UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2013] UKUT 0632 (LC)
UTLC Case Numbers: ACQ/76 and 77/2013

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – two maisonettes on former Ministry of Defence residential estate compulsorily acquired for regeneration purposes – value of long leasehold interests -  comparables – weight to be attached to settlement evidence – value of claimants’ interests determined at £34,000 and £31,750 – disturbance – surveyor’s fees

	IN THE MATTER OF TWO NOTICES OF REFERENCE

BETWEEN	
                                                      (1) JULIE MAY	                  Claimants
	     (2) QUANG THINH TRUONG

	and

	GOSPORT BOROUGH COUNCIL	Acquiring 		Authority

Re: 51 and 52 Livingstone Court
	Nimrod Drive
	Rowner
	Gosport
	PO13 8AQ

Determination on basis of written representations
by N J Rose FRICS
	 
© CROWN COPYRIGHT 2013

The following case is referred to in this decision:

Farr v Millersons Investments Ltd (1971) 22 P&CR 1061

The following case was also cited:

Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendant of Crown Lands  (1947) 
AC 565

DECISION
Introduction
1.	These are two conjoined references to determine the compensation payable by Gosport Borough Council, the acquiring authority, for the long leasehold interests in two maisonettes known as 51 and 52 Livingstone Court, Nimrod Drive, Rowner, Gosport PO13 8AQ.  The reference properties will be referred to in this decision as No.51 and No.52 respectively.  They were compulsorily acquired under The Gosport Borough Council (Howe Road, Nimrod Drive, Rowner) Compulsory Purchase Order 2010 (the CPO), which was made in September 2010 and confirmed by the Secretary of State on 28 July 2011.  Following a General Vesting Declaration the reference properties vested in the acquiring authority on 25 November 2011, which is the valuation date.
2.	The claimants are Mrs Julie May (No.51) and Mr Quang Thinh Truong (No.52).  They are two of a number of residential leaseholders of properties in a complex known as the Rowner Precinct on the Rowner Estate who have been unable to reach agreement on the level of compensation payable for their interests.  It has been agreed that these two cases should be referred to the Tribunal for determination in the hope that the resultant decisions will assist in concluding negotiations on the remaining cases which are outstanding.  It has also been agreed that the references will be determined without an oral hearing.
3.	I have received written submissions from Mr Gary Wood MRICS of Woods Surveyors Ltd on behalf of Mrs May, Mr Clive Rutland FRICS, MAE on behalf of Mr Truong and Mr John Sayer MRICS of CBRE Ltd on behalf of the acquiring authority.  Mr Wood valued the leasehold interest in No.51 at £48,750.  In addition, if the amount of compensation determined for the leasehold interest was less than the outstanding mortgage (approximately £41,610), he claimed the difference by way of disturbance compensation.  Mr Rutland’s valuation of No.52 was £50,000 and he contended for disturbance compensation totalling £8,215.92 and surveyor’s fees of £14,000.
4.	In Mr Sayer’s opinion the value of No.51 was £30,000, to which should be added the following agreed disturbance items: £658 for loss of rent, mortgage interest payments of £152.64 and surveyor’s fees based on twice Ryde’s scale.  The only disputed disturbance claim related to a  possible ongoing mortgage liability.  The principle of a basic loss payment was agreed.  As for No.52, Mr Sayer’s leasehold valuation was £28,000.  He assessed disturbance compensation at £3,038.61 plus surveyor’s fees of £3,262.50. A home loss payment of £4,700 was agreed.
5.	I did not consider that I would be assisted by a site visit, given the demolition of the estate which has occurred since the valuation date.

