UPPER TRIBUNAL (LANDS CHAMBER)	
	
UT Neutral citation number: [2010] UKUT 390 (LC)
ACQ/427/2009

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
	
COMPENSATION – Compulsory Purchase of Grade II listed buildings in poor repair – valuation by comparables or residual method – cost of repair and reinstatement – Land Compensation Act 1961 section 5, rule (2) – compensation determined at £32,500    

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN	HEMINGBY AGRICULTURAL TRADERS LIMITED (1)	
	JUDITH MARGARET TAYLOR (2)	Claimants

	and
	EAST LINDSEY DISTRICT COUNCIL	Acquiring 
		Authority

	Re: 7-9 and 11-13 Bridge Street, Horncastle, Lincs LN9 5HZ 

	Before: P R Francis FRICS

	Sitting at: Lincoln Magistrates Court, 358 High Street, Lincoln LN5 7QA
on 21 & 22 September 2010

Ian Pennock, instructed by Chattertons, solicitors of Horncastle, for the claimants
Guy Williams, instructed by Legal Services, Lincolnshire County Council, for the acquiring authority 

© CROWN COPYRIGHT 2010

The following cases are referred to in this decision:

Taylor v Cheltenham Borough Council [1978] 246 EG 923
Hale v County Borough of Blaenau Gwent (1999) LT ref ACQ/25/1999 (Unreported) 
Bellamy & Bellamy v Great Yarmouth Borough Council [1996] RVR 41

