Compulsory purchase compensation includes temporary and permanent loss of profits

Compensation for compulsory purchase under section 5 of the Land Compensation Act 1961 includes temporary and permanent loss of profits, if justified by the evidence. The Upper Tribunal (Lands Chamber) awarded the claimant compensation for temporary and permanent loss of profit in Warren James (Jewellers) Ltd v Watford Borough Council [2023] UKUT 153 (LC). The claimant, a national jewellery retailer, operated a retail store in Charter Place, Watford, a 1970s pedestrianised shopping centre, which was acquired by the respondent for a regeneration scheme under a compulsory purchase order in 2014. The claimant’s leasehold interest was acquired by a general vesting declaration on 17 November 2015, the valuation date. The claimant relocated to a unit at Intu Watford, a 1990s retail shopping mall, 111.5m from its Charter Place premises, and commenced trading from there on 1 July 2016. The parties agreed relocation, strip-out and general costs and professional fees, but could not agree either temporary or permanent loss of profit suffered by the claimant as a result of the relocation. Section 5 of the 1961 Act provides for compensation for disturbance where there is a causal connection between the acquisition and the loss in question, the loss is not too remote from the acquisition and the claimant has complied with its duty to mitigate its loss. The tribunal preferred the claimant’s expert evidence based on net profit grounded in the management accounts to the respondent’s expert’s focus on gross profit based on sales trends and the notional performance of a national average store. It focused on the years affected – the years ending 2016 and 2017 – and concluded that the temporary loss was just over £185,000. As for permanent loss, the relocation property was the only suitable option available to the claimant at the relevant time. It was in a better position than the reference property, the retail shop was comparable in overall size and there was no material difference in the shop fit-out. It had a wider primary frontage – which meant the Zone A area was 25% higher than the reference property. However, the layout had disadvantages: part of the ground-floor sales area was lost to an access area and the headroom was compromised partly by the mezzanine. However, the occupation costs of the relocation unit were more than double those of the reference property, which the tribunal attributed directly to the relocation. Multiplying the difference by the number of years left remaining on the lease resulted in a permanent loss of £318,469. Louise Clark is a property law consultant and mediator