Facts
6.	In the light of an agreed statement of facts and the evidence I find the following facts.
7.	The Rowner Estate was built by the Ministry of Defence in the 1960s to provide accommodation for naval personnel and their families.  The high rise Rowner Precinct contained 301 maisonettes and flats.
8.	During the 1980s the estate was sold.  Some of the low rise residential properties were purchased by registered social landlords.  The high rise area, which included the subject properties, was sold to a private company who offered the individual properties for sale on 125 year leases.  These interests were purchased by a mix of owner occupiers and buy to let landlords.
9.	Rowner Precinct suffered from a lack of financial investment which resulted in the fabric of the buildings deteriorating.  The complex experienced crime, vandalism and antisocial behaviour. The Rowner Renewal project was conceived in order to regenerate the area.  It involved the demolition of the high rise Precinct and its replacement by a mixed use scheme.  
10.	The creation of the Rowner Renewal Partnership (the Partnership) to carry the regeneration plan into effect was formally agreed on 20 March 2007.  The Partnership comprised the acquiring authority, First Wessex Housing Association (First Wessex), Hampshire County Council, the Homes and Communities Agency and Taylor Wimpey UK Ltd.  It launched the Rowner Renewal Project in October 2007.  It comprised the redevelopment of the Precinct and the area of housing south of the Precinct adjoining Grange Road.  The proposal included new housing, retail and community facilities.  Many of the properties were acquired by agreement in the period 2007 to 2010.  The CPO was promoted in order to ensure that all the necessary land and property interests were secured.
11.	There were three types of property within the Precinct.  No.51 was a 3 bedroom type on two floors.  The total floor area was approximately 102m2. The main access was from a fourth floor walkway.  There were two bedrooms and a bathroom on the fourth floor.  The third floor was accessed via stairs and contained the kitchen, a third bedroom and the living/dining area.  Externally there was a balcony and store room.
12.	The property was held on a 125 year lease with approximately 101 years unexpired.  Mrs May purchased it in 1986 for £42,000 for owner occupation.  As her family circumstances changed the property was sub-let on an assured shorthold tenancy.  It remained tenanted until October 2011.
13.	No.52 was a 2 bedroom type with accommodation on two floors.  The total floor area was approximately 75m2.  The living/dining area, kitchen, bathroom and both bedrooms were located on the fifth floor and the main access doors, meter cupboard and external store were located on the fourth.  Access to the main living area was via stairs from the entrance hall.
14.	The property was owner occupied and held on a 125 year lease with approximately 101 years unexpired.
Valuation Evidence of Mr Wood
15.	Mr Wood said that, in Autumn 2007, First Wessex was appointed to be the nominated purchaser for properties within the regeneration scheme.  First Wessex in turn appointed Vail Williams as its valuation advisers.
16.	In late 2007 First Wessex offered to purchase No.51 for £29,000, based on a valuation from Vail Williams.  Mr Wood was instructed to advise Mrs May on 5 July 2008.  He approached Vail Williams with a view to securing a higher price, as part of a negotiation including neighbouring properties.
17.	Mr Wood said that he was unable to make any significant progress in the negotiations.  Vail Williams made it clear that they had arrived at their opinion of value and were not interested in agreeing a higher figure.  Comparable evidence provided to them was dismissed.  Vail Williams’ valuer explained that he had set a tariff and that was the price his client was prepared to pay. Only marginal uplifts of £500 or £1,000 would be agreed to achieve a settlement.  Mrs May was not prepared to accept this offer and the property remained in her ownership and tenanted.
18.	On 8 November 2011 Mr Wood received a revised verbal offer from Vail Williams of £34,000, which was also rejected.  On 17 February 2012 CBRE – who had by then been appointed by the acquiring authority - advised Mr Wood that they had valued the property at £29,000 with a view to making an advance payment of 90%.  Mrs May rejected this valuation, but accepted the 90% advance payment.
19.	Mr Wood said that in their discussions CBRE had used evidence of prices paid for properties acquired within the CPO area.  In his opinion this was not market evidence.  He referred to the following definition of market value by the RICS:
“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller is an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
20.	In the case of properties purchased within the scheme there had been no marketing and no opportunity for meaningful negotiations.  The sellers were compelled to sell to Rowner Regeneration or not at all.  Sales were not market transactions as there was no market.
21.	Mr Wood said that he had acted for a number of flat owners.  None of them was happy with the price offered.  Sales were agreed for one of three reasons.  First, for investor owners, when a tenant vacated it was difficult to attract a new tenant, given the known compulsory purchase and forthcoming demolition of the properties.  The investor therefore had an empty property attracting no income with an obligation to pay high service charges.  Such an investor took a commercial decision to take what was on offer and move on.
22.	Secondly, for owner occupiers the environment of the estate gradually declined.  Phase 1 of the development, two storey houses, was boarded up and being demolished and an increasing number of flats were being purchased and boarded up.  Social unrest and vandalism were increasing.  Owners found the environment unacceptable and felt forced to sell up and move elsewhere.
23.	Thirdly, owner occupiers who needed to relocate for personal reasons had no option but to accept the price offered.
24.	Mr Wood said that the estate at Rowner comprised two forms of construction.  One, which included No.51, consisted of Jesperson large concrete panels.  The other was the Wimpey Nofines.  The latter was more valuable and he therefore disregarded prices paid for such properties as comparable evidence.  The best comparables were flats constructed of Jesperson large concrete panels, on the Rowner Estate but outside the CPO area.
25.	Mr Wood said that he had worked in the Gosport area since the Rowner properties were first sold to private owners.  From the early days he considered that the market for such properties had been divided into the following distinct sections:
Group 1: Properties of Wimpy Nofines construction.  These properties were mortgageable under normal terms and were considered to be the most desirable and most valuable.
Group 2: Properties in the separate self contained four storey walk up blocks in Mantle Close, Williams Close, Cornwell Close and Magennis Close.  These flats were of Jesperson large panel concrete construction but in small defined blocks amongst two storey housing.
Group 3: Low rise flats in Rowner Village.  They were known as Livingstone Court, Raleigh Walk and Darwin Way.  Although within the most densely developed part of Rowner they were low rise and more popular than Group 4.
Group 4: Properties in the high rise part of Rowner village, being Hilary Court and Lawrence Walk.  The most densely developed part of Rowner.
26.	Nos. 51 and 52 fell within Group 3.  Mr Wood said that he had divided his comparable evidence into groups 2, 3 and 4 and omitted group 1.
27.	He had based his analysis on evidence of sales in 2007.  That was the last year when sales had taken place without formal knowledge of the regeneration scheme and the proposed CPO.  Although some prices might have been tainted by rumours of forthcoming regeneration this could equally be claimed for sales at any time after about 2003.  At some point a line must be drawn.
