UT Neutral citation number: [2011] UKUT 18 (LC)

ACQ/420/2009

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – value of land taken - severance and injurious affection – valuation – comparables – disturbance - Land Compensation Act 1961 section 5, rules (2) and (6); Compulsory Purchase Act 1965 section 7  – compensation determined at £544,400

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN LEDBURN PROPERTIES LIMITED Claimant

and

EAST CHESHIRE COUNCIL Acquiring

Authority

Re: Heawood Hall Cottage, Nether Alderley,

Cheshire SK10 4TN

Before: P R Francis FRICS

Sitting at: Manchester Civil Justice Centre,

Bridge Street, Manchester

on

7 December 2010

Andrew Piatt, solicitor, of HBJ Gately Wareing for the claimant

Martin Carter, instructed by East Cheshire Council, Legal Services, for the acquiring authority

DECISION

Introduction

1.           This is a decision to determine the compensation payable by East Cheshire Council (the council or the acquiring authority) to Ledburn Properties Limited (the claimant) in respect of the compulsory acquisition of 0.77 acre land, together with severance and injurious affection to retained land and disturbance at Heawood Hall Cottage, Nether Alderley, Cheshire (the subject property) under the Cheshire County Council (A34 Alderley Edge and Nether Alderley Bypass) Compulsory Purchase Order 2004 (the CPO).

2.           The claim in respect of the land taken has been agreed at £15,400, based upon a value of £20,000 per acre.  The claimant seeks £800,000 in respect of injurious affection, on the basis of the estimated value of the property being reduced from £1,450,000 prior to the construction of the bypass to £650,000 post construction.  The acquiring authority values that aspect of the claim at £375,000 being a reduction from £1,250,000 to £875,000. During the course of the hearing the disturbance claim for £4,000 relating to director’s time expended in connection with the reference was agreed, but a claim for £254,360 relating to extra mortgage payments incurred to the claimant’s alleged inability to sell the property during the construction period remained to be resolved.

3.           Mr Andrew Piatt, a solicitor with HBJ Gately Wareing appeared for the claimant and called Mr James Michael Norris Ogborn BA(Hons) Dip LE MRICS, a director of Lambert Smith Hampton, Commercial Property Consultants of Manchester, who gave expert valuation evidence.  Mr Martin Carter of counsel appeared for the acquiring authority whose expert valuation evidence was given by Mr Steven John Plack MRICS, a Senior Valuer with the council.

4.           I carried out an accompanied inspection of the subject property and an external inspection of the four agreed comparables on 6 December 2010.

Facts

5.           The parties produced a brief statement of agreed facts and issues from which, together with the evidence and my inspections I find the following facts. The subject property comprises a detached part two-storey and part single-storey private residential dwelling-house built in 1977 with an attached cottage which has been incorporated into a self-contained annexe, located in a semi-rural position about half a mile south of Nether Alderley.  It forms part of Heawood Hall which is a substantial country mansion that has been divided and, with the conversion of barns and other outbuildings, now forms an enclave containing a total of 11 residential units.  The hall was, prior to the construction of the new bypass, approached off an approximately 500 metre shared private drive off Congleton Road. 

6.           The property, which is constructed of brick under tiled roofs and has timber framed, leaded light windows, is set within private front, side and rear gardens and has an adjacent paddock. The main house has been modernised and improved in the last 3 years, but works to the annexe are ongoing.  The principal accommodation briefly comprises porch, hall and inner hall, cloakroom, three good sized reception rooms, kitchen/breakfast room and utility room to ground floor, with a galleried landing, master suite comprising bedroom, dressing room and bathroom, together with two further bedrooms and a family bathroom at first floor.  The annexe (which is accessed from the main house at both ground and first floors), contains a living room/kitchen area and utility room at ground floor with a bedroom and bathroom above and stairs to a galleried upper bedroom in the roof space.  There are separate propane gas heating systems serving the main house and annexe. There is a detached double garage, a further single garage and a garden store. The whole property extended to some 2.36 acres prior to the compulsory acquisition of 0.77 acres from the paddock (including a detached farm building which is to be re-erected elsewhere on the claimant’s land at the council’s expense). 

