Compulsory acquisition(expropriation, compulsory purchase, eminent
domain)
Do we need compulsory acquisition methods?See classical photos below!
Helsinki 2015HM
Reasons for compulsory acquisition (why are not voluntary agreements sufficient?
1. Property owner may veto transfer of property, when the property is needed for new use
2. Seller is in a monopolistic position3. Distribution of wealth between seller and buyer in favour of
the community/municipality or developer
But it is in principle important with a balance between public and private interests
Public interests can be expressed as the acquisition benefits (not always expressed as monetary value) must exceeds its costs and the acquisition must be important
Following lecture4. Sweden (as a specific example)5. International overview (also only with examples)Nationalization is not included in the lecture but it is allowed in some countries in Europe, e.g. France and Germany
Lecture: Compulsory acquisition and taking; Hans Mattsson, KTH, Stockholm
Purpose type Permission government sometimes takes over)
Taking possession Compensation
Expropriation Government Land and environment court
Land and environment court
Water enterprises Land and environmental court
Land and environment court
Land and environment court
National roads Traffic authority Traffic authority Land and environment court
Rail road Traffic authority Cadastre surveyor Cadastre surveyor
Municipal street Municipality (detailed plan) Cadastre surveyor Cadastre surveyor
Oil-, el-, telecom lines Government or authorities Cadastre surveyor Cadastre surveyor
Joint facility Cadastre surveyor Cadastre surveyor Cadastre surveyor
Compulsory purchase between land owners in a detailed plan (reallotment)
Municipality (detailed plan) Cadastre surveyor Cadastre surveyor
Mining Mining authority Mining authority Mining authority
Cultural heritage Cultural authority Cultural authority Land and environment court
Land consolidation Cadastre surveyor Cadastre surveyor Cadastre surveyor
Regulations/takings (will not be discussed here!)
Government, local government, authority
At legal force Land and environmental court (if compensation)
Examples of combinations of Swedish decision makers for compulsory acquisition and taking
Remark: The table assumes that there are no agreements
Institutional Model for Land AcquisitionInitiation Who may initiate?
Investigation Responsible authority?
Who provides information, evidence etc.?
Specific procedures?
Decision Decision-making authority?
Decision-type?
Participation-/Bargaining rights?
Appeal Judicial or administrative?
Remark:Three main decisions are normally needed1. permission2. taking possession3. compensation
Taking possession and compensation can be decide by another organization(s) than the permission giving organization. In such a case, the steps in the model are repeated.
Source: Peter Ekbäck Lecture: Compulsory acquisition and taking; Hans Mattsson, KTH, Stockholm
Initiation Summons application
Investigation Land and Environment Court
Parties of expropriation present claims and evidences before the Court
Decision Land and Environment Court
Judgment on acquisition and compensationParties free to negotiate and settle out-of-court
Appeal Land and Environment Court of Appeal
Supreme Court
Initiation Application
Investigation County Administrative Board
Applicant: Technical and economical data
The Board: Investigation of public interests
Decision National GovernmentExpropriation permit
Appeal Governmental decisions cannot be appealed
Expropriation permission (Swe)(Government normally)
Expropriation trial (taking possession and compensation)(Land and Environment court)
Model test applied on Swedish expropriation
Accepted purposes for expropriation (Sweden)(to take different land rights and to create land rights)
⁻ land for future urban development if the land shall be used in a foreseeable future⁻ land for infrastructure needs⁻ land for industry of great public importance⁻ for security and health protection⁻ military purposes⁻ exchange of land with another country⁻ gross neglect in property management⁻ fishing conservation and fishing science⁻ cultural heritage⁻ nature conservation and recreation⁻ enhanced land values due to public investments
In reality, expropriation is extremely rare, instead other specified acts are used with permission from the government, local government or cadastre surveyor authority (see second slide above)
Initiation Application
Investigation Cadaster surveyor
Parties are heard at meetings
Decision Cadaster surveyor
Permission (if that is not handled earlier by other authority), acquisition (taking possession)
and compensationParties free to negotiate but the CS has to check
the agreement
Appeal Land and Environment Court of Appeal
Supreme Court
Initiation Application
Investigation Relevant authority responsible
Authority or applicant (depending on case) makes the investigation
Decision Authority
Permit
Appeal Authority (if governmental decisions it cannot be appealed)
Permission (if permission case)
Cadastral procedure(if non-permission case)
Compulsory acqusition through cadastral procedure, e.g. , utility easement, joint facility, reallotment(Sweden)
Three types of taking possession1. Normal taking possession: After the compulsory purchase procedure is completely finalized
(order, money paid)2. Advanced taking possession: Before the compulsory purchase procedure is completely
finalized, so construction activities can start. However, not full ownership right, so ownership right can´t be registered. The future owner has no right to mortgage the property
3. Qualified advanced taking possession: Full ownership rights with registration possibility, even if the compulsory purchase procedure is not completely finalized . The new owner can mortgage the purchased land
Taking possession (Sweden)
Application to court
Court order: Taking possession and
compensation
Full possessionType 1
Court order: Advanced taking possessionPreliminary compensation
Full possessionType 2
Right to construct but not to register ownership
Court order: Qualified advanced taking possession
Preliminary compensation
Full possessionType 3
Court order: Compensation
Court order: Compensation
Remark: Assumption, no appeal
(sometimes additionalcompensation decision after 10 years)
Market value related to other approaches
Price
Number of transactions
Most probable price
D. Market value