28.	Mr Wood said that he had not made adjustments to the 2007 sale prices to reflect differences between properties, because the amount of information available about the individual properties was insufficient.  Nevertheless, given the number of transactions in the various areas he thought there was sufficient data for any adjustment factors to balance themselves out, leaving the raw data as a fair reflection of the market.
29.	He had taken comparable evidence from sales in Group 2 in 2011 and analysed this as either two bedroom properties, three bedroom properties or combined two and three bedroom properties.  He assessed the raw data and applied adjustment factors to reflect the relative merits compared to No.51.  In Mr Wood’s opinion there were two relevant factors to take into account when adjusting the raw data.  Firstly, a ground floor property with private garden was worth more than properties on upper floors.  Secondly, the condition of a property was significant.  He bore in mind that those properties were at the lowest end of the property market.  He therefore used Gosport/Rowner construction prices and specifications to estimate building costs, not standard text book costs.  He then applied a location adjustment between Group 2 and Group 3 properties, which he had derived from the 2007 comparable evidence, to arrive at a value for combined 2 and 3 bedroom flats in Group 3 of £42,065.  Mr Wood said that the evidence showed that the value of 3 bedroom flats was 9.2% higher than the combined values of 2 and 3 bedroom flats.  This exercise therefore suggested that the value of 3 bedroom flats in Group 3, in the same condition as No.51, was £45,934.
30.	Mr Wood produced a letter dated 19 July 2013 from David Seymours, independent letting and estate agents in Gosport.  The letter was headed “Lawrence Walk/Livingstone Court” and read:
“Following our recent telephone conversation, we confirm that we have been involved with these married quarters almost from [the time] that they were sold off by the MOD to individuals.  During that time our office dealt with the letting and selling of these two bedroom flats and three bedroom maisonettes.
When they were purchased by owners they were in the original MOD condition and specification.  We have been involved in the refurbishing and modernisation, which could involve new UPVC double glazed windows and doors, new kitchens and bathrooms plus re-wiring, replacing hot water tanks and redecoration throughout, including replacing doors and laying new carpets and lino.  These costs could range from between £10,000 and £15,000.  
A lower speck (sic) would be used in these flats compared with more expensive properties.”
31.	Since No.51 was in “good basic condition” Mr Wood considered it appropriate to make an allowance only for the cost of uPVC windows and minor decoration.  The condition of the remaining elements of the property would have been considered to be good by Rowner standards and did not justify a further adjustment.  There had been the minimum expenditure on maintenance after 2007, when it became known that the property would be demolished.  Any deterioration between 2007 and 2011 should be ignored, as it resulted from the scheme.  Even in 2011 the property had basic modern fittings, and respectable carpets and decoration.  Assuming it was cleaned and tidied up, and with four years less wear and tear, it would be in good condition.
32.	In Mr Wood’s view, the estimated refurbishment costs of £13,677 which CBRE had produced were unrealistic.  They included a 10% contract administration fee, which was inappropriate for a single owner occupied or buy to let residential property.  His own enquiries indicated that a complete refurbishment, including all the CBRE items plus a new kitchen, new bathroom and new uPVC windows, could be provided at a cost similar to CBRE’s total figure.
33.	Mr Wood also rejected CBRE’s individual cost figures for the following reasons.  If the decorations were assumed to be four years newer the décor would be entirely acceptable.  The suggested cost was unrealistic in an area where jobbing builders would be happy to work for £100 per day.  It was not appropriate to allow for cleaning and clearing out costs.  Since the property was to be demolished it would not be reasonable to clean the kitchen and bathroom, nor were the items remaining in the flat such as to justify their removal prior to demolition.  The market value claimed for the property did not include a figure for floor coverings, and the cost of removing such coverings would be a valid disturbance item.
34.	Mr Wood also relied in support of his valuation on the purchase in 2008 of a portfolio of 27 properties from companies owned by a Ms Veal.  The offer to purchase was made by Taylor Wimpey, a member of the Partnership, and the transaction was subsequently completed by First Wessex.  Although the properties were all within the CPO area and the sale took place after the CPO had been announced, Mr Wood considered that the sale price provided untainted evidence of value.
35.	Mr Wood’s analysis of the sale price for the Veal portfolio was as follows:
10 properties in Group 3, comprising mix of 2 and 3 beds @ £50,200         -      £  502,000
17 properties in Group 4, comprising mix of 2 and 3 beds @ £48,700         -      £  827,900
										   £1,329,900
									         say £1,330,000
Deduct £3,000 per property to reflect very good condition of portfolio.
Value of combined 2 and 3 bed flats in Group 3 = £50,200 - £3,000 = £47,200
Value of 3 bed flats in 2011 was 9.2% above value of combined 2 and 3 bed flats
Portfolio evidence therefore suggests 3 bed flats worth £47,200 + 9.2% = £51,542
36.	Thus, Mr Wood’s analysis of the comparable evidence produced values of £45,934, derived from the 2007 evidence outside the CPO area, and £51,542, based on the 2008 Veal portfolio within it.  He suggested that the value of No.51 was in the middle of this range, namely £48,738, which he rounded up to £48,750.
Valuation Evidence of Mr Rutland
37.	Mr Rutland considered that the latest date by which the CPO scheme had commenced was 20 March 2007, when the decision was taken to form the Partnership.  Indeed, the regeneration of the area had been planned since 2004.  Any diminution in value within the area which was to be the subject of acquisition by any member of the Partnership resulting from the proposal to undertake the scheme must be ignored.  Thus, all purchases by First Wessex within the CPO area were unreliable as evidence of market value.
38.	In Mr Rutland’s opinion the most relevant streets in which comparables should be sought  outside the regeneration area were Williams Close, Cornwell Close, Samson Close, Mantle Close and  Carless Close.  The sale of properties in the last three roads between 1995 and 2011 provided the most useful information about the movement of property prices.   In that period prices rose from an average of £11,950 to £51,500, an increase of 231%.  Against the background, the offer of £30,000 made by Vail Williams for No.52 (and the acquiring authority’s latest figure of £28,000) were inexplicable.
39.	Mr Rutland considered that all properties within the CPO area since at least 2004 had been blighted.  Whilst mortgages were available for the purchase of these properties in the late 1990s by 2004, and certainly by 2007, mortgages were not available because of the scheme.  The lack of mortgage availability for properties on the estate should be ignored, since it was a consequence of the announcement of the scheme and not a feature of the market generally.  In the period just prior to the date of valuation mortgages were generally available for the purchase of buy to let properties not affected by compulsory purchase proposals.  Mr Rutland suggested that the valuer at Vail Williams who negotiated purchases of properties within the CPO area was not aware that the prices paid should disregard the effects of the scheme.  He also suggested that values in the Precinct had been depressed, in part, because there had been a lack of maintenance of the blocks due to their forthcoming demolition.  The period when this lack of maintenance occurred included the time when First Wessex owned the freehold interest.  (In his rebuttal report Mr Sayer said that First Wessex did not acquire the freehold until July 2010).
