England and Wales Lands Tribunal

[2002] EWLands ACQ_72_2001 (21 March 2002)

ACQ/72/2001

LANDS TRIBUNAL ACT 1949

COMPENSATION – compulsory acquisition of long leasehold house in poor condition – mortgage – value of unencumbered long leasehold interest determined at £7,600 – no deduction of charges when determining market value – lack of evidence regarding mortgage – no determination of amounts payable to claimants

IN THE MATTER of NOTICES OF REFERENCE

BETWEEN ALBERT JAMES BEARD First Claimant

and

NATIONAL WESTMINSTER BANK PLC Second Claimants

and

WIGAN METROPOLITAN BOROUGH COUNCIL Acquiring

Authority

Re: 21 Stanley Road,

Platt Bridge,

Wigan

Before: Mr P H Clarke FRICS

Sitting at Manchester on 27 February 2002

Mr Albert James Beard, the first claimant, appeared in person

The second claimants were not represented

Mr Andrew Clark of counsel, instructed by Forbes, solicitors, appeared for the acquiring authority


 


DECISION

1. These are references to determine the value on compulsory purchase of a terraced house in Platt Bridge, near Wigan.
2. Mr Albert James Beard, the first claimant, appeared in person. National Westminster Bank Plc, the second claimants, did not appear and were not represented. Mr Andrew Clark of counsel appeared for the acquiring authority, Wigan Metropolitan Borough Council ("the Council"), and called Mr Nigel T Herdman MRICS, a Group Surveyor (Professional Services) with the Council.

FACTS

3. On 14 February 1997 Wigan Borough Council made The Wigan Borough Council Stanley Road, Platt Bridge Compulsory Purchase Order 1997 under section 17 (3) of the Housing Act 1985. This authorised the compulsory purchase of 21 Stanley Road, Platt Bridge, near Wigan ("the subject property") for the purpose of making the dwelling suitable for occupation. It was confirmed on 20 November 1997. The Council acquired the subject property using the General Vesting Declaration procedure under the Compulsory Purchase (Vesting Declarations) Act 1981. The date of vesting was 6 May 1998. This is the date of valuation.
4. 21 Stanley Road is a mid-terraced pavement fronted house situated in Platt Bridge, approximately two miles south-east of Wigan. At the valuation date the accommodation comprised two living rooms and kitchen on the ground floor and two bedrooms and a bathroom (without appliances) on the first floor. The property had been extended at the rear. The floor area was 81.7 sq m. The property had been vacant for some time prior to acquisition and had suffered fire damage. A schedule of works to put the property into a habitable condition had been prepared by the Director of Environmental Health and Consumer Protection and costed as at the valuation date at £10,500.
5. At the valuation date the subject property was held on a long leasehold interest for a term of 999 years from 1 May 1903 at an apportioned ground rent of £3 per annum, assigned to Mr Beard on or about November 1991. This interest was subject to a registered charge dated 7 November 1991 held by National Westminster Bank Plc (the second claimants) to secure monies advanced including further advances. The claim form returned by the second claimants referred to this as a first legal mortgage to secure the sum of £68,157.21.
6. Following acquisition of the subject property the Council disposed of the freehold interest with vacant possession in accordance with their standard procedure for the disposal of surplus property. This involved marketing and the submission of sealed offers by a closing date. Conditions of sale required the purchaser to pay a contribution towards the Council's legal and surveyor's fees of 4% or £600, whichever is greater, and to carry out the works in the schedule referred to above.
7. The subject property was first marketed on 22 December 1998 with a closing date for offers of 29 January 1999. Sealed offers were invited in the region of £9,000. Three offers were received, for £7,400, £6,251 and £3,500 respectively. The highest offer was subsequently withdrawn. The other offers were considered too low to be acceptable. Both parties and the Council's recently selected nominated developer to work with the Council under its Empty Property Initiative were invited to resubmit or submit offers. The closing date was 30 April 1999. Two offers were received, for £7,001 and £6,500 respectively. The highest offer was accepted and the sale of 21 Stanley Road was completed on 12 January 2000.
8. On 8 May 2001 the Council made two references to this Tribunal for the determination of compensation naming Mr J Beard and National Westminster Bank Plc respectively as the claimants. On 6 July 2001 these references were consolidated by the Registrar.

