Guide

Injurious affection: maximising asset value through the use of statutory powers

Gateley Hamer

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In this episode, Jonathan O'Shea, a director in our utilities team, provides insight into how businesses can use statutory powers – in this case, injurious affection to maximise their asset value.

In this episode:

  • We define injurious affection and explain why now is an appropriate time to consider making a claim.
  • We outline who can make an injurious affection claim.
  • We define "wayleaves" and how a landowner will know if there is a “wayleave”.
  • An overview of the process of an injurious affection claim.
  • An explanation of how landowners would typically make a claim. 

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This episode is part of our straight talking business success podcast series. Learn more about the series and what we cover. This podcast is available on iTunes, Spotify and Soundcloud.

Read the transcript:

Host: Welcome to Straight Talking Business Success, your guide to growing and developing your business.

Hello. The focus of this podcast today is to consider how businesses can use statutory powers, in this case, injurious affection, to maximize their asset volume.

I'm joined by Jonathan O'Shea, a technical director here at Gateley. Jonathan is a qualified chartered surveyor with 20 years' experience. He assists landowners and developers with utility diversions and, where appropriate, injurious affection claims against electricity companies and distribution network operators nationwide.

Firstly, Jonathan, would you mind explaining to us what this is all about, and what injurious affection actually is?

Jonathan O'Shea: Well, Martha, in short, when developing a site, developers can claim compensation for utilities operators like pylons and cables, and these affect the sites that they're going to build. They can claim for this from the utilities companies that own the operators, and it's based on a loss in development value.

Now, in essence, injurious affection is exactly the same thing. The difference is that it's a retrospective claim, and it's one that professional landlords of all types can undertake. So it's not based on the utilities on a site, which is being built out. It's a site which already has existing assets property on it and isn't necessarily under development.

Host: Okay. Thanks for clearing that up, Jonathan. Why would you say now is an appropriate time to consider an injurious affection claim?

Jonathan O'Shea: Well, injurious affection is an exercise in maximizing asset value and, as such, generating a capital receipt. For many landlords at the minute where rents may have fallen as a result of COVID-19, this could be a really useful cash injection into their business.

Host: Okay, great. Does this apply to all landlords?

Jonathan O'Shea: It does, yes. All professional landlords, so both private and public sector landlords, including registered providers, housing associations, multiple property residential landlords. All of them have the opportunity in some instances to claim significant capital payments from electricity supply companies, and that's either the national grid or the distribution network operators, such as UKPN or Western Power, et cetera.

Host: Why would they be able to make a compensation claim? Surely if the electricity line is already there, nothing can be done.

Jonathan O'Shea: Fair comment and actually quite a common misconception. Without going into too much technical detail, the Electricity Act 1989 allows landowners to claim against the electricity providers for the impact of their equipment on their existing property, but only where it is situated on the same property and usually where it's held on a wayleave.

Host: Okay. You just mentioned a wayleave. What actually is a wayleave?

Jonathan O'Shea: In very simple terms, a wayleave is effectively a personal license for the temporary siting of the electrical equipment, and it can be terminated.

Host: Okay. How will a landowner know if there is a wayleave?

Jonathan O'Shea: Well, an easy tell is that the landowner may often receive a small annual payment, but that's not always the case. So even if the landowner doesn't receive payment of this nature, it doesn't mean there's not a wayleave. That's just an easy early indicator, not that there's likely to be one.

The easiest way to find out is our team at Gateley Hamer and contact them to conduct the necessary legal investigations.

Host: Okay. Thanks for that, Jonathan. What I'll do is I'll leave the information for the Gateley Hamer website below in the description.

My next question for you is, Jonathan, who removes the equipment? Would that be the electricity company?

Jonathan O'Shea: Not so often where the buildings already exist. They can do where the land is presently undeveloped.

But going back to the Electricity Act 1989, the statute allows landowners to enter a process with the electricity company, who will make a compensatory payment in return for the granting of the permanent right for the equipment to be sighted often exactly where it is.

Host: Okay. Are we talking about power lines on steel pylons?

Jonathan O'Shea: Yes – mainly – equipment on wooden poles and pylons attracts a lesser rate off payment as it has less visual affect.

Host: So the equipment remains and the landowner receives a lump sum payment.

Jonathan O'Shea:Yes, yes. In short, that's the process of an injurious affection claim.

Host: If there is no electricity line close by, could anyone claim?

