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Nelson & Anor v Burnley Borough Council [2005] EWLands ACQ_93_2005 (13 October 2005)

ACQ/93/2005

LANDS TRIBUNAL ACT 1949

COMPENSATION – compulsory purchase – unfit house – valuation – comparables – disturbance – compensation awarded: £58,200

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN

OLIVER PETER LAWRENCE NELSON

SUSAN MARGARET NELSON Claimants

and

BURNLEY BOROUGH COUNCIL Acquiring Authority

Re: 3 Coal Clough Lane, Burnley, Lancs, BB11 4PG

Before: P R Francis FRICS

Sitting at: Burnley Combined Court Centre

Hammerton Street, Burnley, BB11 1XD

on

29 September 2005

Matthew Copeland, instructed by Milners solicitors of Leeds, for the claimants

Ian Ponter, instructed by Burnley Borough Council, Legal Services, for the acquiring authority

DECISION

This is a reference, heard under the Simplified Procedure (Rule 28, Lands Tribunal Rules 1996) to determine the compensation payable to Mr Oliver Peter Lawrence Nelson and Mrs Susan Margaret Nelson ("the claimants") by Burnley Borough Council ("the council") for the compulsory acquisition of the freehold interest in 3 Coal Clough Lane, Burnley, BB11 4PG ("the subject property") in connection with the Burnley (Coal Clough Lane, Burnley Clearance Area) Compulsory Purchase Order 2004 ("the CPO").

Mr Matthew Copeland of counsel appeared for the claimants and called Mrs Susan Nelson who gave evidence of fact and Mr David Briffett BSc (Hons) MRICS to give expert valuation evidence. Mr Ian Ponter of counsel appeared for the acquiring authority and called Ms Clare Sutton of Burnley Borough Council who spoke to her witness statement and Mr Stephen Hudson and Mr Winston Robinson B Eng (Hons) C Eng MICE who gave expert valuation and engineering evidence respectively.

FACTS

From the evidence, and my inspection of the former location of the subject property on 29 September 2005, I find the following facts:

The subject property comprised a long-leasehold (999 years) two-storey mid-terrace house constructed in the late 19^th century of dressed stone and brick under pitched, slate covered roofs as part of a long hillside terrace in a heavily developed residential area about ¾ mile from the town centre. It had a small, enclosed front garden, with similar to the rear where there was also a single storey extension. There was no on-site parking. The location was, specifically, at the bottom of a long hill, close to the junction with Burnham Gate and there were open views to the front over an area of greensward on the opposite side of the road. Coal Clough Lane predominates with terraced houses, as do the adjacent residential streets.

The property had been modernised to include gas-fired central heating and updated kitchen and bathroom fittings and the accommodation comprised Hall, Living Room and Kitchen at ground floor, with two double bedrooms and a bathroom to first. The net internal floor area was agreed at 68 square metres.

The claimants purchased the subject property in 1994 as a 'buy-to-let' investment. In February 2004, by an undated letter from the council, they were advised that, under the provisions of the Housing Act 1985 ("the 1985 Act"), the subject property along with 8 others including the adjacent 1 Coal Clough Lane were proposed to be included in a Clearance Area. The letter sought the claimants' consent for technical officers of the council to carry out an inspection and advised that following this there would be an opportunity for consultation to obtain affected parties' views of the Clearance Area proposals. An inspection was undertaken on 27 February 2004 at which officers of the council were present, along with Mrs Nelson, her then tenant Miss Leanne Oie and Mr Briffett.

On 23 March 2004 the council wrote to Mrs Nelson advising that the fitness inspections of the properties were complete, and that as the subject property did not meet the requirements of section 604(1) of the 1985 Act on the grounds of "structural instability" it had been declared unfit for human habitation. A notice under section 289 of the 1985 Act of intention to include the building in a Clearance Area was attached, and it sought the claimants' comments by 23 April 2004. The results of any individual consultations would be considered by the council's Executive Committee for them to make a CPO to acquire the properties. The letter further advised, however, that the council did have authority to purchase the properties by agreement prior to a CPO, and invited the claimants to appoint a surveyor [if they had not already done so] and to commence negotiations with Mr Hudson, the council's valuer. Mrs Nelson responded on 1 April 2004 stating that she objected to the classification, that she did not agree the property was unstable, and the council's real reason for including the property was because it was required for a new access road.

Ms Clare Sutton of the council responded on 15 April and confirmed that the proposed after use was indeed to provide the access road to the Health and Community centre, but that the intended demolition would also address the problem of the adjoining vacant and derelict property which was suffering from subsidence. Ms Sutton also said:

"The council's engineer has offered to meet you at your property to go through the structural report and why the property has been classified as structurally unstable. If you would like to meet to discuss this matter please contact me…

I understand your objection to the classification of the property, but can assure you that if structural movement was not ongoing at the property then it would not have been classified as unfit. The classification will not affect the market value of your property as the fitness inspection has no bearing upon the Council's Surveyor's valuation.

