UPPER TRIBUNAL (LANDS CHAMBER)
UT Neutral citation number:  UKUT 125 (LC)
LT Case Number: ACQ/203/2009
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
COMPENSATION - compulsory purchase - dwellinghouse - whether to be valued when CPO made or on vesting date - value in good condition - comparables - cost of necessary works - whether deduction to be made for risk and profit - compensation determined at £200,000
IN THE MATTER OF A NOTICE OF REFERENCE
LONDON BOROUGH OF Acquiring
Re: 24 Buckingham Road
Before: N J Rose FRICS
Sitting at 43-45 Bedford Square, London, WC1B 3AS
on 17 February 2011
Valentine Chikwe of St Valchikwe, solicitors of Seven Kings, Ilford for the Claimant
Jonathan Wills, instructed by Director of Legal and Democratic Services, London Borough of Newham, for the Acquiring Authority
1. This is a reference to determine the compensation payable by the London Borough of Newham (the acquiring authority) arising from the compulsory acquisition of the freehold interest in a dwellinghouse known as 24 Buckingham Road, London, E15 1SP from the claimant, Mrs Claristene Doreen Yarde. The subject property was compulsorily acquired under the Newham (24 Buckingham Road, London, E15 1SP) Compulsory Purchase Order 2006, made on 10 July 2006 and confirmed by the Secretary of State for Communities and Local Government on 12 July 2007. The acquiring authority executed a general vesting declaration in respect of the property on 17 December 2007 and the vesting date was 15 January 2008. The claimant contended for compensation in the region of £375,000 and the acquiring authority’s valuation was £200,000.
2. Mr Valentine Chikwe, a partner in Messrs St Valchikwe, solicitors, appeared for the claimant, whom he called as a witness. He did not call any expert evidence. Mr Jonathan Wills of counsel appeared for the acquiring authority. He called factual evidence from Ms Noreen Shabir, legal assistant with the acquiring authority, and expert evidence from Mr David Drane MRICS, who is employed as a senior surveyor by DVS, the commercial arm of the Valuation Office Agency. I made an unaccompanied external inspection of the subject property, and certain other properties which had been cited as comparables, on the morning of 25 March 2011.
3. From the evidence I find the following facts. The subject property comprises a semi detached three bedroom house, built in about 1860 of brick with a pitched slate roof on two storeys. It has a front bay to the ground floor and a single storey back addition. It is situated between the A11 Leytonstone Road and the A114 Woodgrange Road (accessed off St James Road via Forest Lane) in an established residential area, relatively close to Maryland and Forest Gate railway stations.
4. On 17 September 1997 the claimant wrote to the council tax officer of the acquiring authority. She said that the subject property had been uninhabitable for some years. On 2 February 2000 the claimant completed a review form for council tax discount/exemption. She said that the property was in a very bad condition and she was not able to occupy it. She also mentioned that she had applied for a renovation grant in 1985 and 1986, but without success. Officers from the acquiring authority’s environmental health team attempted, unsuccessfully, to encourage the claimant to refurbish the property and bring it back into beneficial use.
5. Upon receiving notice that the acquiring authority had cabinet approval to make a CPO, the claimant informed the acquiring authority that she wished to renovate the property. In a letter dated 26 March 2004 she said that estimates for the refurbishment of the property were awaited and that a mortgage was being sought. On 3 September 2004 the claimant telephoned the acquiring authority in response to a requisition for information. She said that the property was vacant on a temporary basis whilst major structural works were carried out. This was followed by a letter dated 13 September 2004, which stated that a builder had been employed and works were due to commence in late October 2004. On 3 November 2005 the claimant telephoned a planning lawyer at the acquiring authority. She said that she had put the property on the market as she could not afford the work necessary to bring it back into habitable condition. The acquiring authority waited to see if the property would be sold and works commenced by a new owner, but nothing happened.