7.           The claimant acquired the property, which was then in need of general modernisation and refurbishment, at public auction in August 2007 for £1,230,000.  When purchased, the main house was vacant, but the annexe was subject to a residential tenancy for a term of 5 years from 1 February 2005.  The tenant had, however, vacated by the date of valuation.

8.           The CPO which was required to facilitate the construction of a new bypass around Nether Alderley and Alderley Edge, was made on 21 June 2004 and confirmed by the Secretary of State on 15 March 2007.  Notice to Treat and Notice of Entry were served on 30 July 2008 and the date of entry on the land, which is also the valuation date for the purposes of this reference, was 3 September 2008.  In addition to the acquisition of part of the claimant’s own property, the council acquired rights of access over the shared communal entrance road which was re-routed to join with the new roundabout at the southern entrance of the bypass.  The bypass, which was opened to vehicular traffic about one week before my visit, runs in a north-south direction about 150 metres to the east of the subject property and there is a painted steel and concrete footbridge over it on raised banks.  This links a public footpath which runs between the private gardens and paddock of Heaton Hall Cottage with land between it and the Congleton Road.   

Issues

9.           The issues remaining to be determined are:

1. Diminution in value to the retained land caused by the scheme.

2. Whether or not the claimant is entitled to claim, as disturbance, mortgage payments said to have been incurred solely as a result of being unable to sell the property during the scheme works.

Claimant’s case

10.        Mr Ogborn qualified in 1994 and specialises in compulsory purchase and compensation work, both commercial and residential, throughout the north-west of England.  He said that, in assessing his “before” and “after” valuations in accordance with the compensation code he had considered the impact on the retained land arising from the execution and subsequent use of the new bypass.  As to his pre-scheme valuation he said that prior to the commencement of the construction works, the property was in a truly rural position surrounded by open countryside and not affected in any way by traffic noise, artificial lighting or other visual intrusions.  Being some way from the village and approached over a long, private drive that only served the properties at Heaton Hall, the house would have appealed to those seeking privacy and seclusion.  Nether Alderley, he said, was a small rural village south of Alderley Edge which was an equally prosperous but more urban location. He said he had initially considered the sale of a number of comparable properties within the vicinity but, by the date of the hearing and following discussions with Mr Plack, it had been agreed that that there were four houses which were directly relevant and only those would be relied upon as comparables: Mere Farm, Bollington Lane, Nether Alderley, White Oaks and Fieldhead, both in Brook Lane Alderley Edge, and Seven Oaks, Hough Lane, Alderley Edge.  Mr Ogborn also said that he had obtained the independent professional opinions of three local estate agents.

11.        Mere Farm is an imposing detached fully renovated and restored farmhouse set well back from a quiet country lane less than half a mile from the subject property.  It is set more or less centrally within its own grounds of about 1 acre but is approached off a driveway shared with a range of converted farm buildings and other properties. The house has 4 reception rooms, large living/kitchen/breakfast room, utility, five bedrooms and three bathrooms, extensive garaging and stores. Mr Ogborn said that due to its nearby location with similar rural outlook, and its imposing character, it was the best comparable.  Although the accommodation was larger, the subject property had the advantage of being tucked away off a very long private drive. Mere Farm was originally marketed for £1.6 million, was subsequently reduced to £1,490,000 and sold in July 2009 for £1,300,000 – after Mr Ogborn had undertaken his initial report to the claimant, but before he completed his expert report.  In that regard, he said in cross-examination that although it sold for less than the asking price, his valuation was not affected as he had allowed for the fact that £1.6m was an asking price when looking at all the comparables in the round.

12.        White Oaks is a detached two-storey family house centrally placed in its own extensive gardens and approached over a long, private driveway, close to but not quite within walking distance of the centre of Alderley Edge.  It has 3 reception rooms, kitchen/breakfast room, utility room, 4/5 bedrooms and 2 bathrooms together with two garages. Mr Ogborn said that it is situated in an inferior position to the subject property, being in an urban area and approached off a busy road, and the internal accommodation is not as good.  It is well secluded from other properties by mature hedging to the side boundaries and has views to the rear over open countryside. He agreed with Mr Plack that along with Mere Farm, this is a most useful comparable. The property sold for £1,375,000 in August 2008.

