Ranjana Zeena Parmar v The London Borough of Barnet

Mr Malinowski said in evidence that the best comparable was the sale of 35 Edgeworth Crescent in April 2013 for £655,000. The only adjustment that he made to this sale was for time since No. 35 had the same accommodation and other factors as the reference property. The time adjusted value of the sale price was £686,195.

35 Edgeworth Crescent was a particularly good comparable because, like the reference property, it had planning permission for a major extension. Planning permission was granted on appeal on 30 March 2009 for a part single, part two-storey side and rear extension and the conversion of the garage into a habitable room and a loft conversion into a bedroom. The accommodation was increased from three bedrooms to five bedrooms (three en-suite) and a new study was provided together with a much enlarged lounge and kitchen/diner and a new utility room. This permission was renewed on 13 April 2012.

In my opinion 35 Edgeworth Crescent was not sold as an existing three bedroom house, it was sold for redevelopment as a much larger property. This conclusion is borne out by the fact that shortly after the sale in 2013 the purchaser applied for another planning permission, this time involving the conversion of the basement to a gym and cinema, among other uses. Planning permission was granted on 7 October 2013 and, as Mr Malinowski confirmed, development was underway before January 2015.

The purchase price of £655,000 paid for 35 Edgeworth Crescent must have reflected the property’s redevelopment potential and I consider it to be a direct comparable to the reference property. The purchaser paid a price that took account of the 2012 planning permission and the prospect of a more valuable use of the basement.

The reference property did not have a basement, nor was one proposed in the June 2013 planning permission. Unlike 35 Edgeworth Crescent, which appears from the exhibited photograph to have been in reasonable condition at the date of sale, the reference property was derelict. But the reference property had planning permission for a sixth bedroom and also retained a garage.

On balance I consider that 35 Edgeworth Crescent was worth more than the reference property for redevelopment and extension and I deduct 5% from the adjusted sale price of No. 35 to reflect this. This gives a value of £651,885 which I round to £650,000.

Mr Malinowski did not undertake this direct comparison as one of his four valuation methods. His comparison with 35 Edgeworth Crescent (valuation method 2) assumes that it was sold as an existing three bedroom house. He then deducts the cost of restoring the reference property (also to a three bedroom house) which gives a value of £555,000. I put it to Mr Malinowski at the hearing that the sale price of 35 Edgeworth Crescent must have reflected its potential for redevelopment and that the price would already have taken account of the costs of that redevelopment. That being so it would be double-counting to deduct costs again as Mr Malinowski does. Mr Malinowski appears to have rejected this point and I think he was wrong to do so. I do not agree with Mr Malinowski’s second valuation method and I give it no weight.

I would comment on Mr Malinowski’s other three valuation methods as follows:

Mr Malinowski’s adjustments for “additional factors” were not fully explained. They appear to be based upon frontage, additional parking space and what Mr Malinowski described as “kerbside appeal”. The frontages of the comparable properties vary from 10.58m to 13.5m with an average of 11.6m (excluding 35 Edgeworth Crescent). The frontage of the reference property is said to be 10.19m. Mr Malinowski does not explain how he obtained the frontage measurements. I note for instance that on the planning application plans for 35 Edgeworth Crescent the frontage is shown as 10.875m and not 10.93m as stated by Mr Malinowski. In my opinion Mr Malinowski has over emphasised the importance of these additional factors and I would halve his allowances for comparables with frontages over 11.5m and make no allowance otherwise.

Mr Malinowski takes the average adjusted values of comparable properties in Edgeworth Avenue but omits his five comparables in Edgeworth Crescent from the calculation. He gives no reason for this omission. I would exclude 35 Edgeworth Crescent because I do not think the price reflected a sale of an existing three bedroom property for the reasons I have already given. But assuming that the other four properties were not redevelopment opportunities I see no reason why they should not also be included in the calculation of an average adjusted comparable value. This gives a figure, using my amended adjustments, of £771,000.

Adopting Mr Malinowski’s building costs figure and his allowance for fees at 12.5% and developer’s risk and profit at 15% gives a total cost of £129,375 to rebuild the reference property as a three bedroom house. Deducting this from the GDV of £771,000 gives a market value for the reference property under this method of £641,625, which I round to £642,000.

This method relies upon the sale of 20 Edgeworth Avenue, the house adjoining the reference property. It was sold in June 2014, five months after the valuation date. Section 5A(2) of the Land Compensation Act 1961 states that:

“No adjustment is to be made in the valuation in respect of anything that happens after the relevant valuation date.”

Although this suggests that this comparable should not be taken into account, given the proximity of the comparable to the reference property I am prepared to use this comparable as a check on the valuation of the reference property by the other methods. Using the amended adjustments I have adopted under Method 1 above, and the same costs of repair, I estimate the (rounded) value of the reference property to be £630,000.

