Khan & Anor v Manchester City council [2006] EWLands ACQ_70_2006 (05 December 2006) 

ACQ/70/2006

LANDS TRIBUNAL ACT 1949

COMPENSATION – Compulsory purchase of two houses in Clearance Area - valuation – disturbance – compensation awarded £33,500

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN	SALIM KHAN and KAREN KHAN	Claimants

and

MANCHESTER CITY COUNCIL	Acquiring		Authority

Re: 40 & 42 Louisa Street, Openshaw, Manchester M11 1AB

Before: P R Francis FRICS

Sitting at: VAT and Duties Tribunal, 9th Floor, Westpoint,
501 Chester Road, Manchester M16 9HU
on
28 November 2006

Mr Christopher Taylor BSc (Hons) MRICS, Chartered Surveyor of Lambert Smith Hampton, Manchester, with permission of the Tribunal, for the claimants
Mr Jonathan Easton, instructed by Legal Services, Manchester City Council for the acquiring authority

DECISION
1.	This is a reference, heard under the Simplified Procedure (Rule 28, Lands Tribunal Rules 1996) to determine the compensation payable to Mr S & Mrs K Khan (“the claimants”) by Manchester City Council (“the acquiring authority”) for the compulsory acquisition of the long leasehold interests in 40 and 42 Louisa Street, Openshaw, Manchester M11 1AB (“the subject properties”) under the City of Manchester (Louisa Street, Openshaw) Compulsory Purchase Order 2003 (“the CPO”). 
2.	Mr Christopher M Tayler BSc (Hons) FRICS, a senior surveyor with Lambert Smith Hampton, Property Solutions, of Manchester appeared for the claimant and produced a statement of case and a supplementary report in response to the council’s reply.  The reply was provided by Mr Richard G R Martyn BA (Hons) MRICS of Manchester City Council, Corporate Services, who appeared for the acquiring authority.   From these documents, and the evidence presented at the hearing I find the following facts:
2.1	The subject properties, which had been acquired by the claimants in May 2004, were located on the east-side of Louisa Street, a predominantly residential area of Openshaw about 4 miles east of the City Centre, and comprised a pair of adjoining part 2-storey and part single-storey Victorian terraced houses that had each been converted into small flats.  No 40, sited at the southern end of a terrace of 10 properties on the corner of Old Lane had, at some stage, been a corner shop with ancillary living accommodation, but at the valuation date (agreed as 25 June 2004), comprised two ground-floor “studio” flats with integral lounge/bedroom, kitchen and bathroom with wc, together with a 1 bedroom flat at first floor.  The property as a whole was subject to a 999 year lease (less 10 days) from 24 June 1911 at a ground rent of £4 pa.   No 42 had self-contained 1 bedroom flats at ground and first floor and was subject to a ground lease on the same terms as no. 40 but at a rent of £3 pa. 
2.2	The City Council resolved, as part of its strategy to improve run down residential areas in suburban Manchester, to declare parts of Louisa Street, Old Street and Southsea Street, Openshaw, a Clearance Area and made the CPO on 17 April 2003. It was confirmed by the Secretary of State on 23 February 2004 and following a General Vesting Declaration dated 20 May 2004, the properties vested in the council on 25 June 2004.   The properties were subsequently demolished to provide areas of public open space  
2.4	Disturbance costs of £250 per property have been agreed between the parties.
2.5 	Notice of reference to this Tribunal was made on 18 May 2006.
3.	The sole issue for determination in this reference is the value of the long leasehold interests in each of the properties at 25 June 2004.
Claimant’s case
4.	Mr Tayler initially produced evidence of 4 comparables on Louisa Street, all of which were terraced houses.  No 66 was sold for £33,500 in February 2004 and, subsequent to the valuation date, no. 132 (which had been subject to a regulated tenancy) achieved £43,500 in September 2004; no. 92 sold for £45,000 in October and no. 78 sold for £39,000 in January 2005.   In his opinion, accepting that they were all in blocks that had been improved, and expressing the view that the market had experienced a levelling off immediately after the valuation date, the appropriate figures for the subject properties were:
40 Louisa Street		£26,000
42 Louisa Street		£24,000
