In last week’s post we looked at the scenarios in which a mortgage lender could take repossession of your property. This week we will explore Government Powers Over Your Property and how they can possess a buy to let property or order you to sell. What compensation would there be?
This would be extremely unusual but is still important part of property ownership, which a professional landlord should be aware of. The UK government or local councils can in certain circumstances take possession of a Buy-to-Let (BTL) property. But it’s rare, highly regulated, and compensation is typically due.
Here are the key scenarios:
1. Compulsory Purchase Order (CPO)
A Compulsory Purchase Order allows a public authority (usually a local council or the government) to acquire property without the owner’s consent.
This would happen in cases where they need the land your property is on for a major infrastructure project. This could be anything from for example HS2, new roads or regeneration schemes.
Another example could be if your property is in an urban redevelopment or housing expansion area.
What Compensation You Might Get
If your property came under a CPO, you would certainly receive the current market value compensation, which would be based on an independent valuation. This is also another reason why you should regularly track the current value of your property. You can get a good estimate at Zoopla.
There also maybe additional home loss and disturbance payments, if applicable, and your legal and surveying fees would typically be covered.
As your property is an investment you may also be entitled to compensation for lost rental income.
A CPO isn’t definite. You can object and challenge it at a public inquiry. You can also negotiate for a better offer. That said, once it’s been approved, you can’t ultimately block it.
2. Empty Dwelling Management Orders (EDMOs)
An Empty Dwelling Management Order (EDMO) lets the local authority take control of a property that has been left empty for 6 months or more. It’s important to state that the council will not get ownership of the property, just control of it.
An EDMO would occur if the property is left vacant and causing a nuisance, blight or is attracting crime. As you can imagine a local authority and the neighbours would like to address this as soon as possible. There would be an escalation process, but if the owner (you) is unresponsive or refuses to bring the property back into use, then ultimately the council will take charge.
Again, you would receive compensation for this. The council could take control and manage the property. They then might let it out, in which case you would receive the rental income minus any costs. You remain the legal owner and so would still be responsible.
This scenario is extremely rare and only used when all other approaches fail.
3. Housing Act Powers (Statutory Nuisance or Dangerous Buildings)
Under the Housing Act 2004 or Environmental Protection Act, councils can take action on a BTL property that is in severe disrepair or is structurally dangerous. If the property presents a risk to health (e.g. dangerous electrics, no sewers, fire hazard), they may take control of it. You would still be the owner, once again. This would be highly unlikely as, you would not be able to secure a mortgage against such a property in the first place. Also, as a good landlord, you would never let the property deteriorate to such a level.
Also under the Housing Act, if the rental is overcrowded or in breach of licensing/HMO laws, you could be served with an enforcement notice. Meaning that you will have to remedy the issue.
If you ignore enforcement notices and fail to carry out the urgent repairs, the council would deem the property unfit for habitation.
The council may carry out the works, instead, and place a charge on the property to recover costs. This means that you would foot the bill.
In extreme cases, they could pursue forfeiture or seek possession via a tribunal, but this is exceedingly rare.
As with all issues, this is totally avoidable with proper landlord management and communication.
4. Council Tax or Business Rates Arrears
If you owe money for council tax (on an empty property) or business rates (if it’s a holiday let or commercial property), councils can:
- Issue liability orders
- Instruct bailiffs or place charges on the property
- In the long term, apply to enforce a sale if the debts remain unpaid
You would receive any equity after the sale and any debt repayment. This would however be a last resort, as there would be months if not years of escalation.
How to Protect Yourself from Government or Council Reposession
These really are all in your control:
- Keep your BTL properties occupied, compliant, and well maintained.
- Always respond quickly to any council communications.
- Keep your landlord insurance and licensing up to date.
- If you are ever approached about a Compulsory Purchase Order, get a specialist surveyor and legal advice as soon as you can.
As with the previous post Mortgage Repossession Myths: What Landlords Need to Know, where we talked about how a mortgage lender can take control of your investment, if you behave like a professional landlord who cares about their property and tenants, you will be fine.
If in the unlikely event that your property is compulsory purchased, you will receive market value and compensation. Even this is not out of your control, as you can object and challenge any plans.
As I said before, don’t let fear stop you enjoying your fantastic investment.
Next week we will explore how you can protect yourself from a Global financial collapse.