Under this method, Mr Malinowski takes account of the development potential of the reference property by means of a residual valuation rather than by direct comparison with the sale of 35 Edgeworth Crescent. He adopts as comparables the sale of four five bedroom houses, adjusted for time and for size, to give an average figure for an equivalent six bedroom house. In this method only Mr Malinowski makes no adjustment for “additional factors”. Restating his average figure by using the amended adjustments I have adopted earlier gives £943,622. Mr Malinowski then makes a significantly greater allowance for building costs than he did in his other three methods. Whereas previously he adopted building costs of £100,000, or £746 per m² (based on the gross internal area of 134m² for the existing house given in the planning application dated 8 April 2012) he now adopts a rate of £1,362 per m² which he derives from BCIS Online Average prices. It appears that the figure adopted by Mr Malinowski is the median for “rehabilitation/conversion: ‘one-off’ housing detached (3 units or less).” This is shown as £1,326 per m² (not £1,362 per m² as adopted by Mr Malinowski). Mr Malinowski’s supplementary Exhibit E does not show the upper quartile figure or the sample size upon which this figure is based. Nor does Mr Malinowski’s evidence explain what is included within this figure. Mr Malinowski offers no explanation for the 78% difference (increase) in the costs which he adopts in his Method 4 compared with those adopted in his other methods. Mr Malinowski also adopts a spot figure of £5,000 for site clearance which he does not include in his other methods.

Adopting the (corrected) building costs figure of £1,326 per m² and a GDV of £943,622, but excluding the allowance for site clearance, gives a residual value for the subject property of £579,933 which I round to £580,000. I consider that the re-building and extension of the reference property in accordance with the 2013 planning permission would be a more complex and expensive building project compared with its reinstatement as a three bedroom house. I would therefore adopt a higher rate than £746 per m² used in Mr Malinowski’s other three methods. In my opinion a rate of £1,000 per m² (an increase of 34%) would be consistent with Mr Malinowski’s other valuations (i.e. slightly above the lower quartile as shown in the BCIS analysis). This gives a residual valuation of £669,347 which I round to £670,000.

My preferred valuation method is a direct comparison with the sale of 35 Edgeworth Crescent which produced a figure of £650,000 for the reference property. My valuations based upon Mr Malinowski’s methods 1 and 4 are £642,000 and £670,000 respectively (an average of £656,000). Method 3, used as a check, gave a value of £630,000. In my opinion the open market value of the reference property at the valuation date was £650,000.

The claimant has made no claim for, or any reference to, compensation under section 5 rule (6) of the Land Compensation Act 1961 and I make no award under that head.

I accept Mr Green’s submission that the claimant is not entitled to a home loss payment. There is no evidence that the claimant was in occupation of the reference property throughout the period of one year ending with her date of displacement. Nor was she in occupation at that date and therefore she does not qualify for consideration for a discretionary payment under section 29(2) of the 1973 Act.

Mr Green accepts that the claimant qualifies for a basic loss payment under section 33 of the 1973 Act and is not excluded under section 33D. Mr Green says that the claimant has not made a written claim for a basic loss payment under section 33E(2) and I have seen no evidence that the claimant has made such a claim.

Unlike a home loss payment, which is payable as of right upon qualification and is not dependent upon an application being made by the claimant, a basic loss payment requires the claimant to apply in writing to the acquiring authority in accordance with section 33E of the 1973 Act. Since no such application has yet been made I make no award of compensation for a basic loss payment. But, in my opinion, the claimant may still make an application under section 33E. My determination of the market value of the reference property at £650,000 means that the amount of a basic loss payment, if an application is appropriately made, is fixed at 7.5% of that value or £48,750. The claimant has not yet made any claim of her own (the reference being made by the acquiring authority) but I see nothing in the 1973 Act that would prevent the claimant making an application for a basic loss payment after the Tribunal’s determination of the market value of the reference property provided such an application complies with the limitation period referred to in section 33E(4). In this reference the claimant’s right of action to recover a payment accrued on the valuation date, i.e. 15 January 2014. No application can be made after the expiration of six years from that date.

This decision is final on all matters other than the costs of the reference. The parties may now make submissions on such costs and a letter giving directions for the exchange of submissions accompanies this decision.

I have received submissions on costs from the acquiring authority but not from the claimant despite due notice having been given.

