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UPPER TRIBUNAL
(LANDS CHAMBER)
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UT Neutral citation number: [2011] UKUT 125 (LC)
LT
Case Number: ACQ/203/2009
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
COMPENSATION
- compulsory purchase - dwellinghouse - whether to be valued when CPO made or on
vesting date - value in good condition - comparables - cost of necessary works
- whether deduction to be made for risk and profit - compensation determined at
£200,000
IN
THE MATTER OF A NOTICE OF REFERENCE
BETWEEN CLARISTENE
DOREEN YARDE Claimant
and
LONDON BOROUGH OF Acquiring
NEWHAM Authority
Re: 24 Buckingham Road
London
E15
1SP
Before:
N J Rose FRICS
Sitting
at 43-45 Bedford Square, London, WC1B 3AS
on
17 February 2011
Valentine Chikwe of St Valchikwe,
solicitors of Seven Kings, Ilford for the Claimant
Jonathan Wills,
instructed by Director of Legal and Democratic Services, London Borough of
Newham, for the Acquiring Authority
DECISION
Introduction
1.
This is a reference to determine the compensation payable by the London
Borough of Newham (the acquiring authority) arising from the compulsory
acquisition of the freehold interest in a dwellinghouse known as 24 Buckingham
Road, London, E15 1SP from the claimant, Mrs Claristene Doreen Yarde. The
subject property was compulsorily acquired under the Newham (24 Buckingham Road, London, E15 1SP) Compulsory Purchase Order 2006, made on 10 July 2006 and
confirmed by the Secretary of State for Communities and Local Government on 12
July 2007. The acquiring authority executed a general vesting declaration in
respect of the property on 17 December 2007 and the vesting date was 15 January
2008. The claimant contended for compensation in the region of £375,000 and
the acquiring authority’s valuation was £200,000.
2.
Mr Valentine Chikwe, a partner in Messrs St Valchikwe, solicitors,
appeared for the claimant, whom he called as a witness. He did not call any
expert evidence. Mr Jonathan Wills of counsel appeared for the acquiring
authority. He called factual evidence from Ms Noreen Shabir, legal assistant
with the acquiring authority, and expert evidence from Mr David Drane MRICS,
who is employed as a senior surveyor by DVS, the commercial arm of the Valuation
Office Agency. I made an unaccompanied external inspection of the subject
property, and certain other properties which had been cited as comparables, on
the morning of 25 March 2011.
Facts
3.
From the evidence I find the following facts. The subject property
comprises a semi detached three bedroom house, built in about 1860 of brick
with a pitched slate roof on two storeys. It has a front bay to the ground
floor and a single storey back addition. It is situated between the A11 Leytonstone Road and the A114 Woodgrange Road (accessed off St James Road via Forest Lane) in an established residential area, relatively close to Maryland and Forest
Gate railway stations.
4.
On 17 September 1997 the claimant wrote to the council tax officer of
the acquiring authority. She said that the subject property had been
uninhabitable for some years. On 2 February 2000 the claimant completed a
review form for council tax discount/exemption. She said that the property was
in a very bad condition and she was not able to occupy it. She also mentioned
that she had applied for a renovation grant in 1985 and 1986, but without
success. Officers from the acquiring authority’s environmental health team
attempted, unsuccessfully, to encourage the claimant to refurbish the property
and bring it back into beneficial use.
5.
Upon receiving notice that the acquiring authority had cabinet approval
to make a CPO, the claimant informed the acquiring authority that she wished to
renovate the property. In a letter dated 26 March 2004 she said that estimates
for the refurbishment of the property were awaited and that a mortgage was
being sought. On 3 September 2004 the claimant telephoned the acquiring
authority in response to a requisition for information. She said that the
property was vacant on a temporary basis whilst major structural works were
carried out. This was followed by a letter dated 13 September 2004, which
stated that a builder had been employed and works were due to commence in late
October 2004. On 3 November 2005 the claimant telephoned a planning lawyer at
the acquiring authority. She said that she had put the property on the market as
she could not afford the work necessary to bring it back into habitable
condition. The acquiring authority waited to see if the property would be sold
and works commenced by a new owner, but nothing happened.
6.
