UT Neutral citation number: [2013] UKUT 64 (LC)

UTLC Case Number: ACQ/10/2012

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – absent and untraceable owners – house in state of disrepair – cost of repair and refurbishment – valuation – comparable transactions – relevance of price achieved by formal tender - Housing Act 1985 section 17 and Acquisition of Land Act 1981  – compensation determined at £205,000

IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN ROSALIE A STEPHENSON

WINIFRED E STEPHENSON Claimants

and

EAST RIDING OF YORKSHIRE COUNCIL Acquiring Authority

re: 11 Manor Road, Beverley, Yorks HU17 1AR

Determination on the basis of written representations

by

P R Francis FRICS   

© CROWN COPYRIGHT 2013

DECISION

Introduction

1.           This is a decision to determine the amount of compensation to be paid into court by the East Riding of Yorkshire Council (the council) in respect of the compulsory acquisition of the freehold interest in 11 Manor Road, Beverley, Yorkshire HU17 7AR (the subject property) under the The East Riding of Yorkshire (11 Manor Road, Beverley) Compulsory Purchase Order 2011 (the CPO).  The CPO was made by the council following Cabinet Authority (minute 4207) on 5 July 2011 and confirmed under powers conferred on it by the Acquisition of Land Act 1981 on 20 October 2011.  Under the terms of a General Vesting Declaration made on 4 January 2012, the property vested in the council on 3 February 2012, this being the valuation date for the purposes of this reference. The council has subsequently sold the property.

2.           The council has made numerous and extensive attempts to establish contact with the claimants but to no avail.  Consequently, no submissions have been received from the Misses Stephenson. I have read the papers and documents submitted by the council in its notice of reference dated 21 February 2012 together with subsequent correspondence and the expert witness report dated 1 August 2012 of Geoffrey M Preston FRICS, a chartered surveyor employed in the council’s Valuation and Estates Service.  I am satisfied that all reasonable steps were taken to trace and make contact with the claimants.

3.           The subject property comprises a detached, conventionally constructed, two-storey bay-fronted house occupying a corner plot of approximately 570 sq m on the corner of Manor Road and Park Avenue in a predominately residential area to the north west of Beverly town centre. It is believed to have been built about 80 years ago and contains a hall, lounge, dining room and kitchen at ground floor with three bedrooms and a bathroom at first.  Externally there are gardens on all sides and a driveway to the front.

4.           The statement of reasons submitted in respect of the council officers’ application for a CPO recorded that the property had been empty for some seven years, and that it had fallen into a state of serious disrepair with a number of Category 1 hazards as defined under the Housing Act 2004.  As at October 2009, the council had estimated that approximately £71,000 was required to bring it into a satisfactory state of repair and make it habitable. Although some of the statutory notices that had initially been served had been complied with, most had not.  The property’s gardens were also overgrown and unkempt, the house had been subject to forced entry, and it had been vandalised.

5.           In accordance with the council’s Housing Strategy 2008 which contained specific provisions to bring empty private sector properties back into effective use to meet local housing need, it was proposed to compulsorily acquire and then sell the property.  The contract of sale would provide for an agreed schedule of works to be completed by the buyer within a specified timescale (12 months from exchange of contracts subject to a 28 day extension if required at a penalty charge of £200 per day).  Failure to comply would result in recission of the contract and the buyer losing his deposit. The purchaser would be required to pay £4,000 towards the council’s valuation and legal fees incurred in connection with the sale

6.           Following confirmation of the CPO, the subject property was duly vested in the council on 3 February 2012, was cleared of rubbish and effects, and was subsequently marketed for sale by formal tender in early April with a closing date for sealed bids of 12 noon, Wednesday 13 June 2012. Fifty six formal tender packs were issued and 26 bids were received by the closing date.  The highest bid, £205,000, from Mr Dimitrius Gonzalo Marantos of Beverley was accepted, a 10% deposit was paid and contracts were exchanged on 18 June 2012.  At the time of writing this decision, the renovation works were underway, and the purchaser has until 18 June 2013 to complete them.

