UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 426 (LC)

LT Case Numbers: ACQ/330-337, 339-345, 348, 350-351, 367-368 and 385/2008

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

COMPENSATION – compulsory purchase – dwellinghouses – comparables – whether sales either within or just outside the CPO area provide reliable evidence of market value

 

IN THE MATTER OF TWENTY ONE NOTICES OF REFERENCE

 

BETWEEN (1) MR JOHN ROGER HORNBY

(2) MR MICHAEL PATRICK O’BRIEN

(3) MRS MARJORIE CARMICHAEL

(4) MR GRAHAM CHRISTOPHER TARR and

MRS SUSAN JANE TARR

(5) MR ERIC McBRYDE and MRS NORMA McBRYDE

(6) MR MARTIN FOXALL

(7) MR RALPH FREDERICK TARR

(8) MR HENRY GLUCK

(9) MR UMESK CHANDLER MISRA

(10) MR ALAN MATHEW COPELAND

(11) MR DONALD McKENZIE BALL

(12) MR ANTHONY JOHN RATH and

MS MAXINE HUNTER

(13) MR STEPHEN WANDLESS (TWO REFERENCES)

(14) MRS ELEANOR BELL

(15) MR MALCOLM MALLOY AND MRS ELIZABETH MALLOY

(16) MR NORMAN ROBSON

(17) MR MALCOLM PARKES

(18) MR MALCOLM TOPPING (TWO REFERENCES)

(19) MRS CLOTILDE ROBINSON Claimants

 

and

THE BOROUGH COUNCIL OF Acquiring

GATESHEAD Authority

 

Re: Properties in Sunderland Road North,

Gateshead, Tyne and Wear

 

Before: N J Rose FRICS

 

Sitting at South Tyneside Magistrates’ Court

on 16-18 November 2010 and at

Newcastle Social Security and Child Support Agency on 19 November 2010

 

 

James Marwick, instructed by Swaisland Harris Associates, chartered surveyors of Newcastle, and Stephen Nelson FRICS, IRRV of Gosforth, by direct professional access.

Robert Walton, instructed by the Solicitor to Gateshead Council, for the Acquiring Authority

 

 

 

The following cases are referred to in this decision:

 

Abbey Homesteads (Developments) Limited v Northamptonshire City Council [1992] RVR 110

Waters v Welsh Development Agency [2004] 1 WLR 1304

Spirerose Ltd (in administration) v Transport for London [2009] 4 All ER 81

Potter and Potter v Hillingdon London Borough Council [2010] RVR 271

Sadiq and Hashmi v Stoke on Trent City Council [2009] RVR 178

 

DECISION

Introduction

1.           These 21 references, which were heard together, are to determine the compensation payable by the Borough Council of Gateshead (GBC) to the owners of various residential properties, compulsorily acquired under The Borough Council of Gateshead (Land at Sunderland Road, Gateshead) Compulsory Purchase Order 2003 (the CPO), which was made on 1 September 2003 and confirmed by the First Secretary of State on 6 September 2004 following a public inquiry held in May 2004.  A General Vesting Declaration was made by GBC on 31 December 2004 and the properties vested in the acquiring authority on 1 March 2005, which is the valuation date.

2.           Mr James Marwick of counsel appeared for the claimants.  He called expert evidence from Mr Richard Harris BSc, FRICS, IRRV, in respect of eleven of the reference properties and from Mr Stephen Nelson FRICS, IRRV in respect of the remaining ten properties.  Mr Marwick also called factual evidence from Mr Stephen Wandless, the owner of two of the reference properties and Mr Martin Foxall, who owns one of the reference properties.  Counsel for the acquiring authority, Mr Robert Walton, called expert and factual evidence from Mr Daniel Gillbanks FRICS, who is employed by GBC as a team leader in charge of valuations, acquisitions and disposals and who has been responsible for numerous compensation settlements within the CPO area.  Following the hearing I visited the CPO site and the adjoining area in company with the three experts.  Subsequently I have viewed a DVD showing various properties within the CPO area, taken by GBC on 20 September 2002. 

3.           Details of the claimants, their properties, and the valuations contended for by the parties, are as follows:

 

A. Properties valued by Mr Harris
Reference No.	Claimant	Address and property type	Claimant’s valuation	GBC’s valuation
ACQ/330/2008	Mr Roger John Hornby	44 Allhusen Terrace – Ground Floor 2 Bed Flat	£25,000	£10,800
ACQ/331/2008	Mr Michael Patrick O’Brien	505 Sunderland Road – 3 Bed House	£80,000	£43,200
ACQ/332/2008	Mrs Marjorie Carmichael	14 Ford Street – Ground Floor 2 Bed Flat	£37,500	£15,000
ACQ/333/2008	Mr Graham Christopher Tarr and Mrs Susan Jane Tarr	1 Bronte Street – First Floor 3 Bed Flat	£42,500	£13,200
ACQ/334/2008	Mrs Eric McBryde and Mrs Norma McBryde	42 John Street – 3 Bed House	£67,500	£23,400
ACQ/335/2008	Mr Martin Foxall	11 Bronte Street – Ground Floor 2 Bed Flat	£37,500	£10,200
ACQ/336/2008	Mr Ralph Frederick Tarr	3 Bronte Street – Ground Floor 2/3 Bed Flat	£37,000	£13,200
ACQ/337/2008	Mr Henry Gluck	22/24 Bronte Street – Ground Floor 1 Bed Flat and First Floor 3 Bed Flat	£50,000	£22,800
ACQ/343/2008	Mr Stephen Wandless	20 Allhusen Terrace – Ground Floor 2 Bed Flat	£37,000	£11,400
ACQ/344/2008	Mr Stephen Wandless	8 Bronte Street – Ground Floor 2 Bed Flat	£33,000	£9,600
ACQ/345/2008	Mrs Eleanor Bell	46 John Street – 3 Bed House	£62,500	£23,400
B Properties valued by Mr Nelson
ACQ/339/2008	Mr Umesk Chandler Misra	34/36 Bronte Street – Ground Floor and First Floor Flats	£50,000	£20,400
ACQ/340/2008	Mr Alan Mathew Copeland	437 Sunderland Road – 4 Bed Maisonette	£40,000	£19,200
ACQ/341/2008	Mr Donald McKenzie Ball	42 Bronte Street – 3 Bed House	£60,000	£24,000
ACQ/342/2008	Mr Anthony John Rath and Ms Maxine Hunter	5 Emily Street –3 Bed Maisonette	£35,000	£13,200
ACQ/348/2008	Mr Malcolm Malloy and Mrs Elizabeth Malloy	14 Bronte Street – 3 Bed House	£60,000	£24,000
ACQ/350/2008	Mr Norman Robson	14 Emily Street – First Floor 2 Bed Flat	£30,000	£10,800
ACQ/351/2008	Mr Malcolm Parkes	519-521 Sunderland Road – Pair of flats	£85,000	£34,800
ACQ/367/2008	Mr Malcolm Topping	17-19 Emily Street – 3 Bed First Floor Flat and 2 Bed Grnd Flr Flat	£60,000	£21,100
ACQ/368/2008	Mr Malcolm Topping	507 Sunderland Road – 3 Bed First Floor Flat	£40,000	£17,400
ACQ/385/2008	Mrs Clotilde Robinson	495 Sunderland Road – 4 Bed Maisonette	£55,000	£21,000

4.           In each case Mr Gillbanks suggested that a surveyor’s fee of £500 should be paid and this was not challenged.

Facts

5.           From an agreed statement of facts and the evidence I find the following facts.  The reference properties were all situated in an area known as Sunderland Road North (SRN) approximately 1.4 km east-south-east of Gateshead town centre.  SRN is bounded to the north by the line of the Metro track running on a substantial embankment and to the south by Sunderland Road.  The land in this area falls generally towards the north.  The older properties dated from between 1890 and 1900.  They consisted of two storey buildings of brick under a slate roof, arranged in a series of terraced blocks aligned with the fall of the land, between Ford Street in the east and Hylton Street in the west, together with a number of properties fronting the north side of Sunderland Road itself.  The remaining streets in the area, from east to west, were Emily Street, Bronte Street, Allhusen Terrace, Jane Eyre Terrace, John Street and Beech Street.  The majority of the properties acquired were flats – known locally as Tyneside flats – in houses containing a ground floor flat and a first floor flat, each with its own front door and rear entrance.  There were also a few properties that had previously been arranged as two flats and were subsequently converted into a single house.  Most of the properties had later brick built extensions, each containing a bathroom and kitchen, and small enclosed rear yards/gardens.  In some cases the properties opened directly onto the street.  In others they were separated from the highway by small front gardens with low boundary walls.  The blocks were all approached at the rear from broad alleyways. 

6.           A purchaser of a Tyneside flat obtains a 999 year lease of the flat, of which he is entitled to possession.  He also obtains the freehold reversion to the other flat in the building, but he is not entitled to possession of that flat as it is also subject to a very long lease.  This conveyancing procedure is unique to the North East of England.  It was designed to ensure that each leaseholder could enforce the covenants in the lease of the other flat.

