England and Wales Lands Tribunal

[2002] EWLands LCA_139_2001 (26 April 2002)

LCA/139/2001

LANDS TRIBUNAL ACT 1949

COMPENSATION – Claim under Part I of Lands Compensation Act 1973 – house – depreciation in value caused by use of new motorway bridge – whether settlement evidence reliable – whether subsequent sale price relevant – compensation awarded £6,250.

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN MARK A NESBITT Claimant

and

THE NATIONAL ASSEMBLY FOR WALES Compensating

Authority

Re: 2 Earlswood Cottages

Jersey Marine

Swansea SA10 6NG

Before: N J Rose FRICS

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

on 26 March 2002

The following case is referred to in this decision:

Farr v Millersons Investments Limited (1971) 22 P & CR 1061

Claimant in person

Mr G T Thomas, FRICS, District Valuer Wales, for the Compensating Authority.


 


DECISION

1. This is a reference, heard under the simplified procedure (rule 28, Lands Tribunal Rules 1996), to determine the compensation payable to Mr M A Nesbitt under Part I of the Land Compensation Act 1973 ("the Act") in respect of the depreciation in value of 2 Earlswood Cottages, Jersey Marine, Swansea, SA10 6NG ("the subject property") following the construction of the London to South Wales M4 Motorway (Baglan to Earlswood section). The road was opened to public traffic on 12 December 1994 and the valuation date is 12 December 1995.
2. Mr Nesbitt appeared in person and gave evidence. Mr G T Thomas, FRICS, a principal valuer, district valuer Wales, lands services and taxation appeared, with leave of the Tribunal, for the compensating authority, the National Assembly for Wales. Both Mr Thomas and Mrs Linda Hunt, who heads the team dealing with Part I compensation at the compensating authority, gave evidence.
3. The parties were unable to make arrangements for me to inspect the subject property internally. Accordingly, and by agreement with the parties, I made an unaccompanied external inspection on 5 April 2002. In the light of that inspection and the evidence I find the following facts. The subject property is located some 200 yards south-east of the roundabout at the A483 and A48 junction, in the small hamlet of Earlswood. Swansea city centre is approximately five miles to the south-west and the village of Briton Ferry lies three-quarters of a mile to the north-east. The property is accessed off the south-bound carriageway of the A483 and is approached over a double width tarmacadam road, which terminates at the front of the property at its entrance to the Monkstone sailing club.
4. The hamlet of Earlswood comprises four dwelling houses, together with the former Ferry Boat Inn which has now been converted to residential use, a car repair depot and a larger depot servicing fire brigade vehicles. The area is semi-rural in character and somewhat isolated from the main body of urbanisation to the north-east at Briton Ferry.
5. The old A48 Neath river bridge lies approximately 95 metres to the north; the distance from the underside of that bridge to the ground below is about 16 metres. The new M4 bridge – which is the cause of this reference – is some 120 metres to the south of the subject property; the height from the ground to the underside of that bridge is approximately 21 metres.
6. The subject property comprises one of a pair of semi-detached houses, built probably about 200 years ago, of brick and stone with rough cast rendered and colour-washed elevations under a concrete interlocking tiled roof. To the side is a single-storey flat roofed extension running the full depth of the property. Most of the windows are provided with secondary glazing. At the rear the property is attached to a pair of houses known as 3 and 4 Earlswood Cottages.
