UT Neutral citation number: [2010] UKUT 389 (LC)

LT Case Number: ACQ/399/2010

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – Compulsory Purchase – untraced owners of freehold reversions – vacant land subject to long leases – compensation assessed at £1,000

IN THE MATTER OF A NOTICE OF REFERENCE

BY

SHEFFIELD CITY COUNCIL Acquiring

Authority

Re: Land and Arundel Gate,

Brown Lane and Eyre Lane

Sheffield

Determination on the basis of written representations under Rule 27 of the

Lands Tribunal Rules 1996 (as amended)

By

A J Trott FRICS

No cases are referred to in this decision.

DECISION

Introduction

1.           This is a reference to determine the amount of compensation payable in respect of the compulsory purchase of the freehold interest in three plots of land at Arundel Gate, Brown Street and Eyre Street in Sheffield. These plots form part of a larger site known as Eyre Works, Arundel Gate, Sheffield that was purchased by Sheffield City Council (the acquiring authority) in March 1975. The acquiring authority only purchased the long leasehold interests in the reference properties. Attempts to identify the freehold owner both at the time of purchase and subsequently have failed.

2.           The acquiring authority now wish to allow Sheffield Hallam University (SHU) to redevelop the Eyre Works site, including the reference properties, to accommodate its Development and Society Faculty. SHU is apparently constrained in its ability to raise finance for this development unless it can show an unencumbered freehold title. The acquiring authority therefore made the City of Sheffield (Arundel Gate, Brown Lane, Eyre Lane, Clay Lane) Compulsory Purchaser Order 2006 (the CPO) on 26 June 2006. This was confirmed on 24 August 2006. It included the reference properties.

3.           A general vesting declaration was made on 9 November 2006 and the reference properties became vested in the acquiring authority on 14 December 2006, which is therefore the valuation date.

Facts

4.           The CPO identified four plots of land. Plot 1 does not form part of this reference. Plot 2 comprises 279 sqm of vacant land at Eyre Lane and Brown Lane. Plot 3 comprises 256 sqm of vacant land at Arundel Gate and Brown Lane. Plot 4 comprises 98 sqm of land forming half the width of Brown Lane between Arundel Gate and Eyre Lane. Plots 2 to 4 are the subject of this reference.

5.           Plot 2 is subject to a lease dated 29 December 1814 for a term of 800 years from 29 September 1814. The rent reserved is £4.7s.11d (£4.40). There are no rent reviews. The tenant covenanted to build one or more dwelling houses on the land within six months but it is unlikely that there have been any dwelling houses on the site since the 19^th century. The lease contains restrictions against the use of the property for offensive trades together with a landlord’s right of forfeiture in the event that the rent is unpaid for 30 days.

6.           Plot 3 is subject to a lease dated 7 October 1820 for a term of 800 years from 29 September 1820. The rent reserved is £7.17s.4d (£7.87). There are no rent reviews. There is no express obligation to build although there are restrictions against the use of the property for offensive trades. There are forfeiture provisions for non-payment of rent and breach of covenant.

7.           The acquiring authority own a long leasehold interests in both plots 2 and 3. The freehold titles of these plots are unregistered and the owner of the freehold interest in them is unknown.

8.           Plot 4 was included within the CPO to ensure that the acquiring authority acquired all interest in the land under Brown Lane between Arundel Gate and Eyre Lane.

9.           The reference to this Tribunal was made by the acquiring authority on 23 March 2010. The registrar was satisfied that the owner of the freehold interest could not be found after all diligent inquiries had been made and ordered that the service of proceedings be dispensed with under rule 56 of the Lands Tribunal Rules on 9 July 2010. The Tribunal also agreed that under these circumstances the reference could be determined without an oral hearing upon the application of the acquiring authority.

Evidence

10.        The acquiring authority rely upon the expert report of Patrick John Hickey MRICS, a chartered surveyor employed by Kier Asset Partnership Services which has provided property services to the acquiring authority since those functions were outsourced in 2009. Previously he had been employed since 1974 by Sheffield City Council, the Sheffield City Development Agency and the urban regeneration company, Sheffield One.