7.           With the exception of the block at the western end of SRN, comprising properties fronting the east side of Hylton Street and the west side of Beech Street, all of SRN was included in the CPO.  This area was referred to by Mr Gillbanks as “the Demolition Area” and I shall do the same.  The Demolition Area comprised a total of approximately 302 properties.  Most were privately owned, but some flats were owned by GBC.  Ground floor flats had two bedrooms, with the second bedroom accessed from the living room.  First floor properties had three bedrooms and were accessed by steep narrow staircases.  The main bedrooms of both property types were located to the front of the building with the living room to the rear.

8.           A number of properties in the Demolition Area were acquired and demolished prior to the valuation date and the remaining properties were demolished afterwards.  The cleared site was sold by GBC to Lancing Homes Limited and has been partly redeveloped with new housing.  The remainder of the cleared site remains undeveloped, awaiting an improvement in market conditions. 

9.           In May and September 1998 public meetings were held with local residents who were concerned about housing conditions in the area. 

10.        On 24 June 1999 GBC’s Executive Committee considered a report concerning a petition received from residents living in and around Sunderland Road.  The report stated that the petition sought the revitalisation of SRN.  The Council no longer has the petition and the claimants have therefore not inspected it.

11.        In January 2000 the Housing Corporation awarded £500,000 to Enterprise 5 Housing Association to buy and demolish 39 of the worst properties in the Demolition Area.  GBC was consulted on this and supported Enterprise 5’s proposal.  These 39 properties were located in two blocks:  Nos.  1-61 Jane Eyre Terrace and Nos. 395-413 Sunderland Road.  Enterprise 5 appointed a local estate agent, Andrew Craig, to negotiate acquisitions.  By the end of 2000 eight of the 39 properties identified had been acquired.  These eight flats were in three different units in the street.  For practical reasons none were demolished. 

12.        GBC’s Executive Committee considered a further report on 25 July 2000 to approve a formal strategy to deal with conditions in SRN.

13.        On 23 January 2001 a report was presented to the Executive Committee entitled “Purchase of private properties in the Sunderland Road Area, Gateshead.”  It related to SRN and included the following:

The Current Position

7.           Work is now progressing on an award of £500,000 from the Housing Corporation New Tools Pilot Fund which was made to Enterprise 5 Housing Association to buy up properties in Jane Eyre Terrace (nos.1-61) and one of the blocks on Sunderland Road (nos.395-413) for their eventual demolition (see attached map).  These two terraces contain the highest proportion of empty properties.

8.           Demand for properties in the area in decreasing.  There is therefore a need to consider the long term future of the area in accordance with owners’ and tenants’ wishes.

9.           It may be possible, working with a registered social landlord and developers of new houses to facilitate relocation of people out of the area if they wish to do so.

10.        Officers are currently working on a longer term strategy which will be developed in discussion with residents via the street committees.

Proposal

11.        The Council has previously agreed to purchase properties in the King Street, Teams Clearance Area in advance of the Compulsory Purchase Order.  A similar strategy could be used for appropriate properties in the Sunderland Road area.  Funds are currently available which could be used for this purpose.  This will complement the acquisitions being made using New Tools funds in the two blocks indicated above, particularly where there are empty, eyesore properties adjacent to those blocks being acquired.

12.        Where properties are bought it is proposed that they be demolished at an appropriate time when the properties assembled allow that.  The resultant sites will be landscaped to provide temporary amenity space until such time that the area is redeveloped.

13.        Residents will be consulted on the acquisition proposals.

14.        This proposal to acquire properties will fit in with the longer term strategy which is likely to identify further properties for demolition.

Recommendation

15.        The Committee is recommended to approve:-

i)                Officer consultations with residents and others with an interest in the properties in the Sunderland Road North Area about the acquisition proposals outlined above as part of the wider strategy for the area.

ii)              The acquisition of privately owned properties in the Sunderland Road North Area using HIP funds.

These recommendations were duly approved by the Committee.

14.        In March 2002 a public meeting was held at which GBC presented three options for the future of SRN.  The three options all included varying degrees of demolition.  The first was for part of the Demolition Area stretching from its western boundary to the west side of Allhusen Terrace.  The second was for a bigger part, as far as the west side of Emily Street, and the third was for the entire Demolition Area.  Further public consultations on these options took place during Spring 2002.

15.        When the results were known a report was presented to GBC’s Cabinet on 17 September 2002.  The Cabinet approved the preferred option for the total demolition of the Demolition Area; authorised GBC to make a CPO to acquire the outstanding interests in the Demolition Area to enable demolition to take place, and authorised officers to develop proposals for the wider area.

Evidence of Mr Wandless

16.        Mr Wandless owned the freehold interest in 20 Allhusen Terrace and 8 Bronte Street.  He had previously owned other properties elsewhere in Gateshead which he had sold to GBC. 

17.        Mr Wandless produced copies of his correspondence with the Commission for Local Administration in England, following the complaint he made on 31 July 2005 on behalf of a Mr I Bell, who had sold two flats in the Demolition Area to GBC in December 2003.  He complained that GBC did not advise Mr Bell of his right to receive independent valuation advice, that they did not offer to pay for such advice, that they did not advise Mr Bell of his right to allow the matter to proceed to a formal CPO, with its attendant right of reference to the Lands Tribunal, that GBC employed a valuer who was not qualified and that his valuation was flawed.

18.        On 16 August 2006 the Ombudsman found that there had been maladministration in one respect, namely that GBC had relied on reports to their Executive Committee as a basis for their policy of not paying professional valuation fees, when those reports had not adopted such a policy.  Nevertheless, she concluded that this maladministration had not caused injustice to Mr Bell.  Mr Wandless wrote a six page letter to the Ombudsman on 19 June 2007 querying her decision, but the Ombudsman declined to enter into any further correspondence on the matter.

19.        Mr Wandless said that he had asked GBC to reimburse the fees he had paid for valuation advice in respect of his own properties, as they had previously done in the Hartington CPO area, and GBC agreed to do so.  But no such payments were made to those property owners who were not aware that they were entitled to such reimbursement.  The result was that, of the many sales of properties in SRN to GBC before the vesting date, valuation fees were paid by GBC to only one vendor.

20.        Mr Wandless said that the early sales to GBC were conducted against the background of neighbouring properties having been bricked up and demolished.  He suggested that some owners had been pressured into accepting the price offered for their property by GBC.  He produced a letter dated 5 May 2004 to a Mrs Bell of 46 John Street from her surveyor, Andrew Craig, which said:

“I was also informed by Karen Parlett (a surveyor with GBC) that if the current offer of compensation is not acceptable, then the offer of alternative accommodation will be withdrawn until such time as compensation has been agreed.  She also told me that should the CPO be confirmed, there will be no automatic offer of alternative accommodation and only one offer of accommodation on the basis of  ‘a roof over your head’  would be made.”

21.        In a letter to Mr Wandless dated 14 April 2009 Mr George Larman, the former owner of 481 Sunderland Road, said:

“I agreed to sell my house to Gateshead Council at a negotiated figure £500 higher than the Council valuation.  I did not consider this to be a fair price.  I sold because if I did not I would have been refused the opportunity to move to the Council accommodation of my choice.”

22.        Mr Wandless also produced a letter dated 1 December 2006 from Mr Roger Barnsley FRICS, who had acted for the owner in the sale of 547 Sunderland Road to GBC.  Mr Barnsley said:

“I was instructed to arrange a sale as quickly as possible due to the fact that the Client needed the money from the sale.  I was therefore not in a position to obtain the best price but was under instructions to accept the figure of £16,500 exclusive of fees.”

23.        Mr Wandless produced a number of graphs which he had prepared, designed to show the relationship between sale prices achieved in SRN, the area to the south of Sunderland Road (SRS), and Gateshead as a whole between 1995 and 2001.

Evidence of Mr Harris

24.        Mr Harris said that he had been involved with Newcastle City Council (NCC) in respect of CPOs in the Benwell, Scotswood and Walker Road areas, which were part of a Going for Growth policy to regenerate and redevelop the city.  There had been extensive vandalism and damage to the properties in this area and previous purchases and CPOs made by the Council since 1998.  These areas became part of the Newcastle Gateshead Pathfinder Initiative.  The Scotswood, Benwell and Walker Road areas, together with SRN in Gateshead, were identified as areas of poor quality housing and local demand.  Negotiations on properties in these three areas resulted in agreements on compensation payable for investments and owner occupied buildings which showed significant increases over time. 

25.        Mr Harris acted on behalf of an owner occupier, a Mrs Grieve of 11 Homeland in Low Delaval Walker, who was offered £15,000 for her property in September 2003.  This figure was accepted as a 100% offer but not agreed.  Compensation was finally agreed with NCC on 31 May 2005 at £20,000, an increase of one-third over the period.  An offer was made at the end of December 2006 for a property in Woodlands Crescent, Low Delaval at £31,500.  Mr Harris said that these were not impressive properties, and the increased prices offered by NCC represented that Council’s perception of changes in the market over time. 

26.        Mr Harris also referred to two modern houses in Beech Street, SRN which were not included in the CPO.  They were adversely affected by the condition of properties in Jane Eyre Terrace and the yet the price paid for No.29 on 11 October 2004 (£71,300) was four times that paid for No.27 in June 2001 and more than double the £32,000 paid for No.33 in August 2002.  Mr Harris accepted that some of this increase was attributable to the CPO, but the general vesting order did not come into force for another five months and neighbouring properties were being demolished at the time.  Despite the detrimental effect of these works, the increase in the price paid for No.29, from £17,300 in 2001 to £71,300 in October 2004, reflected changes in the market as well as the improving area.

