England and Wales Lands Tribunal

[2001] EWLands ACQ_161_2000 (15 August 2001)

ACQ/161/2000

LANDS TRIBUNAL ACT 1949

COMPENSATION – compulsory acquisition of derelict property in Bradford – comparables Council's valuer's comparables rejected in favour of settlement on adjoining property – compensation determined at £16,000

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN MOHAMMED ABDUL KHALIQUE

and

NATIONAL WESTMINSTER BANK PLC Claimants

and

CITY OF BRADFORD METROPOLITAN Acquiring

DISTRICT COUNCIL Authority

Re: 242 Manningham Lane,

Bradford

Tribunal Member: P H Clarke FRICS

Sitting at Huddersfield

on 28 and 29 June 2001

The claimants did not appear and were not represented.

Vincent Fraser QC, instructed by Department of Legal and Democratic Services, City of Bradford MDC, for the acquiring authority.


 


DECISION

1. This is a reference to determine the compensation payable for the compulsory acquisition of a derelict property in Bradford.
2. The claimants did not appear and were not represented. Vincent Fraser QC appeared for the acquiring authority and called Ivor James BSc, a property services officer with Bradford Metropolitan District Council; John Philip Rishworth BSc MRICS, a senior property services officer in the Asset Management Department of the Council; and David Fisher BSc CEng MICE MIHT, senior development engineer in the Structural Engineering Unit of the Council.

FACTS

3. From the evidence I find the following facts.
4. On 18 November 1998 the City of Bradford Metropolitan District Council (234-244 Manningham Lane, and 2-4 Clifton Street, Bradford) Compulsory Purchase Order 1998 was confirmed. It included 242 Manningham Lane, the property which is the subject of this reference. Notices to treat were served on 26 July 1999 and notices of entry on 14 December 1999. The acquiring authority ("the Council") took possession of the property on 14 February 2001. This is the date of valuation.
5. The subject property was situated on the east side of Manningham Lane, between Clifton Street and Thorncliffe Road, in a predominantly commercial location approximately one and a half miles to the north of Bradford City Centre. Manningham Lane is one of the main radial roads leading out of Bradford and carries a heavy volume of traffic. The subject property was built in the last quarter of the 19^th century on the site of a former quarry with loosely placed fill some 14 metres deep. It was one of a pair of stone built dwellinghouses with accommodation on basement, ground and two upper floors with a two-storey rear extension. The ground floor front room had been converted into a shop. The property was in a derelict condition at the date of valuation. It has now been demolished. The site areas was 120 square metres.
6. Evidence regarding the condition of the subject property and the estimated cost of structural repairs was given by Mr Fisher, on behalf of the Council. The relevant part of his expert report is as follows:-

"Exterior

The roof had been re-covered with tiles but about 50% of this covering was missing as a result of a fire in the attic storey. The extension roof could not be seen although internal evidence in the form of collapsed ceilings suggested that it was in poor condition. The chimney stack leaned slightly.

The front wall was generally plumb and straight. Pointing was in poor condition and a mullion in one of the first floor windows was splitting apart at the base; the lintel to this window sloped. The woodwork over the shop front sagged and the attached gutter was rotten. A straight joint had been formed in the masonry at the junction with the neighbouring property and this had been newly pointed above first floor level; below this the pointing had fallen out leaving an open joint. The shop front was fully boarded over and could not be inspected.

Interior

Internally the property seemed to have been empty for some time and fire damage and subsequent water penetration had caused deterioration in the upper floors and staircases; consequently certain area were not entered for safety reasons.

The fire had occurred in the attic and much of this level was open to the sky. The staircase to this level had virtually collapsed and no entry was attempted. On the first floor the ceilings had collapsed in virtually every room. There were vertical cracks at the front and cross wall junctions and also at the junction of the back wall and the extension wall. On the ground floor the back room ceiling was sagging and there were vertical cracks in the party wall near its junction with the back wall and also at the side of the door between the back room and the hallway. The extension walls leaned outwards. The stairs between the ground and first floors were in a precarious condition although just usable; entry beneath them to the basement, however, was not attempted.

