England and Wales Lands Tribunal

[2002] EWLands ACQ_63_2002 (06 November 2002)

ACQ/63/2002

LANDS TRIBUNAL ACT 1949

COMPENSATION – compulsory acquisition of house in disrepair – value in good repair – comparables – cost of repairs – estimate – builder's tender – home loss payment – jurisdiction of Lands Tribunal – surveyor's fees

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN

SYDNEY BROWN Claimant

and

BRIDGNORTH DISTRICT COUNCIL Acquiring Authority

Re: 18 St Cuthbert's Crescent,

Albrighton, Shropshire

Determination without an oral hearing under

rule 27 of the Lands Tribunal Rules 1996

BY: P H Clarke FRICS

The following case is referred to in this decision:

Lee v Minister of Transport [1966] 1 QB 111
 


DECISION OF THE LANDS TRIBUNAL

1. This is a reference to determine the compensation payable for the compulsory acquisition of a house in Albrighton near Wolverhampton.
2. The parties have agreed to a determination without an oral hearing under rule 27 of the Lands Tribunal Rules 1996. I have received written representation from Mr Nicholas J Plant BSc MRICS, a director of Silk Rowson Plant Ltd, chartered surveyors of Shrewsbury and Walsall; and from Mr Nicholas Tart FRICS, a senior associate director of Lane Fox, chartered surveyors of Bridgnorth and elsewhere. I made an external inspection of the subject property and the comparables on 30 October 2002.

FACTS

3. On 27 September 1999 Bridgnorth District Council made the Bridgnorth District Council (18 St Cuthbert's Crescent, Albrighton) Compulsory Purchase Order 1999 authorising the compulsory acquisition of 18 St Cuthbert's Crescent, Albrighton ("the subject property") under section 17 of the Housing Act 1985 for the purpose of providing housing accommodation. The order was confirmed on 31 July 2000 following a public local inquiry. On 13 November 2000 the acquiring authority made a general vesting declaration which vested the property in the council on 13 December 2000. This is the date of valuation.
4. Albrighton is a large, pleasant village, seven miles to the west of Wolverhampton. It is by-passed by the A41 and is on the Wolverhampton to Shrewsbury railway line. Immediately to the west is Cosford RAF station and further west are the towns of Shifnell and Telford. The subject property is situated in a residential area, close to the main shopping and service centre in the High Street approximately one mile from the railway station.
5. 18 St Cuthbert's Crescent is a 2-storey semi-detached house constructed of brick with a tiled pitched roof. It was probably built in the 1950s. The accommodation comprises: entrance hall, two living rooms and kitchen on the ground floor and two double bedrooms and a single bedroom and bathroom on the first floor. There are gardens at the front, side and rear and at the valuation date a timber garage existed at the side of the property.
6. At the valuation date the subject property had been vacant since 1992 and was in considerable disrepair. The inspector who held the compulsory purchase order inquiry described the condition of the property in his report dated 7 June 2000 (some six months before the valuation date) as follows:-

"27. …... It is vacant and the ground floor is boarded up at the front and rear. At first floor level there are broken multi-paned windows to the front and rear. From an external examination it is apparent that the rainwater downpipes are rusty and leaking in places. The external brickwork appears to be in reasonably good repair and the roof tiles are in place but showing signs of ageing and deterioration. Where they are not boarded the metal window frames are in an advanced stage of rusting. The house is not wind and weather proof. The front garden is untended and the rear garden overgrown. The timber garage at the side of the house is leaning and seems to be in a precarious condition. ……..

28. At the accompanied site inspection following the inquiry I inspected the interior of the house. There are no satisfactory facilities for the preparation and cooking of food and the bathroom is in a poor state of repair. Neither the electric, the gas nor the mains water supplies were turned on at the time so these could not be tested. Electrical fittings are missing or broken in places. In the rear first floor bedroom there are cracks in the internal walls. There are various items of domestic furniture, clothing and rubbish throughout the house and generally the house is an untidy and vandalised state."