27.        Mr Harris placed weight on the purchase by his client, Mr Martin Foxall, of one of the reference properties, 11 Bronte Street, Gateshead.  This was a ground floor two bedroom investment flat which was purchased in August 2002 for £24,000.  The purchaser’s solicitor carried out proper searches and there was no mention of a CPO or regeneration scheme.  The property had previously been bought in July 2002 for £15,000.  Following his purchase, Mr Foxall spent £2,400 on repairing, improving and furnishing the property, which was then let at £65 per week.  By comparison with the previous purchase prices, GBC’s initial offer of compensation for this property was £7,000 and this was eventually increased to £10,200. 

28.        Mr Harris was also involved with 533 Sunderland Road on behalf of a Mrs Elderbrant.  His client purchased this modernised first floor flat for £24,000 in August 2000 with a mortgage of £22,800 from the Cheltenham and Gloucester Building Society.  Although the flat had the disadvantage of fronting the main road, it was larger than the flats in the northern part of SRN, having a bay window to the front room.  GBC offered £14,500 for this property in July 2002.  After some negotiation this offer was accepted in March 2003.  The owner decided to accept £9,500 less than the price she had paid in 2000 because GBC refused to pay a surveyor’s fee and offered only limited legal costs, and also because the adjoining properties and the flat on the ground floor of the same building had all been purchased by GBC and kept empty, leading Mrs Elderbrant to fear for her safety.  At first she was unable to pay off the mortgage and the Building Society was reluctant to allow the debt to be transferred to another property.  The sale was eventually completed in December 2003, following settlement of a personal injury claim by the owner.

29.        In Mr Harris’s opinion it was significant that the price paid by GBC for 533 Sunderland Road was £9,500 less than that paid by Mr Foxall for 11 Bronte Street, an inferior flat, two years later. 

30.        In arriving at his valuations of ground floor flats in the Demolition Area, Mr Harris had regard to the sale of a number of properties in close proximity, but outside the CPO area and on the southern side of Sunderland Road.  The first was 25 Howe Street, sold in November 2004 for £49,500.  Howe Street runs south from the southern side of Sunderland Road, opposite and a short distance west of the junction with Hylton Street.  This flat did not have central heating, it was several steps up from the road but had been modernised.  Another helpful comparable was 30 Howe Street, a modernised ground floor flat with central heating.  It had changed hands on several occasions, the last time in February 2005, just before the general vesting date, at £47,500.  It was a slightly smaller property than No.25.  It had central heating but no double glazing or uPVC windows.

31.        358 Sunderland Road was an upper floor three bedroom flat, situated on the east side of the junction with King Edward Street, which runs south from the south side of Sunderland Road, almost opposite its junction with Hylton Street.  It was sold for £38,500 in September 2002.  It was a larger flat, suitable for letting.  It could be converted into four bedrooms as it had two reception rooms.  The two attic bedrooms were set in the T-fall of the roof. 

32.        Mr Harris considered that 492/494 Sunderland Road provided an excellent comparable for houses in the Demolition Area.  It was sold on 5 July 2002 for £37,000 and resold on 18 October 2004 for £105,000.  It was a converted pair of flats, similar to the reference properties at 42 and 46 John Street and 505 Sunderland Road.  Nos.492/494 were located virtually opposite 505 Sunderland Road, which was of similar size.  It had several disabilities, however, being on a steeply sloping site, having 13 steps up to the front door, a main road frontage and an odd layout.  By comparison 505 Sunderland Road was larger and had a better internal layout.  The John Street houses, although smaller, were on the level, not adjacent to a main road and overlooked landscaped gardens.  They did however suffer from the presence of the vacant properties in John Street and Jane Eyre Terrace onto which they backed.  

33.        Mr Harris’s next comparable was a pair of flats known as 64/66 King Edward Street.  No.64, a first floor flat, was sold three times during the scheme period.  In February 2002 it was sold for £13,500, in July 2004 for £40,000 and in November 2005 for £50,000.  It was not a particularly attractive or well modernised property.  No.66, a ground floor flat, was sold in December 2004 for £46,500.  It was sold again in June 2005 for £45,000 and in September 2007 for £68,000.  The property had a new roof.  There was double glazing to the front and rear of No.66, but only to the front of No.64.  Neither flat was particularly attractive or well maintained. 

34.        Mr Harris also referred to his negotiations for the sale to GBC of a ground floor semi-detached flat at 2 Hylton Street.  It was situated in SRN, just outside the scheme but affected by it.  The adjoining properties were within the CPO and had been demolished.  No.2 was a double fronted flat of 1930s construction.  It was smaller than other properties in the area but had better daylight.  It had been modernised to a basic standard.  In November 2000 it was purchased for £12,000.  It was sold to GBC in April 2005 for £52,000.  In Mr Harris’s opinion this price did not reflect the improvement in the area as a result of the programme of demolition, but merely reflected changes in the market.

35.        Mr Harris said that it was difficult to ignore the effects of the scheme where, as in this case, the scheme had begun before the declaration of the intention to make a CPO was published.  In arriving at his valuations he had made a discount from the prices paid for properties to the south of Sunderland Road, but those sales were nevertheless good evidence. 

Evidence of Mr Nelson

36.        Mr Nelson said that NCC had initiated a Going for Growth policy to regenerate the city, with better education, improved job prospects, affordable housing and good access to health, leisure and shopping facilities.  The Master Plan was produced in June 2000.  Consultation meetings were held between June and September 2000, when the opinions of 3,162 residents were recorded.  The Master Plan sub-divided the city into neighbourhoods, with seven in the West End and six in the East End.  Following extensive consultations the go-ahead was given in October 2001.

37.        In April 2002 the Secretary of State for Transport, Local Government and the Regions announced nine Pathfinder Housing Market Renewal initiatives in Northern England and the Midlands to tackle the problems resulting from housing market failure.  Newcastle/Gateshead was one of the Pathfinder initiatives.  Each initiative was awarded an initial £2.66m to start the process of developing the initiative.  In a report to the NCC Cabinet dated 19 June 2002, the Cabinet was informed that NCC had identified in its Going for Growth Strategy a surplus of poor quality and low demand housing in the city.  Going for Growth had recognised the overall impact this had, the contribution to population loss and the broad range of actions needed to tackle the problem.  The stated purposes of the Pathfinder initiatives included:

“For local authorities and their partners to work with the Government to develop new innovative solution to problems of derelict, abandoned and low demand housing and resultant housing market failure.  

Working across local authorities, to intervene in housing markets to achieve long term restructuring and meet changing demand and modern requirements, therefore creating vibrant neighbourhoods.

To provide lasting solutions for communities and ensure that housing, job creation, education and employment, transport, crime and better public services are improved within an overall strategy.

To work within an effective partnership and ensure delivery vehicles which involve the private sector.”

38.        Since 2006 Mr Nelson has been involved on behalf of a large number of clients as part of the ongoing Newcastle/Gateshead Pathfinder initiative in Saltwell, Bensham and Teams in Gateshead.  A number of properties were acquired in advance of compulsory purchase and he has acted for owner occupiers, landlords and the Home Group Housing Association in respect of more than 100 properties, some completed in phases 1 and 2 and others awaiting an improvement in market conditions. 

39.        Mr Nelson said that he was first involved with residents in the Demolition Area in October/November 2002, following GBC’s resolution on 17 September 2002.  His involvement included attending residents meetings in a local public house as part of the consultation exercise on the proposed regeneration.  Mr Nelson produced a schedule of offers which GBC had made for his clients’ properties.  The initial offers were made on various dates between 2002 and 2003.  On 15 December 2004 revised offers were made, which generally reflected an increase of 5 or 10% over the previous offer.  This compensation was paid to the claimants on the basis of a 100% scheme, which allowed for further negotiation or reference to the Lands Tribunal if agreement could not be reached and mediation was unsuccessful.  In fact the claimants’ suggestions that the matter should proceed to mediation were not accepted by GBC.

40.        On 18 August 2005 GBC submitted a schedule containing further offers, which were in turn generally 5% or 10% higher than the December 2004 figures.  Details of the offers are as follows:

Address	Initial offer	Second offer 15 December 2004	Third offer 18 August 2005
14 Bronte Street	£20,000	£21,000	£22,000
34/36 Bronte Street	£16,000	£16,800	£17,600
42 Bronte Street	£20,000	£21,000	£22,000
5 Emily Street	£11,000	£11,550	£12,100
14 Emily Street	£9,000	£  9,450	£  9,900
17/19 Emily Street	£17,500	£18,375	£19,250
437 Sunderland Road	£16,000	£17,600	£19,200
495 Sunderland Road	£17,000	£18,700	£20,400
507 Sunderland Road	£14,500	£15,950	£17,400
519-521 Sunderland Road	£29,000	£29,000	£34,800

 

41.        Mr Nelson contrasted the approach to the assessment of compensation which had been adopted by GBC with that of NCC in acquiring properties in connection with the Newcastle/Gateshead Housing Renewal Pathfinder Initiative.  He said that NCC decided at an early stage to facilitate the sale of properties to the council by way of a 100% scheme under section 52 of the Land Compensation Act 1973.  There was initially a six month deadline for reference to the Lands Tribunal and this was subsequently extended to 12 months.  Meetings were held to review the market for various types of property every six months.  They were mainly two and three bedroom ground and first floor Tyneside flats in terraces of different qualities, and terraced houses.