	DECISION
Introduction
1.	This is a decision to determine the compensation payable to Hemingby Agricultural Traders Ltd and Mrs Judith Margaret Taylor (the claimants) by East Lindsey District Council (the acquiring authority) for the compulsory acquisition of premises at 7-9 and 11-13 Bridge Street Horncastle (the subject premises) under the District of East Lindsey, Parish of Horncastle, Compulsory Purchase Order 2001 made under section 47(1) of the Planning (Listed Buildings and Conservation Areas) Act 1990.
2.	Mr Ian Pennock of counsel appeared for the claimants and called Mr Leonard George Taylor, a director of the first claimant and husband of the second, and Mr Gary Batten a property investor and developer who gave evidence of fact, together with Mr Andrew Curtis BSc (Hons) MRICS a chartered surveyor of Walters, Lincoln who gave expert valuation evidence.    Mr Guy Williams of counsel called Mrs Mary Anderson BA BSc AA Dip (Cons) IHBC FRSA AABC RIBA a conservation architect and partner in Anderson & Glenn of Boston, Lincs who gave expert evidence relating to the condition of the buildings on acquisition and costs or repair, and Robert Martin Swainson BSc (Est Man) MRICS FAAV Dip Bldg Cons, a chartered surveyor with the Valuation Office Agency, Lincoln, who gave expert valuation evidence.
Facts
3.	The parties produced a short statement of agreed facts from which, together with the evidence and my inspection of the subject premises and the three comparable properties following the close of the hearing on 22 September 2010, I find the following facts.   The subject premises comprise a terrace of four 2½ storey late seventeenth/early eighteenth century properties located on the edge of the established retail area about 25 metres to the north-west of Horncastle Market Place, fronting the main western route into and out of the town centre.  Formerly utilised as shops with office and storage space above (parts of the upper storeys also having been previously residential), the buildings are constructed of rendered brickwork under timber framed, pitched roofs with part asbestos and part pantiled coverings, are listed Grade II and are within the Horncastle Conservation Area.  They had, at the valuation date, a net internal floor area of 350.5 sq m.   Nos 7-9 Bridge Street had been unoccupied since 1990 and 11-13 were vacated in 1997, none of the properties having been re-occupied prior to the compulsory acquisition.   All of the buildings had been allowed to fall into a state of disrepair, and it was acknowledged that nos 7-9 were in the worst condition with roof coverings having been removed, leaving the accommodation open to the elements, and part of the front elevation was considered to be at risk of collapse.
4.	Between 21 September 1998 and 15 December 2000 Urgent Works Notices under section 54 of the Planning (Listed Buildings and Conservation Areas) Act 1990 (the 1990 Act), and Repairs Notices under section 48 of that Act were served on the claimants by the council.   Although some repairs were effected, these were considered unsatisfactory, and the council subsequently entered and carried out the repairs it deemed necessary to prevent the properties deteriorating further, including the erection of scaffolding to buttress the dangerous part of the frontage of nos 7-9.  The £44,272.91 cost of those works, invoiced to the claimants, remain unpaid.  
5.	The CPO was made under section 47(1) of the 1990 Act on 21 August 2001 on the grounds that “reasonable steps are not being taken for properly preserving a listed building”.   The Statement of Reasons said, in part:
“1.	The land which the council is seeking to acquire … covers approximately 0.051 hectares ... is relatively flat and has been developed between the line of the old Roman wall and the river.   The owner of Nos 7, 9, 11 and 13 also owns Nos 15 and 17 Bridge Street.   These listed buildings were renovated by Heritage Lincolnshire, a local building preservation trust, in 1994.  Access and ownership of Nos 15 and 17 will not be affected by the CPO.
2.	Nos 7 and 9 … form an important part of the street scene in views out from the Market Place and link with Nos 15 and 17 to form a group adjacent to the river, a popular spot with visitors and locals alike.   Their vacant and derelict state is not only harming the appearance and character of the area, but also the image and economic wellbeing of the town.   Over the past 10 years the Council has been trying to encourage the owner to carry out a scheme of refurbishment and conversion.   This encouragement has included offering advice on the submission of applications for LBC and PP, leading to the approval of a scheme to convert the buildings into offices, and to develop the rear for residential use, the offer of grant aid, and advice on other grants to assist with the costs of converting the buildings to commercial use.   These negotiations have failed to reach a satisfactory conclusion and the owner has stated that he does not feel it is viable to proceed with the scheme.   He has applied to demolish Nos 7 and 9.”     
6.	The CPO was confirmed by the Secretary of State on 4 March 2003, a General Vesting Declaration was made on 5 October 2004, and the premises vested in the acquiring authority on 5 November 2004, which is the valuation date for the purposes of this reference.  At the valuation date, the buildings comprising 7-13 Bridge Street and the land on which they were constructed were in the ownership of the first claimant, Hemingby Agricultural Traders Ltd (of which Mr Leonard Taylor is the Managing Director), with the yard areas and land to the rear owned by his wife, the second claimant, Mrs Judith Taylor.  For the purposes of this decision it was agreed that the premises and land should be valued together and as if in one ownership.  
7.	On 13 December 1990, Mr Taylor obtained planning consent for change of use, conversion and refurbishment of 9-17 Bridge Street and for the construction of a pair of semi-detached houses on land to the rear of 9-13.  The permission was subject to a condition that Nos 11-17 Bridge Street should be refurbished in accordance with the proposed scheme to the satisfaction of the local planning authority before the residential units could be occupied. The refurbishment of 15-17 was completed and the premises were subsequently let but the rest of the development was never undertaken.
8.	An application for planning permission and listed building consent was made by architects on behalf of the claimants on 26 June 2001 for the demolition of Nos 7-9 Bridge Street and replacement with a 3 storey building to house offices on ground and first floors with storage above, this being refused due to “insufficient evidence being put forward to justify demolition of this Grade II listed building.”   On 12 March 2002 a further planning application was submitted by Mr & Mrs Taylor for the renovation and conversion of 7-13 Bridge Street into a single residential unit, and this was also refused due to there being insufficient justification for the removal of internal cross-walls and concerns over the affect that the proposed construction of a carriage arch would have on the structural integrity, historic interest and character of the building.    
