England and Wales Lands Tribunal

[2001] EWLands ACQ_139_2000 (19 December 2001)

ACQ/139/2000

LANDS TRIBUNAL ACT 1949

COMPULSORY PURCHASE – compensation – terraced dwelling house – cracks in external walls – their cause and its effect on value – home loss payment – whether disturbance losses established – compensation determined at £63,100

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN CHRISTOPHER ANTHONY RODWELL

and Claimants

ABBEY NATIONAL plc

and

LONDON BOROUGH OF BARKING Acquiring

AND DAGENHAM Authority

Re: 12 Baron Road

Dagenham

Essex

Before: N J Rose FRICS

Sitting in public at 48/49 Chancery Lane, London, WC2A 1JR

on 9 March, 21 November and 5 December 2001

Mr C A Rodwell, one of the claimants, in person.

Mr N Hancox, solicitor, of Mills and Reeve of Norwich for the acquiring authority.

Abbey National Plc were not represented.


 


DECISION

1. This is a reference to determine the compensation payable by the London Borough of Barking and Dagenham (the acquiring authority) to Mr C A Rodwell (the claimant) and Abbey National Plc (the second claimant) for the freehold interest in a dwelling house known as 12 Baron Road, Dagenham, Essex (the subject property). The property was compulsorily acquired under the London Borough of Barking and Dagenham (Baron Road) Housing Act 1985 Compulsory Purchase Order 1998, made on 3 July 1998 and confirmed by the Secretary of State for the Environment, Transport and the Regions on 15 October 1998. The property was vested in the acquiring authority on 11 May 1999, which is therefore the valuation date, although possession was not taken until 28 July 1999. The purpose of the compulsory acquisition was to enable sheltered housing accommodation to be provided in the area through a housing association.
2. On the first day of the hearing, 9 March 2001, it became clear that the evidence adduced by both parties was inadequate to enable me to determine the matter. The acquiring authority contended that a substantial deduction should be made when arriving at the value of the freehold interest to reflect the costs of remedying serious elements of disrepair, but they produced no direct evidence to justify such a deduction. The claimant, on the other hand, failed to quantify his claim, both prior to the hearing and at the hearing itself. The hearing was therefore adjourned until 21 November 2001.
3. The claimant appeared in person and gave evidence. The second claimant was not represented. Mr N Hancox, solicitor, of Messrs Mills & Reeve of Norwich appeared on behalf of the acquiring authority. He called Mr J M Murphy, BSc, ARICS, IRRV on the first day of the hearing and Mr L P M Boston, FIStructE, Mr S L Giles BSc, ARICS and Mr M Platt MCIOB at the resumed hearing. Sadly, Mr Murphy passed away in the interim.
4. By the end of the hearing the claimant was claiming £65,000 for the freehold interest, a home loss payment of £6,500 and various items, which may be broadly described as disturbance, amounting to £7,524; his total claim was therefore £79,024. The acquiring authority's freehold valuation was £36,212.50. It suggested that the total compensation, including home loss payment and disturbance, should be between £40,833.75 and £41,333.75.
5. From the evidence I find the following facts. Baron Road is in one of the more desirable parts of Dagenham. It lies in the northern section of the Becontree Estate, an established residential district of former local authority dwellings. It is close to Chadwell Heath railway station, which connects with London Liverpool Street. It is also close to the shopping facilities in High Road, Chadwell Heath.
6. The subject property was built about 70 years ago. It was a mid-terraced house on two storeys, with a shared tunnel access to the rear. There was an entrance hall, lounge and kitchen on the ground floor and two bedrooms, bathroom and separate WC on the first. Main services were connected and the property was centrally heated with a gas fired boiler. At the valuation date, the building was in a below average condition.
7. The claimant purchased the property in 1993 with the aid of a mortgage from the second claimant. He originally agreed to pay £46,000. The mortgage offer was subject to a satisfactory survey and valuation and Cornerstone Professional Services of East Ham were instructed accordingly. Their report was dated 23 March 1993. It included the following observations in its summary:

"Evidence of structural movement noted. Although this appeared to be generally longstanding and natural settlement it would be advisable to have this checked further and any necessary remedial works undertaken."

