Joshua v Southwark London Borough Council

Blight notice – Compensation – Valuation – Acquiring authority adopting scheme for redevelopment of residential estate – Claimant owning leasehold interest in one-bedroom flat in block on estate – Claimant serving blight notice requiring acquiring authority to purchase his interest at unblighted open-market value – Assessment of open-market value – Whether values blighted by existence of scheme – Assessment of reasonable pre-reference surveyor’s fees – Claim determined accordingly The claimant held a 125-year lease of a one-bedroom flat on the 13th floor of a concrete block of flats forming part of the acquiring authority’s Aylesbury Estate, a large residential development in London, SE17, that had been constructed between 1966 and 1977. The estate was visually unattractive and poorly designed and laid out, and, by 2000, it suffered from high levels of social and economic deprivation. In 2005, the acquiring authority resolved to redevelop the estate and, following the adoption of an action plan in 2010, resolved to make the necessary compulsory purchase orders. The claimant’s block was identified for early acquisition under that plan. In March 2013, the claimant served a blight notice under section 150 of the Town and Country Planning Act 1990, alleging that the value of his flat was blighted by the scheme and requiring the authority to acquire it at its unblighted value. The authority accepted that notice and the Upper Tribunal was asked to determine the sum payable by the authority. The matters in dispute were the open-market value of the flat, at the valuation date of May 2013, and the claimant’s surveyor’s fees. The claimant claimed £146,000 as the open-market value of his leasehold interest, plus surveyor’s fees of £31,607 plus VAT, representing an hourly rate of £200. The authority contended that the open-market value of the claimant’s lease was £116,000 and that a surveyor’s fee of £1,300 plus VAT was fair and reasonable. Both parties used other properties on the estate as comparables when valuing the claimant’s lease but differed in their approach to those comparables. The claimant’s expert made a 10% adjustment to values to reflect blight, while the authority contended that no adjustment was necessary. The authority argued that properties on the estate were attractive to buy-to-let purchasers, who knew that the authority would probably acquire their interest, so enabling them to sell at an an unblighted open-market value, and that such purchasers were unlikely to have to contribute substantial capital sums under the service charge provisions of their leases because, in light of the redevelopment plans, the authority was unlikely to undertake work to bring the Aylesbury Estate up to the Government’s “Decent Homes” standard. Held: The claim was determined accordingly. (1) The authority had accepted the claimant’s blight notice even though, in light of their expert’s evidence about the absence of blight at the valuation date, they could have served a counternotice on the ground in section 151(4)(g) of the 1990 Act, contesting that the claimant had been unable to sell his interest except at a price substantially lower than that for which he might reasonably have been expected to sell if no part of the reference property was, or was likely to be, comprised in blighted land. While the acceptance of such a notice might establish a prima facie case that values were blighted by the scheme, it did not, in all the circumstances, preclude the authority from disputing the existence of blight. In circumstances where the authority was trying to acquire the flat by agreement anyway, their failure to serve a counter-notice did not constitute a tacit acceptance that values were blighted. However, the authority had failed to establish on the evidence that the value of the claimant’s property was unblighted by the redevelopment scheme. The sales evidence relied on by the authority did not support its view that the emergence of a niche buy-to-let market had offset the blight caused by the scheme. In order to establish such a position, the authority would have to show that relative values on the Aylesbury Estate, and other local estates unaffected by the scheme, were constant in the pre-scheme world and at the valuation date. The difficulty with the use of comparables on the Aylesbury Estate was that the sale prices of the comparables were affected by the scheme. While the authority had produced a partial analysis of various comparables of similar flats on other estates sold at or about the valuation date, they had failed to undertake a similar exercise for pre-scheme sales of comparable flats on other local estates against which the later results could be calibrated. The 10% adjustment for blight advanced by the claimant’s expert was conservative in light of his evidence that blight could affect values by 10% to 60%. The authority did not deny the existence of the problems identified by the claimant resulting from the fact that the authority had stopped carrying out any repairs to the claimant’s block except those necessary to comply with their statutory duty to keep the block in a safe condition. Whatever the attraction of the Aylesbury Estate to buy-to-let purchasers in the scheme world, the proper conclusion was that the value of the adopted comparables was affected by blight at the valuation date. The claimant’s allowance of 10% was reasonable. There was no evidence to support any adjustment for the potential savings in capital expenditure on Decent Homes works. In so far as it was a factor that would have increased the price paid for the on-estate comparables, it was implicitly reflected in the relatively low addition of 10% for blight. In light of the above conclusion, the value of the claimant’s flat, determined by reference to the comparables, was £129,000. (2) The claimant was entitled to receive as compensation not only the open-market value of his leasehold interest but also his conveyancing costs and the fees that he had had to pay his surveyor in preparing, negotiating and settling the claim. However, the sum claimed by the claimant for surveyor’s fees was excessive. The figure advanced by the claimant did not distinguish between pre-reference costs and reference costs. An adjustment to reflect pre-reference costs at the claimed hourly rate of £200 produced the figure of £19,000, which was not proportionate to the size and complexity of the claim or commensurate with the time, effort and expertise required to deal with it. That sum was unreasonable, notwithstanding that additional time and expense had been incurred by a delay in negotiations resulting from the fact that the authority had consistently undervalued the flat. Taking all relevant matters into account, a reasonable allowance for the claimant’s pre-reference costs was £3,500 plus VAT, representing a total of 20 hours’ work, half at the expert’s original rate of £150 per hour and half at his subsequent increased rate of £200. Ike Ehribe (instructed by Victory@Law Solicitors) appeared for the claimant; Mark Cook (instructed by the legal department of Southwark London Borough Council) appeared for the acquiring authority.   Sally Dobson, barrister Click here to read transcript: Joshua v Southwark London Borough Council