42.        Mr Nelson was initially involved in 2001 in the sale of a two bedroom flat, 10 Shafto Street, to NCC, for £10,500.  The sale completed on 20 July 2002 on the basis of a 100% scheme with referral to the Lands Tribunal within six months of completion if necessary.  Negotiations with NCC in this period resulted in a settlement at £11,750, based on a valuation date of 20 July 2002.  Mr Nelson also acted for the owner of a three bedroom house at 93 Roberts Street, which was sold to NCC, again on a 100% scheme, for £22,000.  Subsequent negotiations resulted in a final settlement at £23,500, based on a valuation date of 15 March 2002.

43.        As the scheme progressed Mr Nelson acted on behalf of owner occupiers who were relocated to nearby terraces by way of Home Swap schemes, whereby residents could identify properties on the open market.  Alternatively, NCC would acquire vacant properties from the Home Group (Mr Nelson’s client) for a refurbishment scheme with the co-operation of residents. 

44.        In February 2003, NCC agreed beacon values of £11,000 for a good two bedroom flat with uPVC windows and gas central heating in Roberts Street, and a three bedroom house was agreed at £27,000.  Different values were agreed according to the quality of the terrace.  Shafto Street flats had a value of £12,000 (half of Shafto Street was to be retained).  Whitfield Road flats were valued at £13,000, reflecting open views over the river Tyne and towards Gateshead.  Pretoria Street flats had a value of £9,000, since this was one of the worst terraces with a large number of vacant and vandalised terraced houses.

45.        Even in Pretoria Street, however, settlements in 2005 showed a substantial increase in value.  For example, on 8 February 2002 NCC offered £10,500 for a pair of flats converted to a house at No.30/32, but the sale was finally agreed at £35,000 on 11 February 2005.  Other transactions in Scotswood were quoted by Mr Nelson to illustrate the active consideration which was given by NCC to changing market conditions.  They were

83 Roberts Street Purpose built terraced house.  13 December 2003 offered £30,000.  8 April 2004 completed on 100% basis at £33,000.  8 October 2005 agreed at £43,000 as at 8 April 2004.

15 Roberts Street Pair of flats converted to house.  8 November 2001 offered £16,000.  20 February 2003 offered £24,000.  4 March 2004 offered £32,000.  28 July 2004 offered £40,000.  24 March 2005 offered £45,000.  12 July 2005 sale completed £50,000.

9/11 Roberts Street Pair of flats fully improved.  4 March 2004 offered £27,000.  30 July 2004 offered £36,000.  11 July 2005 offered £50,000.  11 November 2005 sale completed £53,000.

46.        In arriving at his valuations Mr Nelson had regard to the following sales on the south side of Sunderland Road and the terraces behind:

Address	Price	Date	Type
492/494 Sunderland Rd	£37,000	5 July 2002	Two storey 3/4 bed house with central heating
492/494 Sunderland Rd	£105,000	18 October 2004	As above
17 Howard St	£11,000	1 July 2001	3 bed FF flat 1950s
17 Howard St	£54,950	4 August 2005	As above
496 Sunderland Rd	£20,000	3 September 2001	3 bed FF flat 1900 with mod ext garage
496 Sunderland Rd	£64,000	8 October 2004	As above
484 Sunderland Rd	£18,000	21 January 2002	3 bed FF flat 1900 with mod ext
484 Sunderland Rd	£94,000	3 February 2008	As above
50 Howe St	£12,100	10 April 2001	2 bed GF flat uPVC with mod ext
50 Howe St	£62,950	9 June 2005	As above
46 Howe St	£13,100	21 December 2001	2 bed GF 1900.  Single glazed
46 Howe St	£45,000	12 September 2005	As above
11 Howe St	£18,850	11 April 2001	3 bed FF flat 1900.  Single glazed
11 Howe St	£50,000	14 October 2005	As above
80 King Edward St	£13,000	13 June 2000	3 bed FF flat single glazed old roof
80 King Edward St	£47,000	10 August 2004	As above
79 King Edward St	£18,000	2 January 2001	2 bed GF flat 1900 old style offshoot
79 King Edward St	£47,000	11 April 2004	As above
15 North View Terrace	£10,000	22 August 2000	2 bed GF flat on main road 1965
15 North View Terrace	£35,000	28 January 2005	As above

 

47.        Mr Nelson observed that 492/494 and 496 Sunderland Road were located directly opposite the reference properties at 495, 507 and 519/521 Sunderland Road.  He pointed out that the values of properties shown by the comparables ranged from £35,000 to £64,000.  He adopted the following levels for properties in Sunderland Road which had been fully improved:

2 bedroom	GF flat	£45,000
3 bedroom	FF flat	£50,000
4 bedroom	FF and 2F flat	£55,000

 

48.        Based on his experience in Scotswood, he deducted 10% to reflect the effects of the scheme on SRS, which might ultimately benefit from regeneration of the area.  It was, however, too early for there to be a substantial effect on value in SRS, as the terraces in the Demolition Area were, in the main, bricked or boarded up and ready for demolition.

49.        It had not been possible for Mr Nelson to inspect comparable properties.  He had therefore made certain assumptions in providing the mean values referred to above.  Following inspections where these could be arranged, as near as possible to the valuation date, he had made allowances for lack of repair and maintenance, and any improvements that would be likely to be carried out by a prospective purchaser, such as replacing windows, installing gas central heating, kitchen and bathroom fittings and redecoration. 

50.        He adopted lower values for properties in the terraces behind Sunderland Road, including Ford Street, Emily Street and Bronte Street.  This reflected the lack of open outlook, smaller size, entrance straight on to the path and proximity to the road.  His valuations were as follows:

3 bedroom	Terraced house	£70,000
2 bedroom	GF flat	£30,000
2/3 bedroom	FF flat	£35,000

 

These figures reflected the value of fully improved properties.  It was again necessary to make an allowance for condition and required improvements.

51.        Mr Nelson said that GBC did not appear to have taken this evidence into account in arriving at their valuations.  For example, 495 Sunderland Road, a 4 bedroom maisonette, had been valued at £21,000 whereas a 3 bedroom flat opposite had sold for £64,000.  He had reduced this figure to £55,000 to reflect the location of the property and the increase in values in SRS due to the pending scheme. 

52.        In Mr Nelson’s opinion it was the responsibility of GBC and the police authority to resolve any social problems which the terraces might have had.  The Scotswood area of Newcastle experienced similar problems of crime, vacant properties and vandalism.  Nevertheless, even in Pretoria Street, which was considered the worst affected terrace, with a number of vacant properties predominantly owned by housing associations, property values still increased.  Between February 2002 and February 2005 the price offered for 30/32 Pretoria Street increased from £10,500 to £34,000.  Both councils were working on the Newcastle Gateshead Housing Renewal Pathfinder Initiative and presumably had access to similar funds.

Evidence of Mr Gillbanks

53.        Mr Gillbanks said that the social and environmental problems affecting the Demolition Area made it increasingly difficult for owners to sell their properties through conventional methods.  The area suffered from a stigma as a result of these factors, which were well known locally and were reported in the press.  In his opinion many potential purchasers would have been put off by the problems associated with the area.  One consequence of this was that increasing numbers of properties in the Demolition Area appeared in auctions, where owners had the opportunity to sell to those from other areas who might have been less aware or unaware of the problems.  This led to more investors from outside the area buying properties at modest prices.  A significant number of these investors were either unable or unwilling to invest sufficient funds to secure the necessary improvement works to their properties.  It was clear to him at the time that, instead, the focus of many of these investors was to maximise the profits achieved from renting out their properties.

54.        Mr Gillbanks said that the strategy approved by GBC on 17 September 2002 and its proposals for the redevelopment of the Demolition Area created the “scheme”.  The scheme comprised the comprehensive acquisition of the properties in the Demolition Area, their demolition and the redevelopment of the land for housing.  Other improvement measures were proposed for the remainder of the strategy area.  He was in no doubt that, if GBC’s decision of 17 September 2002 had not been taken, SRN would have continued to decline and the speed of the decline would have accelerated.  GBC would have continued with its ad hoc efforts to try to arrest the decline.  They would have continued with the rapid response team and piecemeal acquisition of the worst properties where possible, but inevitably these steps would not have achieved a lasting improvement and would not have stopped the decline. 

55.        Some of the objectors to the CPO had argued that it should not be confirmed because GBC could have considered refurbishment of the properties.  Mr Gillbanks considered that the likelihood of this happening in the no scheme world was remote, because such action would have been ineffective in solving the underlying cause of the decline.  This had been the conclusion of the CPO inquiry inspector. 