7. On 20 March 2002 Mr Plant, on behalf of the claimant, referred the determination of compensation to this Tribunal. The reference was accompanied by an agreement of 19 February and 7 March 2002 that: the matter be dealt with by written representations; each party would pay half the hearing fee, equal to 1% of the claim determined; each party would pay their own costs; and there will be no application by either party for an award of costs.

ISSUES

8. There are three issues in this reference:-

(1) the value of the land acquired:

(2) a claim for a home loss payment;

(3) a claim for fees for a structural survey and for surveyor's fees.

LAND VALUE

Claimant's case

9. Mr Plant valued the subject property by assessing the open market value in good repair at £89,000 and then deducting £20,000 for the cost of repairs, to produce a value of £69,000.
10. The open market value has been found by reference to comparables, houses in good repair in or close to St Cuthbert's Crescent, namely 20, 34, 66 and 106 St Cuthbert's Crescent and 4 Loak Road. These sales varied in date between August 2000 and February 2002 and in price between £67,000 and £92,500. Mr Plant particularly relied upon the sale of 20 St Cuthbert's Crescent, directly adjacent to the subject property, which was sold in poor condition in May 2001 for £67,000. He estimated that the repairs would have cost £10,000 to £12,000, giving a value of £79,000 in good condition and ignoring the depressing effect of the repairs in progress next door at the subject property. This would have affected the value of no. 20 by a further £10,000, giving a true value for this comparable in good condition of £89,000.
11. Mr Plant's deduction of £20,000 (excluding VAT) as the cost of repairs at the subject property was given by Mr Colin Silk, MRICS MBIFM in a report dated 2 January 2001. These repairs would put the property into a habitable condition. Mr Silk also stated that, having taken those items into account, the value on 20 December 2000 (the date of his inspection) was £72,500 and that, following completion of the works, the value would increase to £90,000. At the compulsory purchase order inquiry Bridgnorth District Council estimated that the cost of rehabilitation was £30,000. Adjusting the tender price used by Mr Tart in his valuation for works which Mr Plant considered excessive (£9,675) produced a reduced tender of £22,265 close to Mr Silk's figure. The works carried out by the authority represent a comprehensive refurbishment and renewal and are outside the scope of adequate repairs. Furthermore, the specification used for the tender is undated and does not give a date of inspection nor refer to the condition of the property. The specification is a "shopping list" of works which the council subjectively wished to carry out, not works required to put the property into good repair.

Authority's case

12. Mr Tart also valued the subject property by assessing the open market value as if in good repair (£79,000) and deducting the cost of remedial works (£41,000), to produce a value of £38,000.
13. He referred to four comparables to support his value in good repair: 44 Loak Road, 20, 33 and 34 St Cutbert's Crescent. These sales varied in date from March to September 2001 and in price from £67,000 to £86,000. The Halifax house price survey showed that prices in the region of £80,000 rose by only 3.1% between the last quarter of 2000 and the second quarter of 2001. This would also have been a quiet period in the house property market. Having regard to the sales of 33 and 34 St Cuthbert's Crescent and 44 Loak Road the average price of a semi-detached house in good condition was £78,000 to £80,000. With regard to 20 St Cuthbert's Crescent the condition is subject to some conjecture but it was re-let without major works. This showed that it was in better condition than the subject property although some works were necessary.
14. There were properties available in good condition at about the valuation date and there was no reason why a buyer would purchase the subject property unless it was the prospect of some immediate gain. A purchaser might undertake some refurbishment works himself. The value of the house is not only the result of deducting the cost of works from the future value. There has to be a sum equivalent to a theoretical profit to make the exercise worthwhile. If the value as repaired was £79,000 the deduction of the cost of works of £41,000 gives a net value before "profit" of £38,000. The estimated cost of works could have been reduced and this reduction would be taken as profit before undertaking the refurbishment.
15. As to the cost of the remedial works, the acquiring authority obtained a schedule of works or specification which was put out to tender. Three quotations were put in and the council accepted the lowest in the sum of £31,940. The works have been completed. It is anticipated that the final account will be about £35,000, just over £41,000 with the addition of VAT.