C. Seller´s reservation price
B. Profit-sharing
A. Buyer´s maximum willingness to pay
E. Compensation below market value
Source: Based partly on Kalbro and Paulsson 2014, adapted from Werin 1978
+25%Market value
Reservationprice
Swedish expropriation compensation (also for situations similar to expropriation)
+25%
Compensation before
Compensation since May 2011
(we can call it safety margin)
Constitutional protection of ownershipAll countries mentioned later in the lecture follows European Convention on Human Rights that protects private ownership but also accepts that property can be compulsory purchased if it is important from public point of view
A lot of countries share common strands of legal history that effects legislation and it is also interesting that the countries have similarity in defining the acceptable limits of expropriation, even before the European convention was introduced. Then with legal authorisation, elements of public good and fair compensation
Common law countriesEngland and Ireland have a piecemeal nature of their compulsory acquisition legislation. Ireland has a constitutional protection for ownership
French influenced civil law tradition (France, the Netherlands, Belgium, Spain and Sweden)Compulsory acquisition must be for public purposes and for fair compensation. In Sweden the public purpose is not general, instead defined
Germanic civil law tradition (owners have social obligations)Strong property protection and at the same time must property owners accept that there must be a balance between public and private interests
Post-Socialist/Post-Communist Era Countries (Poland in this case)Has a list of public purposes and the legislation require a just compensation to be paid
The following part of the lecture is based on Expropriation law in Europe, edited by Jacques Sluysmans, Stijn Verbist and Emma Waring, 2015 (the book has compared 16 European countries, Finland is not included in the survey)
Accepted purposes (examples)- Broad general statements in some countries- Norway have stipulated 55 potential grounds for expropriation- Sweden specifies purposes and expropriation is supplemented by about 20
special enactments that take precedence over general rules- England and Ireland have a piecemeal and complex combination of
legislation and government guidance documents
- Several countries allow compulsory acquisition for private parties if it serves public goods. Some countries do not allow compulsory acquisition for “speculative economic benefits”
ProceduresQuite different in different countries but all surveyed countries require that negotiations are undertaken before compulsory acquisition
In all surveyed countries, the owners must be noticed before the procedure starts and there must be an element of publicity. Time for notification varies between countries
The procedure can be administrative or a combination of administrative and judicial procedures (England is an example of the first one and Sweden of the second). If a dual procedure then the permission is given by an administrative body and compensation by court (in the Netherlands the court also judge if the administrative body has followed the rules)
In some countries the permission can be checked by administrative or civil courts. But in Italy, Norway and Sweden it is highly unlikely to be successful. In the rest of the surveyed countries there is a better substantial safeguarding mechanisms to protect property owners from compulsory acquisition. The grounds can be:1. No public interest2. There is no proportionality/balance between public and private interests3. No need of compulsory acquisition 4. No legal basis for compulsory acquisition procedural problems (legal procedures are not
followed)
Taking possession of the property must be preceded by at least a substantial advance on the compensation for the compulsory acquisition. In Sweden it must be paid before taking possession (see however advance taking possession above)
CompensationCompensation rules are influenced by the political nature of the country
Liberal oriented countries have more generous compensation rules based on the principle that the property owner shall be in the same economic position after the compulsory acquisition - Full compensation for market value is the general view- Sweden adds 25%
Socialistic or social-democratic countries highlight the social function of properties and have more restricted compensation rules- Italy has no rule for compensation of market value (25% under market value if
the property is intended to be used for social and economic reforms)- Germany emphasis social obligation and can compensate below market value
All countries do not compensate for damageMoral damage (reservation price) is normally not compensated
Compensation decided by - A board (Italy, Spain, Germany)- Judge, sometimes supported by expertise (France, the Netherlands, Greece,
Sweden)
Valuation methods Comparative, yield or cost methods depending on case
FIG recommendations(38 sections for own studies)
1. Compulsory purchase shall not be preferred tool for the acquisition of land2. The compulsory purchase shall be implemented with respect for the rights of affected
parties3. The compulsory purchase shall be legitimate4. The compulsory purchase process shall be an inherent part of the process of land
acquisition and be exercised in an objective, impartial, independent and ethical manner5. The compulsory purchase process shall be transparent6. The costs of the compulsory purchase process are to be carried by the expropriator7. The right to appeal to an independent court shall be ensured8. Affected parties have the right to represent themselves and/or use an attorney, expert, or
agent to do so9. Compulsory purchase can only be used for public interests10. The basis for compulsory purchase shall be legitimate11. Etc.
Source: FIG , 2010, Compulsory Purchase and Compensation – Recommendations for good practice, FIG publication, no 54
Compensation if reallotment/land consolidation/joint facility
Owner A Owner B Owner A Owner B Owner A Owner B Owner B
Owner A
Owner ??
Owner A Owner B
Owner C
Joint facility road for A and C
Reallotment cases
Reallotment (land consolidation case) Joint facility case
Value for property owner who loose land or right
Profit-sharing
Value for property owner who gets additional land or right
Compensation if reallotment/land consolidation/joint facility