Compensation for Diminution in Value Under Section 197
Where an approved plan reduces the value of a nearby property, the owner may be entitled to compensation from the local committee. The right is limited to three years, wide exemptions exist, and the proof is essentially a valuation exercise. This guide explains who is entitled, for what, and on what conditions.
What a section 197 claim is
Section 197 of the Planning and Building Law gives a right to compensation for harm to the value of land caused by a plan, otherwise than by expropriation. The claim is made to the local committee in whose area the property lies.
The distinction from expropriation matters: in an expropriation the land itself is taken, and compensation for that follows a separate route. Under section 197 the property remains with the owner, but the plan reduces its value, for example through a new road nearby, a change of designation on the adjoining plot, or an increase in building rights that blocks light and air.
Who may claim
Two conditions govern the right to claim:
- A connection to the property. The claimant holds the rights in the land, or another right in it, as at the day the plan took effect. A person who bought after that date bought at the reduced value and is usually not entitled.
- Location. The land lies within the plan area or borders it. That boundary is examined under tests developed in the case law, and not necessarily by a formal boundary line alone.
A point often missed: entitlement is tested as at the day the plan took effect. If you sold after that day, the right may have stayed with you rather than passing to the buyer, and the reverse can also be true. In transactions made close to the approval of a plan this needs settling in the sale agreement.
What counts as harm
Harm is measured by the drop in the value of the land itself, on an objective test. It is not subjective loss to the current owner, distress or loss of enjoyment, but the question of what the property was worth on the eve of the plan being approved and what it is worth afterwards.
Common kinds of harm:
- A change of designation on an adjoining plot, for example from residential to commercial or industrial.
- A road or infrastructure route fixed close to the property.
- An increase in building rights next door that blocks a view, light or air.
- A public building allocated nearby with an environmental effect.
Section 200 and the exemption
Even where harm exists, section 200 lists situations in which no compensation is payable. Its essence is that harm which does not exceed what is reasonable in the circumstances, and for which it would not be just to pay, does not give rise to compensation.
The list in the section includes among other things a change within the permitted designation, the fixing of a location for a public building, and provisions on massing and design. The exemption is not automatic: the committee has to show that the harm is reasonable in the circumstances and that it would not be just to compensate for it.
In practice, section 200 is the centre of the dispute in most files. The question is not only how far the value fell, but whether the harm goes beyond the reasonable. That is a mixed question of fact and law, and it is what makes professional handling worthwhile.
The process and deadlines
| Step | Deadline |
|---|---|
| Filing the claim with the local committee | 3 years from the date the plan took effect |
| Appeal against the committee decision | 45 days to the compensation and betterment appeals committee |
| Application to the administrative court | After the decision of the appeals committee |
The three years run from the day the plan took effect, meaning from its publication giving it force, not from the day you learned of it and not from the day building actually began. That is why watching plans in the area of the property is worth doing.
A further point: a local committee that pays compensation may in certain conditions seek an indemnity from the party who benefited from the plan, which is why the developer is sometimes the real party behind the defence.
What has to be proved
The claim rests on a valuation opinion comparing the value of the property under the previous planning position with its value under the new one. A good opinion deals in advance with three questions:
- What the previous planning position was exactly, including earlier plans that had already reduced rights.
- What harm precisely the new plan created, distinguishing it from other factors affecting value in the same period.
- Why the harm goes beyond the reasonable, addressing section 200 expressly.
Alongside the valuation, the documents are needed: the extract, the approved plan and the date of its publication, the previous plan, and evidence of the condition of the property. The quality of the opinion is the main difference between a file that succeeds and one that fails.
In these proceedings the deadline counts no less than the argument. If a decision, order or demand has arrived, contact us at once with the document and the date on it. Call 02-5953322, send a WhatsApp message to 050-4411343 or leave your details in the form below, and we will get back to you as soon as possible.
What people ask most often
How long is there to file a section 197 claim?
I sold the property after the plan was approved. Who is entitled?
What is section 200 and why does everyone talk about it?
My property is not inside the plan but borders it. Am I entitled?
The committee rejected the claim. What next?
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A plan approved near your property
A diminished value claim rests on valuation and on meeting the deadlines. We file the claim for you and represent you before the committee and on appeal. Tell us which plan was approved and when, and we will act within the period.