Jonathan O'Shea: Not quite. No. The landowner must own both the property that is affected by the line and the land upon which the equipment sits. Although it doesn't necessarily need to be actually physically on the ground. If you think about cables that might run over a property, that's still affecting the land or the owner's property. We call that an oversale and it's still applicable.

Host: Can a claim be made for more than one property, Jonathan?

Jonathan O'Shea: Yes. If the landowner owns more than one property, there is no limit on the number of properties that can be affected by the line, nor the value of the same. So multiple properties are aggregated into the claim.

Host: Okay. In practical terms, how would a landowner make a claim?

Jonathan O'Shea: Well, initially, our utilities team here at Gateley Hamer or the landowner's appointed surveyor would need to have site of an ownership plan or a note of the potentially affected land registry title numbers. This would then be audited, and the precise position of the utilities would be checked, obtaining and checking any agreements from the electricity company, if necessary, for the occasional peculiarity as they do crop up, although not that often.

We then formulate a claim based on previously negotiated settlements, which are similar in nature and also based on our experience of the three key aspects of the claim. These three aspects are, one, the nature of the equipment, two, its distance from the subject properties and, three, its overall impact on the landowner's property.

Host: Brilliant. Thank you, Jonathan. What information is required from the landowner throughout this process?

Jonathan O'Shea: Once title information has been obtained – simply any copies of relevant leases and other legal rights that would affect value. We then value the property held by the client according to its tenure and length of any unexpired leases etc. We then calculate the impact of the equipment in relation to the property and produce the claim by going through the process we just discussed.

Host: Okay. Say, for instance, the surveyor and landowner have worked together to produce a claim, what happens then?

Jonathan O'Shea: Well the claim is submitted to the electricity company and they go through their own process of validation. Typically, they then appoint an agent to assess the claim on their behalf and we commence negotiations around the settlement. We then report the offer of compensation to the landowner and advise whether we feel it is market sensitive.

Host: How much does that process cost?

Jonathan O'Shea: We usually make a small charge for a report that allows the landowner to make a decision on whether or not to pursue a claim (This is credited against a success related invoice raised on legal completion). We can then either charge based on time spent throughout the process on a monthly basis, or, a success related fee based on the settlement achieved on behalf of the landowner. It does tend to be the latter that many clients prefer; the “no win, no fee” approach.

Host: Assuming your recommendation is to accept the offer, what happens then?

Jonathan O'Shea: We would secure the necessary contribution towards your legal representative costs of advising you on the legal agreement that the electricity company will produce. Then we would produce heads of terms for the agreement.

This document is called an easement, and it gives the electricity company the right to situate their equipment on the landowner's property in perpetuity. We would oversee the draft documentation and the plans.

Host: That process, how long does it take?

Jonathan O'Shea: Well, we expedite as far as is possible the process, and the timeline is up to the submission of a claim. All typically last a month or so. It can take some time for the power companies, however, to validate the claim, appoint an agent and then the ensuing negotiations to take place. In all, the process usually takes between 12 and 18 months.

Host: Ah, okay. Do the wayleave payments continue?

Jonathan O'Shea: Any wayleave payments would cease on completion of the legal agreement for the easement. That's a really important part of the market sensitivity analysis, which our team does and which any surveyor appointed on the landowner's behalf should be doing.

When reviewing the offer from the electricity company, it's essential to take account of the income that should be received under the way leave when assessing that offer so that we can offer the landowner guidance that's in their best long-term interest.

Host: Okay. So another scenario. Let's say someone has heard this podcast knows they have a number of pylons or other operators on their property. How does the landowner take this forward?

Jonathan O'Shea: Well, in order to assess the opportunity on behalf of the landowner, all we really require is a plan of the potentially affected property. Additionally, and ideally, a note of any relevant title numbers will enable us to investigate the legal basis upon which the equipment exists on the land, and whether or not there is an opportunity for the professional landlord to claim retrospectively in this way.

In short, I'd say just get in touch. We'll always be able to guide you in the right direction. Now is a good time to try and claim back any form of compensation, and get some much-needed cash for many businesses. The earlier you can get the ball rolling, the better.

Host: Brilliant. Thank you, Jonathan. We'll share this podcast along with Jonathan's details. If you have any specific questions or want to follow up with Jonathan directly, all of his information will be there.

Jonathan O'Shea: Thanks, Martha.

Host: Thank you for listening to Straight Talking Business Success. To find out more about this series, please visit gateleyplc.com/businesssuccess. From here, you can subscribe for updates, meet our speakers and get more information on all of the topics that we've covered.

Gateley Hamer is regulated by RICS (Royal Institution of Chartered Surveyors)

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