13.        Field Head, also in Brook Lane, is within a few hundred metres of White Oaks, slightly closer to the village centre. This is a substantial semi-derelict 5 bedroom detached family house constructed in the 1840s which is in need of extensive modernisation and refurbishment to make it habitable.  It has the benefit of extensive gardens and grounds of just over one acre, but again, Mr Ogborn said, is approached off a busy road which it is clearly visible from, and is in urban area.  It was sold for £1,100,000 in October 2009.

14.        Seven Oaks is another substantial detached two storey family house constructed in the 1930s and set in its own private gardens and grounds (including a small paddock) of about 1.7 acres. Hough Lane is a residential street comprising similar detached properties in a semi-rural area about half a mile from Alderley Edge. The house has 3 reception rooms, large kitchen/breakfast/sitting room, 5 bedrooms, 3 bathrooms and two garages. Mr Ogborn said it is situated in an inferior location to the subject property, being quite close to the main road between Alderley Edge and Mottram and thus its setting is less unique. Although he thought the house was sold for £1.55 million in August 2009, the date was in fact one year later.  However, he said he agreed with Mr Plack that this made no difference as there had been no material deterioration in the market for this type of property during that period.

15.        Taking all these properties into account, and making adjustments for size, condition and location, Mr Ogborn said that he was of the view that the subject property was worth £1,450,000 at the valuation date. This opinion was supported, he said, by the advice he had received from three local agents. Holmes-Naden of Prestbury estimated a pre-scheme value of £1.4 - £1.5 million, Jackson Stops and Staff of Wilmslow said they would suggest an asking price of £1,470,000 and Ian Macklin of Hale Barns said £1.375 to £1.4 million.  In connection with the valuation of £950,000 undertaken for the council by Gascoigne Halman, Mr Ogborn said he did not agree with their deduction of £250,000 for repairs and refurbishment (for which there was no evidence) from a value which, they thought, would be between £1.2 and £1.3 million if fully modernised. The claimant had actually spent £28,000 fully refurbishing the main house, and the annexe was an ongoing project.  In his view, because of the unique nature of the property, prospective purchasers would not make a deduction to allow for the costs of modernisation.

16.        He said that his own opinion was further supported by looking at the price paid by the claimant in 2007 when the annexe was tenanted. As there was, at that time, some 2.5 years left on the tenancy, deferring his opinion of the unencumbered freehold value with vacant possession of £1.45 million for that period produced £1,253,000 which was close to the price that had been paid. When the claimants bought the house, it would have had a higher value as a development opportunity, but that chance had to be deferred until vacant possession of the annexe could be guaranteed. There was no suggestion that the purchase price represented any diminution for blighting by the proposed scheme as, although it was in the public domain, the CPO had not been implemented, there was no funding in place and the exact route of the bypass had not been finally determined.

17.        Regarding the post-scheme value, Mr Ogborn said he had taken into account the efforts that the claimant had made to sell the property during the construction period, and the effect that the bypass would have on what had previously been an idyllic and unspoilt rural setting.  The new bypass now runs extremely close to the house and even closer to the eastern boundary of the paddock.  Not only would there be the constant drone of traffic, and light pollution from the nearby southern roundabout, but also the intrusive location of the new footbridge meant that people using the footpath, who previously walked past and onward from the property at ground level, can now stand on the bridge and look directly into the house.  The fact that the height of the bund that had been constructed along the western side of the bypass where it passes the property had been heightened from the original design was not, he said, an advantage. Although he was aware that there was to be an extensive landscaping programme, the raised height served to make the whole scheme even more intrusive in visual terms. It should be noted, he added, that the bunding did not continue at its raised height, and a dip in it just to the north of the subject property meant that there would be a corridor of sound that would filter through to the house.