The acquiring authority currently has a large compulsory purchase
programme as part of its empty property strategy across the borough, with the specific
aim of seeking sustainable improvements to the private housing sector. Where improvements
fail to materialise the authority will, when all else fails, resort to the use
of compulsory purchase powers and it did so in the case of the subject
property.
Case for the acquiring authority
7.
Mr Drane said that he had carried out a limited visual inspection of the
subject property on 15 January 2008. In his opinion it was generally in below
average condition. It would have required a certain degree of refurbishment
and repair to bring it up to good mortgageable standard. He noted that the
roof covering required minor overhaul and replacement at the rear. There was a
certain level of water ingress in the main building. This had transmitted
damage to the ceilings and floors below. The condition of the guttering and
down-pipes was poor and these needed to be replaced. The windows, joinery and
sills throughout the property were in below average condition and showing signs
of age, with timber in various places being poor. Mr Drane allowed for the
replacement of all the existing poor quality double glazed windows and exterior
doors with new modern double glazed units. He considered that re-wiring and
some replacement of plumbing was required.
8.
There was a need for re-plastering in various places and replacing parts
of certain ceilings which had suffered water damage. Brickwork needed
re-pointing in various places at the front and rear. He allowed sums for
replacing the bathroom and kitchen fittings and installing a new central
heating system. Full interior and exterior decoration was desirable and
ideally brick cleaning to restore the gothic appearance of the exterior. In
addition he allowed for damp proofing and rebuilding the front bay, where
rising dampness and structural damage were apparent. Finally there was a
requirement for some clearance of rubbish and debris from both inside the house
and in the rear garden.
9.
In arriving at his valuation Mr Drane had regard to three properties
which were sold in the open market during the period surrounding the vesting
date. He provided the following brief details:
30 Buckingham Road, E 15
An 1870s three bedroom
semi-detached house with a garage. Sale completed 20 December 2007 at £314,500.
In very good condition when inspected in January 2008.
39 Buckingham Road, E15
An 1890s four bedroom mid-terrace
house. Sale completed 15 January 2008 at £320,000. In good condition when
inspected in January 2008.
41 Buckingham Road, E15
An 1890s three bedroom end terrace house. Sale completed 26
June 2008 at £250,000. In fair condition when inspected in January 2008.
10.
Mr Drane said that the property market rose rapidly during 2007, before
levelling off towards the end of the year and into early 2008, after which it
began to decline. From his general experience of property values in the area
he considered that the three comparable sales confirmed his view that a mid-nineteenth
century three bedroom house in the locality would have commanded around
£300,000 in good order following refurbishment. He discounted this figure to
reflect the poor condition of the subject property. He estimated that the cost
of the repair and refurbishment works required to put it into good mortgageable
condition would have been in the region of £80,000 to £90,000. In his
experience this type of property would have had a limited market. It would
have been of interest to a cash buyer, probably a small builder or the like and
it was to be expected that any such purchaser would require a return on his
investment. In addition to a minimum of £80,000 for the necessary building works
he therefore allowed £20,000 to reflect the profit required to compensate the
purchaser for the risk involved. He thus arrived at a valuation in the order
of £200,000.
Case for the claimant
11.
In evidence the claimant said that she had obtained two estimates to
repair the subject property. On 18 December 2006 Hammond Engineer Services of
Tottenham quoted £38,000. Detroit Builders of Manor Park quoted £35,845 on 2
June 2007. She considered that the subject property had been worth in the
region of £400/450,000 in 2006. She would reluctantly accept a value in good
condition between £400,000 and £420,000. She contended that, from this value,
the Tribunal should deduct the average of the two estimates she had obtained.
In addition she was entitled to “a relocation fee and compensation etc for the
inconveniences caused to me”, but these matters were not quantified.
12.
Mr Chikwe emphasised the fact that Mr Drane’s expert report was dated 26
March 2009, well over a year after the vesting date. He submitted that Mr
Drane’s valuation had been influenced by the decline in values which had
occurred in the intervening period. He made the following additional points.
There was no evidence that Mr Drane had inspected the subject property in
January 2008. It was wrong to rely on the prices paid for 39 and 41 Buckingham Road. They were both terraced houses and not appropriate to be used for
valuing the subject property, which was semi-detached. There was no
justification for Mr Drane’s deduction of £20,000 for profit. The property
should be valued in 2006, when the CPO was made, and not at the vesting date.