9.	On 6 March 2003 East Lindsey District Council served a notice on the claimants advising that a planning application had been submitted by Heritage Lincolnshire and on 23 April 2003, permission was granted for “Change of use, conversion of, extensions, alterations and part rebuilding of existing vacant buildings, which are listed buildings, to provide office/retail accommodation at ground floor level, office accommodation at first floor level and storage on the second floor, in accordance with the originally submitted plans and information except as amended by details received on 26 March 2003.”     
10.	Immediately following the compulsory acquisition, ELDC sold the subject premises, in a “back-to-back” deal, to Heritage Lincolnshire through the Building Preservation Trust who carried out the development in accordance with that permission at an overall cost of £1,039,708 of which £779,727 related directly to the building project.   Once completed, the premises were offered for sale by sealed tender.   The sale was subject to conditions regarding such matters as the number of businesses to be housed on the premises, and job creation, and the highest bid received was £250,000, but the property was sold to an underbidder for £212,000.           
Issues
11.	The only issue between parties is the value of the subject premises at the 5 November 2004, assessed in accordance with section 5, rule (2) of the Land Compensation Act 1961.   In determining that figure, it is agreed that it is necessary to consider the provisions of section 49 of the 1990 Act, and what effect, if any, they have.  There was also an issue as to whether it was appropriate to arrive at a value by reference to comparable transactions, or whether, in the light of the condition of the buildings and considerable cost of renovation works a residual appraisal should be adopted. The claimants claim £160,000 on the basis of a valuation undertaken by Mr Curtis by reference to comparable evidence and the acquiring authority values the properties at £32,500, a “spot figure” ascertained by its expert, Mr Swainson, based upon the negative figure that a residual appraisal produced.
Claimants’ case
12.	At the commencement of the hearing, an application was made for the admission of a further supplementary report by Mr Curtis comprising a detailed photographic record of 6 Market Place, one of his comparables, in the light of the experts’ failure to agree its condition when it was sold.  No objection was raised on the question of lateness, but it was pointed out that the photographs were taken some 6 years after the property was sold.   I agreed to its admission on the basis of the parties’ acceptance that it would have been in no better condition at the date of sale.
13.	Mr Taylor set out the background relating to his company’s and his wife’s ownership  of the subject premises (Nos 11-13 from 1977 and Nos 7-9 from 1992) and explained that the reason the proposed renovation, conversion and construction works to the subject premises was not undertaken when Nos 15-17 were renovated (in accordance with the 1990 planning consent) was because the company was unable to raise the balance of funds that would be required after the grant aid totalling £117,381 offered by Horncastle Conservation Partnership Scheme (CAPS), a European Regional Development Fund and East Midlands Development Agency.  In any event, there were also problems over access to the residential units, and it was his view that the scheme was not economically viable mainly due to the substantially increased costs that would be incurred as a result of the Grade II listing.  The grant facilities referred to were withdrawn in 2001, after which much smaller amounts would be available.  Mr Taylor said that the required works were done to Nos 15-17 by the Building Preservation Trust on behalf of Heritage Lincolnshire, to whom he had sold the buildings (for £20,000) in 1994; they were re-purchased by him in 1995 (for £82,500) and let on lease.   
14.	The later, 2002, application for a purely residential development on Nos 7-13 had been made, he said, because this was considered to be a more valuable proposition, but it had been refused.   
15.	As to the notices that had been served under sections 48 and 54 of the 1990 Act, Mr Taylor said that he did undertake some works to prevent the buildings deteriorating further, but the instructions from the council had not been precise enough, hence their entry onto the premises for the purposes of making them safe and at least temporarily watertight.  He acknowledged that there were serious concerns over the stability of at least part of the front wall of number 7 but was of the view that the service of notices was “part of the build up to the CPO.”   Due to the relentless pressure of the authorities, Mr Taylor said it was decided to put the properties on the market in December 2000 at an asking price of £82,500.  They remained on the market until about 2004 but no offers were received.  In his opinion, there had been a chance of a substantive offer from “a gentlemen from Scarborough”, but he had been put off bidding by the council’s conservation officer.  
16.	Mr Taylor acknowledged that he had withdrawn his objection to the CPO “as a commercial judgement” after he was told he would not get anywhere with it, but had not, when he did so, been aware that Mr Job, the council’s then appointed valuer, had assessed the value at only £15,000 to £20,000.  This valuation had been carried out in 2001 but a subsequent update in September 2003 was also only for £20,000.
17.	In late September or early October 2004, Mr Taylor said that he was approached by Gary Batten, an experienced local property developer who had worked with his father on the restoration of many historic buildings and who had read about the proposed CPO in the local newspaper.   After an inspection of the buildings, Mr Batten offered £80,000 which Mr Taylor accepted, but said that that must be seen as a forced sale value due to the impending CPO.  Following an approach to the council it became apparent that this last-minute deal was too late, as the General Vesting Declaration had been made on 5 October.   Despite efforts to speak to the Chief Executive of the council, it was not possible for this deal to proceed, and even Mr Batten’s direct approach on 20 October to try and buy the property from them after it was vested met with a negative reaction, as the council had agreed a “back-to-back” deal with Heritage Lincolnshire and there was a contractual obligation on their part to carry out the works of repair in accordance with the 2003 planning permission.  