Although the Council is proceeding with the Compulsory Purchase Order procedure, we are still committed to acquiring your property by agreement and would like to negotiate the market value of your property."

In the interim period, Mr Briffett had, however, written to Mr Hudson (on 28 February) stating on behalf of his clients that they were prepared to "negotiate by agreement" but no early progress was made.

The CPO was made on 25 August 2004 and, no objections being received, it was confirmed without modification by the Secretary of State on 28 September 2004. The General Vesting Declaration was dated 16 December 2004, and the subject property formally vested in the council on 17 January 2005, which is the valuation date for the purposes of this reference.

The claimants agreed to purchase a replacement investment property, 147 Coal Clough Lane, Burnley, in October 2004. Prior to the notice of reference to this Tribunal, dated 20 May 2005, the claimants claimed the sum of £65,000 as the open market value of the subject property. Their solicitors, in a letter to the council of 31 March 2005, said: "In addition…our clients claim a loss payment of 7.5% of the agreed or determined value (section 106 Planning and Compulsory Purchase Act 2004) together with interest, costs associated with purchasing the alternative property, professional fees and compensation for our clients' very considerable time and effort in dealing with this protracted matter and loss of rent." The council advised, in a letter dated 4 May 2005, that a loss payment could not be claimed in this instance as the CPO was made before the appropriate provisions of the 2004 Act came into effect. Subsequently, in their statement of case to this Tribunal, the claimants quantified their claim as:

Value of property	£65,000.00
Loss of rent 23 July 2004 – 17 January 2005 @ £65pw	£1,657.50
Costs of acquisition of replacement property	£1,761.06
Disturbance and other losses – claimants' time 60hrs @ £25.00	£1,500.00
Loss of value of carpets at subject property	£250.00
	£69,678.56

An advance payment based upon 90% of the council's assessed value of the subject property at £40,000 was sent to the claimants on 29 April 2005.

Issues

The issues for determination are:

1. The open market value of the subject property as at 17 January 2005.

2. Whether loss of rent appropriately claimed.

3. Disturbance and other losses.

Claimants' case

Mr Copeland said that the whole reason this matter was before the Lands Tribunal was because the claimants' valuer – who had been appointed to act for them at a very early stage – had met with the "slow process of local government" and had been unable, despite concerted efforts on his behalf to elicit a satisfactory offer from Mr Hudson. It was the claimants' case that far from being structurally unstable, the subject property had been well modernised and was in better than average decorative order (as acknowledged by Mr Hudson). No 147 Coal Clough Lane, bought by the claimants as an alternative investment property for £59,000 in October 2004 was smaller than the subject (at 60 sq m net internal area), was in poor condition and had needed at least £10,000 spending on it (so making it worth £70,000 in comparable condition). Whilst it was acknowledged that, in general terms, the higher numbered properties towards the top of Coal Clough Lane commanded higher prices than those at the bottom, the disparity was not as great as was being alleged. It was submitted by Mr Copeland that the alleged structural instability was unproven, and the council just wanted an excuse to justify compulsorily acquiring the property as it was needed, along with No 1, for a new road.

As to the report resulting from the borehole test that had been carried out on the site of the subject property in June 2005 after it had been demolished, confirming that the properties had been constructed on the site of an old quarry, Mr Copeland said this was inadmissible, and in any event, did not prove the condition of the house whilst it was still standing.

Mr Briffett is a chartered surveyor, and managing director of Thomas V Shaw & Co Ltd, Chartered Surveyors of Blackburn. He has 25 years of experience in respect of compulsory purchase matters, and has been involved in valuation work in the Burnley area for a similar period. He confirmed that he had been instructed by the claimants in February 2004, had attended the fitness inspection on 27 February 2004 and that the council's representative, Mr Darling, had only made a cursory inspection. Ms Clare Sutton of the council was also present. No detailed survey had been undertaken either then or subsequently. In Mr Briffett's professional opinion, whilst accepting that there was some minor displacement to the lintel over the door giving access to the kitchen, that the inner brick leaf was not bonded to the outer leaf of stonework and there was some evidence of long-standing settlement to the ground floor, there was no evidence of current or active subsidence. As the photographs produced with his report showed, the internal architraves and doorjambs were all level and plumb. The external window and door openings were all square and well within tolerance, and the roof-line was lineable with no sign of distortion to common rafters.