In his supplementary statement, he included copy of the OurProperty website (produced from published Land Registry statistics) that indicated no less than 15 properties sold on Louisa Street during 2004 at prices ranging from £19,500 to £67,000 – an average, of £38,700.  He accepted that such an average was meaningless, but the minimum price, he said, was lower than the council had offered for either of the claimants’ properties.   He said further evidence was available nearby, with 1 Old Lane (immediately behind 40 Louisa Street), 21 Old Lane and 140 Wheler Street being sold by the claimant for £45,000 each on 3 August 2004.   The first two were in need of very substantial repair and refurbishment, and costs for the modernisation of two of them (including 21 Old Lane that had also been fire-damaged), had been confirmed at £48,600 per property.   However, he accepted in cross-examination that there was no Land Registry record relating to the transfer of 1 Old Lane in August 2004, and the register showed the price for no. 21 having been £27,000.   Mr Tayler said that no. 107 Wheler Street, a derelict terrace house in a nearby street, had been sold for £25,750 in June 2004, but he had not, he admitted, been aware of its earlier marketing history which was explained in the council’s submissions.  
5.	Mr Tayler said he thought the fact that the subject properties had been converted to flats produced an uplift in value over a similar terraced house for single family occupation, but accepted that whilst in his assessment of value he had taken account of the poor condition of the properties, he had not then realised that they had been declared unfit for human habitation and were the subject of closing orders.   He also acknowledged that the flats in 40 Louisa Street were deficient in terms of natural light and ventilation, means of escape in the event of fire, that they had no facilities for the heating of water, and some rooms had no electricity.  He said that he accepted all the council’s evidence as to the condition of the properties, and that they were, to all intents and purposes, houses in multiple occupation, but he did not wish to revise his opinion of value.  The market in Openshaw, he said, was at the relevant time particularly strong.   He also gave details of a number of properties that had been sold in 2004, then re-sold very soon afterwards at virtually double the previously agreed prices.  However, he said, he had excluded the effects of the scheme for which the CPO was made, in his valuations.  He said he had been aware that the council had agreed prices for the subject properties with the previous owner (at £15,250 for no.40 and £14,250 for no. 42), but the transfer was not concluded as he had sold the properties on to the claimants instead.       
6.	As to Mr Martyn’s comparables, Mr Tayler said that the majority were the result of CPO related negotiations.  The CPOs (there were several in the general area) had created their own market and kept values low – that being evident from the fact that some of the non-CPO affected properties referred to by him in the block further up the street had seen significant increases in value over a very short period.   As to the properties in the same block, Mr Tayler said they were most boarded up and in very poor condition.
7.	Mr Khan said that he had been involved with properties in Openshaw since 1995, and had bought and sold over 100 units during that time.   It was an area that had experienced significant growth and, he said, investors from London were even ‘buying blind’ to benefit from the hope value being created by the regeneration proposals.    He said that he bought the subject properties in May 2004, in full knowledge of the fact that 40 and 42 Louisa Street were subject to a CPO, as part of a package that included 1 and 21 Old Lane, and thought he paid between £20,000 and £22,000 each for them although he could not remember precisely.   Many of the properties that he had bought had been on behalf off Mosscare Housing Ltd (“Mosscare”), the charitable not-for-profit Housing Association that had section 22 rights to buy under the 1996 Housing Act on behalf of the council.  
Acquiring Authority’s case
8.	Mr Martyn described the subject properties, which he had first inspected internally in November 2003 and produced a series of photographs.  He said they were in very poor condition, as confirmed in the housing survey report that had been undertaken by the council, and which he also produced.   For example, he said, what Mr Tayler had described as a lounge/bedroom in flat 1, 40 Louisa Street, was so small that it was virtually completely taken up by a double bed.  There was no hot water to the kitchens or bathrooms, and the first floor flat at no. 42 had no electricity either in the front bedroom or the bathroom.     He produced the closing orders relating to the two properties, served by the council under the provisions of section 284 of the Housing Act 1985 (as amended) on 7 April 2004 which stated that both properties, being houses in multiple occupation, failed to meet the requirements of section 604(1) of the 1985 Act in that they were not free from serious disrepair and did not have an adequate piped supply of wholesome water.