7. The subject property is set on a slightly elevated plot, which at one time was lightly wooded. The accommodation consists of an entrance/utility room, living room, dining room, kitchen and bathroom/WC on the ground floor and three bedrooms on the first floor. Outside there is a garden and a purpose-built, gated car space. There is an oil-fired central heating system and mains drainage, water and electricity.
8. At the valuation date Mr Nesbitt owned the freehold interest in the subject property, which was occupied by three tenants on an assured shorthold tenancy. Neither party suggested that that tenancy is of any valuation significance.
9. S.1 of the Act provides for compensation to be paid where the value of an interest in land is depreciated by certain physical factors caused by the use of public works, including any highway. The physical factors in question include noise, vibration, smell, fumes, smoke and artificial lighting. It is agreed that Mr Nesbitt is entitled to compensation under s.1. The dispute relates to the amount of compensation; Mr Nesbitt suggests it should be £10,000 and Mr Thomas £650. At one stage Mr Nesbitt also claimed £6,000 for loss of rent, but in cross-examination he accepted that such loss was not covered by the relevant provisions of the Act.
10. Mr Nesbitt's valuation was arrived at as follows. He purchased the subject property in August 1988 for £28,000. In April 1994 the estate agents through whom he had originally purchased it expressed the view that its present market value was £35,000. In April 2000 he sold the house at auction for £25,000. Since the new road was opened to traffic after the property was valued at £35,000, the decline in value must have been attributable to such opening. Mr Nesbitt produced various property indices which showed that, if the value of his property had increased between the time he purchased it and when he sold it in line with house prices generally in Wales, it would have been worth more than £40,000 in April 2000. The implication I draw is that, since the property was sold for only £25,000, his claim for £10,000 was very reasonable.
11. Mr Thomas is a native of Swansea and has resided in the city for nearly 60 years. He commenced his professional life as an articled pupil in the estates department of Swansea Council in January 1961 and has worked in south Wales ever since. He explained that the subject property was situated in a unique location, there being only five other dwellinghouses in the immediate vicinity. The main residential area close by was Briton Ferry, on the other side of the river Neath, between half and three-quarters of a mile away. Because of their location, however, none of the houses in Briton Ferry was affected by the new motorway bridge. Of the properties in the immediate area, Part I claims had only been received in respect of the subject property, 4 Earlswood Cottages and 1A Warren Hill.
12. In Mr Thomas' opinion, the value of the subject property on the valuation date, reflecting the presence of the new bridge but without any traffic travelling along it, was £33,000. He referred to that as the "switched off value". Throughout the scheme, the "switched on value" – the value assuming traffic travelling along the newly constructed length of highway – had been assessed by deducting a percentage of the switched off value. This percentage had ranged from 0.5 per cent to 10 per cent. In the case of the subject property he had adopted 4 per cent. This was the same percentage as had been used to assess the compensation for the adjoining property, 4 Earlswood Cottages. It was less than the 10 per cent that had been applied to 1A Warren Hill, across the river, which was closer to the new bridge and at a higher elevation relative to that bridge than the subject property.
13. From the difference between switched off and switched on values Mr Thomas then deducted half the cost of the secondary glazing which had been installed by the compensating authority pursuant to regulations made under s.20 of the Act. His valuation was therefore £650, arrived at as follows:

Switched off value £33,000

Depreciation, ignoring secondary glazing, at 4% £ 1,320

Deduct 50% of cost of secondary glazing (£1,375) say £ 685

£ 635

say £650

Decision

14. Construction work on the new motorway bridge lasted from 1990 to 1994. Throughout that time the access road in front of the subject property was used on a daily basis by contractors' vehicles and, following closure of the neighbouring Ferry Boat Inn, the Inn car park was used as a caravan park for the building workers. The resulting disturbance clearly had an adverse effect on the use of the subject property and one cannot but sympathise with Mr Nesbitt on that account. Nevertheless, Parliament has decided that only certain categories of loss are compensatable. Mr Thomas suggested that the extent of that loss should be assessed by subtracting the switched on value from the switched off value and by the end of the hearing Mr Nesbitt appeared to accept that as a proper approach. I, too, think that it is an appropriate basis of measurement and I propose to consider the value of the property at the valuation date accordingly.
15. Before doing so, however, I deal with the effect on value of the secondary glazing which, at the valuation date, had been installed in the property at the compensating authority's expense. Mr Thomas explained that, in cases where the compensating authority has installed secondary glazing,

"Half of the installation cost has been deducted from the difference between the switched off and switched on values to arrive at the monetary compensation payable."

16. This method, he said, followed a well-established principle in dealing with Part I claims. Although it was a robust approach, Mr Thomas felt that it gave "the maximum possible benefit of the doubt" to Mr Nesbitt.
17. Mr Nesbitt did not agree. He said that, when the compensating authority's consulting engineers made him the offer of noise insulation works in 1991, no mention was made of the fact that half the cost would be deducted from the compensation payable under the Act. The existing window frames were part aluminium and part timber, whereas the secondary glazing was white uPVC. Not only was the new glazing out of keeping with the existing windows, but its installation meant that it would in future be necessary to open two windows instead of one. If he had been told that the cost would be reflected in the compensation, he would probably have refused the offer and replaced all the windows with double glazing. In summary, Mr Nesbitt said that the secondary glazing was unattractive and would not encourage anyone to buy the house.
18. On this aspect I prefer the evidence of Mr Nesbitt, who knows the subject property well, to that of Mr Thomas, who was not instructed to deal with the matter until December 2001 and who has not inspected the subject property internally. It is an elementary principle of valuation that an increase in cost does not necessarily result in a corresponding or any increase in value. In accepting Mr Nesbitt's description of the disadvantages of the secondary glazing in question, I bear in mind that it has in fact been removed from the main living room on the ground floor. I therefore do not consider it appropriate to make any deduction to reflect the presence of secondary glazing at the valuation date.
19. I now turn to the value of the subject property at that date, with the new bridge in place but without any traffic using it – the switched off value. Mr Nesbitt's figure is £35,000. It is based on a valuation report prepared by Messrs Stuart Wilkie of Sketty on 23 April 1994, and which suggested that figure as the then market value of the property. The purpose for which that valuation was prepared is not clear and the author of the report did not give evidence before me. The weight to be given to his opinion is therefore limited. The same applies to Mr Thomas' figure £33,000 because, as I have said, he has not inspected the subject property internally. Nevertheless, the difference between the two valuations is small and I find that the switched off value of the subject property on 12 December 1995 was £34,000. This valuation reflects, among other matters, the pre-existing noise from traffic using the A48.
20. Finally, I consider the switched on value. Mr Nesbitt relies on the sale of the subject property itself over 4 years later at £25,000 as providing the best evidence of this value. He says that, if anything, this price exaggerates the value in December 1995, because property prices increased significantly between then and April 2000. Mr Thomas relies, in effect, on the compensation agreed by the owners of two other houses in the vicinity. He properly points out, however, that the agents who advised the owners of those houses, the William Ricketts Partnership of Cardiff ("Ricketts") did not recommend their clients to accept the agreed figures. In each case, their letter informing the district valuer of their client's acceptance made it clear that the settlement was entirely without prejudice to any other cases in which Ricketts might be involved.
21. I should add that negotiations between Ricketts and the district valuer in relation to the subject property nearly resulted in a further settlement. In a letter to Mr Nesbitt dated 29 October 2001 Mr K J Cooper FRICS of Ricketts reported that the district valuer was not prepared to increase his offer of £650 plus statutory interest and surveyor's fees, despite the intervention of Mr Peter Black AM, the national representative for the area at the compensating authority. The letter continued:

"It would now seem that the only possible course of action which remains available is to make an appeal to the Lands Tribunal in London. Any appeal must be lodged by the 12^th December 2001 in order to protect your position under the Statute of Limitations, although I would emphasise that the offer of compensation remains open for acceptance.

Although the initial cost of making the application is only £50 the subsequent costs could be substantial. The Lands Tribunal have, in recent years, instituted a 'simplified procedure' for dealing with cases of this nature but this is subject to the consent of each party being obtained. Whilst the costs of proceeding in this manner are somewhat less than the formal hearing route the drawback is that no costs would be awarded to you even if the appeal was successful. Accordingly there is a significant risk that the benefits achieved on a successful appeal via the 'simplified procedure route' would be outweighed by the costs incurred.