After the CPO was made the property was occupied by squatters, who caused fire
damage. It was unfair to reflect this damage in the valuation. In any event
Mr Drane’s estimate of £80,000 for repairs was excessive having regard to the
two estimates received from builders.. The Tribunal should determine the value
of the subject property in accordance with what was fair and reasonable having
regard to all the circumstances.
Conclusions
13.
I deal firstly with the issue of the appropriate valuation date. I am
in no doubt that Mr Drane was right to value at the date of vesting. This is
because section 5, rule (2) of the Land Compensation Act 1961 (the Act)
provides that:
“the value of land shall, subject as hereinafter provided,
be taken to be the amount which the land if sold in the open market by a
willing seller might be expected to realise”
and section 5A of the Act
provides as follows:
“(1) If the value of land is to be
assessed in accordance with rule (2) in section 5, the valuation must be made
as at the relevant valuation date …
(4)
If the land is the subject of a general vesting declaration, the
relevant valuation date is the earlier of -
(a)
the vesting date, and
(b)
the date when the assessment is made …”
14.
I am unable to accept Mr Chikwe’s submission that the condition of the
subject property on the vesting date had deteriorated due to the actions of
squatters. This is because, in oral evidence, the claimant stated that
squatters did not occupy the property until February or March 2008, which was
after the vesting date. There is in my judgment no doubt that the subject
property was in poor condition on the vesting date, and that this was the
result of continuing neglect over many years.
15.
As to the value of the property in good condition, there was no
objective evidence to support the claimant’s estimate of £400/420,000 and I
reject it. I am satisfied that Mr Drane is an experienced valuer, and that he inspected
the property on the vesting date. I also find that he based his assessment of
value on market conditions at that date, not on the date of his report to the
Tribunal (26 March 2009), nor in October 2008, when he first informed the
acquiring authority that his valuation was £200,000. The three comparable
transactions on which Mr Drane relied are all situated close to the subject
property and, subject to appropriate adjustments, provide good evidence of
value. In the light of my site visit I am satisfied that they support a
valuation in good condition of £300,000.
16.
As to the cost of the necessary works, I am unable to place much weight
on the two estimates obtained by the claimant in December 2006 and June 2007.
The reasons for this conclusion are these. The estimates pre-dated the
valuation date by between 6 and 12 months and it is not clear whether the
condition of the property changed in the intervening period. Neither of the
authors of the quotation was called to give evidence. The specification of
works included in the estimates is not clear. There is room for doubt about
the independence of Hammond Engineer Services, who employed the claimant’s
daughter as customer services manager when their estimate was prepared. On 22
January 2008 Messrs Wiseman Lee, solicitors, wrote as follows to the
environmental health officer of the acquiring authority:
“our client [the claimant] is confident that not only does
she want all the work to be undertaken to place the property into a habitable
condition so that she can live there but that she has the means to discharge
the costs involved. She knows that those costs will be in the region of
£50,000/£60,000 and we are emphatically informed that this money is available.”
It is right that I record that the claimant said that she did
not discuss the cost of the works with the writer of that letter, but I am
satisfied that she was mistaken. After taking possession of the subject
property, the acquiring authority carried out works of repair and refurbishment
at a cost of £97,000 plus professional fees of £10,000. It then sold the
property to Stadium Housing Association Limited, with completion on 23
September 2010. Mr Drane was not aware of the cost of the works carried out by
the acquiring authority at the time he prepared his own cost estimate, but the
actual cost does not suggest that Mr Drane’s estimate of £80,000 is excessive.
In my judgment his estimate is reliable and I accept it.
17.
I also accept Mr Drane’s opinion that, having regard to the extent of
the work needed to put the subject property into good repair, a purchaser would
have required a profit of at least £20,000 to compensate for the trouble and
risk involved. I therefore accept Mr Drane’s valuation in its entirety. In
the absence of any claim for disturbance or reliable evidence to support one, I
determine that the compensation payable for the freehold interest in the
subject property is £200,000. In addition statutory interest is payable in the
usual way. A letter regarding costs accompanies this letter, which will become
final when the question of costs is determined.
Dated 29 March 2011
N J Rose FRICS