Conclusions

Consideration of the defects observed in this property shows three main structural problems:-

(i) Subsidence of the rear of the house and particularly movement of the two storey extension rotating downwards at the rear and away from the main house building;

(ii) Separation of the front wall and , to a lesser extent, the back wall from the main cross walls;

(iii) Virtual dereliction of the property following its abandonment and fire damage."

Repairs to prevent further subsidence which would have been expected were the installation of piling and ground beams to support the walls off the quarry base and the installation of steel straps to tie the walls to the cross walls and floors. The approximate costs of structural repairs was £40,000 for piling and ground beams and £500 for the stabilisation of walls.

7. The claimants were freeholders and mortgagees respectively of the subject property.
8. On 19 June 2000 the Council referred the determination of compensation to this Tribunal. On 20 March 2001 it was ordered by the Tribunal that this reference be heard together with the references ACQ/133 and 162-5/2000 relating to adjoining properties. At the hearing, however, it was recognised that this reference should be the subject of a separate hearing. On 31 May 2001 an application by the Council to call a third expert witness (a quantity surveyor) and to adduce further expert evidence was refused on the grounds that further expert evidence would not be proportionate to the amounts of compensation claimed and offered. This application was renewed at the start of the hearing and was again refused on the grounds of proportionality.

COUNCIL'S CASE

9. Mr James gave evidence in the hearing of reference ACQ/133/00 and was cross-examined by counsel appearing for the claimants in references ACQ/162-5/00 on that part of his evidence relating to 4 Clifton Street. This evidence is also relevant to this reference. The compensation payable for the acquisition of 4 Clifton Street was the subject of a reference to this Tribunal but was agreed in November 2000 with the claimant's valuer before the hearing. The agreed compensation was £15,000. This residential property was let at £250 per month. Mr James arrived at his figure of £15,000 by capitalising the rent at 5 YP (20% yield in perpetuity). This represented investment value. The building was in poor structural condition and had a life of only five years. Mr James did not have a figure in mind for the cost of repairs when he reached this agreement but he was aware that Mr Fisher's estimate was £35,650. Mr James had previously offered £5,000 for this property in 1997.
10. Mr Rishworth valued the subject property at £2,250. He relied on two comparables: 154 Salt Street and 6, 8, 12 and 16 Iddesleigh Street. He rejected 4 Clifton Street as a good comparable on the grounds that this property was occupied and, even though it was structurally defective and beyond economic repair and had a short life, it was capable of producing rental income in the short term. It therefore had a higher value.
11. 154 Salt Street was a house built about 100 years ago on the site of an old quarry. It is one mile from the subject properties. The Council offered to buy this property for £5,000 in March 1994. It was sold by auction in July 1995 for £3,500. The properties in Iddesleigh Street are about two and half miles from the subject property. These houses were built about 100 years ago but were structurally sound. In the early 1990s the street declined and was declared a clearance area in July 1995. A compulsory purchaser order was made in 1997. The properties were acquired by the Council as follows: no.6 bought in March 1997 for £2,000; no.8 bought in February 1998 for £2,000; no.12, bought in May 1996 for £2,000; and no.16 bought in April 1997 for £2,000. Residential values for this type of property in Bradford have changed little over the past five years and not at all relative to the subject property. All the houses in Iddlesleigh Street were derelict and fire damaged at purchase. However, there were no site problems.