40.	In Mr Rutland’s view the comparison which should be made was with properties outside the scheme area, but with adjustments to reflect differences between locations and properties.  This could best be done by considering the extent to which property values had increased outside the scheme since 1995.
41.	Although house prices overall fell from 2007 levels and then increased relatively slowly from 2009 onwards, properties outside the regeneration area had increased significantly.
42.	On the state of repair of No.52, Mr Rutland considered that its redecoration would not have cost more than £2,000, based on £150 per day for 10 days and £500 for materials.  That figure should only be deducted if the level of market value was derived purely from property in good decorative condition.  Since that was not the case, no repairs allowance was justified.
43.	Although it was difficult to obtain ideal comparable evidence, the prices paid in 2011 for properties in Carless Close, Mantle Close and Samson Close suggested that the value of No.52 on the valuation date was £50,000.
Valuation Evidence of Mr Sayer
44.	Mr Sayer said that the poor social conditions in the Rowner Precinct almost created a “no-go” area for public services.  The area attracted media attention between 2003 and 2005.  It was the subject of a BBC Panorama programme.  On 23 October 2005 a programme titled “What Future for Kurt?” was broadcast.  It dealt with the challenges and disadvantages faced by children in the Precinct compared to a neighbouring, more affluent area.  The Precinct was nominated as one of the worst buildings in Britain in Channel Four’s “Demolition” programme shown in early 2006.  The poor conditions of the flats  in the Rowner Precinct were also reported on the BBC News website.  An article titled “Run Down Rowner” published on 21 April 2004 publicised the poor state of repair and social problems.
45.	Mr Sayer considered that the national media attention had had a negative effect on the image of the area.  Such attention reinforced the belief that the Precinct was a pocket of failed housing.  During the period of media attention and beyond there were a number of disputes between long leaseholders in the Precinct and the management company together with the freeholder.  Disputes relating to service charges were heard in the Leasehold Valuation Tribunal in 2002 and 2005 and on appeal to the Lands Tribunal in 2007.  In short, the disputes resulted from the failure of the freeholder to repair the building on one hand and many long leaseholders being unwilling to pay the service charge on the other.  A number of long leaseholders believed they were not being charged appropriately or receiving value, in the form of repairs and maintenance, for the amounts being demanded.  With what appeared to be a stalemate position between the parties over a prolonged period the Precinct’s state of repair continued to deteriorate.
46.	Mr Sayer produced a copy of a Leasehold Valuation Tribunal decision dated 25 November 2005.  It related to property that was later included within the CPO.  The Tribunal referred to a “history of litigation” that included a previous application to the Tribunal in 2002 and a number of actions in the County Court.  Given that such disputes had arisen over many years, the various parties being unable or unwilling to comply with their obligations, there appeared little prospect that the situation could be reasonably resolved.  The culmination of this was that the Precinct became a pocket of failed housing within the Rowner Estate.
47.	In Mr Sayer’s opinion the estate had reached, or at any rate it was towards the end of, its useful life.  Irrespective of the freeholder’s legal obligations, it was unlikely to make economic sense for it to undertake many of the necessary repairs.  This situation was compounded by long leaseholders withholding service charge payments.  The freeholder would have found itself in a situation where expenditure on the property would not provide a return on investment or be recovered from the long leaseholders.  Mr Sayer considered that, by the time the Partnership was formed in 2007, a distinction could be drawn between the quality of housing and the environment in the Precinct and that in the surrounding streets in the estate.  There were initiatives to improve the wider Rowner Estate.  A refurbishment programme was undertaken in respect of the Portsmouth Housing Association properties and the Nimrod Community Centre.  Despite the various initiatives the Rowner Precinct remained a great challenge,  The Rowner Partnership believed that demolition was appropriate for what many believed to be the most undesirable part of the estate.
48.	Mr Sayer produced copies of reports prepared by Mr Kevin Nunn BSc (Hons), MRICS,  of CBRE’s building consultancy team, who inspected Nos. 51 and 52 in early December 2011 to record the properties’ condition.  Mr Nunn estimated that the cost of repair and decoration works required to bring No.51 to a modern standard and reasonable decorative condition was £13,677 including VAT.  The necessary works included replacement of the floor covering, kitchen units and cooker and redecorating the walls.  The estimated figure included an allowance of 10% for contract administration.  In the case of No.52 Mr Nunn’s cost estimate was £10,810.67.  The general scope of the works was generally similar to that for No.51.  In Mr Sayer’s opinion these works would bring the interior of both maisonettes up to a similar standard to that of properties in nearby streets.  The prices paid for the leasehold interests in Nos. 51 and 52 would reflect the need to spend money on those premises.
49.	Mr Sayer produced a copy of a report produced by CBRE in October 2011.  It commented on the overall economy and the residential property market.  The general picture of the market was weak but stable, with average prices 0.3% less than a year earlier.  The report noted that the RICS had suggested that the outlook remained moribund with a decline in new buyer enquiries.  Whilst there were signs that credit availability was improving (albeit slowly), with 3,035 mortgage deals available in the UK, this remained significantly worse than in the summer of 2007, when more than 8,000 deals had been available.
50.	Mr Sayer said that, at the valuation date, there were and had been for a number of years downward pressures on the market on both a national and global basis.  At a more localised level Mr Sayer considered that the values of long leasehold interests in the Precinct were lower than those in surrounding streets.  In his view this was due to: the freeholder’s failure to repair the building; the resistance from a number of long leaseholders to paying service charges; the long term service charge disputes, with a history of litigation; negative reports in the media; and the dense population and layout of the Precinct allowing social problems to escalate.
51.	Mr Sayer said that he had placed the comparable transactions into two groups.  The first was from streets within the wider Rowner Estate, but which were not included in the scheme.  These were comparable in terms of internal layout, construction type, and age.  However, for the reasons identified in the previous paragraph, it was his opinion that in the surrounding streets the market operated more positively than in the Precinct.  He had been unable to identify comparable properties outside the CPO area that were disadvantaged by the same market failure experienced in the Precinct. In his opinion the combination of factors affecting value in the Precinct was relatively rare and there were no properties in a truly comparable market.