56.        Mr Gillbanks said that, in general, between 2000 and 2005 values of flats increased both nationally, regionally and in Gateshead overall.  In SRN, however, values did not increase significantly because of the collapse of the private housing market there, as a result of the social  and environmental problems in the area.  Although values in SRS had increased, this was a result of both the scheme and general market trends.  In SRS the stigma of being located close to SRN with its poor reputation  created two opposite effects over time.  Initially the stigma depressed values.  Subsequently, however, when details of the scheme became known to the market, values increased as the stigma wore off and the new redevelopment proposals improved the general perception of the area.

57.        Between 1997 and June 2001 there were 34 entries in auction catalogues for properties within SRN.  This compared with only 11 entries for properties from the south side of Sunderland Road, King Edward Street, Howe Street, Moore Street, Howard Street, Duncan Street and East Hill Road.  In Mr Gillbanks’s view an increasing number of properties in SRN were put into auction because of the difficulties associated with selling them on the open market locally. 

58.        He produced details of the prices achieved at auction within SRN between 1993 and 2001, together with the guide prices where the properties failed to sell.  This showed, he said, that property prices in SRN had already fallen significantly prior to GBC’s intervention in 2001.  Prices were significantly higher in 1993 than they were in 2001, when GBC began to acquire properties in an attempt to deal with the problems in SRN. 

59.        When the auctioned properties were advertised as investments with a stated rental income, the return on those investments ranged from 29.7% to 48%.  This was an indication of the risk involved in investing in the area.  By comparison, yields for similar properties in other areas of Gateshead were between 10% and 20%. 

60.        Following its resolution of  23 January 2001, said Mr Gillbanks, GBC began buying the worst empty “eyesore” properties by negotiation “through invitation without compulsion.”  He added that, as public consultation and strategy formulation was taking place

“it was not appropriate to encourage emigration from the area by offering a significant compensation package above market value.  After all refurbishment remained a possibility.”

By December 2001, 14 purchases had been completed, with a further 33 properties being purchased before the resolution of 17 September 2002.  Following that resolution GBC continued to buy properties by agreement.  A further 112 properties were acquired before GBC used their compulsory purchase powers to acquire the remaining properties by executing a GVD.  In total 159 properties were purchased by agreement.  Some sellers sought independent surveying advice whilst others did not.  In a few cases where the seller appointed a surveyor to act on his behalf the authority paid the vendor’s surveyor’s fees “as a gesture of goodwill”.

61.        Mr Gillbanks said that, prior to confirmation of the CPO on 6 September 2004, all acquisitions were by agreement without compulsion.  Until that date GBC could not be certain that compulsory purchase powers would be authorised and therefore purchases by agreement were on the basis of open market value.  After the CPO had been made on 1 September 2003, however, GBC tried to assist owner occupiers with the process of moving by paying discretionary home loss payments and the seller’s conveyancing costs.  They also assisted sellers by arranging a removal service for them and paying for it.  The sellers were at liberty to engage their own estate agents to act on their behalf as would be the case in the open market.  Once the CPO had been made GBC acted as if it had been confirmed and sellers became eligible for additional costs and fees payable on the statutory basis. 

62.        Mr Gillbanks based his valuations of each of the reference properties on comparable sales within the same street because, he said, there were subtle variations between streets, even in SRN.  He said that the June 1999 petition, signed by over 1,000 residents in and around Sunderland Road, was clear evidence that the private market for properties in the area had failed.  He did not agree with the claimants’ suggestion that public investment would have resulted in improved conditions in SRN.  The expenditure of £500,000 in 2000 by Enterprise 5 on buying and clearing some 39 of the worst properties on Jane Eyre Terrace and Sunderland Road had failed.

63.        Mr Gillbanks also rejected the claimants’ suggestion that there were indications prior to 17 September 2002 that a CPO was proposed.  It was only on that date, he said, that the authority resolved to make a CPO and anyone could be certain that one would be made.  He did not accept that GBC’s consultation exercise, which he said began in March 2002, would have depressed values in SRN.  Although each of the three options put forward by GBC involved partial or total demolition of the properties in the area, it was entirely possible that none of the options would prove acceptable to the public.

64.        He accepted that, after March 2002, the market would have taken account of the three options.  Since, however, two of the three options advocated the retention of a significant number of properties, the market could have reacted with sharp value rises in the dwellings which were not earmarked for demolition.  This did not take place.  The fact was that SRN had already succumbed to being a very low value housing enclave long before GBC attempted its comprehensive consultation-led intervention.

65.        GBC’s decision to seek compulsory purchase powers to demolish SRN would have affected the market in SRN once it was known.  By the same token, the news would have had a beneficial effect on values of properties in SRS.

66.        Mr Gillbanks did not accept that the action taken by Enterprise 5 would have blighted the Demolition Area.  That action – seeking to buy 39 of the worst affected units and having them cleared to alleviate the poor environmental conditions – was intended to benefit the SRN market.  The initiative failed, but it did not itself blight the area.  In any event it would have formed part of the situation in the no scheme world.

67.        Mr Gillbanks did not agree with the claimants’ suggestion that the acquisition of 47 properties in SRN prior to 17 September 2002 adversely affected the market and virtually sterilised it.  He said that GBC did not encourage any owner-occupiers to sell, but if they could not sell on the open market GBC acted as a purchaser of last resort.  Landlords either retained their tenanted properties for the rental income or sold by auction.  The only reason for sales not completing was “the very thin demand in the SRN micro-market”. 

68.        Sales to GBC by owner-occupiers were transacted on the same terms as in the open market, with each party bearing its own costs.  For GBC it was important to be seen as only stepping in to support the market and not allow dwellings to be abandoned (as sometimes happens when values become very low) because no decision on SRN’s future could be taken before the public consultation had concluded.

69.        Mr Gillbanks disagreed with the claimants’ contention that, by buying with vacant possession and then securing properties and leaving them empty, GBC had adversely affected the open market.  Properties were left empty because SRN was an unattractive area.  Many properties were substandard and prohibitively expensive to bring up to lettable standard.  (In answer to a question from me, Mr Gillbanks explained that it was not considered prudent to spend thousands of pounds on each property for a benefit which would be short-term only, whether as a result of redevelopment or refurbishment).  Moreover, because council tenants would be entitled to the right to buy, GBC could not risk creating secure tenancies prior to the outcome of the consultation process, in case those tenants exercised the right to buy.  GBC left the properties empty, but tried to make them look occupied by leaving the curtains at the windows and not boarding up.  It was easier to give that impression for the less accessible upper flats than for those at street level.  Some vandalism took place via the back lanes, but this was dealt with by Neighbourhood Officer action through GBC’s repairs service.  During this period a number of private owners had allowed their properties to deteriorate and become vandalised.  GBC had to chase them to attend to their responsibilities.  Sometimes GBC carried out protection works on the owners’ behalf in emergencies.  GBC’s aim at this stage, prior to 17 September 2002, was to stop the market collapsing completely. 

70.        Mr Gillbanks agreed with the claimants that the level of vacancies at the time the CPO was made adversely affected open market sales, but that was one year after the authority’s resolution of 17 September 2002.  In summer 2001, some 30% of the properties were vacant and by January 2002, some eight months before GBC resolved to make a CPO, vacancy levels were 39%.  This effectively meant that in January 2002 around 102 properties were empty, at a time when GBC had only bought 17 properties.  They had only purchased 47 properties by 17 September 2002.  Because these properties were “made to look lived in” they did not significantly affect already low market values.  The private market had collapsed by the time GBC tried to arrest any further decline.

71.        Mr Gillbanks accepted that properties in SRS increased steadily in value over the years.  This rise followed the general increase in property values nationally and regionally.  In part, however, it was due to the scheme removing the depreciating effect of the adjacent SRN problem estate.  Conditions in SRN had depressed values in its neighbour at SRS and the scheme had lifted the gloom on the SRS market.  That element of increased value – which Mr Gillbanks considered was 40% – must be ignored as it was created by the scheme.  Any depressing effect on SRS due to the anticipation of building works for the redevelopment of SRN would have been negligible and, in any case, being of a temporary nature would not have been reflected by the market. 

72.        Mr Gillbanks accepted the general accuracy of Mr Wandless’s graph labelled OS8, showing significant increases in values in Gateshead generally and also in SRN and SRS between 2002 and 2005.  The SRN line, however, was of no assistance, since it was based on only one sale (2 Hylton Street), which was a high price tainted by the scheme and special purchaser effects.  It was true that GBC’s agreements in the Demolition Area did not reflect the trend of values in SRS or Gateshead as a whole.  The reason was that the Demolition Area was a completely different market, created by special social and environmental factors.

73.        The claimants had referred to prices paid by NCC for properties acquired under compulsory purchase or on assumed compulsory purchase terms.  Newcastle, however, was a different market.  There was no link between the two councils in terms of assessing market values.  Each local authority applied its own local solutions to its own problem areas.

74.        Contrary to the claimants’ contention, GBC had not ignored market trends when preparing their valuations.  They had reflected no scheme market trends in the Demolition Area, as shown by their purchases on the open market, especially in 2001 and 2002, and the varying value levels in different streets.  GBC’s valuations were increased in an attempt to effect settlements.  It was market failure, not GBC’s interventions, that was at the root of the area’s problems.