6. The acquiring authority currently has a large compulsory purchase programme as part of its empty property strategy across the borough, with the specific aim of seeking sustainable improvements to the private housing sector. Where improvements fail to materialise the authority will, when all else fails, resort to the use of compulsory purchase powers and it did so in the case of the subject property.
Case for the acquiring authority
7. Mr Drane said that he had carried out a limited visual inspection of the subject property on 15 January 2008. In his opinion it was generally in below average condition. It would have required a certain degree of refurbishment and repair to bring it up to good mortgageable standard. He noted that the roof covering required minor overhaul and replacement at the rear. There was a certain level of water ingress in the main building. This had transmitted damage to the ceilings and floors below. The condition of the guttering and down-pipes was poor and these needed to be replaced. The windows, joinery and sills throughout the property were in below average condition and showing signs of age, with timber in various places being poor. Mr Drane allowed for the replacement of all the existing poor quality double glazed windows and exterior doors with new modern double glazed units. He considered that re-wiring and some replacement of plumbing was required.
8. There was a need for re-plastering in various places and replacing parts of certain ceilings which had suffered water damage. Brickwork needed re-pointing in various places at the front and rear. He allowed sums for replacing the bathroom and kitchen fittings and installing a new central heating system. Full interior and exterior decoration was desirable and ideally brick cleaning to restore the gothic appearance of the exterior. In addition he allowed for damp proofing and rebuilding the front bay, where rising dampness and structural damage were apparent. Finally there was a requirement for some clearance of rubbish and debris from both inside the house and in the rear garden.
30 Buckingham Road, E 15
An 1870s three bedroom semi-detached house with a garage. Sale completed 20 December 2007 at £314,500. In very good condition when inspected in January 2008.
39 Buckingham Road, E15
An 1890s four bedroom mid-terrace house. Sale completed 15 January 2008 at £320,000. In good condition when inspected in January 2008.
41 Buckingham Road, E15
An 1890s three bedroom end terrace house. Sale completed 26 June 2008 at £250,000. In fair condition when inspected in January 2008.
10. Mr Drane said that the property market rose rapidly during 2007, before levelling off towards the end of the year and into early 2008, after which it began to decline. From his general experience of property values in the area he considered that the three comparable sales confirmed his view that a mid-nineteenth century three bedroom house in the locality would have commanded around £300,000 in good order following refurbishment. He discounted this figure to reflect the poor condition of the subject property. He estimated that the cost of the repair and refurbishment works required to put it into good mortgageable condition would have been in the region of £80,000 to £90,000. In his experience this type of property would have had a limited market. It would have been of interest to a cash buyer, probably a small builder or the like and it was to be expected that any such purchaser would require a return on his investment. In addition to a minimum of £80,000 for the necessary building works he therefore allowed £20,000 to reflect the profit required to compensate the purchaser for the risk involved. He thus arrived at a valuation in the order of £200,000.
Case for the claimant
11. In evidence the claimant said that she had obtained two estimates to repair the subject property. On 18 December 2006 Hammond Engineer Services of Tottenham quoted £38,000. Detroit Builders of Manor Park quoted £35,845 on 2 June 2007. She considered that the subject property had been worth in the region of £400/450,000 in 2006. She would reluctantly accept a value in good condition between £400,000 and £420,000. She contended that, from this value, the Tribunal should deduct the average of the two estimates she had obtained. In addition she was entitled to “a relocation fee and compensation etc for the inconveniences caused to me”, but these matters were not quantified.
12. Mr Chikwe emphasised the fact that Mr Drane’s expert report was dated 26 March 2009, well over a year after the vesting date. He submitted that Mr Drane’s valuation had been influenced by the decline in values which had occurred in the intervening period. He made the following additional points. There was no evidence that Mr Drane had inspected the subject property in January 2008. It was wrong to rely on the prices paid for 39 and 41 Buckingham Road. They were both terraced houses and not appropriate to be used for valuing the subject property, which was semi-detached. There was no justification for Mr Drane’s deduction of £20,000 for profit. The property should be valued in 2006, when the CPO was made, and not at the vesting date. After the CPO was made the property was occupied by squatters, who caused fire damage. It was unfair to reflect this damage in the valuation. In any event Mr Drane’s estimate of £80,000 for repairs was excessive having regard to the two estimates received from builders.. The Tribunal should determine the value of the subject property in accordance with what was fair and reasonable having regard to all the circumstances.