7.           In its reference to the Lands Chamber, the council as acquiring authority sought an open market value of £169,000 in accordance with an updated valuation that had been undertaken in February 2012 at £170,000 less the £1,000 costs of clearance.

8.           Mr Preston said that he was initially instructed by the council to provide valuation advice to its Private Sector Housing Team in October 2009. A Schedule of Condition and Repairs required to bring the subject property up to a basic habitable standard was produced by UKBS plc at that time and Mr Preston said that his valuation of £132,000 in November 2009 also reflected further anticipated costs for provision of central heating, upgraded insulation, decoration, some additional structural repairs and other factors. That figure was reviewed in June 2011 and again in February 2012 to £170,000 against updated market evidence that was sourced through local estate agents, Nethouseprices and Rightmove websites.  This figure was based upon renovation of the existing property, alternative residual appraisals for demolition and replacement with either one or two detached dwellings (subject to planning) producing very much lower values.

9.           An example of Mr Preston’s analyses was demonstrated by a 3 bedroom detached chalet style house with an additional bathroom and a garage in Molescroft Park, Beverley which sold for £235,000 in October 2011.  To adjust this to the subject property, he deducted £80,000 for renovation/repair, £5,000 for the fact the comparable had a garage and £2,000 for its additional en-suite and then added £20,000 for the fact that the subject property has a large corner plot with possible potential to for a building plot to the rear.   The difference was therefore some £67,000 which suggested that the subject property was worth £168,000. Carrying out the same exercise on 8 other sales between late 2010 and January 2012 and one which was an asking price produced a wide range of values for the subject property from £150,000 to £220,000 – the average being £170,000. From this it was necessary to deduct £1,000 for the cost of clearance leaving a net value of £169,000.

10.        Mr Preston acknowledged that the price achieved on sale was in excess of his valuation, despite the “ongoing difficulties in the property market”.  However, he said that the higher bid may have been made without the benefit of appropriate professional advice.

11.        There are three factors relating to Mr Preston’s evidence that concern me. Whilst he has, rightly in my view, allowed additions to the cost of works assessed by UKBS plc (in 2009 and not updated to 2012) to bring the subject property up to a standard which will be acceptable under the relevant refurbishment requirements of the council’s Empty Homes Policy, he has not specified what those costs are so that a total refurbishment cost can be established.  He has also not given any evidence as to what precisely he thinks the value of the subject property would be at the valuation date were it to be in sound, habitable and marketable condition if the refurbishment costs had been expended.

12.        Secondly, his adjustments of the comparables produced a very wide range of potential values and furthermore no adjustments for time have been made (for instance by reference to relevant house price indices), such that I find I can apply little weight to his conclusions.

13.        Thirdly, and most importantly in my view, his arbitrary dismissal of the price achieved in what the evidence shows to have been a properly conducted tender process in June 2012 is surprising. It is a fact that if a property is sold by public auction, the price achieved will be obtained after open competitive bidding, and will be “one bid above the last”. The process is completely transparent and there can be no suggestion that the successful bidder misread the market or put in a bid far above the next highest. In a tender situation where offers are made in confidence there is scope for misjudging the market and offering considerably more than other bidders.

15.        Although some of the lowest bids could only realistically be described as entirely speculative, there are no less than seven underbids that are higher than Mr Preston’s valuation and two are over £190,000. I am satisfied by this clear and indisputable evidence of the level of interest and the bids received that the successful purchaser did not misjudge the market or the value, and that that evidence establishes beyond doubt the market value of the subject property as at June 2012.

16.        No evidence having been produced to suggest any rise or fall in the market in the 5 months between the valuation date and the date of the sale, I determine compensation in the sum of £205,000.

17.        This determines the issue in this reference, and the matter having been decided under the written representations procedure, the question of costs does not arise.