UT Neutral citation number: [2011] UKUT 192 (LC)

LT Case Number: ACQ/500/2010

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – dwelling house in poor repair – valuation of freehold interest – Land Compensation Act 1961 section 5, rule (2) – compensation £35,750

IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN WALTER MORRISSEY Claimant

and

WIGAN COUNCIL Acquiring

Authority

Re: 487 Liverpool Road, Platt Bridge, Hindley, Wigan WN2 3TY

Before: P R Francis FRICS

Sitting at: Wigan and Leigh Courthouse,

Darlington Street, Wigan WN1 1DW

on

5 May 2011

The claimant in person

Simon Ward, a solicitor with Wigan Council - Legal and Democratic Division, for the acquiring authority

DECISION

Introduction

1.           This is a decision, following a hearing under the simplified procedure, to determine the amount of compensation payable in respect of the compulsory acquisition of the freehold interest in 487 Liverpool Road, Platt Bridge, Hindley, Wigan (the subject property) by Wigan Council (the acquiring authority) pursuant to the Wigan Borough Council (487 Liverpool Road, Platt Bridge, Wigan) Compulsory Purchase Order 2000.

2.           A number of houses in Wigan were owned by the claimant’s family, and were the subject of compulsory purchase orders made in 2000 pursuant to the provisions of section 17 of the Housing Act 1985, and upon which the council has been unable to agree compensation. Due to the fact that the subject property was vested in the council later than the others due to a delay in re-housing tenants, it was the only one where it has been accepted that correspondence from the claimant disputing the compensation offered was received within the 6 year time limit provided by the Limitation Act 1980.   

3.           The notice of reference relating to 487 Liverpool Road was submitted by Mr Walter Morrissey and dated July 2010 (received by the Tribunal on 30 July 2010) and signed by him as claimant. However, it transpired at the hearing that he might not have been the registered owner. I put it to him at the commencement of the proceedings that the first paragraph of page 2 of a report to the Borough Housing Committee dated 10 November 2009, included within the hearing bundle, stated that the registered owner was “Mr Frank Richard Morrissey (address unknown)”.   He stated that that was his son who was indeed the owner at the valuation date and that he lived in South Wales, but he (Walter Morrissey) was acting as his representative.  At all times he had had conduct of the case and was in correspondence and negotiations with the council.   The acquiring authority was represented by Mr Simon Ward, a solicitor with the council, who called Mrs Claire Foster, a conveyancer with the council who gave evidence of fact, and Mr Robert Yardley MRICS of DVS Valuation Services who gave valuation evidence.

4.           No point was taken by the council on the identity of the claimant, and the only issue for my determination is the open market value of the subject property under section 5, rule (2) of the Land Compensation Act 1961.

5.      No statement of agreed facts has been provided, and in determining the facts I have relied upon the council’s reply to the claimant’s statement of case, its officer’s witness statement, the expert report, relevant file correspondence and oral evidence together with my external inspection of the subject property, and the comparables upon which Mr Yardley relied. 

6.           The subject property comprises a late Victorian end terrace two-storey dwelling house constructed of brick with rendered front and rear elevations under traditional slated roofs together with a brick and flat roofed single-storey 1970s built rear extension.  There is a small enclosed front garden and a walled rear yard.  The house is located in an established residential/commercial area about 2.5 miles south of Wigan town centre. The accommodation included, at ground floor, a living room, kitchen/dining room and a bathroom and, at first floor, two bedrooms.  The gross internal area (GIA) was calculated by the council, following a measured survey, at 82 sq m.

7.           On 10 November 1999 a report from Wigan Metropolitan Borough Council’s Borough Environmental Health and Consumer Protection Department was considered by the council’s Housing Committee.  It made a recommendation that due to the fact that 7 properties listed as being within “the Morrissey Portfolio” (including the subject property) were considered to be unfit for human habitation, and various statutory repairs notices had not been complied with, the committee should resolve to instigate action to make compulsory purchase orders under section 17(b) of the Housing Act 1985. It was intended that all of the properties, 5 of which were vacant and suffering dereliction and had become the source of many complaints by the public, should be brought back into housing use by immediately selling them on to a Housing Association for improvement and subsequent letting or resale. That recommendation was approved, and the relevant CPOs were authorised. 

8.           The CPO relating to the subject property was made on 23 November 2000 and confirmed by the Secretary of State on 15 May 2001. A General Vesting Declaration was made on 27 May 2004, and the property vested in the council on 25 June 2004, which is the valuation date for the purposes of this reference.

9.            At the time of the purchase, the property was subject to a tenancy in favour of Mrs K Woodcock and Mr F Hayes.  It was believed that they were holding over following the expiry of a shorthold tenancy (precise details of which were not known) but the council confirmed that they were prepared to proceed with the purchase on the basis that the tenants remained in possession on an assured tenancy. However, the tenants vacated very shortly after the vesting date.