The substantial 8-flue chimney stack that separated No 3 from No 1 Coal Clough Lane would have acted as a significant buttress, helping to prevent any lateral movement down the hill caused by the acknowledged settlement in No 1. Mr Briffett said that the condition of the property would not have precluded it from being considered as suitable security for mortgage funding. Indeed, the adjoining property on the other side, No5, which had had a substantial new gable end wall constructed following the demolition of Nos 1 & 3 had recently had a mortgage granted on it, and two of Mr Hudson's quoted comparables were in worse structural condition but had recently been sold in the open market. Furthermore, as would be seen from the homebuyer's survey report that the claimants had commissioned on their replacement property, that could also have been considered unfit in accordance with section 604(1) of the 1985 Act, but Mr and Mrs Nelson had succeeded in obtaining a mortgage on it.

Mr Briffett said that despite having written to Mr Hudson the day after the council's inspection was undertaken in an attempt to agree a value by negotiation (pre-CPO), little constructive progress had been made during the course of the rest of 2004. Although he could not remember the exact date upon which Mr Hudson's verbal offer of £40,000 had been made, no formal written offer had ever been received. Mr Briffett said he had provided Mr Hudson with comparable evidence during the course of 2004, and that they had discussed comparables generally, but none were provided by Mr Hudson in writing until just before the Tribunal hearing. It was Mr Briffett's view that the reasons for Mr Hudson's failure to deal with the matter in a timely fashion was due to the considerable work pressures that he was under with the council, as evidenced by correspondence produced from the East Lancashire Landlords Association.

Mr Briffett went on to explain that it was the council's policy not to provide residential landlords such as the claimants with relocation grants that are offered, as a matter of course, to owner/occupiers affected by compulsory acquisition in the sum of £20,000. He said the effect of the relocation grant to owner/occupiers has been to distort the council's opinion of values, and has inflated values generally within the Borough. Negotiations for the purchase of investment properties by agreement has been significantly delayed because landlords are reluctant to agree to sell when the compensation offered is effectively £20,000 less than on a comparable owner/occupied property – which benefits from a £4,000 Home Loss Payment as well.

On the basis of the comparable evidence he produced, Mr Briffett was of the opinion that, in good overall condition the subject property was worth £72,500 at the valuation date. Allowing £1,000 for carrying out the required bonding works to the outer walls and a 10% reduction to reflect the poor condition of the adjoining property, No1, gave a realistic value of £65,000.

As to the comparables, Mr Briffet said that 147 Coal Clough Lane was acquired by the claimants for £59,000 in October 2004 in poor condition and also with evidence of past structural movement. That worked out at £983 per sq m in poor order, whereas the subject property was still only £1,066 per sq m in good order. He had also forwarded a list of comparable properties to Mr Hudson as provided in a letter from Mrs Nelson dated 9 September 2004 following her own researches. That letter said, in part:

"There have been no sales of other properties in our block [1-21 – odds] for some time, however we have kept a record of asking prices for properties further up the road during the past 6 months. They are as follows:-

1. 124 Coal Clough Lane, Harris Moss. On at £60,000 – went for more

2. 125 Coal Clough Lane, best offer £60,000

3. 271 Coal Clough Lane, Bairstow Eves £69,950

4. 235 Coal Clough Lane, Bairstow Eves £54,950

5. 175 Coal Clough Lane, Bairstow Eves £74,950

6. 152 Coal Clough Lane, Bairstow Eves £78,500

7. 254 Coal Clough Lane, Petty's £75,000

8. 338 Coal Clough Lane, Harris Moss £60,000

9. 115 Coal Clough Lane, Blacks Estate Agents £70,000

10. 103 Coal Clough Lane, best offer £55,000 - very bad repair

11. 127 Coal Clough Lane, Petty's £64,000 – went for more

12. 103 Coal Clough Lane, best offer £60,000

13. 147 Coal Clough Lane, Harris Moss £62,000"

Mr Briffett acknowledged that the evidence generally showed that prices and values rise the further up Coal Clough Lane one goes, but said that is not uniform. As to Mr Hudson's comparables, provided shortly before the Lands Tribunal hearing, he said No 31, which had been sold in April 2005 for £33,000 was derelict and in very poor order. It had serious structural problems, including structural settlement and holes in the roof, was boarded up along with other adjacent properties, and the terrace was a prime candidate for demolition if it were not for the fact that it was attached to a public house which would significantly increase the acquisition costs. Furthermore, this terrace [23 – 41 Coal Clough Lane] could not be compared with the one in which the subject property had been located. The properties are smaller, have no front garden and do not enjoy the aspect over open land that the lower terrace does.

90 Coal Clough Lane had been sold for £45,000 in February 2005 and was in the process of being substantially modernised and refurbished. Discussions with the adjoining owner had revealed that, prior to sale, it had been occupied by an elderly couple, and no monies had been expended upon it in many years. No 103 which Mr Briffett said was currently on the market at £64,000 had sold for £55,000 in June 2004 and £60,000 in October 2004. He said this property was comparable in size but in a poorer location. Mr Hudson had also referred to properties in Westmoreland Street as being comparable, but Mr Briffett said they were smaller and in a less sought after location. Mr Hudson had also referred in their discussions to 235 Coal Clough Lane which had been sold in early 2005 at £73,500. Mr Briffettt said it was a slightly larger property, but was in a poor location backing, as it did, onto a local authority estate.