13. I deal firstly with the issue of the appropriate valuation date. I am in no doubt that Mr Drane was right to value at the date of vesting. This is because section 5, rule (2) of the Land Compensation Act 1961 (the Act) provides that:
“the value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise”
and section 5A of the Act provides as follows:
“(1) If the value of land is to be assessed in accordance with rule (2) in section 5, the valuation must be made as at the relevant valuation date …
(4) If the land is the subject of a general vesting declaration, the relevant valuation date is the earlier of -
(a) the vesting date, and
(b) the date when the assessment is made …”
14. I am unable to accept Mr Chikwe’s submission that the condition of the subject property on the vesting date had deteriorated due to the actions of squatters. This is because, in oral evidence, the claimant stated that squatters did not occupy the property until February or March 2008, which was after the vesting date. There is in my judgment no doubt that the subject property was in poor condition on the vesting date, and that this was the result of continuing neglect over many years.
15. As to the value of the property in good condition, there was no objective evidence to support the claimant’s estimate of £400/420,000 and I reject it. I am satisfied that Mr Drane is an experienced valuer, and that he inspected the property on the vesting date. I also find that he based his assessment of value on market conditions at that date, not on the date of his report to the Tribunal (26 March 2009), nor in October 2008, when he first informed the acquiring authority that his valuation was £200,000. The three comparable transactions on which Mr Drane relied are all situated close to the subject property and, subject to appropriate adjustments, provide good evidence of value. In the light of my site visit I am satisfied that they support a valuation in good condition of £300,000.
16. As to the cost of the necessary works, I am unable to place much weight on the two estimates obtained by the claimant in December 2006 and June 2007. The reasons for this conclusion are these. The estimates pre-dated the valuation date by between 6 and 12 months and it is not clear whether the condition of the property changed in the intervening period. Neither of the authors of the quotation was called to give evidence. The specification of works included in the estimates is not clear. There is room for doubt about the independence of Hammond Engineer Services, who employed the claimant’s daughter as customer services manager when their estimate was prepared. On 22 January 2008 Messrs Wiseman Lee, solicitors, wrote as follows to the environmental health officer of the acquiring authority:
“our client [the claimant] is confident that not only does she want all the work to be undertaken to place the property into a habitable condition so that she can live there but that she has the means to discharge the costs involved. She knows that those costs will be in the region of £50,000/£60,000 and we are emphatically informed that this money is available.”
It is right that I record that the claimant said that she did not discuss the cost of the works with the writer of that letter, but I am satisfied that she was mistaken. After taking possession of the subject property, the acquiring authority carried out works of repair and refurbishment at a cost of £97,000 plus professional fees of £10,000. It then sold the property to Stadium Housing Association Limited, with completion on 23 September 2010. Mr Drane was not aware of the cost of the works carried out by the acquiring authority at the time he prepared his own cost estimate, but the actual cost does not suggest that Mr Drane’s estimate of £80,000 is excessive. In my judgment his estimate is reliable and I accept it.
17. I also accept Mr Drane’s opinion that, having regard to the extent of the work needed to put the subject property into good repair, a purchaser would have required a profit of at least £20,000 to compensate for the trouble and risk involved. I therefore accept Mr Drane’s valuation in its entirety. In the absence of any claim for disturbance or reliable evidence to support one, I determine that the compensation payable for the freehold interest in the subject property is £200,000. In addition statutory interest is payable in the usual way. A letter regarding costs accompanies this letter, which will become final when the question of costs is determined.
Dated 29 March 2011
N J Rose FRICS