DECISION

12. I have inspected the subject property and the surrounding area. The property have now been demolished.
13. I have been referred to three comparables: 4 Clifton Street, 154 Salt Street and 6, 8, 12 and 16 Iddlesleigh Street. I reject the Salt Street and Iddlesleigh Street transactions as unreliable comparables and give them no weight for the following reasons.
14. 154 Salt Street was sold by auction in July 1995 for £3,500. In the previous year the Council had offered to buy the property for £5,000. I have three reasons for rejecting this comparable. First, the property is one mile from the subject property. Secondly, the offer made by the Council in March 1994 was not a completed transaction and was made some seven years before the valuation date in this reference. Thirdly, the sale by auction in July 1995 was nearly six years before the valuation date. I was given no reliable evidence as to changes in values between July 1995 and February 2001. I am unable to accept Mr Rishworth's unsupported opinion that there has been no change during this period.
15. The properties in Iddlesleigh Street were purchased by the Council between May 1996 and November 1998 for £2,000 each. I reject these comparables for three reasons. First, these houses are approximately two and half miles from the subject property. Secondly, these transactions took place between two and a half and five years before the valuation date and, as I have said, I have been given no reliable evidence as to the changes in values between May 1996 and February 2001. Thirdly, the purchases by the Council, after the declaration of a clearance area and before the making of a compulsory purchase order, were in the shadow of compulsory purchase and are unreliable evidence of the true values.
16. I am left with only one comparable to which I can give any weight, the settlement by the Council of the compensation payable for the purchase of 4 Clifton Street, an immediately adjoining property acquired under the same compulsory purchase order. The price was agreed by Mr James at £15,000 in November 2000 before a Lands Tribunal hearing. This settlement was a considerable increase on his previous offer of £5,000. This agreement was only three months before the valuation date in this reference. At the time of purchase 4 Clifton Street was let at £250 per month (£3,000 per annum). The property was in poor structural condition. Mr James was aware of Mr Fisher's estimated cost of repairs of £35,650 and acknowledged that the building had an economic life of only five years.
17. Mr Rishworth rejected this settlement as evidence of value on the grounds that 4 Clifton Street was occupied, was not derelict like the subject property and, although structurally defective and with a short life, it was nevertheless capable of producing rental income in the short term.
18. I cannot agree with Mr Rishworth that 4 Clifton Street is not a useful comparable. As a settlement it is not, of course, ideal and would normally be given less weight than open market transactions. I have, however, no such transactions on which I can place any reliance. In my judgment, Mr Rishworth was wrong to give 4 Clifton Street no weight when preparing his valuation. This has resulted in his valuation being much too low. The crucial facts, which allow comparison with the subject property, are the admissions by both Mr James and Mr Rishworth that 4 Clifton Street was structurally unsound (Mr James was aware of the estimated cost of repairs of £35,650) and that the building had a very limited economic life (Mr James put this at five years). These admissions allow the settlement figure to be analysed to relate it to the subject property.
19. Mr James arrived at the figure of agreed compensation by capitalising the rent of £3,000 per annum by 5 YP, which is a yield of 20% in perpetuity. This approach is inconsistent with his evidence that the building had an economic life of only five years. In my view, the correct approach would have been to capitalise the rent for five years with reversion to a site plus a building at the end of its economic life. The position in five years time is essentially the position which existed at the valuation date in respect of the subject property. A site with value on which stood a building of no value. The settlement figure of £15,000 can be devalued on this basis to arrive at the value of the site plus a building at the end of its life and with no value. Using the 20% yield, adopted by Mr James to capitalise the rent, to carry out the capitalisation of the rent for five years and to defer the reversionary value of the site plus an uneconomic building, produces the following devaluation:-

Rent	£ 3,000
YP 5 years @ 20%	2.99	£ 8,970
Reversion to value of land &
Uneconomic building	£15,000
PV of £1 in 5 years @ 20%	0.402	£ 6,030
		£15,000

By an arithmetical coincidence the present value of the land plus an uneconomic building (before deferment) is the same as the settlement figure of £15,000.