In cross-examination, Mr Briffett accepted that comparables had been provided by Mr Hudson (in the run-up to the hearing), that they had had a number of discussions and that they had both struggled to find appropriate comparables in the immediate area of the subject property. Acknowledging that values in the lower part of Coal Clough Lane were generally lower than to the upper part, and accepting that there was no hard evidence to support his contentions, Mr Briffett said that a modernised garden fronted property with an open outlook to the front must be worth significantly more than one which was directly onto the street and was in a poorer terrace.

As to the alleged instability, and its effects on value, Mr Briffett said that it was a fact that whilst the council was in possession of two reports from June and August 2004 stating that the subject property and No 1 were built on the site of an old quarry, they were not public documents and a prospective purchaser would not therefore have been aware. He said that he would only have undertaken further research if he, in carrying out an inspection for a purchaser or his prospective mortgagee, had suspected there was active ongoing movement. This was in accordance with, for example, the guidelines for mortgage valuers produced by the Cheltenham and Gloucester Building Society. In this instance, Mr Briffett said he was adamant there were no such signs, but he had still reduced the value by 10% to reflect effect the condition of No 1 would have on it. He said that, if the property had been suffering settlement to the extent that the council contended, he was satisfied that Mr Hudson's valuation of £40,000 would be correct.

Mrs Nelson said that during Mr Darling's inspection of the subject property on 27 February 2004, she was talking to Ms Sutton who explained that the inspection was to find a reason to compulsorily acquire the house. In a subsequent telephone conversation, following advice of the classification, Ms Sutton had said that she should not worry, that the council usually finds something wrong with such properties and in this case it was required to allow for a new road. She was told she should put her objections in writing, which she did. In response, Mrs Nelson said she received another letter from the council, dated 15 April 2004, and as a result of the assurances given [para 8 above], she had decided not to pursue her objections as she thought she would receive market value. She said she had had no reason to suspect that her property was suffering from settlement, and if she had done, she would certainly have notified her insurers. It was now too late to do that. Even if there had been settlement, underpinning would have been an option at relatively modest cost. It was, she said, totally inequitable for the council to produce reports at this stage regarding structural matters which she did not have an opportunity to see prior to the demolition.

As to the tenant, who was in occupation and present when the fitness inspection was undertaken, Mr Nelson said that she was of the view Miss Oie had left on 23 July 2004 because she was aware the property was to be demolished. Indeed, the tenant had actually heard about the requirement for the property from conversations in the local pub in January, before Mrs Nelson was even aware herself. Miss Oie had telephoned her and asked why she had been taken on as a tenant only the month before, if it was known that the property was to be demolished. Despite placing advertisements in the local paper for 3 weeks running immediately after Miss Oie vacated, she said she had been unable to secure another tenant, hence the claim for lost rent. Mrs Nelson said the tenant must have left due to the impending compulsory acquisition, which was common knowledge in the area. She said she had never previously had any trouble letting the property, often for short terms, and apart from one month in 2003 when the house was being modernised and decorated, and an earlier two-week void, the property had been consistently fully let since 1994. Mrs Nelson said she was sure that her jobbing builder who fitted the new kitchen and bathroom and carried out redecoration works would have alerted her if he had been aware of any signs of structural movement.

Mrs Nelson accepted in cross-examination that she had not accepted the offer in the council's letter of 15 April 2004 for its engineer to meet and go through the fitness report, but this was due to her having "homed-in" on Clare Sutton's assurances about value in the same letter. Regarding the claim for loss of rent, Mrs Nelson said that the last payment, 1 month in advance, had been received on 9 July 2004 and although she did not know the exact day on which Miss Oie left (she had not given notice), she certainly had moved out by 23 July, when Mrs Nelson visited. Mrs Nelson also acknowledged that she had retained a 1 month rental deposit which meant that any loss of rent claim would only be appropriate from 10 September 2004.

Acquiring Authority's case

Mr Hudson has, for the past 19 years, been employed as a senior surveyor by the council and has been directly responsible for the compensation negotiations relating to all the council's acquisitions under its Clearance Area schemes, amounting to over 1,000 properties over the past 8 years. In connection with this CPO, Mr Hudson confirmed that he had delegated authority to agree compensation without further reference to the council members.