18.        The whole character of the area would change significantly for the worse and, what’s more, he said, there was now a chance that planning consent might be obtained for a garden centre off the new roundabout.  That would serve to further urbanise the immediate area, although he acknowledged that a recent application had been refused.  Also, he said, the new access to the private drive off the roundabout was less attractive than the previous entrance that had been onto Congleton Road.

19.        Mr Ogborn said that the claimant had been trying to sell the property since 2008 through local agent, Meller Braggins.  Heawood Hall Cottage was put to auction on 26 September 2008 at a guide price of £900,000 to £1,000,000.  Although there had been 19 viewings, the property failed to sell in the room.  The house then continued to be offered for sale by private treaty, with an offer of £600,000 being received in October 2008 and another one of £575,000 in February 2009.  This information was set out in a letter from Meller Braggins to the claimant dated 23 February 2009 but, in cross-examination, Mr Ogborn said that he could not explain why there were two versions of that letter included in the trial bundle.  In the one he referred to in examination-in-chief it just said that the property was withdrawn from the auction, but in another (which had been included as an appendix to his report) it said that it had been withdrawn at £880,000.  He accepted that that could be taken as a genuine bid and an indication of the value at that time, and acknowledged that that figure was extremely close to Mr Plack’s after valuation (of £875,000) and that Mr Plack could not have known about that letter when he produced his report. 

20.        Mr Ogborn said that the property had subsequently remained on the market and another marketing update was provided by Meller Braggins on 12 March 2010.  The best offer obtained was one £770,000 in May 2009, but this was withdrawn when the prospective purchaser, who knew about the bypass, learned of the proposed garden centre.  An unconditional offer of £650,000 from a Mr Tim Sheridan had been received in January 2009 and this must, he said, therefore represent the correct “after value.”  The difference between the before and after values was £800,000 and that should, Mr Ogborn said, represent the compensation payable under this head.  He said that he did no agree with Mr Plack’s methodology which relied solely upon his opinion of a percentage reduction from the before value.  This was an unscientific way to proceed and did not take into account the reality of the situation that actually prevailed.

21.        As to the claim for mortgage interest, Mr Ogborn produced a schedule or payments that the claimant had had to make to Bridging Finance Ltd since the valuation date in the sum of £254,360, and said that because the scheme had been the reason the property had not sold, this sum should be compensated for.  He acknowledged that there had been no reference to this aspect of the claim in the statement of case or in Mr Piatt’s opening statement, and that the claimant could have mitigated the debt, at least in part, by selling the property at an albeit substantially reduced price.  He also accepted that the interest payments were based upon a mortgage that exceeded the price that had been paid for the property and that, therefore, the claimant would never have been able to entirely mitigate that loan, scheme or no scheme.  Furthermore he acknowledged, as did Mr Piatt, that he was unaware of any precedents that would support such a claim.

Acquiring authority’s case

22.        Mr Plack is a chartered surveyor who qualified in 2008 and has over 4 years experience in the valuation of property for compulsory purchase.  In his view the value of the subject property in the no-scheme world was £1,250,000, based upon the comparables he had considered, the price paid by the claimant in August 2007 and the advice received from Gascoigne Halman.  The best comparable, he said, is White Oaks.  It has similar accommodation to Heawood Hall Cottage and good sized gardens of about 0.5 acre.  It also has a public footpath adjacent (rather than running through the land) but is well screened from it by high, mature hedging.  It is very convenient for the centre of Alderley Edge which is a desirable, popular and superior location.  In that regard, he accepted in cross-examination that Nether Alderley is equally attractive but for different reasons.  It is far more rural than Alderley Edge but does not have the same local facilities.  White Oaks has its own private driveway whereas the subject property’s is shared.

23.        Mere Farm is similar to the subject property in a number of aspects but in his view the location and the property itself are marginally superior.  It is well modernised with good quality fixtures and fittings, and has the benefit of a substantial outbuilding that could have potential for conversion to further accommodation.  Although the sale at £1.3 million was some 12 months after the valuation date, he acknowledged the advice of local estate agents who said that there had been no material movement in prices during that period.