PARTIES TO THE REFERENCE

9. At the start of the hearing Mr Clark, on behalf of the Council, raised a matter which led me to consider whether the parties to the reference were correct and caused Mr Beard to ask for an adjournment of the hearing. This matter was Mr Beard's former bankruptcy.
10. On 3 August 1994 Mr Beard was adjudged bankrupt by order of Barrow in Furness County Court. Mr Clark said that Mr Beard's property (including 21 Stanley Road) would have been vested in his trustee in bankruptcy. Mr Beard's bankruptcy would have been discharged three years later. Mr Beard confirmed this occurred in 1997. But, said Mr Clark, it is not known whether the subject property was then transferred back to Mr Beard. The name of the trustee in bankruptcy is not known to the Council. Mr Beard could not tell me his name at the hearing. He has had no contact with him for four years. Mr Clark said that it is not known whether Mr Beard or his trustee were the owners of the long leasehold interest in 21 Stanley Road when the compulsory purchase order was made and at the date of vesting. The order refers to Mr Beard as lessee or reputed lessee. I was told that this matter was raised at the compulsory purchase order inquiry but the inspector continued with the hearing and the order was subsequently confirmed.
11. Mr Clark urged me to continue with the hearing. He referred to rule 10 of the Lands Tribunal Rules 1996 and said that Mr Beard is named on the form of reference as claimant, not the trustee. The claimants are Mr Beard and National Westminster Bank. Mr Beard asked for the hearing to be adjourned on the grounds that the compensation offered by the Council is too low and that the trustee should be given the opportunity to challenge it. He had thought that the Bank would appear and present a case for a higher figure of compensation and therefore he has not put forward any evidence.
12. I decided to proceed with the hearing. There is no evidence to show that Mr Beard's trustee in bankruptcy had any further interest in the subject property after Mr Beard's discharge from bankruptcy in 1997. Mr Beard said that the last contact he had with him was four years ago, i.e. 1997 or 1998. It appears to be no more than a possibility that the trustee may still hold the property. It is, in my view, unlikely that, if the subject property continued to be vested in the trustee, he would have remained silent during the compulsory purchase procedures and the reference to this Tribunal. The Council do not know his name and presumably he has made no contact with them. A search in the Tribunal's files has produced no indication of the trustee's name or existence or continuing interest in 21 Stanley Road. If Mr Beard thought that the trustee still had an interest in the property and wished to seek his assistance in pursuing a claim for compensation he could have done so at any time before or after the acquisition. The fact that Mr Beard thinks that the Council's figure of compensation is too low and that he has not prepared his case are not good reasons for an adjournment. I should add that at this stage of the proceedings Mr Beard decided to leave the hearing but returned ten minutes later and took further part in the proceedings.

VALUATION

13. The second claimants indicated at an early stage in the reference that they would not be adducing expert evidence. They have returned a claim form to the Council but have not sought a specific figure of compensation. Mr Beard has not submitted a claim. At the hearing he put the value of the subject property at £35,000 but did not explain his figure nor present any evidence although he cross-examined Mr Herdman on his valuation. The only reliable evidence on which I can make my decision is that of Mr Herdman.
14. He put the value of the long leasehold interest at £7,000. This is based on the price paid on the sale of the freehold of the subject property by tender (£7,001) less the capitalised ground rent (£15, representing 5 YP of the rent of £3 per annum), rounded up to £7,000. He also produced evidence of comparables and the costs of works to give general support to this figure. The minimum works to make the house habitable were estimated to cost £10,500. Mr Herdman said that 21 Stanley Road would have been worth £18,000 on the valuation date if the works had been carried out. The basic improved value would have been £20,000 on the assumption that the property had been renovated to meet the private rented market from which a deduction of £2,000 was made to allow for internal decorations and the provision of a further range of kitchen units to a basic standard, items not included in the schedule of works. Mr Herdman referred to three comparables of which he has personal knowledge to support his values of £18,000 and £20,000. These were: the purchase by the Council of the long leasehold interest in 641 Liverpool Road in September 1998 for £20,000; the private treaty sale of 113 Neville Street in November 1998 for £14,000; the sale by auction of the residue of the long leasehold interest in 643 Liverpool Road in July 1997 for £10,000 and the subsequent purchase by the Council in May 1999 at £14,000; and the purchase by the Council in advance of compulsory acquisition of the long leasehold interest in 639 Liverpool Road for £27,000.
15. Mr Herdman has 22 years professional experience, 11 of them with the Council. Mr Beard cross-examined Mr Herdman but was unable to throw any doubt on his valuations. To set against Mr Herdman's value I have an unsupported figure of £35,000 from Mr Beard, which I regard as a wholly unrealistic figure plucked out of the air at the hearing. I have no evidence at all from the second claimants.

