelling was:
Not used as a main residence during all of the relevant ownership period, or
Used for income-producing purposes.
There is also provision for compensation for an abandoned acquisition where the claimant has sustained any pecuniary loss or incurred expenses as a consequence of the service of a notice of intention to acquire and the acquisition does not proceed (section 46 Act)
There is no specific stamp duty exemption following from compulsory land acquisition; however, stamp duty could be a category of “disturbance” under section 41.