52.	The second group of properties was from within the Rowner Precinct itself, which had been acquired by First Wessex and then demolished for the scheme.  Mr Sayer produced details of the prices paid for 267 long leasehold interests which were acquired by agreement from 2007 onwards.  He considered that they provided important evidence by way of cross check, given that a number of factors affecting value and market failure in the Precinct were not present in the wider estate.  He said that, when seeking to acquire interests by agreement, First Wessex sought to follow the basis of the ‘Compensation Code’.  He produced a document entitled “Rowner Reassurance – The Partnership answers your questions”.  This document, signed by the project director, provided a response to questions raised by property owners affected by the scheme.  It outlined the scope of compensation to be paid to owners who transferred their interests to the Partnership by agreement.
53.	In Mr Sayer’s opinion the Partnership was offering to acquire properties on terms that reflected the compulsory purchase code and transactions were agreed on that basis.  There was one exception - a 2 bedroom property known as 26 Hilary Court.  This property was acquired at public auction on 20 February 2007.  The price paid was £20,000.
54.	Mr Sayer also referred to the acquisition of the Veal portfolio.  Terms for this transaction were negotiated between the owner and Taylor Wimpey UK Ltd.  A valuation was provided by Vail Williams on 7 August 2008.  It attributed a figure of £1,330,000 to the portfolio of 27 properties.  It stated that values in the area ranged from £20,000 to £50,000 and that the portfolio properties were at the upper end of quality and condition on the estate.  It was not possible to identify specific values for each property.
55.	Mr Sayer considered that the acquisition of such a major portfolio indicated a strong commitment to the project by the Partnership at an early stage.  Apart from providing a ceiling on value the transaction was of limited relevance when considering the values of individual properties.
56.	When a property owner indicated that he wished to discuss the possible sale of his property a valuation was undertaken by an external valuer.  It was identified in “Rowner Reassurance – The Partnership answers your questions” that the basis of valuation was the same whether the sale was by agreement or through the compulsory purchase process.  The valuation was undertaken and an offer to purchase was made.  The basis of a disturbance claim was agreed between the owner and First Wessex and was dictated by individual circumstances.
57.	Mr Sayer said that the subject properties were valued by the external valuer, Vail Williams, on 31 October 2007 to assist in possible acquisitions by agreement.  The valuations provided were £29,000 for No.51 and £28,000 for No.52.
58.	A total of 96 two bedroom properties were acquired by agreement in the Precinct between 2007 and 2011.  The prices paid ranged from £20,000 to £48,750.  In the same period 17 three bedroom properties were acquired by agreement in the Precinct.  The prices ranged from £30,000 to £45,000.
59.	Mr Sayer said that he had also researched transactions effected before 2007, when the Rowner Renewal Project was launched, within the CPO area and also in the surrounding streets identified as containing broadly similar properties.  In both areas he calculated the average value for each street in 1995/96, 2000/01 and 2005/06.  He excluded Magennis Close from this analysis, due to the paucity of transaction data.  Mr Sayer’s analysis showed that, on average, prices in 1995/96 were 18% higher in the Precinct than the nearby streets; in 2000/01 they were 15% lower; and in 2005/06 they were 26% lower.
60.	Mr Sayer concluded that relative values in the Precinct had declined between 1995 and 2006.  He believed the figures demonstrated the downward pressure that the lack of maintenance and anti-social behaviour over a number of years had exerted on values in the Precinct.
61.	Mr Sayer observed that the figures for 2005/06 pre-dated the Rowner Renewal project and thus took place in the no-scheme world.  At that time prices paid in the Precinct were 26% lower than in locations outside the scheme.  Given the condition of the Precinct, he considered that without the intervention of Rowner Renewal this difference in values would have been maintained and would probably have increased over time.
62.	In August 2012 Mr Sayer produced a report of his researches into all the transactions in Carless Close, Cornwell Close, Mantle Close, Williams Close and Samson Close in the 18 months prior to the valuation date.  He considered that the market had been relatively stagnant during that period.  By considering such a lengthy period he had increased the amount of data available and reduced the risk of anomalies that might arise if the evidence was restricted to a short period around the valuation date.
63.	Mr Sayer reached the following conclusions from this research project.  In contrast to Nos. 51 and 52, many properties had benefited from works to improve the external appearance of the buildings, typically external cladding and decoration.  Many were in good decorative order, with modern fixtures and fittings.  In contrast to the reference properties a number of the comparables benefited from external areas such as patios.  The areas on the Rowner Estate away from the Precinct generally contained a less densely populated development, creating a more desirable setting.
64.	The August 2012 report concluded that the average values of transactions in each street were: Samson Close £37,875; Cornwell Close £45,699; Carless Close £54,000; William Close £49,214, Mantle Close £41,620.
65.	In the eighteen months before the valuation date the average price paid in the neighbouring streets was £45,816.  On the conservative assumption that the price differential between two locations remained at 26% at the valuation date, as it had been in 2005/06, this placed the average value within the Precinct at around £33,900.
66.	The average price paid by First Wessex for individual properties in the Precinct was approximately £30,750.  The CBRE surveyor’s reports suggested that significant expenditure was required to both No.51 and 52 to bring them up to a modern standard.  The various properties outside the CPO area which were in good decorative order would be more valuable.  A purchaser of the subject properties would be likely to discount the prices offered when compared with those paid for properties in good repair.  A purchaser would also pay more for a property in one of the surrounding streets, to reflect the lack of maintenance to the external areas in the Precinct and its relatively high rise nature.  A purchaser would also discount the price to reflect the history of litigation, which was in the public domain, and the national media coverage of problems in the Precinct.
67.	If Nos. 51 and 52 had been in good repair, they would still have been worth about 26% less than comparable properties outside the CPO area.  The works of disrepair identified in the building surveyor’s reports would also have had an effect on value, although not to the full extent of the estimated costs, as some items might not be considered essential and others might be carried out more cheaply by the purchaser himself.
68.	Taking these various considerations into account Mr Sayer thought that the values of the leasehold interests in the subject properties were £30,000 (No.51) and £28,000 (No.52).
Valuation of Leasehold Interests - Conclusions
69.	Mr Sayer arrived at his valuations by deducting 26% from the prices paid for similar properties on the Rowner estate, but outside the CPO area.  He cross checked the resultant values by reference to settlement evidence within the CPO area.  He considered that approach to be correct because, he said, on the valuation date the market for properties within the CPO area had failed, unlike the market for properties in neighbouring streets.  Mr Sayer attributed the failed market to a combination of disrepair, ongoing service charge disputes and other litigation, social problems and adverse media publicity.