Decision

16. Mr Herdman's figure of £7,000 is based principally on the sale of the subject property by a tender, which has the characteristics of an open market transaction, supported by a conventional valuation using comparables and the estimated cost of works. In the absence of other evidence to which I can give any weight I accept Mr Herdman's approach and figures subject to one small adjustment. The Council's invitation to offer for the subject property requires the purchaser to pay a contribution towards the Council's legal and surveyor's fees "of 4% or £600 whichever is the greater." Thus the purchaser effectively paid £7,001 plus £600 or £7,601 for the property. On a private treaty sale of a house it is unusual for the purchaser to pay any part of the vendor's fees. I do not think that the open market sale under section 5(2) of the Land Compensation Act 1961 assumes that the purchaser pays any part of the vendor's fees. I therefore adjust Mr Herdman's value upwards by adopting £7,601 as the effective price paid by the purchaser (in place of £7,001). I make the same deduction of £15 for the capitalised ground rent, producing a value for the long leasehold interest of £7,586 which I round up to £7,600. This is more in line with the value using comparables of £7,500, i.e. as repaired and decorated (£20,000) less the costs of these works (£12,500).
17. Mr Clark, however, asked me to go further and decide how much compensation is payable to each of the claimants. This compensation will be paid into court by the Council. He said that, on Mr Herdman's figures, £6,411.20 is payable to the second claimants, representing the value of the leasehold interest (£7,000) less two charges in favour of the Council in respect of works carried out to the property (totalling £589.80). No compensation is payable to Mr Beard, representing the value of the leasehold interest less the charges in favour of the Council and the amount due to the second claimants under the mortgage. Mr Clark said that this is case where the value of the mortgaged land (21 Stanley Road) is less than the amount due (£68,157.21). Section 15(1) of the Compulsory Purchase Act 1965 requires that "the value of the land, or the compensation to be paid by the acquiring authority in respect of the land, … shall be determined by the Lands Tribunal." Mr Clark also referred to section 7 of the Compulsory Purchase (Vesting Declarations) Act 1981 and adopted as his submissions paragraphs [350-360], [1348-1600] and [1042] in Volume 1 Part D of Butterworths Compulsory Purchase and Compensation Service.
18. In order to make the further determinations required by Mr Clark I would need more evidence than was adduced at the hearing. The second claimants were not represented and I have little evidence regarding their charge on the land. I do not have a copy of the instrument giving effect to this charge, which I was told covers other properties. The second claimants lodged with the Council a claim form dated 1 December 1997 which refers to a "first legal charge held – sum due £68,157.21" but no specific claim for compensation has been made. In a letter to the Tribunal dated 5 July 2001 the bank stated that it "… does require monies received for the Order, to come to this Department for the reduction of our outstanding balance. … and is awaiting payment from the sale proceeds." It was submitted by Mr Clark that this is a case where the value of the mortgaged land is less than the amount due. However, in the absence of the mortgage deed, I cannot be certain that either the whole of the amount of the loan is secured on the subject property or, if apportioned, that the apportioned amount exceeds the value. I was told by Mr Herdman and it is recorded in the Council's statement of issues that the legal charge held by the second claimants is disputed. I have no evidence regarding this dispute although in the letter of 5 July 2001 referred to above the bank stated that it "is not a party to any pending Court Action, …" Under the particular circumstances of this case I cannot determine whether the compensation should be paid to one claimant or the other or should be divided between them and, if so, in what proportions.
19. Mr Clark particularly asked me to deduct from the sum payable to the second claimants, two amounts, £404.80 and £185, charged on the subject property in respect of works carried out by the Council. I was not given a copy of the Local Land Charges Register confirming the charges. I was not told the name of the Act under which the works were carried out and the charges imposed. In my judgment these charges should not be taken into account when determining the value of the long leasehold interest in the property. Mr Herdman did not deduct them in his valuation; I think that is correct. They would not be taken into account when valuing the land under section 5(2) of the 1961 Act. The vendor and purchaser under the hypothetical open market sale envisaged by rule (2) would not reflect these charges in their negotiations and agreement of price. These charges are a matter between the Council and the claimants, particularly Mr Beard. It is not for this Tribunal to decide whether or not these sums can be deducted from the compensation determined by the Tribunal.
20. I determine that the value of the long leasehold interest in the subject property under section 5(2) of the 1961 Act as at 6 May 1998 was £7,600 (seven thousand and six hundred pounds).
21. This decision concludes my determination of 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 right of appeal will come into operation. The parties are invited to make submissions as to the costs of this consolidated reference and a letter accompanying this decision sets out the procedure in writing.

DATED: 21 March 2002

P H Clarke FRICS

Member of the Lands Tribunal

ADDENDUM

22. The Council do not seek their costs; I have received no representations from the claimants. I make no order as to costs.

DATED: 25 April 2002

P H Clarke FRICS

Member of the Lands Tribunal