18.	Shortly after the property vested in the council, Mr Taylor said, he received a letter from them confirming that the valuation of £20,000 still stood as at the valuation date.   He then instructed Mr Curtis to act on his behalf, who valued the property at £160,000.   In response to a question from me, Mr Taylor said that he had intended to effect the required repairs to the subject property once the works had been completed to Nos 15-17, and those properties had been transferred back to him, but there had by then been a change in committee members (on Heritage Lincolnshire) and a similar project could no longer proceed.
19.	Mr Batten said that he joined his family’s property development business, which specialises in renovating period properties, 22 years ago.  Although many of the properties that had been acquired by the firm were in the name of his father and other relatives, Mr Batten said that he had his own portfolio of 10 buildings, only one of which had been sold following renovation.  He said the family business had acquired a reputation for high quality renovations using, whenever available, reclaimed materials.   A number of the projects were in Horncastle, including 29 Bridge Street and 1-5 West Street where extensive renovation and rebuilding works were effected to the Grade II listed buildings (with limited grant aid and the full co-operation of the Listed Buildings Officer).   Those buildings now comprise a restaurant and shops, with residential accommodation on the upper floors.   He had also considered acquiring 6 Market Place, Horncastle (one of Mr Curtis’s comparables) after the conservation officer had indicated that he might be a suitable contractor to carry out the required extensive renovation works.   However, he said that he did not proceed due to the fact that the council would not allow him to modify some of the existing staircases.
20.	As to the subject premises, Mr Batten said he read about the CPO in the local paper, and after establishing who the owner was, approached Mr Taylor directly, rather than his then appointed agent.  He looked at the properties with his father and was of the view that, overall, the buildings were not in as bad condition as had originally been thought (other than Nos 7-9 where the front wall would need partial rebuilding).  Although he did not obtain any professional advice as to costs, or the views of a quantity surveyor, he said he thought he would be able to carry out a renovation project that would provide shops on the ground floor with residential units above.   He then spoke to Mr Walker, the conservation officer at the council, who advised him that it was now too late to buy the properties, and that he should buy 6 Market Place instead.   Undeterred, Mr Batten said he went to the council offices and inspected all the files, which included the reports of Mrs Anderson, and the costings that had been provided for the Lincolnshire Heritage scheme. He said that he was of the opinion that he could undertake the scheme that had been drawn up for about £250,000 - £300,000, very much less than the quotes that had been received by the council.    This was because, apart from some aspects such as the provision of a chemical damp proof course, he would be able to undertake all the work “in house”.   He had his own specialist joinery department, and access to all the trades that would be required.   
21.	Mr Batten said that he calculated that he could afford, and was prepared to pay, up to £150,000 for the properties but made a much lower offer to Mr Taylor.  A price of £80,000 was agreed and confirmed in Mr Taylor’s letter to him of 4 October 2004.  However, on approaching the council, he was advised of the General Vesting Declaration and that, as a result, he could not purchase the properties from the claimants.  He said that he then made attempts to buy the property from the council and was able to provide evidence that he had the financial wherewithal to undertake the project, which was intended to be a long term investment for his pension fund, rather than a speculative renovation and sell on.     The council said that it was obligated to proceed with the CPO and the project that had been priced and tendered for, and was legally obliged to transfer the properties to Heritage Lincolnshire as soon as the premises were vested in the council on 5 November 2004.
22.	Asked why he had not made earlier attempts to acquire the properties, which had been on the market since 2000, Mr Batten said that he had not been actively in the market at that time.   It was only when his first completed renovation project was sold that he started looking for other prospects.  As to his expressed confidence in being able to carry out the project as designed by the council and Heritage Lincolnshire for substantially less than all of the tenders that had been received, he said that he did not need to take professional advice, being quite capable of costing the project himself.   Everything he needed to know was in the council’s planning files which he said he had inspected thoroughly.  He also thought he might be able to “swing” residential use on the upper floors due to the presumption in the development plan policy regarding residential use on upper floors in town centres. He said that when he wrote to the council on 12 October 2004, he explained that he thought he could do the works for £300,000 and that there was no need for the council to waste £600,000 or more of public money proceeding in the way that it planned.   However, that was all to no avail.
23.	Although he accepted that he might not get all of his money back immediately his proposed refurbishment was finished, Mr Batten said that he was “in it for the long term”.
24.	Mr Curtis is a chartered surveyor with 22 years experience in the valuation of residential and commercial property throughout Lincolnshire and North Nottinghamshire.   Although regularly involved with the valuation of listed buildings, he said he had no previous experience in compulsory purchase matters.   He produced a report and supplemental statement in which he described the subject premises and commented upon their condition at the valuation date.  In assessing value, he said he had not specifically considered any particular potential scheme of refurbishment (including the Heritage Lincolnshire proposals), and had not undertaken any exercise to calculate the likely costs of refurbishment, but had relied solely upon the sale of the local properties he considered comparable.   He had analysed those sales on a price per square metre, and had made a “value judgment” as to an appropriate figure to apply to the subject premises. 
25.	Whilst acknowledging that the premises were vacant at the valuation date, he described them as being previously in commercial use on the ground floor, and residential to the upper floors.  Although he accepted in cross-examination that the properties had no residential planning history, and there were no kitchen and bathroom facilities to the upper floors, he said the general layout and décor suggested they had previously been used for residential purposes, and assumed residential consent would be forthcoming.  Despite not having referred to it in his reports, he said he relied upon local development plan policy 8H that there would be a presumption towards granting planning consent for residential on the upper floors, but had not specifically considered how many units could be provided or what accommodation they might contain.  He did not agree with Mr Swainson’s view that residential permission would not be forthcoming if applied for.   