Decision

16. I will follow the approach used by both valuers, namely to assess the market value in good condition as at 13 December 2000, having regard to the sales of comparable houses, and then to deduct the estimated cost of repairs.
17. I have been referred to seven comparable transactions. I give no weight to two of them due to differences between the dates of sale and the valuation date and the absence of evidence covering these periods regarding changes in house prices. These are: 66 St Cuthbert's Crescent, a sale in February 2002, two years two months after the valuation date; and 44 Loak Road, a sale in September 2001, nine months after the valuation date. I am left with five transactions all relating to properties close to the subject property.
18. 106 St Cuthbert's Crescent was sold in August 2000 for £84,500. This was referred to by Mr Plant but not by Mr Tart. It is an end of terrace house with similar accommodation to the subject property. 4 Loak Road was another comparable referred to only by Mr Plant. It is not in St Cuthbert's Crescent but is only a short distance from the subject property and has similar accommodation. It was sold in December 2000 for £86,000. 34 St Cuthbert's Crescent is a semi-detached house close to the subject property and with similar accommodation. Both valuers referred to this comparable but unfortunately did not agree on the price or the date of sale, although the differences are not substantial. Mr Plant said that the sale was in July 2001 at £82,000, Mr Tart said March 2001 at a price of £80,000. 33 St Cuthbert's Crescent was referred to by Mr Tart. This was a sale in July 2001 at either £82,000 (Mr Plant) or £80,000 (Mr Tart).
19. In my judgment these comparables indicate a price for the subject property in good condition at the valuation date in the region of £82,000 to £85,000.
20. I now consider what might have been the best comparable, the sale of 20 St Cuthbert's Crescent in either March 2001 (Mr Plant) or May 2001 (Mr Tart) at £67,000. Unfortunately for comparison purposes this property was in disrepair although the extent is not agreed. This is a semi-detached house immediately adjoining the subject property (although not the other half of the semi-detached pair of which the subject property forms part), of similar construction and appearance and accommodation. Mr Plant has produced a letter dated 27 February 2002 containing a statement as to the condition of the house at sale, confirmed as correct by the owner. The condition statement notes that the house was vacant for 18 months prior to sale and was purchased as an investment. The works required included redecoration, rewiring, a new boiler, replacement of windows. At the time of sale the subject property was being repaired and was used as a builder's compound, a material factor is depressing the price of no. 20. Mr Plant said that the repairs required to no. 20 would have cost £10,000 to £12,000 and the effect of the works being carried out at the subject property would have depressed the price by a further £10,000. The price of £67,000 should therefore be increased by £12,000 and £10,000 to indicate a value in good repair of £89,000. This comparable, said Mr Plant, is the best evidence of value. Mr Tart said that the internal condition of no. 20 is the subject of some conjecture but it was quickly re-let following purchase without the obvious need for extensive remedial works. The selling agents have advised that it was sold with some repairs necessary to the central heating system. In my judgment, Mr Plant has exaggerated the effects of the disrepair and the works being carried out to the subject property at the time of sale. In my view the sale of no.20, making allowance for disrepair, gives an indication that about £80,000 was the value of the subject property in good repair in December 2000.
21. Taking all the relevant comparables into account I find that the value of the subject property on 13 December 2000 in good repair was £82,000.
22. I turn now to the cost of repairs. Mr Plant relied on an estimate prepared by Mr Silk in the sum of £20,000 excluding VAT. Mr Silk's opinion was, however, qualified as follows: "we would however stress that this is purely an estimate at this stage and would need to be verified by the obtaining of competitive builder's quotations." Mr Plant's deduction in his valuation was £20,000, which would be increased to £23,500 with the inclusion of VAT. Mr Tart's deduction was £41,000 including VAT based on the actual cost of the works carried out to the subject property by the acquiring authority.
23. I prefer to base my repairs deduction on the actual adjusted costs. Actual costs following a competitive tender are likely to be more accurate than an estimate, a view which is apparently shared by Mr Silk in the qualification to his estimate referred to above. My starting point is therefore the accepted quotation by KNM Construction Ltd of £31,940 based on a specification prepared by Bridgnorth District Council. (The other quotations were £34,952, £36,669 and £44,380). The date of the tender is 12 September 2001, nine months after the valuation date but I have been given no evidence regarding changes in building costs during the intervening nine months. I regard the specification as generally reasonable having regard to the condition of the subject property, but I am doubtful whether a purchaser in the open market would have allowed for the renewal of the roof. I think he would have allowed solely for minor roof repairs. For this reason I reduce the cost of works by £3,500, to produce a revised figure of £28,940. The addition of VAT gives a total cost of £34,004, say £34,000.
24. My valuation of the subject property as at 13 December 2000 is therefore £48,000, comprising the value in good repair of £82,000 less the cost of repairs of £34,000.