24.        Field Head, he said, is also a useful comparable, as is Seven Oaks.  That property is in all respects superior to the subject property being a larger house and set in an extremely desirable semi-rural area between Alderley Edge and Prestbury which is also one of the most popular villages in the area.  Taking all the evidence into account, he said he pitched the value of the subject property in the middle of the range between the achieved prices of £1.1 and £1.55 million.  He said he did not agree with Gascoigne Halman’s suggested reduction of £250,000 to reflect the need for improvements, and so took the £1,250,000 base price that they were working on.  

25.        As to the value of the property with the bypass in place, Mr Plack said that he fully accepted that there will be a substantial reduction in the value of the property and the most intrusive problem will be noise.  However, that will be mitigated to some extent by the bund that has been created to a height of 3 metres and by the comprehensive landscaping scheme that is proposed.  In his view the re-alignment of the shared drive is an advantage with improved and safer access directly on to the new roundabout, and the newly surfaced section will result in reduced maintenance costs for at least 10 years. Nevertheless, in cross-examination he accepted that the new road is extremely close to the house and land, and will have a significant urbanising impact.  He agreed that views and the quiet rural aspect have been significantly affected, the new footbridge is a dominant feature and that users of it will be able to see directly into kitchen, second bedroom and garden area.  Overall, he admitted that the character of the property’s location has been radically changed and that it will now appeal to a somewhat different market.

26.        Mr Plack said that he had taken on board views expressed by local agents, his amendment to the opinion of Gascoigne Halman, and his experience of other compensation settlements, and thought a 25% reduction in value would be appropriate.  To that should be added a further 5% for the affects of the footbridge leaving an after value of £875,000.  He accepted that this was purely a matter of judgement, and that he had not taken into consideration the level of offers that had been received since the property was re-marketed by the claimants.  He did say that during this period the bypass had been a building site, and that may have had some effect upon the level of interest, but accepted that the offers that were received were material considerations.

27.            In closing, Mr Carter said that, as to the mortgage interest issue, he was also unable to find any precedent for such a claim.  A claim for severance and injurious affection was just that, and the claimant would always have been in difficulties whatever had happened as it borrowed more than the property was acquired for.  There was nothing the council had done to impose that burden. As to the post scheme valuation, he submitted that the range of offers upon which Mr Ogborn had based his opinion of £650,000 was incomplete.  He had not referred to the price at which the property was withdrawn from the auction, and had not, in calculating the range of values, included the offer of £770,000.  

Conclusions

28.        Taking firstly the pre-scheme value, I agree with the experts that Mere Farm appears to be the best comparable, and White Oaks is also useful for the reasons given.  It is clear that both of these properties are a little larger than the subject property, and appeared to have been well modernised and improved and in good overall condition.  One sold for £1.3 million and the other for £1.375 million during periods when it was agreed there was little movement in market values generally for this type of property.  However, whilst Mere Farm is also rural, and very close to the subject property, I do accept that the location of the Heawood Hall complex was marginally more tucked away and probably slightly more desirable.  I also consider Seven Oaks to be extremely useful as it is located in a semi-rural position rather than, like White Oaks and Field Head, actually within Alderley Edge.  It is a larger house in extensive grounds and has views to the rear over open countryside but it is a little nearer to a main road than was Heawood Hall Cottage prior to the bypass.  That achieved £1.55 million but I do think that its location in general terms seems a little more desirable, despite Mr Piatt’s insistence in submissions that the markets in Alderley Edge and Nether Alderley are directly comparable in terms of values.

29.        I note that Mr Ogborn did not agree with the reduction in value suggested to the council to be appropriate by Gascoigne Halman to reflect the need for general modernisation and improvement to the subject property, and his figure of £1.45 million suggests the property was comparable in terms of fit and finish to the comparable properties, despite the fact that there was much work to be done to the annexe.  I do think some allowance needs to be made, and have taken into account the money that was spent by the claimant in modernising the main house.  Doing the best that I can in the light of all the evidence I conclude that the “before” value can be fairly reflected in a figure of £1,325,000.