26.	He had not, he said, relied upon any of the statutory planning assumptions set out in the compensation code and admitted that he did not recall the provisions of sections 14-16 of the Land Compensation Act 1961, but said he had assumed the planning situation at the valuation date to be in accordance with the 2003 scheme which Heritage Lincolnshire ultimately undertook.   He also said he had not taken section 49 of the Planning (Listed Buildings and Conservation Areas) Act 1990 into account in his valuation.   In addition to the likelihood of residential use on the upper floors, he said he thought there might be some prospects for further residential development at the rear, but had not added any particular value for that, reiterating that his figure was derived purely from an analysis of the comparable sales.  He was simply, he said, comparing similarly dilapidated buildings and adjusting for size and condition.   Although he commenced a development appraisal exercise, he said he abandoned that as there were so many different things that could be done with the properties, and an accurate appraisal would have been a massive undertaking. 
27.	Whilst accepting that Mrs Anderson’s report into the condition of the buildings was accurate, Mr Curtis said that large parts of the property were not in particularly bad repair and were in generally serviceable condition.  His valuation of £450 per sq m was the same for 7-9 and 11-13 Bridge Street despite it being acknowledged that 7-9 was in a significantly worse condition.  He said that with 7-9 being already stripped out, that would offer a cleaner refurbishment prospect, thus justifying the same overall figure.    
28.	Mr Curtis said that he considered 6 Market Place (virtually opposite the subject premises) to be the best of his 3 comparables.   He had been approached by the new owner immediately after it had been bought at auction in October 2004 for £72,000 (£522 per sq m) to advise upon what would be needed to put it in tenantable repair.    The property comprised a 3 storey Grade II listed corner property with 138 sq m net internal floor area comprising a shop unit on the ground floor and offices and living accommodation above, together with a 2 storey rear outrigger that had been seriously damaged by fire.  The building was suffering from structural instability and was, he thought, in a condition commensurate with the subject premises.  In cross-examination it was put to Mr Curtis that the works that had been required to stabilise the front and side walls of 6 Market Place due to the failure of a timber bressumer – installation of a Helibar box frame and tie bars – was significantly different to the underpinning and new roofs required at the subject properties, but he said that in his view there were “some similarities”.
29.	The second comparable, 10 West Street, Horncastle is a middle terrace Grade II listed 3 storey property of 107 sq m net internal comprising shop with living accommodation above.  It was sold for £44,000 on 13 August 2005 which represents £411 per sq m.   Mr Curtis said he undertook a structural survey for the purchaser and found the property to be in need of extensive repair.  It was also in a poorer location, a little way from the town centre although it is subject to the same planning and Conservation Area criteria.
30.	15 West Street Horncastle comprises an end-terrace two-storey building almost opposite No 10 and adjacent to an agricultural trader’s yard and workshops.   It consists of a shop with living accommodation over and extends to 52.8 sq m net internal.   It was in reasonable overall condition and free from apparent defects, but again was in a poorer location than the subject properties.  The price of £74,000 achieved in February 2005 analysed at £1,410 per sq m.   Mr Curtis said that with both of the first two comparables being in need of repair, their achieved prices ranged from £411 psm to £522, hence his mid-point figure of £450 per sq m for the claimants’ properties, which came to £158,000 – say £160,000.
31.	Mr Curtis acknowledged that the property had been on the market for about 4 years at just over half his valuation figure, but said that purchasers might have been put off by talking to the conservation officer, and, in any event, the marketing that was done ran out of steam towards the time of the CPO.   Accepting that a prospective purchaser would be expected to assess what redevelopment proposals were likely to cost, and would be unwilling to proceed if a loss could be anticipated, he said that he would expect the average speculator to be able to undertake a suitable and acceptable refurbishment project for very much less than the costs incurred by Heritage Lincolnshire.   There would be significant fees and other associated costs that could be saved, and the “over the top” specification that had been quoted against could be significantly pared back.    
32.	As to Mr Job’s valuations at £15,000 to £20,000, Mr Curtis said that they were prepared on the basis of the Heritage Lincolnshire scheme and its anticipated costs.  The cost of the works, estimated at c. £764,000, would have allowed for very significant margins, and Mr Curtis said he felt sure that speculators would have been much more flexible and would have been able to undertake an acceptable refurbishment for significantly less.    He did not agree with Mr Job’s estimate of the value when works were complete at £165,000 to £175,000 but acknowledged that that had been his former colleague’s view at the time (Mr Job also having been a partner in Walters, Lincoln).  He acknowledged that there was no evidence that Mr Job’s valuation of the completed project reflected the onerous planning conditions.  He did not accept that the highest offer that had been received for the properties once the works had been completed should act as a “reality check” for his valuation, or that the fact that that figure was only £90,000 more than his valuation of the premises in their then existing state most throw his valuation into serious doubt.  
Acquiring Authority’s case
33.	Mrs Anderson is a chartered architect with a Diploma in Conservation from the Architectural Association, and is a member of the Institute of Historic Building Conservation.  She specialises in design and contract administration for the renovation, repairs and alterations to historic buildings in conservation areas.   She is also on the advisory committee of the Heritage Trust of Lincolnshire, is consultant architect to Boston Borough Council and a member of the Lincoln Diocesan Advisory Committee on churches.    She has been involved with the subject premises from 1998 in connection with the urgent works and repairs notices, the preparation, in 2000, of the Feasibility Study to assess the potential for repair and conversion, the provision of a detailed scheme and specification of works, obtaining planning permission and Listed Building Consent, obtaining tenders and letting the contract, and acted as contract administrator for the scheme that was undertaken for Heritage Lincolnshire.   She was assisted by Philip Thompson FRICS of Thompsons Quantity Surveyors, Peterborough in respect of advice on costs, and a report from him was appended to her proof.   Further assistance in respect of the project was obtained from structural engineers and valuers.