10.        Following confirmation of the various CPOs, the District Valuer undertook valuations of the seven properties and that relating to 487 Liverpool Road was dated 16 August 2002.  It was in the sum of £20,000, based upon the knowledge that the property was subject to a tenancy, but assuming vacant possession could be obtained within 2 months of notice being served.  That figure was agreed with the nominated purchaser, Ayrefield Developments Limited, but despite the council’s valuer, Mr Yardley, stating in response to a query from the council that the valuation was not affected by the fact that the tenants had left, the purchaser increased the price it was prepared to pay, and subsequently paid, £22,325 to reflect immediately available vacant possession.

11.        The claimant’s then solicitor indicated to the council in October 2004 that an advance payment under section 52 of the Land Compensation Act 1973, being 90 % of the £22,325 price that Ayrefield Developments Limited had paid.  Thus, £20,092.50 was paid to the claimant on 8 December 2004 on the understanding that the final compensation figure remained to be agreed.

12.        Mr Walter Morrissey, in a statement of case dated 12 September 2010 said that the value of the subject property was approximately £90,000. In his view, the property could have continued to be rented out, following the date that it vested in the council, for about £6,000 pa, and that opportunity had been lost. No evidence was produced to support the contentions as to value either prior to or at the hearing, and Mr Morrissey accepted in oral evidence that that was purely his opinion. He said that at the time the council had served various repairs notices (which had been sent to 563 Warrington Road, Wigan, another of the family’s properties), prior to the CPO process, he had been in prison. His son was not a builder and, he said, he had been waiting for him to be released in order for the repairs to be carried out. Mr Morrissey said that once he came out of prison he made attempts to get the council to suspend the CPO process (which had been successfully achieved on 563 Warrington Road) to give him time to put the property into repair, but the council had refused and had also declined grant applications.

13.        He said that his brother had written to the council in 1998 to advise them of his incarceration, and so, he said, they were aware of his predicament but this made no difference. As to the council’s building surveyor’s assessment of the likely costs of repair to the property (£32,000), set out in a schedule to Mr Yardley’s report, Mr Morrissey said this was seriously exaggerated.  He and members of his family were, and had been, builders for a considerable number of years, and in his view, the requisite works to bring the property up to an acceptable standard could have been undertaken for about £10,000. He could get materials at about one third of retail values and whereas Mr Russell (the building surveyor) had estimated £260 for stripping the slates off the roof, he could do it for about £30.  The rising dampness that Mr Russell had mentioned was also limited just to the party wall, and was nothing like as extensive as he had estimated for – the other damp areas being due to condensation. It should also be remembered, he said, that the gable end wall had been rebuilt and the bathroom extension was modern and both had proper physical damp proof courses.  

14.        Mrs Foster has been employed by the acquiring authority for the last eight years and is a conveyancer.  She produced a witness statement confirming that the council’s reply to the claimant’s statement of case was a true and accurate record of the events that had occurred in respect of this CPO. She said that her investigation of the council’s files revealed that all the registered owners had been notified of the CPOs and the relevant notices had been correctly served.  She pointed out that between 2002 and 2004, Mr Morrissey had been represented both by a solicitor and a chartered surveyor, but both of them had reported difficulties in obtaining instructions from their client and matters were, therefore, unable to be concluded by negotiation.

15.        As to the repair notices, Mrs Foster said she was unable to comment, but in connection with the grant applications she advised that the council considered the extent of works required across the Morrissey portfolio was too great for that route to have been acceptable.

16.        Mr Yardley is a chartered surveyor and is a consultant to the Manchester office of District Valuer Services – the commercial wing of the Valuation Office Agency.  He has over 43 years professional experience including compulsory purchase and compensation matters throughout central and east Lancashire. He set out the background to his involvement with the subject property and described it as being in very poor condition when he carried out an internal and external inspection on 2 August 2004, just after the vesting date. Whilst it was evident that the side gable wall had been reconstructed at some stage over the preceding 10 years, and the single storey bathroom extension was also relatively modern, there was extensive evidence of dampness to the lounge; kitchen units were virtually non existent and the bathroom required modernisation. Decorations, especially at first floor were in particularly poor condition and many of the old softwood window frames were rotten.

17.        Although no detailed condition survey was undertaken at the time of vesting, Mr Yardley said he sought, in connection with this hearing, the advice of Mr John Russell MRICS, a chartered building surveyor employed by the DVS building surveying service. In his report, dated 13 April 2011, Mr Russell provided a schedule of repairs which, exclusive of VAT amounted to £32,000 based upon 2005 prices. He said that he had not inspected the building, and had based his opinion upon the information that had been provided to him as to the condition of the house at the relevant date.

18.        Mr Yardley said that he had approached his valuation by considering 7 comparable houses located within the vicinity of the subject property that had sold during the period February to November 2004, and produced a schedule setting out the details of each. As 2004 was a year of rapidly rising property prices (particularly the first 6 months) he used the VOA Property Market Report for 2004/5 to make adjustments to reflect a valuation date of June 2004. An analysis of these sales, suitably adjusted, produced a range of £318 to £702 per sq m. The wide range reflected the fact that some of the properties were in better condition than others. He said that the comparable that produced the lowest figure per sq m should probably be excluded, as it was well out of line with all the others.  The range then became £472 to £702 and he said that it could be assumed that the highest price reflected a property that was modernised and in good condition. Thus, he concluded that the value of the subject property, fully renovated, would amount to £57,400 (82 sq m x £700) – say £57,500.