The other manner of appealing to the Lands Tribunal is as mentioned above via the formal hearing route. In our experience the costs on one side alone by proceeding in this way could be expected to be of the order of £15-20,000. If you were unsuccessful on appeal then you would be responsible for the costs of the National Assembly in addition to your own."

22. (It should be mentioned as a matter of fact that it is not necessarily essential to obtain the consent of the compensating authority to the use of the simplified procedure. Rule 28 merely provides that the Tribunal

"may, with the consent of the applicant or appellant, direct that proceedings shall be determined in accordance with this rule").

23. In view of Mr Cooper's advice, Mr Nesbitt reluctantly decided to accept the compensation offered by the district valuer, while at the same time submitting complaints to the Welsh Office and the Ombudsman. However, the compensating authority advised him to re-consider his decision not to refer the matter to this Tribunal and indicated that it would not object to the simplified procedure being adopted. Mr Nesbitt accepted that advice and referred the matter to the Tribunal on 5 December 2001.
24. As I have said, Mr Thomas' valuation is, in effect, based on the evidence of two settlements. This Tribunal has on various occasions indicated that such evidence should always be treated with caution. In Farr v Millersons Investments Limited (1971) 22P&CR 1061 the member, Mr R C Walmsley FRICS said:

"Unless the settlement evidence is shown to provide solid support, the Tribunal attaches little weight to it: for instance if the tenants who settled had done so without professional advice, or despite such advice; or if there is no clear evidence as to the basis on which the settlements were negotiated; or if the valuer producing the settlement evidence was not personally concerned in the negotiations; or if there is market evidence which puts in doubt the site value contended for; then in any or all of these circumstances the evidence afforded by settlements is readily displaced by other evidence."

25. I agree with those observations. The advice contained in Mr Cooper's letter to Mr Nesbitt dated 29 October 2001 clearly illustrates the danger of relying on settlement evidence, particularly where the amount in issue is modest. In this case the "other evidence" which is before me consists of the sale of the subject property for £25,000 in April 2000. When considering that transaction it is firstly necessary to determine whether it truly reflected the property's market value at that date. Mr Thomas points out that the property had been on the market for a long time and that the original asking price in 1997 of £35,000 was too high. He says that after a long period on the market properties have been known to go stale, prospective purchasers considering that there is something wrong. They therefore lose interest and do not bid. I accept that it is possible that the long period of unsuccessful marketing may have had an adverse effect on the price eventually achieved for the subject property. Nevertheless, sale by public auction is a recognised method of testing the demand for a property. I cannot imagine that the price achieved represented less than 90% of the figure which might have been obtained on a sale by private treaty if the subject property had not been blighted by a history of unsuccessful marketing. Accordingly, I find that the market value of the subject property in April 2000 was £27,750. That value reflects the fact, among others, that traffic was using the motorway bridge at the date of sale.
26. I have not overlooked the fact that the subject property was re-sold in November 2001 for £40,000. That sale, however, took place after the property had been extensively refurbished. It is therefore not relevant to a valuation of the property in its unrefurbished condition at the valuation date.
27. The next point I must decide is whether the equivalent value in December 1995 would have been smaller, larger or the same. Mr Nesbitt says that, if anything, the switched on value was even lower at the valuation date, because all the relevant indices show that residential values in Wales increased substantially between 1995 and 2000. Mr Thomas accepts that these statistics

"could show broad based trends and averages but are no substitute for an actual valuation of the actual property by a locally based valuer."