Acknowledging that he was not present at the fitness inspection, Mr Hudson said he first inspected the subject property on 28 September 2004. He said he noticed a significant downwards slope (towards the rear) of the first floor and that there was a crack in the external wall between the dining room window, and the first floor window above. In his view, that evidence would have rung alarm bells as to the building's structural stability and if he had been advising a purchaser, he would have recommended further investigation. Also, bearing in mind the condition of No 1, he felt a prospective purchaser would have been well advised to look elsewhere, and that the subject property would only really appeal to a cash buyer who was prepared to take a risk. In his professional judgment, Mr Hudson said he thought the council's offer of £40,000 fairly reflected the value bearing in mind the property's condition. If it had not been for the structural problems that the council had identified, he would have valued it in the region of £55,000.

To support his views on value, and the fact that prices tend to rise towards the upper part of the Lane, Mr Hudson provided a list of all registered transactions along Coal Clough Lane during 2004/05. They were:

23 Coal Clough Lane	Sold 22/01/04	£11,750
27	02/08/04	£22,500
27	10/09/04	£32,000
31	22/04/05	£33,000
40	12/02/04	£33,500
44	06/08/04	£30,000
73	09/01/04	£22,000
90	03/02/05	£45,000
103	25/06/04	£55,000
103	05/10/04	£60,000
115	03/06/04	£63,000
115	19/08/04	£67,500
124	16/06/04	£61,000
127	22/10/04	£64,000
147	03/12/04	£59,000
152	21/05/04	£85,000

In addition, the agreed compensation for the compulsory acquisition of No 1 was £35,000.

Whilst accepting that the properties in the terrace 23 – 41 Coal Clough Lane were inferior to the subject property Mr Hudson said that they were not sufficiently so to justify a differential of 100% in the amount claimed for No 3. He also produced a table showing the average prices obtained in some of the streets adjoining Coal Clough Lane, and it was evident that those in the nearest streets – Hudson Street and Richmond Street were significantly lower than those adjoining the upper end of Coal Clough Lane.

In cross-examination, Mr Hudson accepted that there was no evidence relating to the size and condition of any of the comparables he had produced, but said that they were to show the trend. He accepted that location is only one factor (although a very important one) in determining the value of any property. Size and structural condition were also important determinants and he accepted that the photographs showing the subject property just before it was demolished showed no evidence of the cracking he had referred to. Mr Hudson acknowledged that although the valuers agreed there was an the overall trend for rising values further along the street, there could be 'pockets' where that trend was bucked, but Mr Briffett had failed to produce any evidence to support his view that No 3 was in one of those pockets. In any event, he said, there would always be a ceiling on value in any particular location.

Mr Hudson said that, in arriving at his opinion of value for the subject property, he had relied upon his inspection, but the two reports prepared by Mr Robinson reinforced his decision. He said that the borehole data, which was not produced until much later, had no impact on his views. In respect of Ms Sutton's alleged comments to Mrs Nelson, Mr Hudson said he had taken account of the condition of the property that led to the classification, rather than the classification itself. He acknowledged that during the period between May and August 2005, he had failed to respond to Mr Briffett's attempts to continue negotiations, but they appeared to have reached an impasse as far as their opinions were concerned.

Mr Robinson is a chartered engineer and is employed by the council as an engineering manager with responsibility for all capital and engineering works including construction, maintenance, Health and Safety and property inspections. He produced extracts from two email reports he had submitted to the council's Housing Officer in June and August 2004. They resulted, he said, from an initial external inspection of Nos 1 and 3 undertaken on 17 February 2004 (he did not attend the fitness inspection on the 27 February) followed by a desk-top survey of maps relating to the locality. In his report of 11 June, Mr Robinson said:

"No 3 Coal Clough Lane suffers from subsidence to the extent that it would not be possible to demolish No 1 and build a gable up to No 3.

Based on an external visual survey and studies of the local Ordnance Survey plans I would suggest that the problems with 1 and 3 have arisen because it No 1 is built over a 'filled' quarry that has consolidated causing No 1 to slip and drag No 3 with it.

Both 1 and 3 Coal Clough Lane need to be demolished so that a gable wall can be built up to No5.

Both 1 and 3 Coal Clough Lane do not comply with section 604 of the Housing Act 1985".

His report of 6 August 2004 stated:

"The Ordnance Survey plans of 1890 show a quarry in the vicinity, the extents of which encompass the whole of the terrace including 1 and 3 Coal Clough Lane…

…The rear, gable and front of No 1 Coal Clough Lane is suffering extensively from subsidence which is most likely due to settlement and consolidation of the fill material to the quarry. As terrace properties are interlinked they depend upon each other for structural support and if one property has a problem the effect manifests down the terrace with reducing severity.

Unfortunately in this case the subsidence at the end of the terrace, No 1, is so significant that it has in effect 'dragged' No 3 with it and this property appears to have 'broken its back' on the front and rear elevations. This distortion is so great that I consider the property to be unstable.

