Lesson from the clean-up in the Big Apple

The Corporation of London has fired the first salvo in what could prove to be a protracted legal battle to establish the right of public authorities to force private landowners to sell their property in the interests of the wider good.

It will be the first time the City has used its powers to order a compulsory purchase to further commercial redevelopment, as distinct from public interest redevelopment such as new housing.

The use of compulsory purchase powers - known as the right of eminent domain in the US - are controversial in most countries that recognise private property rights.

Lynne Sagalyn, Kazis-Shore director of the MBA Real Estate Programme at Columbia University's Business School in New York, notes that the path to the successful use of such powers is strewn with litigation. "The first question anyone asks is: Why is this necessary?" she says. Those who think it is not, sue. As a result, urban planners habitually abandoned half-completed sites.

Some of the instinctive public distaste for compulsory purchase orders in the US stems from the way it was once widely mis-used as a device for ethnic re-engineering, particularly to displace African-Americans from certain neighbourhoods, says Ms Sagalyn. "It was once known as Negro removal," she notes.

But the right of eminent domain can be, and has been, used to good effect in crucial urban regeneration projects, most spectacularly, perhaps, on 42nd Street, in Manhattan, near Times Square. There, after more than a decade of legal battles, the city was able to assemble a 13-acre parcel in the heart of Manhattan. The area was once a drug-infested, crime-ridden eyesore, largely home to greasy-spoon eateries and to pornography shops.

"The rationale for going through a public condemnation is because you cannot assemble the site through any other means," she says. In the case of 42nd Street, there were 60 to 90 separate ownership sites, as well as myriad leases and sub-leases.

Complicating New York City's efforts, she says, was the fact that it had been obvious for some time that the city wanted to condemn the property and that it would have to buy out its owners. Speculators, hoping to hold NYC to ransom, snapped up the sites and used every possible mechanism to avoid negotiating.

IT IS these "ransom sites" which are proving most troublesome to the Corporation of London in its bid to see Paternoster Square redeveloped. This week, it called in the owners of parking and access rights abutting Paternoster Square to tell them that it intended to use its compulsory purchase powers to order the sale of their rights to Mitsubishi Estates, the Japan-based owners, which has received approval to redevelop the space.

Negotiations about the complex ownership rights at the 1960s era site, a long-desolate office complex adjacent to St Paul's Cathedral which was once decried as a "a carbuncle" by Prince Charles, have now almost all been resolved.

However, two fringe land parcels need to be acquired by Mitsubishi so that the redevelopment can proceed. The sticking points remain car-parking and access rights for the owners of two buildings, Juxon House, at the south-west corner of the site and 5 Cheapside to the north.

The owners of these two buildings, just outside the square itself, are thus able to frustrate the developers' ability to lay down the underground infrastructure, without which the project cannot be built. The corporation will argue that the redevelopment of the square is vital to the City's future and that it is within its rights to force the obstructing landowners to sell.

This would be the first time that the corporation has used its compulsory purchase powers in more than 25 years. But it has not been alone among public authorities - both in Britain and abroad - in its reluctance to do so.

Privately, City officials acknowledge that the compulsory purchase order is a blunt instrument that must be used only in the most extreme circumstances.

This is increasingly the view that prevails, not only among public authorities around Britain, but in the US and much of Europe as well, says Richard Lambert, director of planning and residential property at the British Property Federation. In Europe, Mr Lambert says, compulsory purchase powers are used most frequently in those countries which have fragmented land ownership patterns, such as Germany. "There is opposition to compulsory purchase because it is perceived that a public power is depriving an individual of their land rights," he says.

The rules in Britain, he notes, only allow a purchase to reflect an independent arbitrator's view of the price paid, and there has been the suspicion that arbitrators err in favour of the public purse.