70.	Mr Wood replied that the comparables upon which he had relied were similar to those in the Precinct and that social problems were not restricted to the Precinct area.  He considered that the value differential was only 13%.  Mr Rutland suggested that some of the media reports were not objective, but designed to attract viewers.  Insofar as any problems did exist, he considered that they resulted from the scheme underlying the acquisition, namely the proposal to demolish and regenerate the area.  The problems should therefore be left out of account when assessing compensation.  He made no allowance for any difference in value inside and outside the CPO area.
71.	I prefer the evidence of Mr Sayer on this issue.  I find that the CPO was promoted because the Precinct was in a state of irreversible decline, which had resulted from the matters identified by Mr Sayer.  In my judgment, in the absence of compulsory purchase proposals, values of properties within the Precinct would have continued to decline in relation to properties elsewhere on the Rowner estate, which were physically comparable but did not suffer from the same difficulties.  I am satisfied that the state of disrepair to the structure and common parts of Livingstone Court, which existed at the valuation date, would have continued if there had been no proposals to demolish the area as part of a regeneration programme.  The valuation should therefore take such disrepair into account.  Moreover, the claimants chose not to incur the expenditure that was required to bring the interior of the reference properties up to a higher standard.  There is in my judgment no reason why compensation should be assessed on the assumption that such works had in fact been carried out.  Otherwise, the claimants would be compensated for more than the loss they have actually suffered.
72.	As I have said, in arriving at his valuations Mr Sayer assumed that, at the valuation date, values in the CPO area were on average 26% below those in the surrounding streets.  Mr Rutland did not consider that there was any difference in values between the two areas.  For the reasons I have given in the previous paragraph I reject Mr Rutland’s evidence.  In Mr Wood’s view there was a value differential but, based on sales evidence in 2007, it was only 13%.  Mr Sayer criticised Mr Wood’s approach on the grounds that he had not adjusted the 2007 prices to reflect factors such as condition and the presence of a garden.  That was inconsistent with the approach that had been adopted when analysing transactions in 2011.  Mr Sayer also suggested that the adjustments which Mr Wood did make were arbitrary.
73.	Mr Wood justified his decision not to adjust the 2007 prices on the grounds that, while there was insufficient data available on individual properties, the number of transactions was sufficient to ensure that any physical differences would cancel each other out.  He criticised Mr Sayer’s approach on the ground that no attempt had been made to differentiate between two and three bedroom properties.
74.	In my view there is force in both Mr Wood’s and Mr Sayer’s criticisms of the approach adopted by their opposite number.  They have both done their best to arrive at the relationship between values inside and outside the CPO area, but the amount of information available to them, in terms of the number of sales and the physical details of the properties, is insufficient for me to be able to reach a reliable conclusion on the issue.
75.	Having concluded that it is not possible to make reliable adjustments to sale prices outside the CPO area, I turn to the prices paid for individual properties within it.  When doing so, I consider it is helpful to recall the following observations made by the Lands Tribunal Member (Mr R C Walmsley FRICS) in Farr v Millersons Investment Ltd  (1971) 22 P & CR 1061:
“It is not unusual for valuation witnesses to rely on site values derived from settlements under the same provisions of the 1967 Act, in support of their opinion evidence of a particular section 15 site value for the subject house.  On this the tribunal had made clear that, before reliance can be so placed, such settlement evidence must be shown to provide solid support, and even then there may require to be brought into account what has been termed the Delaforce effect, namely a deduction on account of the neighbouring tenants’ deemed anxiety to settle, as explained in Delaforce v Evans.  Unless the settlement evidence is shown to provide solid support, the tribunal attaches little weight to it: for instance, if the tenants who settled had done so without professional advice, or despite such advice; or if there is no clear evidence as to the basis on which the settlements were negotiated; or if the valuer producing the settlement evidence was not personally concerned in the negotiations; or if there is market evidence which puts in doubt the site value contended for; then in any or all of these circumstances the evidence afforded by settlements is readily displaced by other evidence.”  
76.	Those remarks were made 42 years ago, in a reference to the Lands Tribunal under the Leasehold Reform Act 1967. but they remain applicable to any valuation dispute which is considered by the Lands Chamber.  In my judgment the settlement evidence which has been relied upon by Mr Sayer must be treated with caution.  Many of the vendors were not professionally represented; no evidence was given by the valuer or valuers at Vail Williams who negotiated the acquisitions; and there is no clear evidence as to the basis upon which that firm prepared its valuations.  Moreover, Mr Wood’s evidence to the effect that Vail Williams adopted an intransigent negotiating position was not challenged.
77.	The claimants’ valuers rely on the price paid for the Veal portfolio, consisting of 27 units within the CPO area.  That price was equivalent to £49,259 per unit.  It was based on a valuation report by Vail Williams dated 7 August 2008.  The report was addressed to the Portsmouth Housing Association, which later became First Wessex.  Mr Sayer did not consider this evidence was relevant, apart possibly from providing a ceiling figure for the valuation exercise.
78.	In my opinion there are two reasons why the price paid for the Veal portfolio does not provide a reliable guide to the value of individual properties elsewhere in the Precinct.  Firstly, Vail Williams’ report included the following paragraph:
“You will appreciate that the range of values on the estate varies from circa £20,000 for very poor condition two bedroom flats through to circa £50,000 for the best quality three bedroom maisonettes.  It would appear that the properties in the ownership of Suzanne Veal’s companies are very much at the upper end of quality and condition.”
79.	Of the total portfolio, six of the properties contained three bedrooms and the remaining 21 had two bedrooms.  Assuming the three bedroom units were each worth £50,000 as suggested by Vail Williams, the price paid for those with two bedrooms averaged £49,047.  Thus, the extra bedroom added only £953 or less than 2 per cent, to value.  That is a surprisingly small differential, equivalent to one tenth of the figure used by Mr Rutland himself in his devaluation of the portfolio price.
80.	The second – and even more powerful – reason for my conclusion that the price paid for the portfolio is not reliable evidence of individual values is the clear statement in the final paragraph of the valuation report that:
“For the avoidance of doubt, the valuation represents my opinion of the value of the portfolio and does not relate to individual properties.”
81.	In my judgment, the price paid for Ms Veal’s properties included a portfolio premium in addition to the aggregate value of the individual properties.  In the absence of any evidence as to the size of the premium, the price paid is of no assistance in these references.