As the whole of the terrace is built over the former quarry, I would expect that sooner rather than later problems will arise within the remainder of the block…

…If one was to underpin these two buildings now this would arrest further movement, but it would not correct existing distortions and it would re-assign the 'locked-in" stresses to the remainder of the block possibly causing premature failure.

I am of the opinion that the only option is to demolish these two properties and re-build a structural gable wall with movements joints between this new wall and the remainder of the terrace."

He went on to quote from the soil report prepared by the council's soils and minerals laboratory dated 22 July 2005.

Mr Robinson confirmed that the reports were not public documents, but were internal emails. He said that No 1 was the worst affected in that the gable end wall had sunk and twisted. The suggestion that the chimneystack separating Nos 1 and 3 would act as a buttress was not, he said, sustainable. Whilst the stack would prevent downward movement it would not assist with the prevention of lateral movement. That would require a properly constructed buttress. He confirmed in cross-examination that he had not seen inside No 3; his reference to the property having broken its back was in relation to No 1.

Mr Robinson insisted that he had seen cracking between the ground and first floor windows of No 3 but said that the photographs produced by Mr Briffett were insufficiently clear to confirm it. He had not included any comment regarding the cracking within his reports, but said that the existence of subsidence inferred it. He accepted that, from the photographs, there appeared to be no distortion or settlement apparent to the window and door openings and admitted that it was impossible to categorically confirm that movement is ongoing without undertaking long-term monitoring. However, he said it appeared that the cracks between ground and first floor openings had been re-pointed in the last 10 – 15 years, and he thought they had opened up again.

Responding to the suggestion that a new gable end wall could have been built up against No 3, as had been carried out to No 5, rather than demolish it, Mr Robinson said the property had distorted so much that that would have been impossible. Also, it would not resolve the problems to the front and rear walls, roofline and floor levels. He said that he had not undertaken any costings for the retention of No 3.

Ms Sutton is an Assistant Housing Renewal Manager for the council and produced a brief response to Mrs Nelson's witness statement. In setting out the background, she said the council had been alerted to 1 Coal Clough Lane by complaints from local residents. It had been vacant for a long time and was attracting anti-social behaviour. From the initial external inspection it became apparent that the structural movement that was obviously affecting it could be having an impact on No3. As a result, she instructed the council's engineers to carry out a structural survey of both properties and attended the fitness inspection that was arranged for 27 February. Ms Sutton said that she explained to Mrs Nelson that her property was in an area in which the council was targeting substantial resources for regeneration as part of its strategy to tackle low demand in Borough's housing market. She said that if the properties were found to be unfit, the council would look at the most satisfactory course of action, one of the options being a Clearance Area CPO.

At no time, Ms Sutton said, did she say to Mrs Nelson that the council normally finds something wrong with properties to speed up the CPO process. Classifying a property as unfit is only one of the factors to be considered before deciding to declare a Clearance Area and make a CPO, and it would certainly not speed the process up as such a classification under the provisions of section 604 can lead to a challenge at inquiry. She said she wrote to Mrs Nelson on 15 April 2004 clarifying the position and at that time confirmed that the council was looking to improve the access to the Howard Street Health Centre.

As to the comment about the effects on value made in that letter, and from which Mrs Nelson had apparently derived comfort, Ms Sutton said she meant the fitness inspection was separated from the valuation process and just because a property is classed as unfit, does not mean that it will be valued at a lower market value. The survey and negotiations regarding compensation are undertaken at a later date by the council's valuer who is not present at the fitness inspection and who is not influenced by that process.

In cross-examination, Ms Sutton said that the requirement for the property for the construction of a road was a secondary factor in the decision to make a CPO. It was, of course, important to consider a proposed after use for the site. She reiterated that it was necessary for the council to be able to clearly establish that a property did not comply with the provisions of section 604 to ensure that a CPO will not be refused. If it could not be clearly established, then it may be necessary to go to a public inquiry.

In closing for the council, Mr Ponter said that despite the claims only arising in the claimants' statement of case, it was conceded that they were entitled to be compensated for loss of rent and the costs associated with acquiring another property. He said it was clear from the evidence that the fact the property was built over an old quarry, with the resultant unstable ground, made it uneconomic to carry out the required remediation works. Hence, the need for demolition and a value reflecting its condition of £40,000.

Conclusions

It is clear that the principal factor affecting the open market value of the subject property was its structural condition. Mr Briffett has agreed with Mr Hudson that, had it been in the condition that the council said it was, its value on 17 January 2005 would have been £40,000. If it had been in the condition argued for by Mr Briffett, the value would have been £65,000 according to him, or, in Mr Hudson's opinion, £55,000.