75.        In reply to Mr Harris’s  suggestion that both the Demolition Area and SRS were suffering problems, Mr Gillbanks said that those in SRS were far fewer and far less serious.  He considered that Mr Harris’s suggestion that “some investment and enforcement of legislation” would have turned SRN round with “only limited demolition” was wrong.  Investment was never forthcoming from the private sector in any effective way.  The attempt by a housing association, Enterprise 5, had failed.  The inspector concluded, in paragraph 171 of his report on the CPO inquiry, that the alternatives to the CPO suggested by the objectors “would fail to tackle the fundamental imbalance between supply and demand that is at the root of the problem in this area”.  Mr Harris’s references to his experiences of acquiring properties in Newcastle were not relevant, since they related to a separate and different market. 

76.        The price paid for 29 Beech Street, which sold on 11 October 2004 for four times the price paid for two similar properties in 2001 and 2002, reflected the impact of the scheme.  The significant factor was that these houses were not in the CPO area.  The increase in value was influenced by GBC’s committed proposals, firstly to demolish and clear all the surrounding old, low value high density dwellings and replace them with new modern private housing with a more stable tenure mix and, secondly, to rid the Demolition Area of the serious social problems stigmatising the area.  Mr Gillbanks thought that the £17,000 paid for a modern home in Beech Street in 2001 supported his valuation and settlements for old Tyneside flats in 2001 in the Demolition Area.  On the same basis, the £71,300 achieved in October 2004 reflected both the improving nature of the Demolition Area because of the scheme and the buoyancy in the wider Gateshead housing market.  The significant increase in the prices achieved for the Beech Street houses also supported his opinion that property values in SRS increased to a significant degree as a result of the scheme.  Moreover, past sales in Beech Street also provided evidence of the decline in the Demolition Area due to social and environmental problems.  Similar houses in Beech Street sold for £32,000 in 1995 and for £17,000 in 2001. 

77.        The sale of 11 Bronte Street, relied upon by Mr Harris, must be considered in context.  This property was sold with vacant possession prior to an auction on 29 May 1999.  On 25 June 2002 it was entered into another auction, but failed to sell.  On 30 July 2002 it was entered into another auction and again did not sell.  It was, however, bought shortly afterwards on the open market for £15,000.  In August 2002, that is less than one month later and one month before GBC’s resolution to make the CPO, the purchaser sold it to Mr Foxall for £24,000.  Mr Gillbanks did not regard the prices paid for 11 Bronte Street as good comparable evidence for the Demolition Area.  They were the result of several speculations and they were significantly out of kilter with prevailing prices in the area.  They also suggested that the property might have been bought without proper enquiries being made. 

78.        With regard to 533 Sunderland Road, this was purchased by agreement by GBC on 19 December 2003.  Mr Gillbanks agreed that GBC’s offer of £14,500, first made in July 2002, was much less than the price of £24,000 that had been paid in August 2000.  He agreed with Mr Harris that the reduction in value was due to the neglect of the area prior to the scheme.  The neglect, however, was caused by market failure and not by GBC.  Moreover, in Mr Gillbanks’s opinion the purchaser had paid an inflated price for the property in 2000, so that the massive reduction in price was not representative of the extent of the decline in values in SRN. 

79.        In response to Mr Harris’s reliance on sale prices in SRS, Mr Gillbanks said that they reflected the benefits of the scheme which promoted the demolition of poor physical buildings and their replacement with new housing, thus removing the stigma of the social problems occurring within SRN.  Comparables from SRS must be heavily discounted to reflect the effects of the scheme.  They must also be reduced to reflect the difference between the market failed Demolition Area and the better SRS market. 

80.        The reference to 2 Hylton Street made by Mr Harris required careful consideration because of its special circumstances.  The freehold interests in all the properties in Hylton Street had been owned by GBC.  The buildings had been occupied by council tenants and excluded from the CPO.  Subsequently GBC decided to relocate the tenants and demolish the properties.  However one flat, 2 Hylton Street, had been sold on a 125 year lease pursuant to the right to buy granted by the Housing Act 1985.  GBC therefore had to acquire this property and extinguish the lease in order to demolish it.  It was one of four flats in a detached block.  Thus, the situation on purchase in April 2005 was that there was one remaining flat in a vacant block of four proposed for demolition, situated immediately outside the confirmed CPO area and with imminent demolition of all the properties in the CPO together with the remainder of Hylton Street.  The basis of this purchase by agreement was open market value.  The agreed purchase price of £52,000 took into account the effects of the scheme.  It reflected the alternative high costs of part demolition or total refurbishment of the block of four flats, the significant rise in value as a result of the scheme, and an element of special purchaser value.  

Statutory Provisions

81.        Compensation for the compulsory acquisition of the reference properties is to be assessed in accordance with section 5, section 6 and section 9 of the Land Compensation Act 1961 (the Act) which, so far as is relevant, provide as follows:

“5.  (1) No allowance shall be made on account of the acquisition being compulsory:

(2)  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…

6. (1) … no account shall be taken of any increase or diminution in the value of the relevant interest which, in the circumstances described in any of the paragraphs in the first column of Part I of the First Schedule to this Act, is attributable to the carrying out or the prospect of so much of the development mentioned in relation thereto in the second column of that Part as would not have been likely to be carried out if –

(a) (where the acquisition is for purposes involving development of any of the land authorised to be acquired) the acquiring authority had not acquired and did not propose to acquire any of that land.

9. No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely to be acquired by an authority possessing compulsory purchase powers.”

The first paragraphs in Part I of the First Schedule read as follows:

	“Case	Development
1.	Where the acquisition is for purposes involving development of any of the land authorised to be acquired.	Development of any of the land authorised to be acquired, other than the relevant land, being development for any of the purposes for which any part of the first-mentioned land (including any part of the relevant land) is to be acquired.”

82.        In Abbey Homesteads (Developments) Limited v Northamptonshire City Council [1992] RVR 110 Glidewell LJ held that, in applying section 9,

“an indication given ‘by any other means’ must share this characteristic with an indication to be found in the development plan, that it provides information which is available not merely to the landowner-vendor, but also to a potential purchaser.  The point of section 9 is to remove planning blight arising from information which potential purchasers may come to receive.”

The parties’ legal submissions

83.        Both parties’ experts approached the valuation exercise on the basis of the “no scheme world”.  Following the hearing I requested submissions on the provisions of sections 6 and 9 of the Act, insofar as they might be relevant to the circumstances of these references. 

84.        On section 6, Mr Marwick submitted that none of the circumstances described in the paragraphs in the first column of Part 1 of the First Schedule was engaged in the present case.  Nevertheless, in the absence of the acquiring authority’s proposals for the Demolition Area it was likely that the western end of the scheme (in particular Jane Eyre Terrace and the immediate vicinity) would have undergone an accelerated redevelopment.  Such redevelopment would have led to an improvement in social and economic conditions, and consequential increases in property values, at the eastern end of the scheme.  Such development would have been likely to occur but for the scheme.  Therefore, any consequential increases did not fall to be disregarded under section 6. 

85.        Mr Marwick also placed reliance on section 9.  He submitted that an indication that the reference lands were likely to be acquired by GBC was given in 2001, when the questionnaire data was gathered, considered and reported to the public.  Such information was widely disseminated and, in broad terms, was public knowledge.  It followed that the depreciation in the value of the reference lands which must have resulted in the period up to September 2002 should not be taken into account.

86.        Mr Walton submitted that section 6 would apply if the following criteria were met: (i) the compulsory acquisition in question was for purposes involving the development of any of the acquired land;  (ii) the case fell into one of the categories of cases set out in column 1 of Part 1 of Schedule 1;  (iii) it was unlikely that either some or all of the development listed in the corresponding paragraph in column 2 would have been carried out if the acquiring authority had not proposed to acquire any of the land; and (iv) that development, or the prospect of that development increased or decreased the value of the relevant interest.

87.        Applying this framework to the facts of these references, Mr Walton said that the reference properties (along with the entirety of the Demolition Area) were acquired so as to allow the clearance and redevelopment of the acquired land.  Criterion (i) was therefore met.  Case 1 of column 1 applied because the acquisition was for purposes involving development of the land authorised to be acquired.  It was unlikely that the development listed in the corresponding paragraph in Column 2 of the Schedule would have been carried out had GBC not proposed to acquire the land and, as GBC had accepted, at the valuation date the prospect of that development had decreased the value of the reference properties.  It followed that section 6 operated so as to require that decrease in value to be ignored when assessing the open market value of the reference properties at the valuation date.  Thus the experts’ agreed approach, namely to ignore the impact of the proposals for the compulsory acquisition and subsequent redevelopment of the Demolition Area – the scheme – was in accordance with section 6.

88.        As for section 9, Mr Walton emphasised that GBC did not resolve to make the CPO until 17 September 2002.  Although they decided in January 2001 to use Housing Improvement Programme funds to acquire (unspecified) private houses in SRN,  Mr Walton submitted that there was no indication prior to September 2002 that any of the individual reference properties either would be or were likely to be acquired.  GBC’s approach to the valuation was therefore entirely consistent with Section 9.