8. The claimant therefore instructed Mr B Pearlstone, Eur Ing, C Eng, FIStructE, FInstCE to carry out a structural survey of the property, which he did on 15 April 1993. Mr Pearlstone's report contained the following conclusions:

"Cracks noted on the external coating to the property have been identified as due to seasonal temperature variations causing alternative shrinkage and expansion movements. They are not impairing the structural integrity of the house. There is no evidence to suggest that any underlying subsidence might be occurring. There is no specific cure for the problem but the future recurrence of such cracks can be minimised by use of pebble dashing or flexible paint coating."

9. In the light of these reports the claimant negotiated a reduction in the purchase price of £500 through his solicitors.
10. The claimant's case is that the subject property was worth £65,000 on the valuation date assuming it was in sound condition; since it was in fact in sound condition that figure should be paid by way of compensation.
11. Mr Murphy considered that the defect-free value was £58,000. He had not carried out a structural survey, but he had been told by the acquiring authority that detailed surveys had been made of other similar houses in the vicinity and that the necessary remedial works were estimated to cost between £20,000 and £25,000. He adopted a figure of £22,000 and thus arrived at a valuation of the property in its defective condition of £36,000. In answer to a question from me, Mr Murphy said that if the remedial works were carried out they would result in an improvement to the building, whose value would increase to £65,000.
12. In March 1991 Mr Boston's firm, Michael J Heard and Associates, was instructed by the acquiring authority to inspect structural damage which had occurred to 76 Baron Road. Mr Boston reported that thermal movement could have been a contributory factor, but this would not explain all the visible damage. He pointed out that the adjoining property, No.78, was also affected and he advised that further investigations should be made to determine the cause of the damage to both buildings before any remedial works were carried out.
13. Mr Boston was instructed to make these further investigations, not only to 76 and 78 Baron Road, but also to Nos. 4, 18, 66, 68, 72 and 74. He reported to the acquiring authority on 14 January 1992, based on a visual inspection of all the buildings, more detailed exploratory and investigatory works to No.18 which had become vacant, and discussions with the Building Research Establishment. He concluded that five blocks of houses in Baron Road had all been constructed in the same manner, namely Nos.4-18, 56-66, 68-78, 57-67 and 69-79. The external, front, rear and end walls of these blocks consisted of two skins of in situ poured concrete. Exploratory holes made in the walls of No.18 had exposed hollow steel posts or tubes, rather like scaffolding poles, located mainly within the inner skin at the junction with the outer concrete. Metal detector scans revealed that there were 13 such posts within the external walls of the house, positioned in a regular manner and extending for the full height of the external walls. Each post was founded on a small base plate, visible externally at the base of the wall. In all cases where steel posts were exposed, they were found to be suffering from varying degrees of corrosion. Other steel embedments were found in the walls and were also found to be corroding. Samples of concrete from both skins of the external walls were collected and sent for analysis.
14. Mr Boston reported that it was not possible positively to identify the initial cause of the cracking to the external walls, but some of it at least would have been caused by shrinkage, which would have promoted the corrosion problem. The continued corrosion of the steel posts and thermal movements were almost certainly now the main causes of the recurring damage. Apart from material coming loose as a result of spalling, the damage which had occurred did not appear to be causing any instability to the buildings he had inspected. If remedial measures were not carried out, however, the recurring nature of the cracking damage could cause instability in the future.
15. Mr Boston advised that various remedial measures were possible and on 13 April 1992 he provided the acquiring authority with further design details and cost estimates for two alternatives. Remedial works "A" consisted of providing dry lining to most of the internal faces of the external walls; providing cladding to the external faces of the walls; cleaning and treating or replacing the existing steel posts; carrying out limited repairs to damage and filling existing cracks. Remedial works "B" comprised the demolition of the external walls and rebuilding them in solid blockwork. The costs given by Mr Boston had been obtained from Mr Giles, who was employed at the time by Abacus Project Services Limited.
16. In September 1995 Mr Boston was instructed to report further on the structural works and costs associated with the replacement of the steel tubes within the existing concrete walls. Having carried out further investigations, he reported on 30 October 1995 with his opinion that, for a variety of reasons, removal of the posts would not be economically viable. Mr Giles had reported to Mr Boston with up-dated cost estimates for remedial works B and these figures were incorporated in Mr Boston's report to the acquiring authority. In pricing the alternative works, properties were not considered individually, but as part of an entire block. Mr Giles assumed that identical works would be necessary to each property. Neither Mr Boston or Mr Giles ever inspected the subject property.
17. On 20 February 1996 the acquiring authority convened a meeting with its tenants in Baron Road. At that meeting it was agreed that all the properties would be demolished.
18. Mr Platt is employed by the valuation office agency as a senior building surveyor based in Nottingham. On 28 November 1996 he was asked by the Barking valuation office to provide advice with regard to defects evident in a number of properties in Baron Road, including the subject property, together with indicative costs of repair. He was given copies of Mr Boston's reports and he inspected the properties in January 1997. He recommended that the only sensible solution to the defects, other than complete demolition, was to demolish the external walls of the properties and replace them with traditional brickwork or blockwork. This advice was based on the description of the defects contained in Mr Boston's reports. Mr Platt estimated that the cost in 1997 of the necessary works to a mid-terraced unit such as the subject property would be in the region of £22,000. This figure was arrived at using Mr Giles's estimate, up-dated for building cost inflation since October 1995, as well as information obtained from another firm of structural engineers who specialised in work of this type. Before me, Mr Platt said that, if the cost were further up-dated to May 1999, it would amount to £24,500 excluding VAT. This figure included a certain amount of refurbishment, such as new windows and doors, new kitchen fittings, new electrical installation and internal decoration.
19. Towards the end of the hearing Mr Hancox submitted that the value of the subject property was £36,212.50, calculated as follows:

Value when repaired and improved - per Mr Murphy £65,000.00

Deduct cost of work – per Mr Platt - £24,500.00 plus VAT £28,787.50

£36,212.50

Decision

20. The major difference between the parties to this reference relates to what deduction, if any, should be made from the freehold value of the subject property to reflect its condition. The acquiring authority argues for a deduction of nearly 45% of the improved value; the claimant suggests that there should be no allowance at all.
21. In my view it is likely that any prospective purchaser of the subject property at the valuation date would have commissioned a survey and would then have been advised to instruct an engineer to assess the implications of the cracks which, it is clear, were then visible at the property. That is what happened when the claimant purchased the property in 1993 and Mr Platt made it clear that he needed advice from an engineer when he inspected the property, and others, in 1997. The most important question I have to decide, therefore, is what advice would have been given if an engineer had inspected the subject property in May 1999. Mr Boston never inspected the property. In effect, he based his conclusions primarily on the detailed investigations which had been carried out to No.18 in January 1992.
22. The claimant points to the fact that, when Mr Pearlstone inspected the subject property in 1993, he did not consider that there was anything fundamentally wrong with the structure. Of course, had he been aware of what Mr Boston had discovered at No.18 his advice may very well have been different. Mr Hancox, however, very fairly did not attempt to suggest that Mr Pearlstone should have been aware in 1993 of the contents of Mr Boston's 1992 reports.
23. Nevertheless, if an engineer had been instructed to investigate the cause of the cracking in May 1999, the position would have been different from that which had confronted Mr Pearlstone in 1993. By then, absent the residential scheme for which the subject property was compulsorily acquired, it is reasonable to assume that the acquiring authority would have taken some definite steps to deal with the defects which Mr Boston's reports had revealed. Such action is likely to have taken the form, either of extensive works of repair to its tenanted houses in Baron Road, or their demolition. Either way, an engineer inspecting the subject property in 1999 would have been placed on notice that there may have been a serious problem with other houses in the street. Had he approached the acquiring authority to clarify the position – as is in my view likely – he would almost certainly have decided that detailed investigations should be made to ascertain the condition of the steelwork in the external walls.
24. The result of any such investigations is a matter of conjecture. The claimant produced some photographs which he had taken shortly after the subject property had been demolished, but these are insufficiently detailed to enable any reliable conclusions to be drawn. There are, however, two matters which suggest that any corrosion which may have taken place to the steelwork was far less advanced than in the case of other properties in the street. Firstly, Mr Platt considered that the damage to the subject property was "by no means the most extensive" of the various properties he inspected in 1997. Secondly, Mr Boston said that the description of the cracks contained in Mr Pearlstone's report in 1993 suggested that the subject property had not by then experienced the degree of damage that had been evident at No.76 in late 1992.
25. Doing the best I can with the very limited evidence available, I find on the balance of probabilities that a prospective purchaser of the subject property at the valuation date would have been advised that, in addition to thermal movement, the visible cracks were caused by corrosion to some of the steel posts in the external walls, but that such corrosion was at a very early stage. In his report dated 13 April 1992 Mr Boston expressed the view that the existing buildings in Baron Road were "towards the latter part of their normally expected life span". By this I understood him to mean that they were not very far from the end of their useful life. They were seven years older by the valuation date. Against that background, I consider that a prospective purchaser would have been told that the steel posts were unlikely to result in instability to the subject property before it had otherwise reached the end of its useful life.