I am far from satisfied that the council's evidence proves that the property was unfit for human habitation under the provisions of section 604(1) of the 1985 Act. Whatever the council's motives may have been, and that is not for me to speculate upon, the fact is that, despite Ms Sutton's instructions to council officers, no structural survey of the subject property was undertaken. Mr Robinson's evidence, such as it was in producing brief extracts from two internal emails and reference to the post-demolition soil survey, I found to be most unconvincing. He admitted that he had not viewed No 3 internally and, other than a statement given under cross-examination that he had seen some cracking between ground and first floor window openings (which was not mentioned in the emails), produced no evidence to support his contentions about its actual condition. The comment that "the existence of settlement inferred it [cracking]" indicated to me a somewhat cavalier approach to the task and this, together with the admission that he had not even seen inside the property, leads me to conclude that I can attach little weight to his evidence. Mr Robinson put the alleged subsidence down to the old quarry, but I note that that quarry originally extended to the whole area occupied by 1 – 21 Coal Clough Lane, and whilst he speculated that that might cause problems in the future, I fail to be convinced that without undertaking a detailed survey at the appropriate time, he can come to the conclusions regarding No3 that he did.

It is common ground that No 1 was in very poor condition, but I have seen nothing in the evidence that leads me to the conclusion that No 3 was in such poor order as to make it unfit. The photographs produced by Mr Briffett clearly show that, despite the fact that when they were taken No 1 was in the process of demolition, there is no marked distortion to window or door openings on either front or rear elevation, to the roof line or guttering, or to the internal doorway that was shown. There was certainly some minor distortion to the window head on the rear elevation at first floor above the lean-to extension but nothing that appeared to me to be of such consequence as to bring into question the overall structural stability of the property. If any cracking did exist between ground and first floor openings that would, in my judgment, be a not uncommon occurrence at what is always a weaker point in the structure especially where original windows have been replaced with larger ones, as is clearly the case here (ground floor – rear).

Mr Darling, who carried out the fitness inspection has not produced a report, or been called to give evidence. It is a shame that Mrs Nelson did not accept the council's offer to discuss its findings (as set out in Ms Sutton's letter of 15 April 2004), but I accept her evidence as to why she did not. Ms Sutton's choice of words that "the classification will not affect the market value…" were most unfortunate and, in my opinion, it is not surprising that the claimants took comfort from them. Mr Robinson's email "reports" of June and August 2004 were, of course, internal documents and not for public scrutiny and were, I note, produced some time after the date upon which Mrs Nelson was invited to discuss the findings. I have to conclude, therefore, that any findings for discussion were those of Mr Darling and not Mr Robinson.

I accept what Mr Briffett has said about the apparent condition of the property when he first saw it in February 2004 and that there was nothing which led him to conclude that further investigation was needed, other than in respect of the bonding that would be required to the inner and outer skins of the front and rear walls. I also accept Mrs Nelson's statement that her jobbing builder would most certainly have alerted her to any apparent settlement or subsidence problems when he was undertaking modernisation and redecoration works in 2003. Whilst Mr Robinson's dismissal of the buttressing capabilities of the chimneystack between Nos 1 and 3 is logical, I note that there was a similar stack between Nos 3 and 5. I am not persuaded by what has been said about why it would not have been possible to just demolish No 1 and build up a new buttress wall against the newly exposed gable end of No 3, as has now been provided to No 5. It seems to me, from the evidence, that that may have been possible, and the need to demolish No 3 is thus unproven.

Turning then to the value, I note that the property had been modernised, had central heating and was accepted by both experts as being in good decorative order. The aspect over open land to the front, and the fact that each of the properties in this terrace has a small front garden puts it, in my judgment, in a league above those in the next terrace along (Nos 23 – 41 Coal Clough Lane). However, the fact that there is no direct comparable evidence of open market sales of properties in the lower terrace, and the undisputed fact that the properties further up Coal Clough Lane (beyond 41) are clearly of a higher value gives me some difficulty in determining an appropriate figure for No 3, particularly as it is admitted Mr Hudson has no information relating to the size or condition of the properties he has referred to (except Nos 31 and 147). I do accept that it appears logical there could well be 'pockets' where values of individual houses buck the general trend but agree with Mr Hudson that there will always be a ceiling on values in a particular location. What is evident from Mr Hudson's list is that there was clearly a rising market during 2004 with 3 of the properties appearing to have been sold on at significantly higher prices very quickly (27, 103 and 115). No evidence of house-price indices was produced to show what the rise was in terms of percentages between early 2004 and January 2005, and neither of the valuers had made any adjustments to the sale prices of their quoted comparables to reflect what the price would have been in January 2005. This, together with the fact that there is no real direct evidence of similar properties, in similar locations but in poor condition and good condition, makes reliance upon them all the more difficult.