34.	Mrs Anderson said that the buildings were in an extremely sorry state of repair, particularly in respect of Nos 7-9, and it was only when detailed investigations were carried out that the full extent of the structural instability and defects came to light, many of these resulting from its complex building history, the property having apparently been constructed in 6 different phases and with many other minor additions and alterations.  The long term lack of maintenance and repair had exacerbated the problems and there had also been inappropriate use of materials and finishes.  She said that the works that the council had undertaken in accordance with the Urgent Works Notices were limited to those sufficient to make the buildings weathertight and safe from structural collapse, and whilst they did slow down the deterioration, further degredation and decay occurred between 2000 and 2004, by which time the need for substantial repair was urgent.   
35.	As part of the exercise it was established that the most appropriate future use of the properties would be as offices with retail to the ground floor.  The possibility of some residential development at the rear was not considered economically viable.   An indicative schedule of the works that were found to be required, and that were eventually undertaken, was produced in her report (bundle D411).  Once the scheme got underway, work on the site was difficult and challenging and, she said, the project was one of the most difficult she had encountered.  New piled foundations were required along part of the front elevation of Nos 7-9, and sections of the wall had to be rebuilt as they were leaning badly and seriously unstable. Costs inevitably increased above the original estimates of c. £600,000 due to the ongoing problems that were found – for instance, extensive rot.   In her view the repairs that were undertaken, whilst being for a specific client who required particularly high standards, were not over elaborate and any buyer would have needed extremely deep pockets.  She said that she had undertaken a thorough and detailed analysis of the project that was eventually completed, and had come to the conclusion that he maximum amount that might have been saved by a less fastidious client would be no more than 16% of the overall project cost.
36.	In respect of Mr Curtis’s argument that 6 Market Place was in similar condition, and thus could be deemed a good comparable, Mrs Anderson said that whilst she had not inspected the Market Place property, the Helibar box-section strengthening solution that had been used there would have been wholly inappropriate for the subject properties.  Due to the instability of the front wall, the need for piling and the fact that Nos 7-9 had for many years had no roof covering whatsoever, meant that a much more radical, and expensive, solution was required.  In cross-examination Mrs Anderson accepted that she was not a valuer, and that in that respect the council had relied upon Mr Job’s input.  However, she said, she was quite capable of adding up and although she anticipated that an “ordinary” purchaser may have been able to make some costs saving on the renovation works, the overall project was a major exercise that would have needed very substantial funds.  She acknowledged that the cost of £45,000 for providing toilet facilities at the rear was one area where a private investor might have been able to make savings.   That single storey extension had been provided with a lead covered flat roof which added significantly to the cost.  Mrs Anderson said that she was unable to comment upon Mr Batten’s alleged ability to do the works.  
37.	Mr Swainson is a Chartered Surveyor with over 35 years experience in the valuation of commercial and agricultural property, and has been based at the Lincoln office of the Valuation Office Agency since 1984.   He said he first became involved with the subject properties in September 2001 when he was asked to provide valuation advice to the council in respect of their proposed acquisition.  At that time he considered the value to be £15,000 to £20,000 but emphasised in his initial report the difficulties he had encountered in reaching an opinion due to the nature and condition of the properties.   That valuation has subsequently been increased to £32,500 to reflect the fact that planning consent was obtained for the scheme which was ultimately carried out, and the later valuation date of 5 November 2004.   
38.	In his view, the use for which planning permission was granted was the most appropriate for the premises, and he stressed that, despite planning consent having been obtained many years earlier for part residential content, the nature and layout of the accommodation was not conducive to residential use.  Although he had not considered Local Plan policy 8H that assumed residential permission would be granted on town centre properties, he said that would make no difference to his views and that he was adamant that these particular buildings were not suitable for that use.   Any such conversion of the upper storeys would create access problems, would reduce the ground floor area available for retail occupation, and would compromise the historic detail of the buildings, even though he acknowledged in cross-examination that the upper floors could well have had residential use many years ago.   He accepted that planning permission for residential use had been obtained upon the rear offshoot of 6 Market Place (Mr Curtis’s principal comparable), but said that he had had to take a view as to the appropriateness of such use at the subject premises.  He also acknowledged that none of the grounds of refusal in the earlier applications on the subject properties were specifically related to the proposed residential content.  
39.	In forming his opinion, Mr Swainson said he was aware of Mr Job’s valuation for Heritage Lincolnshire in 2000 of £5,000 to £10,000, that having been increased to £15,000 in 2003.   His own valuation had not had regard to any comparable evidence as he was aware that the projected cost of undertaking the necessary renovation and refurbishment works far exceeded any development value that the buildings may have had in the open market, and resulted in a large negative sum.  However, he was of the view that any real estate must have some value, and his assessment at £32,500 was a purely arbitrary spot figure that he thought an investor might pay to add it to his portfolio. He said that the “sort of” residual approach he had used to arrive at his valuation was the only appropriate method as there were, in his view, no comparable transactions that could have assisted him in arriving at a figure by the conventional approach.  He could not recall whether he had specifically approached local estate agents for comparable evidence, but insisted that in these circumstances, the comparables method was not appropriate.  
