Before 1973, householders affected by new roads were not entitled to compensation unless part of their property was acquired to build the road. The Land Compensation Act 1973 provided that compensation is payable for depreciation in the value of a house caused by physical factors such as noise, fumes and artificial lighting arising from a new road (or railway). But section 19(3) provides that compensation is only payable if the road is adopted within three years of being opened to traffic.

Highways authorities, in drafting section 38 and 278 agreements for new roads built by developers, will usually require developers to indemnify them against any claims under the act.

One developer entered into an agreement under sections 38 and 278 of the Highways Act 1980 to construct the Hendre Road relief road in Pencoed, Bridgend in connection with a housing development. There was to be a 14-week construction period. In accordance with common practice, the agreement provided that the relief road should then be adopted following a satisfactory 12-month maintenance period. Under the agreement, the developer would indemnify the council against claims under the Land Compensation Act.

The road was opened to traffic in 2002. But owing to delays in completing the remedial works, the road was not adopted until 2006. A question arose as to whether householders affected by the road had lost the right to claim compensation because more than three years had elapsed since the road was opened to traffic. The Court of Appeal held that, under the terms of the act, no compensation would be payable.

This constituted a breach of article 1 in protocol 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms, under which every person is entitled to the peaceful enjoyment of their possessions, because the householders would suffer a loss in value of their property without compensation. The court pointed out that it would be in a developer’s interests to go slow on completing the roadworks so that it would not have to indemnify the highways authority against claims.

If the court finds that there is a breach of convention rights, it has power to interpret the legislation to give effect to the rights. The court used this power to read section 19(3) as applying a three-year limit, unless, under an agreement with the highway authority before the road was opened to the public, the highway should reasonably have become maintainable within that period. This was the case with the relief road and compensation was therefore payable.

Michael Orlick is a consultant with Lodders Solicitors, Startford-upon-Avon.