82.	I have not found this an easy dispute to resolve because of the deficiencies in the evidence produced.  I have come to the conclusion, however, that – although it is very far from ideal – the least unreliable evidence is that provided by Vail Williams who, 17 days before the valuation date, increased their offer for No.51 from the figure of £29,000 made in 2007 to £34,000.  Although the revised offer was put forward orally, Mr Sayer did not deny that it was made.  Nor did he suggest that a transaction would not have been concluded at £34,000, had Mrs May been prepared to accept the increased offer.  I find that it is the best evidence available of the value of the leasehold interest in No.51.  It was 13.3% higher than Mr Sayer’s valuation.  I consider it appropriate to make a similar addition to his valuation of £28,000 for No.52, resulting in a value for that property of £31,724, say £31,750. 
Disturbance – Mrs May
83.	The element of disturbance compensation payable to Mrs May which remains in issue results from the fact that the figure which I have determined as being payable for her leasehold interest (£34,000) is less than her outstanding mortgage liability, which was £41,731.48 at the valuation date.  Mr Wood argued that, in the absence of the scheme underlying the acquisition, the mortgage would have been paid off when the property was eventually sold at a price which exceeded the outstanding debt.  The debt was not rising, as monthly mortgage payments were being made.  The rent receivable from the assured shorthold tenant produced a profit each month after the mortgage payment.
84.	Mr Sayer did not consider that any compensation was payable for this head of claim.  He said that No.51 was mortgaged to Barclays Bank Plc.  Having received the advance payment of compensation from the acquiring authority, Barclays transferred the outstanding balance to another property purchased by Mrs May and confirmed in writing that it had no further claim for compensation.  Mr Sayer said that a negative equity situation, where the outstanding loan exceeded a property’s value, could commonly arise as a result of market changes.  Such a position could be exacerbated when purchasers were able to borrow 100% of the property’s value, or even more.
85.	I am not persuaded that this item of claim has been made out.  No. 51 was purchased for £42,000 in 1986.  I have concluded that, by the valuation date, the property market in the Precinct was in irreversible decline and that the value of No.51 was significantly below the price which had been paid for it 25 years earlier.  In my judgment, in the absence of the CPO, the negative equity position which existed at the valuation date would not have disappeared as a result of rising property values; in fact the situation may well have deteriorated.
86.	The disturbance compensation payable to Mrs May is therefore limited to the agreed items totalling £810.64.
Disturbance – Mr Truong
87.	When No.52 vested in the acquiring authority, First Wessex granted Mr Truong a tenancy of one of its properties, a ground floor flat known as 12 Falmouth House, 19 Howe Road, Gosport, until a permanent replacement home could be purchased.  Mr Truong lived there for about twelve months.  In October 2012 he acquired the freehold interest in 72b Brockhurst Road, Gosport as the long term replacement for No.52.
88.	The claim for disturbance compensation is in two parts.  The first part relates to the move to 12 Falmouth House and the second to the permanent move to 72b Brockhurst Road.  There is no claim for removal costs, since both removals were undertaken by First Wessex.
89.	The total claimed in respect of the first move is £540.51.  Mr Sayer considered that the cost of Royal Mail redirection, relocation of cooker and broadband connections, totalling £213.12, should be paid in full but that no compensation should be paid for the remaining items claimed, namely a wardrobe, curtains, curtain fittings, a blind and a draining rack.
90.	Mr Rutland said that the window openings at the new property were different from those at No.52, necessitating the purchase of new curtains and blinds, which in turn would not be suitable for any permanent relocation property.  The wardrobe was required because there was insufficient room to hang clothes in the new property, whereas there had been a good supply of cupboards at No.52.  Since all these items were only required for a temporary period, Mr Truong did not receive value for money.
91.	Mr Sayer pointed out that the built-in wardrobe at No.52, which could not be removed, formed part of that property and its loss was compensated for as part of the value of the leasehold interest.  If compensation was paid for the purchase of a new wardrobe, this would amount to double counting.  As for the claim for curtains and blinds, Mr Sayer said it was clear from the photographs dated 16 September 2010, when Mr Truong was living at No.52, that all windows shown were provided with curtains or blinds.  The photographs attached to Mr Nunn’s report after the property was vacated showed that, whilst curtains had been left on at least two windows, some blinds had been removed, presumably for use elsewhere.  Mr Sayer considered that the figure of £129.91 claimed should be reduced by 50 per cent to reflect the removal of certain blinds.  On the question of the draining rack, Mr Sayer said that one of the photographs attached to Mr Nunn’s report showed that the rack was free standing and could have been used on most domestic draining boards,  Since Mr Truong could have taken it to Falmouth House, no compensation should be paid under this heading.
92.	I accept Mr Sayer’s evidence in relation to the curtain and blinds and award compensation of £64.95 for that item.  I agree with his view that no compensation should be paid for the draining rack.  On the issue of the wardrobe, however, I accept Mr Rutland’s submission that, in these unusual circumstances, where money was spent on a new wardrobe for temporary use only, it cannot properly be said that the claimant has obtained value for money.  I therefore determine that disturbance compensation of £482.07 is payable in respect of the removal to Falmouth House (£213.12 agreed, plus £64.95 for curtains and blinds, plus £204.00 for wardrobe).
93.	The disturbance claim resulting from the move to 72b Brockhurst Road totalled £4,478.61.  Mr Sayer agreed that items totalling £3,038.61 should be paid.  The two items of claim that be challenged were £70.00 for the removal and fixing of a cooker and £1,370.00 for the cost of stamp duty land tax (SDCT), being 1% of the purchase price of the new property.
94.	Mr Rutland said that Mr Truong had considered purchasing alternative properties in Bristol and Stafford, but he eventually decided that such a move not practicable for work and family reasons.  The price paid for 72b Brockhurst Road was much greater than the value of No.52.  Mr Truong had considered purchasing a much cheaper property but eventually proceeded with the purchase of 72b Brockhurst Road because of financing difficulties.
95.	Mr Sayer said that the new property cost more than the value of No.52 because it was a superior property.  It was a house, not a maisonette.  By comparison with No.52 it had an additional bedroom, a conservatory, a well presented garden, and was decorated to a modern standard with a relatively new kitchen and bathroom.
96.	Mr Sayer said that research exercises he carried out on 24 November 2012 and 25 September 2013 led him to conclude that there were a significant number of 2 and 3 bedroom properties in Gosport which were available for sale at £125,000 or less.  If Mr Truong had purchased one of those no SDLT would have been payable.  Since he had decided instead to buy a larger and better property, it was not reasonable to expect the acquiring authority to reimburse the SDLT.  As for the claim for £70.00 for the cooker move, Mr Sayer said that he had not had sight of an invoice for that sum.  In any event, 72b Brockhurst Road had a fully fitted kitchen with built in oven and hob and it was difficult to determine to where the cooker had been moved.
97.	Mr Rutland did not challenge what Mr Sayer had said with regard to the claims for the cooker and SDLT.  I accept Mr Sayer’s evidence on those two items and determine the disturbance compensation resulting from the second move at £3,038.61.