HOME LOSS PAYMENT

25. Mr Plant claims a home loss payment of £6,900. Mr Tart does not deal with this head of claim.
26. The jurisdiction of the Lands Tribunal in the compulsory acquisition of land is to determine the amount of disputed compensation (see section 1 of the Land Compensation Act 1961 and section 6 of the Compulsory Purchase Act 1965). A home loss payment does not, in my judgment, form part of that compensation. It is a payment ascertainable by a formula under provisions contained in sections 29-33 of the Land Compensation Act 1973. It does not require assessment. The only jurisdiction given to this Tribunal in respect of home loss payments is the valuation of an interest on a notional compulsory purchase basis (where there has in fact been no compulsory acquisition) under section 30(3)(b) of the 1973 Act. In my judgment the Tribunal has no power to decide whether a claimant is or is not entitled to a home loss payment. It does not form part of the Tribunal's jurisdiction which is to determine the amount of disputed compensation. I make no decision on this head of claim.

SURVEYOR'S FEES

27. Mr Plant said that the claimant instructed his firm to produce a building survey report to assist in the assessment of compensation. The fee was £552.25 (inclusive of VAT) and is claimed as an expense in the calculation of compensation. Mr Plant also claimed surveyor's fees in an unspecified amount. Mr Tart replied that the acquiring authority did not consent to underwrite the cost of a building survey. It would have been prudent in the face of costs to obtain estimates from building contractors rather than incur the expense of such a report. Mr Tart did not refer in his representations to surveyors' fees in general.
28. It is well-settled that surveyor's fees for preparing and pursuing a claim may be awarded as compensation for "any other matter not directly based on the value of land" (see the second limb of rule (6) of section 5 of the Land Compensation Act 1961 and Lee v Minister of Transport [1966] 1 QB 111 at 119 and 123-4). The fee for the building survey and surveyor's fees in general are therefore admissible in principle as part of the compensation on compulsory acquisition. There were negotiations prior to the reference to this Tribunal and the claimant is entitled in principle to reimbursement of the fees payable to his surveyors.
29. I question, however, whether it was necessary for instructions to be given for a building survey report in the detail which was provided by Mr Silk. The claimant was not purchasing the property and did not need to be told in detail its condition. All that was required for the purposes of Mr Plant's valuation was a list of defects and an estimate of the cost of repair. I therefore reject as unreasonable the claim for a separate fee of £552.25. Mr Plant is however entitled to a fee for his services prior to the reference. He has not made a claim for his fees in a specific amount. I have no evidence as to the time spent in preparing and negotiating the claim prior to the reference. All I can do in these circumstances is award a fee in accordance with Rydes Scale, which will include the calculation of the deduction for repairs which formed part of the valuation.

DETERMINATION

30. I determine that the compensation payable for the compulsory acquisition of the freehold interest in 18 St Cuthbert's Crescent, Albrighton, Shropshire under the Bridgnorth District Council (18 St Cuthbert's Crescent, Albrighton) Compulsory Purchase Order 1999 is the sum of £48,000 (forty-eight thousand pounds) plus surveyor's fees under Rydes Scale. Interest on the compensation is the subject of specific statutory provisions (section 11 of the Compulsory Purchase Act 1965 and section 32 of Land Compensation Act 1961).
31. The parties have agreed that each party will bear their own costs of the reference and not apply for an award of costs. Accordingly, I make no order as to costs.

DATED:

(Signed) P H Clarke