19.        From this figure it was necessary to make two adjustments: firstly, the £32,000 renovation costs assessed by Mr Russell. This produced a value in its then condition of £25,500. As a check, Mr Yardley said it was possible to base a valuation purely on the lowest figure per sq m in the list of comparables – that also being a property in poor order.  Thus £318 per sq m x 82 produced £26,000. If, as he had suggested, that comparable was excluded, the next lowest value sale at £472 per sq m produced £38,700. The average of these three values was £30,000. The second adjustment was for the fact that, at the date of valuation, the property was subject to a statutory periodic tenancy.  Although it was appreciated that, barring difficulties with the tenant, it should be possible to get vacant possession within two months of notice being served, he said it was, in his experience, general practice to make a 10% reduction from the vacant possession value to reflect that situation. Thus, the figure became £27,000, and that was the value that was sought in this determination.

20.        Mr Yardley said that he did not agree with Mr Morrissey’s suggestion that the works of repair could be undertaken for anything like as little as £10,000.  For instance, the replacement of windows and doors alone were estimated at £7,637 to which VAT would need to be added. In response to a question from me, regarding the fact that the property was located on a corner and it appeared to be possible to provide a parking space in the rear yard, Mr Yardley accepted that that possibility might add £1,000 to the value but there was adequate street parking available in any event.

21.        Although I note from Mrs Foster’s evidence that the claimant had legal representation and had appointed a chartered surveyor in the early stages of the CPO process, neither are still appointed and no valuation evidence of any description was produced by Mr Morrissey. As to the claimant’s case therefore, all I have is his opinion that the house was worth £90,000 at the valuation date. Nevertheless, whilst there was no valuation evidence, I have taken into account Mr Morrissey’s comments regarding the condition of the property and whilst it was undoubtedly “very poor” (Mr Yardley’s description), the photographic evidence indicates it was far from derelict – which must have been the case if it was occupied by tenants. It is clear that some improvement works had been effected – particularly the rebuilding of the gable end wall in cavity brickwork.

22.        For the purposes of assessing the market value of the land at the valuation date, which is what is required under rule (2), it would not be right to assess the cost of repairs at the figure which the claimant says he could personally do it for. The average purchaser would calculate costs of materials on a retail basis, and a builder would normally add to his costs of materials and labour a sum for profit and risk. There is no evidence that, if the house had not been compulsorily acquired, Mr Morrissey would have carried out the works of improvement, so that there can be no question of increasing the compensation under rule (6) to reflect this. As to Mr Russell’s schedule, I find I am only able to attach very limited weight to it.  Firstly, he admitted that he had not seen the property and was relying upon Mr Yardley’s opinion as to condition, and it is unfortunate that the photographic record, taken a month after the valuation date, is limited and poor.  Furthermore, in Mr Russell’s statement he says that he relied upon Spons 2005 prices, and yet the valuation date was mid 2004. He was also not called to give evidence, and could not, therefore, be cross-examined on his opinion.

23.        I note from the comparables that both the cheapest and next cheapest (in terms of transaction price per sq m) were both mid-terrace properties whereas the subject property is end terrace with a return frontage. Those two comparables sold for £30,000 and £45,000 respectively.  The only other comparable that was end terrace was 479 Liverpool Road (but that did not have a return frontage) and appeared from my inspection to be broadly similar to the subject property in other respects.  That sold for £49,950 (£515 per sq m) in November 2004 which produces an adjusted figure of £490 per sq m.  Unfortunately no details of its then condition were produced, but it does seem to me that it is unlikely it would have been worth virtually double Mr Yardley’s estimated value of the subject.

24.        In my judgment, the subject property had the potential to make a parking space in the rear yard (albeit a small one) and this would undoubtedly add slightly to the open market value. In the light of the evidence, I am satisfied that Mr Yardley has not made sufficient allowance for the fact that it was end terrace, and I do think that whilst £10,000 for modernisation works (as estimated by Mr Morrissey) is too little, a prospective purchaser would expect to effect the necessary repair works for somewhat less than Mr Russell estimated.  I am also not persuaded that a 10% deduction for the tenancy was appropriate, especially at a time when the market was rising rapidly and overall demand was high.  Building costs at, say, £20,000 and a 5% discount for the tenancy would produce, from Mr Yardley’s value assuming fully modernised, and with vacant possession, of £57,500, a figure of £35,625 which to me sits more comfortably with the tone of the comparables. 

25.        Doing the best that I can therefore, on the evidence that was before me, and from my inspection of the property and the comparables, I conclude that the open market value of 487 Liverpool Road, Platt Bridge, Wigan on 24 June 2005 is fairly represented in the sum of £35,625 – say £35,750.

26.        This determines the substantive issue in this reference and I determine compensation in the sum of £35,750.

27.        Although the provisions of section 4 of the Land Compensation Act 1961 are not precluded from applying when a reference is heard under the simplified procedure, it is in general a no-costs regime. I infer that in agreeing to it the parties intended that no order for costs should be made, and I therefore make no such order.