40.	Mr Swainson did not agree with the suggestion that 6 Market Place was comparable as the building was not in his opinion in anything like as bad condition. Although he accepted that the rear offshoot had been extensively damaged by fire, and Mr Curtis’s recently taken photographs indicated there was quite significant structural movement (evidenced particularly by gaps between the main staircase and adjacent walls), he said that the structural stability problems had been overcome by the installation of a Helibar box frame that had cost only £6,000.  The total amount spent by the new purchaser amounted to no more than £25,000 although it was clear that the property was still in fairly poor condition, and it had certainly not been renovated to anything like the standard of the subject premises.  
41.	As to Mr Batten’s offer of £80,000 just before the property was acquired by the council, Mr Swainson said he was suspicious of it as it was received only a matter of days before the GVD was due to take effect.  He was aware of the acquiring authority’s statutory obligation to prevent further deterioration of the buildings, and the fact that the CPO had been confirmed and that Heritage Lincolnshire had the funding in place.  Although he was not aware of whether or not Mr Batten had commissioned a condition survey on the premises (such action being, in his view, essential bearing in mind the dilapidated state of the property), and what type of building work he specialised in, Mr Swainson said that the council chose to stick with the sale to Heritage Lincolnshire as their proposals guaranteed the preservation of the buildings, and Mr Batten could, of course, have withdrawn his offer at any time.   He did not think that the offer provided a “reality check”, and could not see how even a speculative conversion, bearing in mind the listed status, could have produced a return at such a high purchase price.  In the light of the offers received for the property following completion of the refurbishment scheme (the highest being £250,000) and even allowing for an additional 20% to reflect the conditions imposed, it was difficult to see how he could justify his offer, let alone his preparedness to pay, as he had said, £150,000. 
42.	It was accepted that the onward sale of the claimants’ properties following Lincolnshire Heritage’s refurbishment was not an open market transaction as such, and the price of £212,000 that was accepted reflected some onerous conditions.   In his view, the true open market value of the fully refurbished premises in May 2006 was in the region of £300,000 – that equating to £225,000 at the valuation date.   Bearing in mind the cost of the renovation was well over £1 million, even allowing for a speculative refurbishment coming in at somewhat less, this indicated, in his view, that there was no prospect of a profitable development being undertaken – hence the property having only a nominal value.   Mr Swainson said that three Lands Tribunal decisions supported his approach: Taylor v Cheltenham Borough Council [1978] 246 EG 923, Hale v County Borough of Blaenau Gwent (1999) LT ref ACQ/25/1999 (Unreported) and Bellamy & Bellamy v Great Yarmouth Borough Council [1996] RVR 41.  In each of these cases restoration costs exceeded development value, but it was determined that some value would apply as there would always be a speculator in the market prepared to pay something for the property.         
43.	In respect of Mr Curtis’s comparables, Mr Swainson said that none of them had been subject to Urgent Works or Repairs Notices under the 1990 Act, and as far as 6 Market Place was concerned, although the rear outshoot was on the council’s “at risk” register, the building was altogether grander than the subject properties and was in a better location, facing directly onto the Market Place.   He did not think that 10 and 15 West Street were of any assistance, as the huge disparity between achieved prices broken down into a figure per square metre demonstrated.   Neither was in remotely similar condition to the subject premises.  In his view, the fact that the premises had been marketed at an asking price of some £82,500 for approaching 4 years with no offers received indicated that Mr Curtis’s valuation, at almost double that, was wildly optimistic, and was proof, if proof were needed, that the properties had no more than a nominal value.  
Submissions
44.	In his skeleton argument, Mr Pennock said that the acquiring authority had failed to take account of the fact that, under section 49 of the 1990 Act, any previous requirement for listed building consent would no longer be applicable following the CPO.   In simple terms, therefore, the valuation should be calculated on the basis that no such consent was required.   A potential purchaser would therefore conclude that there was nothing in principle to prevent him from demolishing the existing buildings and undertaking a development that avoided any expensive and onerous conservation requirements. In other words, that purchaser could in the circumstances consider the property to be valuable development land that he could redevelop subject, of course, to what planning consent may be forthcoming in that location.  The acquiring authority’s arbitrary figure therefore, arrived at as it was on the basis of there being no development value, was implausible and ludicrous.   The authority’s valuation basis was, he said, wholly inappropriate.  The fact was that there were comparables available, and whilst it had to be accepted that not all of them were necessarily on all-fours with the subject premises, the comparables basis was to be preferred.   There was also Mr Batten’s offer, made on a speculative basis, and there was no better evidence of open market value than that offer.  
45.	The acquiring authority pointed out that, in the claimants’ statement of case, it was wrongly stated that the assumption under section 49 was that it related to planning permission, which of course it did not.  The purpose of the provision is to allow the impact of the requirement for listed building consent for extensions and alterations to be put to one side in compensating the owner for the taking of his property.  It does not seek to alter the general implications of the need for planning permission to carry out the development and does not assume listed building consent would be granted for other schemes of alteration that include partial demolition.   It is necessary, Mr Williams submitted, to take into account the planning permission which was extant at the valuation date, when considering the open market value of the land (section 14(2) LCA 1961), and that was indeed the scheme that was subsequently undertaken.        