28. In my judgment Mr Nesbitt has not used the indices to prepare an accurate valuation of the subject property in December 1995. He merely uses them to support his view that it would not have been worth more in December 1995 than it was nearly five years later. Mr Thomas does not suggest that values in the immediate vicinity actually fell over that period. That being the case I find that, other things being equal, the switched on value of the subject property – which I have held to be £27,750 in 2000 – was the same figure at the valuation date.
29. Mr Thomas gives three reasons why other things may not have been equal. Firstly, he says that the locality could have become less desirable and this may be attributable to the actual physical structure of the bridge and its impact upon the locality or some other matter. He points out that none of this is a compensatable item under a Part I claim. Secondly, he says that the price achieved in 2000 may have reflected a lack of occupation and lack of maintenance in accordance with the normal maintenance cycle. Finally, he suggests that the competing attractions of new-build developments in Neath and Port Talbot may have swayed prospective purchasers away from the area.
30. Mr Nesbitt does not accept that the sale price in 2000 was adversely affected by lack of maintenance. He says that he maintained the property conscientiously throughout the period of his ownership at a total cost of over £6,000. Nor does he accept that competing developments in Neath and Port Talbot materially affected demand; he says that similar competition existed at the valuation date. I prefer Mr Nesbitt's evidence on these two matters.
31. Mr Thomas' final point is that the locality may have become less desirable by 2000. The only factor which he specifically refers to in this connection is the existence of the new bridge. That bridge, however, was also in existence at the valuation date and is reflected in the switched off value. To make an allowance for its existence in 2000, therefore, would constitute double counting and is not justified.
32. Accordingly, I find that the diminution in value of the subject property caused by the use of the motorway bridge is £6,250 (£34,000 - £27,750). This figure represents 18.38% of the switched on value. I stood in front of the subject property on a dry Friday afternoon. At that time the noise from the motorway was clear, sustained and intrusive. I have no doubt that a prospective purchaser fresh to the scene would have required the price he paid to reflect this serious disadvantage and, in my view, a deduction of 18.38% in that regard is not excessive.
33. In addition to compensation, the Act entitles a claimant to reasonable valuation expenses for preparing and prosecuting the claim. From the documents provided it appears that the compensating authority's practice is to pay a surveyor's fee based on Ryde's scale (1996) and that scale is acceptable to Ricketts. The compensating authority will therefore pay a surveyor's fee based on Ryde's scale (1996).
34. I would add this. Mr Thomas said he understood that, if Mr Nesbitt had refused the compensating authority's offer to install sound insulation, 50% of the installation cost would still have been deducted from the compensation payable. I obtained the impression that Mr Thomas had not himself been involved in such a case and it may be that he has misunderstood the position. If, however, the policy is as he described it, I consider that it represents an abuse of the compensating authority's powers under the Act.
35. In proceedings determined in accordance with rule 28 no award is made in relation to costs except in circumstances which the Tribunal regards as exceptional. At the hearing, the parties appeared to accept that there should be no order as to costs. In a subsequent letter, however, Mr Nesbitt gave the impression that he may wish to seek such an order. In the circumstances either party may, no later than two weeks from the date of this decision, apply in writing for costs with a copy to the other party, who may submit any representations thereon within four weeks of this decision. Any application for costs must state the amount claimed and exactly how it is calculated and be accompanied by full supporting documentation. In the absence of any submissions within these time limits I intend to make no order as to costs.

Dated: 26 April 2002

(Signed): N J Rose

ADDENDUM

36. I have received written submissions from the parties on costs. The claimant asks for his costs, which he suggests totalled £900. He accepts that he was not expecting to make such a claim. He says, however, that he invited the compensating authority to make an offer to settle before the hearing, but they declined to do so.
37. The compensating authority expresses concern that the application for costs has been entertained, despite the parties previously having accepted that there should be no order as to costs. It points out that it could have taken the position that the claimant's original acceptance of the offer of £650 was legally binding but it did not do so. Instead one of its officers advised the claimant of the availability of the Tribunal's simplified procedure. It denies that the circumstances of this case are exceptional.
38. Rule 28(11)(b) of the Lands Tribunal Rules 1996 provides that no award shall be made in relation to the costs of proceedings conducted in accordance with the simplified procedure except in cases in which the Tribunal regards the circumstances as exceptional. I agree with the compensating authority that no such circumstances arise in this case. Accordingly, I make no order as to costs.

Dated: 29 May 2002

(Signed): N J Rose