30.        Turning to the after value, I agree that the construction of the bypass has radically reduced the attractiveness of the property to anyone who would have been seeking peace and seclusion in an unspoilt rural location.  It seems to me that the close proximity of the new bypass is a severe detriment, and the existence of the new footbridge has had a devastating affect upon the views from the rooms that it now seriously overlooks.  Now that the bypass has been opened I was able to detect some traffic noise in the main living room and principal bedroom, despite all the windows being closed.  Although sound insulation would doubtless be improved by the provision of double glazing, that would not compensate for the disturbance caused in the summertime when it is normal to have windows open.  There will also be a certain amount of light pollution from the new lighting provided to the southern roundabout. On the subject of that I do not, however, accept the argument that the new access is worse that the original one directly onto Congleton Road.  In my view the new access directly onto the roundabout must be significantly safer, and access and egress should be much easier.

31.        Having concluded that the effects are, indeed, significant (as also acknowledged by Mr Plack) the question is the degree to which the property has been devalued.  I accept the claimant’s argument that Mr Ogborn’s approach was preferable to Mr Plack’s in that taking an arbitrary percentage reduction without considering the offers received for the property whilst it was being extensively and properly marketed was of limited assistance.  However, as Mr Carter submitted, Mr Ogborn based his figure on what he deemed to be the only offer that might still be on the table, and took as his benchmark the offers that ranged between £575,000 and £650,000.  He dismissed the higher offer of £775,000 that had been received and that was subsequently withdrawn, but did not seem to consider whether, in the light of that prospective buyer’s reasons, a slightly reduced figure might have been acceptable.

32.        Mr Ogborn also failed to make any reference to the alleged bid of £880,000 at which the property was withdrawn from the auction, despite admitting that it could be considered to be a material factor.  I find I must temper reliance upon that evidence, as it could have been a fictitious bid used by the auctioneer to run the process up to a point just below the reserve price.  I was not told what the reserve price was but if it was, say, £900,000 (the lower end of the indicative range that had been given by the auctioneers), then I would have expected negotiations to have taken place immediately after the property was withdrawn with a view to concluding a deal at or close to the level of that alleged bid.

33.        I have said that I prefer Mr Ogborn’s approach but I do think that, in determining an appropriate figure, one does need to “step back” and consider whether a figure that, as the claimant’s case does, represents a reduction of 55% is realistic.  In my judgment, although, as I have indicated, I think the property has been severely affected, I do not think that a reduction of that magnitude can be justified. A reduction of 40% from a £1,325,000 pre-scheme value produces £795,000 – say £800,000 which is a little more than the best offer said to have been received during the time when the bypass was being constructed.  I accept the argument that once all the construction works have been completed, and the hard and soft landscaping has been completed and matured, the overall impact may be somewhat less than the market feared during the construction process, and am satisfied that such a figure is now likely to be achievable.

34.        Furthermore, although it is common ground that the environment in which the property is located will have changed beyond all recognition, there will still in my view be a demand for houses of this type and quality in this location.  On balance, I am satisfied that a diminution in value in the region of 40% is appropriate in this instance, and that the post-scheme value should be expressed in the sum of £800,000. This is a loss of £525,000.

35.        As to the mortgage interest claim, this was not referred to in either the notice of reference or the claimant’s statement of case, and there was only the briefest mention of it in the claimant’s skeleton argument.  I find therefore that this is not an issue upon which a determination can be made.  However, it is clear to me in any event that those alleged losses could not have been caused by the scheme.  The sum payable by the acquiring authority for severance and injurious affection compensates the claimant for the losses that have been incurred, and will attract interest from the valuation date.  A further payment would, in my view, represent double-counting.  I would therefore dismiss that element of the claim.

36.        I determine compensation in the following terms:

1. Compensation for land taken £  15,400

2. Compensation for disturbance and injurious affection £525,000

3. Director’s time £  4,000

Total £544,400

37.        This determines the substantive issues in this reference, and the decision will become final when the question of costs has been resolved, and not before.  The accompanying letter sets out the procedure for making written submissions on costs.

DATED  14 January 2011

P R Francis FRICS