Conclusions
46.	Compensation must be assessed in accordance with the assumptions contained in the Land Compensation Act 1961.  In this regard, it is important that practitioners and their advisors adopt a methodical approach, introducing appropriate evidence to cover those assumptions and provisions, and applying them to the facts of the case.   Under section 5 it is to be assumed that the value of the land is its open market value (rule (2)) on the basis of the planning assumptions set out in sections 14–16.   Planning permission (for the scheme of development that was eventually undertaken) was in place at the valuation date, and is therefore, to be taken into account under section 14(2).   The hope of alternative planning permissions is taken into account under section 14(3).    Mr Curtis’s assumption (not specifically recorded in his report or the subject of any evidence, but referred to orally), was that the subject premises had potential for part residential use. Mr Swainson thought that there were no such alternative opportunities (which might have provided a higher value) despite the planning policies that were in force, and gave cogent reasons for that opinion, which I accept.  There was no contention on the part of the claimants that any other permission should be assumed under section 16.            
47.	Section 49 of the 1990 Act provides for further assumptions to be made:
“49 Subject to section 50 [which relates to minimum compensation for buildings deliberately left derelict], for the purpose of assessing compensation in respect of any compulsory acquisition of land including a building which immediately before the date of the compulsory purchase order was listed, it shall be assumed that listed building consent would be granted for any works 
	(a)	for the alteration or extension of the building; or
	(b)	for the demolition of the building for the purposes of development of any class specified in Schedule 3 to the principal Act (development not constituting new development).”
Thus, the fact that the building is listed does not restrict its potential for alteration, extension or redevelopment for Schedule 3 development.  
48.	It is against the background of these statutory provisions that the property is to be valued, and that is the approach that was adopted by Mr Swainson.  
49.	No evidence of alternative schemes, and the development potential they may have had, was introduced either by Mr Curtis or by Mr Batten except in the vaguest possible terms, and Mr Curtis said that he had given up on compiling any form of development appraisal as it would have been a “mammouth” exercise.  Mr Swainson did undertake a form of development appraisal based upon the known costs and in line with the planning permission that was received.  This produced a substantial negative figure, and even if it were accepted that a speculative development could have been carried out for less than the Heritage scheme, it would still, in his view, have been uneconomic.  He assessed the open market value at 20% more than the best offer that had been received following the very high quality refurbishment that had been undertaken to reflect the onerous conditions attached.   At £300,000 fully refurbished, even if the scheme could have been undertaken for that figure in accordance with Mr Batten’s views, there would still be a negative value once profit and risk had been taken into account.  
50.	As no scheme of development on the basis of the statutory planning assumptions has been shown to be profitable, the only possible basis of valuation is what a speculator might pay.
51.	Mr Batten’s evidence that he would have been prepared to pay £150,000 but “did a deal” with Mr Taylor at £80,000 a matter of days before the GVD was made, I find to be unconvincing.  He admitted that he had not undertaken any costing exercise, but from his inspection of the buildings and perusal of the documentation held by the local planning authority, he thought he could carry out the Lincolnshire Heritage (rather than a purely speculative) scheme for “about £300,000”.   This was less than half the cheapest quote that had been received based upon the full specification that had been prepared by Mrs Anderson.  In answer to a question from me, Mr Batten said that he could do it much more cheaply because he would be predominantly using his own workforce, and little would be subcontracted.   I fail to understand how that could possibly lead to such a difference, especially as it must be the case that at least some of the firms that did formally quote for the project would also have their own in-house teams.  I am not persuaded that Mr Batten’s offer for the property provides support for a valuation in that sum, let alone the considerably higher value argued for by Mr Curtis.
52.	Mr Curtis appears not to have adequately reflected the obviously parlous condition of the subject premises in his valuation.  He admitted that he had not considered the likely repair costs other than concluding that the money that was actually spent on the refurbishment was very much more than a speculative purchaser would have needed, or have been prepared to spend.  He said he thought the buildings were not as bad as had been made out, although Mrs Anderson’s report and the considerable detail included within it and which I found clear, helpful and well prepared, were accepted.   He simply looked at three properties that had sold in the vicinity and carried out a “valuation judgment” based upon an analysis of the two most comparable units on a price per square metre.   
53.	In his view, 6 Market Place had been comparable in terms of condition, but it is obvious to me that it was not.  Apart from the fire damaged rear outrigger (that had potential for residential conversion and has recently been sold on for that purpose), and whilst there is undoubtedly considerable scope for further improvement and repair, as evidenced by Mr Curtis’s comprehensive portfolio of photographs, the fact remains that the premises were made suitable for occupation upon the expenditure of only £25,000 which included the £6,000 spent on strengthening works.  On the basis of the exercise that Mr Curtis carried out I found his evidence unconvincing.   Furthermore, his “valuation judgment” does not seem to have taken account of the fact that the subject property languished on the market for 4 years at an asking price that was just over half his valuation figure, and that no interest had been engendered.   
54.	Mr Swainson referred to three previous Lands Tribunal decisions where similar circumstances had arisen, and concluded that a speculator would have still paid something for the site despite its problems and limited commercial opportunities.   I agree that this would be the case, and find his evidence persuasive.  I was also greatly assisted, as I have said, by Mrs Anderson’s comprehensive report from which it was clear that the buildings were in an exceptionally poor state of repair at the valuation date.   I am satisfied that Mr Swainson’s arbitrary figure is reasonable in all the circumstances in the absence of persuasive evidence to the contrary.
55.	I therefore determine compensation for the compulsory acquisition of 7-9 and 11-13 Bridge Street, Horncastle, Lincs in the sum of £32,500.   This decision will become final when the question of costs is determined, and not before.  The accompanying letter sets out the procedure for making costs submissions in writing.
			DATED 28 October 2010

			P R Francis FRICS