Surveyor’s fees
98.	It is agreed that, in the case of No.51, the claimant’s surveyor’s fees are to be based on twice Ryde’s scale 1996 Table A.
99.	Mr Rutland claimed a surveyor’s fee of £12,500 plus VAT, based on 100 hours at £125 per hour.  Her provided time sheets in support of this claim.  Mr Sayer responded that £6,656.25 of the amount claimed related to work carried out after 14 March 2013, the date Mr Rutland commenced work on preparing his client’s case for the Tribunal.  The acquiring authority had undertaken to make a contribution to Mr Truong’s costs of the reference.  Such costs should therefore not be included in the Tribunal’s disturbance award.
100.	Mr Sayer accepted that the time spent by Mr Rutland before 14 March 2013 should be considered as part of the disturbance claim.  Mr Rutland had identified 50.75 hours of work before that date at a cost of £6,343.75.  The time sheets included an entry for 25 hours spent attending a meeting on 6 December 2011.  Mr Sayer assumed that entry was an error and he disregarded it.  He therefore concluded that 25.75 hours of time had been properly incurred.  This produced a fee of £3,218.75 plus VAT based on Mr Rutland’s quoted hourly rate.  At the time an advance payment of compensation was made Mr Rutland received a payment for four hours work.  A deduction of £500.00 should be made to reflect this.
101.	I accept Mr Sayer’s evidence on this issue.  The surveyor’s fee payable in respect of No.52 is £3,218.75 plus VAT, to include the amount paid on account.
Result
102.	I determine the compensation payable by the acquiring authority for the long leasehold interest in No.51 at £34,000, plus disturbance of £810.64, a surveyor’s fee based on twice Ryde’s scale 1996 Table A and a basic loss payment of £2,550.  I further determine that the compensation payable for the long leasehold interest in No.52 is £31,750, plus disturbance of £3,520.68 (£482.07 plus £3,038.61), a total surveyor’s fee of £3,218.75 plus VAT, and a home loss payment of £4,700.00.
103.	The parties having agreed that no order for costs should be made in respect of the references, I make no such order.
Dated:  8 January 2014

N J Rose FRICS