9.	Mr Martyn said that he had not specifically taken the closing orders into consideration when forming his initial opinion of value as they had not been served then, but thought that bearing in mind the poor condition of the properties, notices would have been served even if there was no CPO.   He produced details of the prices the council had paid for the other properties in the Louisa Street terrace under the CPO.  No. 44 was a two-up, two-down terrace house which was empty but, in his opinion, in better condition that the subject properties.  The price, agreed with Lambert Smith Hampton, was £20,000.  No. 46 was occupied but in poor order and was agreed at £17,000.  No. 48 which was empty, boarded up and in poor condition was agreed at £16,000 with a Mr Cohen, the surveyor with whom he had provisionally agreed the values for the subject properties prior to them being sold to Mr and Mrs Khan.  No 50 was in better condition with central heating , but also empty.  The price paid was £20,000.  Finally, at the far end of the terrace, no. 58 was agreed at £21,000.  It was considered to be in better order than either of the subject properties.
10.	As to Mr Tayler’s Louisa Street comparables, Mr Martyn said that all of them were in a block further up the street that was not affected by the CPO and had been the subject of an Environmental Improvement Programme in 2001.  They were vastly superior to the subject properties and only one of those Mr Tayler’s reported transactions was prior to the agreed valuation date.  The Land Registry statistics showed a number of other sales in Louisa Street prior to the valuation date, at prices ranging from £19,500 to £25,000.  It was, he said, a rapidly rising market, and it was not helpful to consider post-valuation date sales.   Regarding 107 Wheler Street, Mr Martyn said that this was a property that the Housing Association wanted to purchase by negotiation without going to the trouble and expense of obtaining a CPO.   The advice from Lambert Smith Hampton was to bid £8,000 to £10,000 for the property, but the owner placed it in an auction, and it was purchased by the claimants for £18,000.   Subsequently, Mosscare had to pay £25,750 to bring it into their ownership.
11.	In Mr Martyn’s view, the compensation to be paid for the properties should be £17,000 for 40 Louisa Street, and £16,000 for 42 Louisa Street.
Conclusions
12.	Having considered the evidence, I prefer that of Mr Martyn.  It is clear that he had been in negotiations with the former owner’s agents, he had provisionally agreed figures of £15,250 and £14,250 for nos 40 and 42 respectively, and he had reported those figures to the city solicitor.  Bearing in mind the clear and unchallenged evidence regarding the condition of the properties, those figures seem to me to fit much better with those agreed for the other properties in the block than Mr Tayler’s suggested values which are based upon comparables from properties that had been subject to some improvement works.   I therefore accept the council’s submissions in regard to the unsuitability of Mr Tayler’s comparables, and also note that he produced no evidence to support his contention that there should be an uplift to reflect the fact that the properties had been converted to flats.    In an area where it was agreed there were no other properties converted for those purposes, and bearing in mind these were only small houses, in my judgment the conversion would, if anything, have a depreciating affect on value.   
13.	It appears that Mr Khan bought the properties on a speculative basis, knowing that they were to be compulsorily acquired.   The amount paid for them provides no useful evidence of their value.    In my view, Mr Martyn’s upwardly revised figures of £17,000 and £16,000 for the subject properties fairly represent their long leasehold values at 25 June 2004, and I therefore determine that the acquiring authority shall pay compensation in the sum of £33,500 (to include the agreed disturbance of £250 per property).
14.	This decision determines the substantive issue, and is final.  The matter being heard under the Simplified Procedure, and in the absence of exceptional circumstances or any applications from the parties, I make no award as to costs.

DATED 5 December 2006

(Signed)						P R Francis FRICS