20. This figure can now be used to value the subject property. No questions of demolition costs or repairs arise because a direct like for like comparison can be made between 4 Clifton Street (land plus uneconomic building) and the subject property (land and derelict and uneconomic building). The site area of 4 Clifton Street was 75 square metres, smaller than the subject property, which had a site area of 120 square metres. The respective site areas are a useful unit of comparison, although the price for 4 Clifton Street cannot be applied pro-rata to the larger area of the subject property, which included a greater amount of backland. In my view, it is a matter of overall judgment, rather than calculation, as to how the settlement price is to be applied to the subject property. Some reducing allowance should be made for the larger site of the subject property with greater backland of less value and some appreciating allowance should be made for the better position in Manningham Lane with prospects of higher value commercial use. Overall, I have decided that the settlement of 4 Clifton Street indicates a figure of £16,000 for the subject property.
21. Mr Rishworth's valuation is much too low, being based on out of date comparables one to two and a half miles from the subject property. In my view, when Mr James agreed the price for 4 Clifton Street, this established a better comparable which, despite the differences, could be used to value the subject property. Mr Rishworth should have reviewed his earlier valuation in the light of this new and better value evidence. To persist in offering compensation of £2,250 for a property of larger size and commercial frontage when an immediately adjoining residential property in a side street with only five years of economic life remaining was agreed to be worth £15,000 was, in my view, inconsistent with this settlement.
22. I determine that the compensation payable for the compulsory acquisition of the freehold interest in 242 Manningham Lane, Bradford under the City of Bradford Metropolitan District Council (234-244 and 2-4 Clifton Street, Bradford) Compulsory Purchase Order 1998 is £16,000 (sixteen thousand pounds).
23. This decision concludes my determination on the substantive issues in this reference. It will take effect as a decision when the question of costs has been decided and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and order 61 rule 1(1) of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to the costs of this reference and a letter accompanying this decision sets out the procedure for submissions in writing.

DATED: 15 August 2001

(Signed) P H Clarke

ADDENDUM

24. I have received written submissions on costs from the Council. The Council ask for their costs on the standard basis on the grounds that no claims for compensation were delivered by the claimants to enable offers to be made.
25. The starting point for my decision on costs is the general rule that the costs of a reference to the Lands Tribunal to determine compensation fall on the acquiring authority without whose resort to the use of compulsory powers there would have been no need for the owner to be compensated (see Emslie and Simpson Limited v Aberdeen District Council (No.2) [1995] 35 RVR 159 and Lesquende Limited v Planning and Environment Committee of the States of Jersey [1998] 1 EGLR 137).
26. The Council, however, say that section 4 of the 1961 Act applies in these references. They should receive their costs due to the failure by the claimants to serve notices of claim. Section 4(1)(b) provides as follows:-

"Where … -

(a) …

(b) the Lands Tribunal is satisfied that a claimant has failed to deliver to the acquiring authority, in time to enable them to make a proper offer, a notice in writing of the amount claimed by him, containing the particulars mentioned in subsection (2) of this section;

the Lands Tribunal shall, unless for special reasons it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred …., after the time when in the opinion of the Lands Tribunal the notice should have been delivered."

27. In my judgment there are two special reasons why the above provisions should not apply in this reference. First, I have awarded compensation in a sum considerably greater than the Council's figure. Second, this acquisition was of a vacant, derelict property where the compensation represented the value of the land; no question of disturbance arose. The Council were not prevented from preparing a valuation and making an offer by the absence of notices of claim. In my experience few claimants submit notices of claim wholly in accordance with section 4(1) and (2) of the 1961 Act. The claimants should have lodged claims but, in the circumstances, their failure to do so should not result in any liability for costs. For these special reasons I decline to order the claimants to pay the Council's costs.
28. I find it surprising, and a matter of critical comment, that the Council, having failed in this reference so decisively, should require the claimants to pay the Council's costs, all in reliance on what is little more than a technicality. If the Council succeed in recovering their costs it would lead to a manifestly unjust result. I can find no reason for ordering the claimants to pay the Council's costs. Notwithstanding the claimants' failure to take any part in these proceedings, I make no order as to costs.

DATED: 13 September 2001

(Signed) P H Clarke