However, as I have said, the experts have agreed that if the subject property were to have been in the condition the council contended it was, i.e., suffering from severe structural movement and unfit for human habitation, it would have a value of £40,000 and that forms a useful "base value" from which to start. I see that No 1 was agreed at £35,000 and that was acknowledged to be in far worse condition anyway

It is now necessary to establish by how much the value of the subject property increases to reflect the fact that it was modernised, well decorated, and as I have determined, not in a condition to which section 604(1) of the 1985 Housing Act would apply, but allowing for some diminution caused by the acknowledged condition of No 1. Could it be 62.5% to bring it to Mr Briffett's suggested value of £65,000, or 37.5% to achieve Mr Hudson's figure of £55,000?

To answer this, I have to look at the evidence from further up Coal Clough Lane. There is no dispute that No 147 was in poor condition and needed at least £10,000 spending on it at the time it was bought as a replacement property by the claimants in December 2004 (completion date) for £59,000. I thus take that as a benchmark for a property that was in need of modernisation at the upper end of Coal Clough Lane. Although there is no evidence as to its condition, except from the photograph provided by Mr Briffett, I note that No 235 sold for £73,500 in "early 2005". That was said to be slightly larger than the subject property, but in a poorer position (despite it being in Upper Coal Clough Lane), backing onto a local authority estate. It certainly appears similar to the subject property and to No 147, has replacement windows and seems to be in a well-maintained terrace. Apart from No 152 for which I have no information other than the sale price, No 235 appears to have been the highest recorded sale price in the area. I consider it reasonable to assume therefore, that property was modernised and not in unfit condition. The differential between that and 147 is around 20%. Even if it could be argued that No 152 at £85,000 was comparable, and reflected values for modernised houses at that end of the street, the differential is still only 30%. It does seem to me that there is no evidence whatsoever to support Mr Briffett's contention that in good condition, the value of the subject property could possibly be 65% more than its agreed value in unmodernised condition. Doing the best that I can, therefore, I find Mr Hudson's opinion more sustainable, and determine the valuation at £55,000 at the relevant date. That figure takes into account any diminution that would have been caused to it by the condition of No 1.

I turn now to the loss of rent. The acquiring authority has conceded that the claimants were entitled to claim compensation under this head, if indeed any such losses could be put down to the compulsory acquisition. It is evident that, apart from two short voids, the claimants have successfully let the property throughout their period of ownership, albeit the turnover of tenants appears to have been relatively high. I am satisfied that the reasons the property could not be let following Miss Oie's vacation were due to the impending acquisition, but as I think was accepted by Mrs Nelson, account has to be taken of the rent paid in advance, and the fact that the deposit was retained. I determine the compensation for loss of rent from 10 September 2004 to 17 January 2005 at £1,170 (18 weeks at £65pw).

There was little between the parties on the remaining heads of claim. Conceding that the costs of acquisition of an alternative property were allowable, the council said that there was some question whether as the whether the lender's fee of £499 in connection with the mortgage should be allowed, as there had been no mortgage on the subject property. However, they said this was only a very minor issue. I am satisfied that the lender's fee is a justifiable head of claim and determine that the sum as claimed at £1,761.06 shall be payable. Similarly, even though there could be some question over whether or not the time taken on the comparables research undertaken by the claimant, rather than Mr Briffett, is valid, I understand the overall time spent was fairly marginal. In any event, I have to assume that Mr Briffett''s fees would be reduced accordingly to take account of that input. I therefore award compensation for the claimants' time spent at £1,500 and £250 for the loss of carpets that was not disputed by the council.

In summary, the compensation is determined as:

Value of 3 Coal Clough Lane, Burnley	£55,000.00
Loss of rent	£1,170.00
Costs of acquisition of 147 Coal Clough Lane	£1,761.06
Claimants' time 60 hours @ £25ph	£1,500.00
Loss of carpets	£250.00
	£58,181.06

Say, £58,200 which sum shall be paid to the claimants by the acquiring authority, together with interest at the standard rate, less any advance payments already made.

Costs

Rule 28 (11) of the Lands Tribunal Rules 1996 states:

(11) No award shall be made in relation to the costs of the proceedings except in cases to which section 4 of the 1961 Act apply, save that the Tribunal may make an award of costs

(a) in cases where an offer of settlement has been made by a party and the Tribunal considers it appropriate to have regard to the fact that such an offer has been made; or

(b) in cases in which the Tribunal regards the circumstances as exceptional,

and if, exceptionally, an award of costs is made the amount shall not exceed that which would be allowed if the proceedings had been heard in a county court.

I received verbal submissions on costs from the claimants on the basis that the circumstances were exceptional under rule 28 (11)(b). The council said that whether or not it made an application would depend upon the outcome of the hearing. I therefore invite the council to make representations in writing, and a letter relating to that accompanies this decision, which will take effect when, but not until, the question of costs has been determined.

DATED 13 October 2005

(Signed)

P R Francis FRICS