The acquiring authority says that the claimant did not deliver to them a notice in writing of the amount claimed by her, containing the particulars mentioned in section 4(2) of the Land Compensation Act 1961. Furthermore she failed to make any attempt to negotiate with the acquiring authority, to advance a positive case in the reference or to engage with the proceedings in any meaningful way. The claimant’s conduct was wholly unreasonable and had denied the acquiring authority the opportunity to reach agreement on the compensation payable without incurring the costs of the reference. The acquiring authority asks that, in accordance with section 4(1)(b) of the 1961 Act, the claimant should bear her own costs and pay the costs of the acquiring authority so far as they were incurred after the time when a notice of claim should have been delivered, which, following the Tribunal’s decision in Colneway Limited v Environment Agency [2004] RVR 37, they take as 30 December 2013, being the date three months after the service of a notice to treat.

Section 4(1) and (2) of the 1961 Act provide as follows (so far as relevant):

“4 (1) Where either –

(a)

…

(b)

the Upper Tribunal is satisfied that a claimant has failed to deliver to the acquiring authority, in time to enable them to make a proper offer, a notice in writing of the amount claimed by him, containing the particulars mentioned in subsection (2) of this section;

The Upper Tribunal shall, unless for special reasons it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred … after the time when in the opinion of the Upper Tribunal the notice should have been delivered.

(2)

The notice mentioned in subsection (1) of this section must state the exact nature of the interest in respect of which compensation is claimed, distinguishing the amounts under separate heads and showing how the amount claimed under each head is calculated.”

In Spirerose Limited v Transport for London [2008] RVR 12 the Lands Tribunal, George Bartlett QC, President and Mr P R Francis FRICS, said at 36[147] that:

“Costs incurred after the date of reference are generally governed by s.4 of the 1961 Act; and, under subs (1), where a claimant has failed to deliver a claim in time to enable the acquiring authority to make a proper offer, the claimant must, in the absence of special reasons, bear its own costs and pay those of the acquiring authority. This provision relates specifically to the costs of proceedings before the Lands Tribunal. The purpose is to ensure that the acquiring authority is not liable for the claimant’s costs and gets its own costs, up to the time when it could have made a proper offer.”

Two points arise from this. Firstly, section 4 of the 1961 Act is only concerned with “proceedings on a question referred to the Upper Tribunal.” Thus any costs of the acquiring authority that fall to be paid by the claimant under section 4(1)(b) of the 1961 Act are restricted to the acquiring authority’s costs of the reference and do not include their costs in dealing with any legal challenge by the claimant to the validity of the compulsory purchase order. Secondly, the purpose of the claimant’s notice is to enable the acquiring authority to make a proper offer. Despite no claim having been particularised by the claimant the acquiring authority made a sealed offer on 4 March 2015 in the sum of £600,000, including the claimant’s costs of the reference, in full and final settlement of her claim. Surprisingly the acquiring authority did not refer to this offer in terms in their submissions on costs.

The acquiring authority did not need the claimant’s particularised claim to enable them to make an unconditional offer to settle the whole claim. This is unsurprising since the property being acquired was a single house, albeit derelict, and no question of injurious affection or severance arose. It is true that the acquiring authority could not quantify any compensation due under section 5 rule (6) of the 1961 Act (for disturbance) but this was likely to be limited given that the house was unoccupied.

From the trial bundle it appears that Mr Malinowski provided a valuation of the freehold interest in the subject property as early as 4 February 2014 in the sum of £550,000. In my opinion this is a case where the acquiring authority could make a proper offer, at least in respect of the land taken, without a particularised claim.

The amount of the acquiring authority’s unconditional offer of £600,000 is less than my award of £650,000 plus a basic loss payment of £48,750 if an application for the same is appropriately made by the claimant. In considering the question of costs I have taken into account Ms Parmar’s conduct throughout this reference. She made no attempt to respond within a reasonable time, or at all, to the requirements of the notice to treat. She did not submit a quantified or properly explained claim by the time the reference was made or subsequently. She took no constructive part in the proceedings and has not co-operated with the Tribunal. I consider her behaviour throughout to have been unreasonable.

I have weighed the claimant’s unreasonable conduct against the acquiring authority’s unsuccessful sealed offer, in reaching the following determination on costs:

I am satisfied that it is proper to depart from the usual consequences of an omission by the claimant to submit an offer in accordance with section 4(2) of the 1961 Act. The special reasons in this case are, as I have explained, the ability of the acquiring authority to make an offer without apparent difficulty due to the nature of the valuation required, and the fact that the claimant cannot be said to have increased or contributed to the costs incurred.

In their submissions the acquiring authority sought a summary assessment of their costs of the reference and I consider this to be appropriate. The acquiring authority shall have 14 days from the date of this addendum in which to revise their costs schedule in accordance with the determination in paragraph 56(i) above. The claimant shall then have a further 14 days in which to make submissions on the acquiring authority’s costs before I give my summary assessment.