11.        Mr Hickey said that there was little market evidence available of the sale of directly comparable property interests and so he relied upon four other sources of evidence.

12.        Firstly, he referred to a publication entitled Residential Auction Property Investment Data (RAPID) published jointly in September 2007 by Allsops and the Essential Information Group. This stated:

“Ten years ago (base rate 6.5%), yields from 990 + ground rents were very close to those from 80 to 125 years (10.9 YP). In 2007 however there is a marked difference with longer dated investments trading at an average of 14.7 YP.”

13.        Secondly, Mr Hickey referred to two auction sales by local surveyors Mark Jenkinson and Son. The first, in March 2003, was the sale of a portfolio of freehold ground rents secured against modern industrial and warehouse buildings. The ground leases were granted in the early 1960s and were mainly for terms of 300 and 600 years. The details did not say whether any of the ground rents were subject to review. Total income was £2,403 and the investment sold at 25 years’ purchase. The second auction lot was a portfolio of residential ground rents secured against 116 houses in Sheffield, Barnsley, Coal Aston and Dronfield. The houses were let on 800 year leases and the ground rent income totalled £3,200 per annum. The details did not say whether any of the ground rents was subject to review. The portfolio was put up for auction in March 2010 but failed to reach the guide price of £65,000 (20.3 years’ purchase).

14.        Thirdly, Mr Hickey referred to the acquisition by the acquiring authority in September 2008 of the freehold reversion in a commercial property at Handsworth Road, Sheffield. The council were the leaseholder under a 900 year lease granted in 1945 and the landlord company had been dissolved. Consequently the freehold reversion became vested in the Crown as bona vacantia. The Crown’s nominee was the Treasury Solicitor who issued guidance notes in February 2006 which stated:

“16. In the case of freehold reversions for buildings that are fully let with leases having at least 60 years left to run before they expire, the price (subject to contract) is ten times the total of the annual ground rents or £500, which ever is higher.”

15.        Finally, Mr Hickey referred to the compensation which the acquiring authority had agreed with the freehold owner of plot 1, which was also acquired under the CPO. This was an area of 477 sqm of vacant land which was subject to an 800 year lease from 25 March 1834 at a fixed ground rent of £10.10s.6d (£10.53). The agreed purchase price was £500 and the vendor was a company with an extensive portfolio of freehold reversionary investments.

16.        Mr Hickey concluded that the covenants in the leases were not sufficiently onerous that the freehold owner would be able to forfeit the leases and that, in any event, defective title insurance would have been available at reasonable cost. He thought it unlikely that the freeholder would be able to prove title to the subsoil under Brown Lane. In these circumstances, and given the low, fixed ground rents, Mr Hickey considered that the freehold owner would have little bargaining power to extract substantial payment from a developer seeking to assemble a site. Equally the freeholder would have little incentive to sell at all unless the sum offered was sufficient to make it worth his while and unless his costs were paid in addition. For these minor freehold interests Mr Hickey, relying upon the sale of Plot 1 in particular, concluded that the appropriate value was £500 each for plots 2 and 3 and that plot 4 would not command any additional value.

Conclusions

17.        I do not find the details of the auctions in 2003 and 2010 to be of assistance. They are too remote from the valuation date and, in any event, the comparable cited in 2010 failed to sell and is therefore not a transaction. Nor do I find helpful the general comments and market commentary contained in the September 2007 edition of RAPID.

18.        I agree with Mr Hickey that the negotiated purchase price of £500 for plot 1 is relevant and useful. I think that a willing seller of plots 2 and 3 would not accept less than this sum. Like him I do not distinguish in value due to the slightly smaller ground rents involved compared to those at plot 1. The figure of £500 per plot is a reasonable sum and is supported by the Treasury Solicitor’s 2006 guidelines on the sale of long freehold reversions which have vested in the Crown as bona vacantia and where it is the minimum price. I also agree with Mr Hickey that there is no additional value in plot 4.

19.        I therefore determine that the compensation payable for plot 2 and plot 3 is £500 each, making a total of £1000. This figure includes any compensation in respect of title to the adjoining highway known as Brown Lane (plot 4).

Dated 28 October 2010

A J Trott FRICS