England and Wales Lands Tribunal

[2003] EWLands ACQ_143_2002 (17 October 2003)

ACQ/143/2002

LANDS TRIBUNAL ACT 1949

COMPULSORY PURCHASE –compensation – dwellinghouse in dilapidated condition – value in good condition- cost of necessary repairs – allowance for profit – compensation awarded £77,500

IN THE MATTER OF A NOTICE OF REFERENCE

BY

WATFORD BOROUGH COUNCIL Applicant

(No Respondent)

Re: 92 Chester Road

Watford

Hertfordshire

Before: N J Rose FRICS

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

On 17 September 2003

James Burton of Counsel, instructed by the Solicitor to Watford Borough Council, for the Applicant.


 


DECISION

1. This is a reference by Watford Borough Council ("the applicant") to determine the amount of compensation payable for the freehold interest in a dwellinghouse known as 92 Chester Road, Watford, Herts ("the subject property"). That interest was compulsory acquired under the Borough of Watford (92 Chester Road) Compulsory Purchase Order 2000 ("the CPO"), which was made pursuant to s17 of the Housing Act 1985 on 31 August 2000 and confirmed by the Secretary of State for the Environment, Transport and the Regions on 20 March 2001. A general vesting declaration was made on 2 July 2001 and the subject property was vested in the applicant on 5 December 2001, which is the valuation date.
2. The previously registered owner of the subject property was Dr Naashat Daiwaly, who had acquired it in 1978, apparently for use as a holiday home each summer. In 1996 the applicant's housing department learned that Dr Daiwaly had returned to Saudi Arabia. They were concerned that the property had been empty for a long time and they attempted unsuccessfully to communicate with Dr Daiwaly by letters dated 6 November 1996 and 21 January 1999 and a notice of intention to remedy the defective state of the building dated 24 May 1999.
3. In fact, Dr Daiwaly had died in 1996, although the applicant was not informed of this until three years later. It wrote (on six occasions between July 1999 and November 2001) to his widow, Mrs Fatima Daiwaly and to her representative, Dr Wajih Abderrahman, both living in Saudi Arabia, requesting evidence to demonstrate that, as claimed, Mrs Daiwaly had become the owner of the freehold interest in the subject property. No satisfactory reply was received to any of these letters and no change of ownership was registered at the Land Registry.
4. The applicant referred the question of compensation to this Tribunal on 12 November 2002. Mrs Daiwaly was given notice of the hearing, but neither she nor any representative took part in the proceedings. Mr James Burton of counsel appeared for the applicant. He called one witness of fact, Mr G D Everett and two expert witnesses, Mr M A C Wilson, MRICS and Mr M P Szalay, MRICS.
5. From the evidence I find the following facts. The subject property is situated about one mile from Watford town centre. It comprises an end of terrace house, built in the late 19^th century. At the valuation date it had been empty and neglected for many years and was in a very poor state of repair. The accommodation comprised two living rooms, kitchen and bathroom on the ground floor and three bedrooms on the first floor, the third leading directly off the second.
6. Mr Szalay is employed by the applicant as a surveyor in its property services department. He valued the subject property at £70,000. This was based on a full market value of £125,000 assuming the property was in good condition, with a deduction for repairs of £47,500. He then made a further deduction of £7,500 for "builders profit", since in his opinion only a builder or developer would have been likely to purchase the property in such poor condition. The market value of £125,000 was arrived at having regard to the sales or marketing evidence of five Victorian houses, all of which were within half a mile of the subject property. The deductions made by Mr Szalay for building costs and profit were based directly on views that had been expressed by Mr Wilson.
7. Mr Wilson is a partner in Thompson Wilson, chartered surveyors of High Wycombe. In June 2001 he was instructed to advise Beacon Housing Association ("Beacon") on the price it should pay the applicant for the subject property following its compulsory acquisition. On 29 June 2001 he prepared a schedule of the works which he considered to be essential, together with a cost estimate of £47,500 including VAT. In advising Beacon on the price it should pay for the subject property in its dilapidated condition, Mr Wilson made an allowance of £7,500 to reflect what he considered to be a reasonable profit. In the course of his oral evidence, Mr Wilson referred to another estimate of the cost of repairing the subject property, which had been prepared for Beacon by a different firm of chartered surveyors in May 1999. On a like for like basis that estimate was approximately £10,000 less than his own figure. He pointed out, however, that building costs had increased by 5 to 10% in the intervening period and that the general condition of the building may well have deteriorated between 1999 and 2001 as a result of water ingress.
8. Mr Szalay is employed by the applicant. Nevertheless, he has clearly taken care to obtain details of the contemporaneous prices paid for comparable properties and he gave his evidence in a straightforward manner. I accept his valuation of £125,000 on the assumption that the subject property was in good condition.
9. Mr Wilson, like Mr Szalay, was a fair witness. I accept his estimate of building costs on the basis upon which it was prepared. That basis included an assumption that the purchaser would carry out alterations to the ground floor to form a larger kitchen and would convert the third bedroom to an additional bathroom. Mr Wilson estimated that the total cost of that work would be £19,000.
10. In answer to a question from me, Mr Szalay expressed the view that, assuming the property were in good repair, the construction of an additional bathroom would make little difference to the price achieved. The sale by the applicant to Beacon resulted from a negotiation between the two parties' professional representatives, and reflected the fact that Beacon intended to carry out works to the kitchen and bathroom which had been costed at £19,000. In my judgment, if the property had been offered for sale on the open market on the valuation date in the absence of a CPO, a higher price is likely to have been paid by a purchaser who was satisfied with the existing accommodation layout and merely intended to put the property into good repair. I consider that such a purchaser would have estimated the total expenditure needed at £40,000 and would also have required a return for profit and risk of the order suggested by Mr Wilson.
11. I therefore determine that the compensation payable for the freehold interest in the subject property is £77,500, calculated as follows:

Value in good repair		£125,000
Less
Cost of works	£ 40,000
For risk, etc	£ 7,500
		£ 47,500
		£77,500

12. The applicant asked to be awarded costs of £2,985.90 that it had incurred in connection with this application and it produced a schedule of such costs. That request appears to me to be reasonable and I order accordingly.
13. The applicant also requested that the compensation awarded should be paid into the High Court under s9 of the Compulsory Purchase Act 1965, pending proof of title by Mrs Daiwaly or by the executor or administrator of Dr Daiwaly's estate, and that its costs should be deducted from the amount paid into court. That may prove to be the appropriate procedure for the applicant to adopt, but it is not a matter for this Tribunal.

Dated 17 October 2003

N J Rose FRICS