26. I now turn to the defect-free value. Mr Murphy considered that the subject property was worth £58,000 in its unimproved state and £65,000 if the extensive works of repair which had been recommended were carried out. The claimant put the defect-free value at £65,000. Although he produced various estate agents' sales particulars, he did not rely on any documented sale prices to support his valuation. Mr Murphy was an experienced chartered surveyor. I have no hesitation in preferring his evidence on this aspect to that of the claimant, who is not a valuer. I accept Mr Murphy's alternative valuations.
27. I have found that a prospective purchaser would have been advised that the subject property would not suffer serious structural damage during the remainder of its anticipated life. It would therefore not have been necessary to carry out the works costed by Mr Platt at £24,500 and which would have included improvement as well as repair. The appropriate defect-free value of the property is therefore £58,000, not £65,000.
28. Mr Platt did say, however, that if the cause of the cracking were thermal movement as advised by Mr Pearlstone, he would have recommended that expansion joints should be provided in the front and rear walls at a cost of approximately £1,680. Mr Boston agreed that thermal movement was a continuing cause of the damage to the houses he had inspected. I accept that evidence and find that the need to provide expansion joints would have been used by the prospective purchaser to negotiate a reduction in the price from £58,000 to £56,000.
29. It is agreed that the claimant is entitled to a home loss payment of ten per cent of the freehold value.
30. The remaining claim relates to disturbance and other items and totals £7,524. This figure includes monies paid by the claimant as a deposit and legal costs in connection with his original purchase of the subject property. He will receive compensation for the full value of that property. These items therefore constitute double-counting and are not admissible. The claimant's figure also includes payments in respect of a garden shed and its contents, which were apparently damaged or stolen around the time the subject property was vested in the acquiring authority. It emerged, however, that some at least of this damage was covered by an insurance policy and, in the absence of any further information, this item of claim has not been substantiated. Nor has supporting documentation been put forward in respect of the remaining items claimed. Since the onus is on the claimant to justify his claim there is, strictly speaking, no justification for awarding any compensation for disturbance. Mr Hancox, however, indicated that the acquiring authority was willing to pay a reasonable sum to reflect the losses that are likely to have been suffered. He suggested that a figure between £1,000 and £1,500 would be appropriate and, in the absence of any other evidence, I award £1,500.
31. I was told that the claimant has not incurred any surveyor's fees in connection with the claim, nor any legal costs in deducing title. The amount of compensation payable is therefore £63,100, as follow:

Freehold value £56,000

Home loss payment £ 5,600

Disturbance £ 1,500

Total £ 63,100

32. A letter on costs accompanies this decision which takes effect when, but not until, the question of costs is decided.

Dated: 19 December 2001

(Signed) N J Rose

Addendum

33. I have received written submissions on costs from the acquiring authority, but not from the claimant.
34. The acquiring authority suggests that, since neither party persuaded the Tribunal to agree the valuation it had proposed, each side should bear its own costs. It also suggests that the hearing fee should be shared equally between the claimant and the acquiring authority.
35. By pursuing the matter, the claimant obtained an increase of some 75% on the figure of £36,000 which the acquiring authority put forward at the commencement of the hearing. Indeed, the acquiring authority did not even agree to a home loss payment – to which the claimant was statutorily entitled - until after I queried the point on the first day. The claimant is, therefore, the successful party and would normally be entitled to his costs. He was, however, extremely dilatory in quantifying his claim, failing to do so until the commencement of the resumed hearing. In my view this should be reflected in my decision on costs.
36. Accordingly, I make no order as to costs, save that the hearing fee will be borne by the acquiring authority.

Dated: 21 January 2002

(Signed) N J Rose