Conclusions

89.        As I have said, all three experts prepared their valuations on the assumption that the compensation payable for the compulsory acquisition of the reference properties should be based on their value in the “no scheme world”.  For this purpose the scheme was the proposal for the compulsory acquisition of the properties in the Demolition Area, their demolition and the redevelopment of the land for housing.  It is clear from the decisions of the House of Lords in Waters v Welsh Development Agency [2004] 1 WLR 1304 and Spirerose Ltd (in administration) v Transport for London [2009] 4 All ER 81 that this is incorrect.  It is the statutory provisions that have to be applied.  The Tribunal (George Bartlett QC, President and P R Francis FRICS) expressed the position in these terms in Potter and Potter v Hillingdon London Borough Council [2010] RVR 271:-

“73. The House of Lords decision in Spirerose is a reminder to practitioners and those deciding claims for compensation for the compulsory purchase of land that valuation for this purpose is to be made by applying the provisions that are contained in the Land Compensation Act 1961.  The claimants’ case referred simply to rr (1), (2) and (5) of s5. Rule (5), dealing with equivalent reinstatement clearly has no application to a claim that is based on ransom value or alternatively hope value.  The council’s approach was to take an initial leap into the no scheme world and to proceed from there.  The scheme, they said, was the scheme for which planning permission was granted in 1992, and, applying the Pointe Gourde rule, compensation was to be assessed at the value that the land would have had if the scheme had not existed.  We think that in future valuers and their advisers will need to adopt a more methodical approach, considering the potentially relevant statutory assumptions and applying them to the facts of the case and only moving on to consider whether some additional assumption is required under Pointe Gourde when those earlier steps have been taken.”

90.        Under section 9 what has to be left out of account is any depreciation in value of each reference property at the valuation date that was attributable to the fact that an indication had been given that it was, or was likely to be compulsorily acquired.  And the effect of section 6 and Schedule 1 is that there has to be left out of account any diminution in value of the subject properties that was attributable to the prospect of the other land in the CPO being redeveloped as a result of the CPO.  All valuers relied on comparables to determine the undepreciated or undiminished value of each property.  But clearly the sale of a property that was itself depreciated in value by reason of the matters that have to be left out of account under sections 6 and 9 is not a useful comparable.  So, for the purpose of determining whether reliance should be placed on any sale of land in the CPO area it is necessary to establish the time at which an indication was given that the land was likely to be compulsorily acquired.  Any comparable after that time should be discounted.  Expressed in that way the matter is stated in terms of section 9, but it is clear that no additional comparables would fall to be discounted under section 6 since the CPO could only have become a factor after the indication had been given.

91.        In order to determine when the indication was given it is in my view necessary to consider the history of events which culminated in the 17 September 2002 resolution.  That history is fairly complex.  In dealing with it the claimants’ experts were necessarily at a disadvantage, not having been instructed to advise owners of properties in the Demolition Area until 2002.  This difficulty did not apply to Mr Gillbanks, who at all material times has been an employee of GBC and involved in the CPO process on their behalf.  Mr Marwick submitted at the outset that for that very reason Mr Gillbanks could not be considered to be an independent and impartial expert, and that his evidence should be taken only as evidence of fact.  I ruled that I would admit Mr Gillbanks’s evidence in its entirety, and decide in due course what weight it should be given.  I regret that I have concluded that Mr Gillbanks’s evidence was less than candid.  The reason for this conclusion is this.  In paragraph 10.3 of his expert report Mr Gillbanks stated that GBC’s consultation on various alternative demolition proposals began in March 2002.  A few weeks before the hearing Mr Wandless submitted an amended set of appendices to his witness statement.  One of these consisted of extracts from a flyer prepared by GBC in 2002 (it is agreed that it was wrongly dated March 2001).  On the second day of the hearing, at the conclusion of Mr Nelson’s evidence, I drew attention to a note on the front page of the flyer which gave brief details of the results of a survey carried out by GBC in 2001, which showed that 35% of local residents thought that the whole of the Demolition Area should be demolished and 40% thought that parts should be demolished.  I suggested that this indicated that GBC had been putting to residents alternative options for the future of the area at a date earlier than the public meeting in March 2002 to which Mr Gillbanks had referred in his expert report.  In that report Mr Gillbanks mentioned that there had been a survey of householders, landlords and businesses within SRN, commissioned by GBC in June/July2001, but he provided no further details. 

92.        Despite my intervention, Mr Gillbanks did not refer to the 2001 survey in his oral evidence given on the third day.  At the conclusion of his re-examination I asked him to provide copies of the questionnaires used for the survey.  These were handed in by Mr Walton at the beginning of the following day immediately before the commencement of closing submissions.  These documents confirmed the impression I had formed from the 2002 flyer.  The residents’ survey was conducted in June 2001 and involved an interview for about 20 minutes with each resident.  Question 13 read as follows:

“How could the area be improved?  (see map at the centre of this survey).

1.            Demolish all of Sunderland Road area between Sunderland Road and the Metro line. 

2.            Demolish parts of the above area and improve the properties remaining there.

3.            Demolish your street.

If you think partial demolition is the answer, please indicate which streets you think should be demolished.”  (original emphasis).

93.        Question 14 asked what property tenure should be provided for new houses if demolition took place.  Question 15 read as follows:

“Given your earlier responses, do you think this part of Sunderland Road has a long-term future?”

94.        The landlords’ survey took place in July 2001.  The options for the future contained in question 13 of the residents’ survey were repeated and a fourth was added – “Leave housing as it is and help to improve older properties.”  Question 15 in the residents’ survey was repeated in the landlords’ survey.

95.        Mr Harris prepared a response to Mr Gillbanks’s expert report in May 2010.  He commented on Mr Gillbanks’s brief reference to the 2001 survey by saying that he had been unable to obtain copies of the survey questionnaires and the results.  Mr Gillbanks did not provide such information until he was asked by me to do so.  In my judgment, his statement that GBC’s consultations on various demolition options began at a public meeting in March 2002, when they in fact began some nine months earlier in a house to house survey of the residents of the area, painted a misleading picture of the events which culminated in the resolution made by GBC’s Cabinet on 17 September 2002.  I consider that this misleading representation of the facts diminishes Mr Gillbanks’s credibility as an expert witness.

96.        In my view the surveys in mid 2001 are of significance because none of the comparable sales relied upon by Mr Gillbanks took place before August 2001.  On 23 January 2001 GBC resolved to acquire privately owned properties in SRN and to consult residents and others with an interest in properties there about their acquisition proposals as part of the wider strategy for the area.  Six months later, in June 2001, GBC did consult SRN residents.  They suggested three ways in which the area could be improved.  All three involved the demolition of all or part of SRN.  The following month GBC consulted landlords.  The three demolition options were again put forward and a fourth was added – to improve older properties.  In my judgment, by mid 2001 a potential purchaser who was aware of the Council’s resolution and the two consultation documents, with their various options for the improvement of SRN, would have concluded that it was likely that some or all of the land in SRN would be acquired by GBC – an authority possessing compulsory purchase powers.  It follows that prices paid for properties in SRN after July 2001 should be treated with caution because they were, or might have been, depreciated by the indication that had been given of their likely acquisition by GBC.  (I would add that I would in any event have attached limited weight to prices paid by GBC for properties in SRN in view of the surprising fact that in only 8 out of 159 sales between August 2001 and March 2005 were the vendors represented by independent valuers).

97.        Mr Harris disagreed with Mr Gillbanks’s view that the market for all properties in the Demolition Area had irretrievably failed by the time GBC resolved to make the CPO in September 2002.  He considered that the area had been blighted by GBC’s actions in acquiring properties and keeping them empty, instead of bringing them up to good tenantable standard and then letting them, or selling them in a market where prices were rising rapidly.  Mr Harris considered that, in the absence of the CPO proposals, the worst terraces would have been demolished.  In particular, he thought that Enterprise 5 would have successfully continued its programme of purchasing flats in Jane Eyre Terrace and Sunderland Road.  I accept that evidence.  I also accept Mr Harris’s evidence that, in the absence of the proposals to redevelop the Demolition Area, GBC could and would have used their extensive powers to ensure that dilapidated, vandalised and abandoned properties were brought back into repair and then re-occupied, and that methods such as the use of grants would have been used to assist this process, as they had in SRS.  I find that in the absence of GBC’s compulsory purchase and comprehensive redevelopment proposals, by 1 March 2005, the valuation date, it would have been apparent to the market that most if not all the social and environmental problems in the Demolition Area had been satisfactorily resolved.

98.        I have not lost sight of the fact that the inspector who held the inquiry into the proposed CPO in May 2004 concluded that there had been a failure of the housing market in the CPO area (para 160) and that GBC “took a positive and proactive approach to the problems faced by the area” (para 161).  Those conclusions, however, were necessarily based on the evidence given at the inquiry, just as my conclusions must be based on the evidence before me which, apparently in contrast to that at the inquiry, included lengthy written and oral evidence from two chartered surveyors instructed by affected property owners.

99.        Mr Harris had regard to a number of sales of properties to the north of Sunderland Road.  I disregard 2 Hylton Street, because GBC was a special purchaser.  I discount Mr Foxall’s purchase of 11 Bronte Street some two and a half years before the valuation date, at a price which I am satisfied was excessive.  Finally, I disregard the sale of 29 Beech Street, a modern house to the north of Sunderland Road but excluded from the CPO.  It is physically different from any of the acquired properties and Mr Harris did not seek to use it as a direct comparable, merely pointing to the substantial increase in the price paid between 2001 and 2004.

100.    Mr Harris and Mr Nelson both made modest discounts to the prices paid for properties in SRS when applying them to the reference properties.  The discounts reflected, firstly, the beneficial effect as perceived at the valuation date of the proposed regeneration of the Demolition Area and, secondly, the higher level of property values generally to the south of Sunderland Road.  Mr Gillbanks took no account of prices paid in SRS when he prepared his valuations.  He said that it was “literally a different market”.  He suggested, however, that property values in SRS increased considerably when the stigma of being close to SRN was lifted by GBC’s demolition proposals.  He thought that sale prices in SRS should be reduced by 40 per cent to reflect the beneficial effect of the redevelopment scheme.  He justified this percentage by reference to one of Mr Wandless’s graphs, OS8, which he said showed that values in SRS increased much more rapidly than in Gateshead as a whole.  In the course of cross-examination it became clear that the figures in OS8 were inconsistent with those appearing in a graph which Mr Gillbanks had himself produced, which was based on figures from the Land Registry.

101.    Nevertheless, I consider that Mr Harris and Mr Nelson have underestimated the beneficial effects of the clearance of the Demolition Area upon values in SRS.  Mr Nelson made an allowance of 10% to reflect this benefit.  He said that it was too early to consider a substantial effect in values as the terraces in Sunderland Road North were, in the main, bricked and boarded up and ready for demolition.  I do not agree.  At the valuation date purchasers of properties in SRS knew that demolition would take place shortly.  I consider that, as a result, the prices they paid increased to a significantly greater extent than Mr Nelson (and Mr Harris) have assumed.

102.    The claimants’ valuers also made modest reductions to reflect what they accepted was the higher overall level of values south of Sunderland Road.  Although I agree that sales in SRS provide the best available starting point for valuing the reference properties, I consider that the claimants’ experts have significantly underestimated the difference in value between the two sides of this busy road.  In reaching that conclusion I have had regard to Mr Gillbanks’s evidence on the relative number of auction sales, which suggests that before June 2001 it was more difficult to sell houses in SRN than in SRS.  I have also borne in mind the contents of a letter dated 23 August 2004 to Mr Wandless from Mr Michael Thomas BSc, FRICS from the Gosforth office of Messrs Colleys, the valuation and surveying division of Halifax plc.  In that letter Mr Thomas stated that his comparable database dating back to 1994 showed that prices to the north of Sunderland Road were approximately 40% lower than to the south.  Mr Harris and Mr Nelson disagreed with that view, but they did not produce any evidence of transactions to contradict it.

103.    The considerable adjustments which I consider must be made to prices paid south of Sunderland Road mean that the comparable sales evidence in SRS is far from ideal.  Nevertheless, there is in my judgment no better evidence upon which I can base my determination of value.  Accordingly, I conclude that the reference properties in the four most easterly roads in the Demolition Area, namely Allhusen Terrace, Bronte Street, Emily Street and Ford Street, were worth 40% less than the figures suggested by the claimants’ valuers.  The difference represents my assessment of the extent to which they have underestimated both the effect of the inferior location north of Sunderland Road, and the degree to which prices achieved in SRS were influenced by GBC’s redevelopment proposals.  I increase the deduction to 50% in the case of 437 Sunderland Road and 55% in the case of 42 and 46 John Street.  437 Sunderland Road was situated at the junction with Jane Eyre Terrace which, together with John Street, was the primary source of the problems in SRN.  Although I have concluded that most if not all of the worst properties in Jane Eyre Terrace would have been demolished by the valuation date, and that those in John Street would have been brought back into repair and fully occupied, the stigma resulting from their previous history would in my view have continued to exert an adverse effect on values in that location.

Further heads of claim

20 Allhusen Terrace

104.    Four further items of claim were submitted by Mr Wandless.  Firstly, he claimed £1,890, being loss of rent at £55 per week between 7 July 2004 and the valuation date.  Mr Wandless said that he could not find a new tenant in this period.  All the flats on either side of No.20 were boarded up.  The tenant left following a burglary during which an attempt was made to remove copper from the flat.  Mr Walton did not strongly press his objection to this claim, although he queried whether the loss resulted from the CPO.  In the absence of any other evidence, I am satisfied that the necessary causation has been established.  I note that the gross rents have not been adjusted, as they should, to reflect possible void periods and landlord’s outgoings.  I determine this item of compensation at £1,500. 

105.    Mr Wandless claimed £500 for the loss of carpets.  Mr Walton said that he would not contest this figure provided I was satisfied that the compensation payable for the property itself did not reflect the fact that it was carpeted.  In the absence of any evidence that the prices paid for the comparable properties which I have found to be of assistance reflected the value of carpets, I allow this claim in full.

106.    The sum of £2,372.62 was claimed for legal costs incurred in purchasing an alternative investment property, 18 Thornley Gardens, Low Fell, Gateshead, in March 2004.  Since Mr Wandless did not occupy 20 Allhusen Terrace, and since the costs were not incurred within the period of one year beginning with the date of entry, they cannot be included in the compensation payable (see Sadiq and Hashmi v Stoke on Trent City Council [2009] RVR 178).

107.    Finally, Mr Wandless claimed for his own time in the sum of £1,500.  He said that the amount claimed was “based upon a purely nominal amount of time spent on issues which relate directly to my efforts in achieving a reasonable settlement, time spent on searching for and acquiring a replacement property and not any duplication of my advisers’ remit.”  Mr Walton did not accept this claim, but nor did he put forward any reason for resisting it.  To the extent that the amount claimed relates to the search for an alternative property I reject it, because 18 Thornley Gardens was purchased before the date of entry.  It is clear, however, that Mr Wandless went to very great lengths to persuade GBC (with justification, as I have concluded) that the levels of compensation being offered were too low.  I find that Mr Wandless is entitled to £750 reflecting his efforts in obtaining and providing background information for Mr Harris’s use.

495 Sunderland Road

108.    Mrs Robinson submitted two additional claims, for loss of rent from the flat and for the value of an advertising hoarding.  The flat was let on an assured shorthold tenancy at a rent of £80 per week, fixed in October 2002.  The tenant vacated in September 2003 and, because of the blight, no further lettings were effected.  The compensation claimed for loss of rent was £6,240, being £346.67 per month from September 2003 until March 2005.  I allow this claim in principle for the same reason I allowed a similar claim in relation to 20 Allhusen Terrace.  I reduce the claimed figure to £5,000 to reflect voids and landlord’s outgoings.

109.    By an agreement dated 4 December 2003 Mrs Robinson permitted The Allum Group Ltd (Allum) to erect and maintain one advertisement panel of approximately 20 feet by 10 feet on the gable wall of the property.  The agreement was for a term of 5 years from 29 September 2002, continuing thereafter from year to year unless determined by either party on 12 months prior notice.  Allum were responsible for any rates that might be payable in respect of the hoarding.  If, however, at any time the rates payable exceeded 20 per cent of the annual sum payable under the agreement, the amount of such excess would be deducted from the annual sum.  Upon the expiry of the agreement without a new agreement being granted to Allum, Mrs Robinson covenanted not to permit the premises to be used for the display of any advertisement for the next six months.  Allum were entitled to terminate the agreement at any time on seven days notice if it became unlawful to display advertisements on the premises, or if in Allum’s opinion the view of the board was “impaired at any time from any cause whatever.”  Allum could also terminate the agreement on 3 months notice should they “reasonably consider that for any reason whatsoever the commercial value of the advertisement(s) displayed is/are materially lower than at the date of this agreement.”

110.    Mrs Robinson claimed £5,000 for loss of income from the hoarding.  This figure was stated to be 12 times the rent payable (£425 per annum), but it was not supported by any expert evidence.  In a letter to Mrs Robinson dated 22 April 2004 Mr Gillbanks offered £500, but no reasoned justification for this figure was provided.

111.    I was not told whether planning permission for the hoarding had been granted and, if so, whether it was on a temporary or a permanent basis.  It is clear, however, that significant risks attached to the continuation of the passing rent on a long term basis.  Doing the best I can with the information available I determine the compensation payable for this head of claim at £2,000. 

Result

112.    I determine the compensation payable for each of the reference properties as follows:

44 Allhusen Terrace	£15,000
505 Sunderland Road	£48,000
14 Ford Street	£22,500
1 Bronte Street	£25,500
42 John Street	£30,375
11 Bronte Street	£22,500
3 Bronte Street	£22,200
22/24 Bronte Street	£30,000
20 Allhusen Terrace	£22,200 + disturbance £2,750 = £24,950
8 Bronte Street	£19,800
46 John Street	£28,125
34/36 Bronte Street	£30,000
437 Sunderland Road	£20,000
42 Bronte Street	£36,000
5 Emily Street	£21,000
14 Bronte Street	£36,000
14 Emily Street	£18,000
519/521 Sunderland Road	£51,000
17/19 Emily Street	£36,000
507 Sunderland Road	£24,000
495 Sunderland Road	£33,000 + hoarding £2,000 + disturbance £5,000 = £40,000

 

In each case a surveyor’s fee of £500 is payable in addition.  A letter on costs accompanies this decision, which will become final when the question of costs is determined.

Dated 20 January 2011

 

 

N J Rose FRICS