DESCRIPTIVE RUBRIC

Disputed compensation – Compulsory purchase – Shop in poor condition – Similar adjacent property purchased by acquiring authority for same purpose – Whether comparable – Open market value – Special interest – Red Book – Relevance of residual valuation – Residual method of valuation – Indexation – Land Compensation (Scotland) Act 1963

McGee & Thomson v South Lanarkshire Council
30 March 2004
LTS/COMP/2003/8

A local authority acquired, by compulsory purchase, a shop in the centre of Hamilton with the intention that it be developed as part of a block of flats and shops. The authority had previously bought similar adjacent subjects to be used as part of the same development. They contended that the price paid for these subjects was not a relevant comparable because they had had to match the price which would be paid for the subjects as a going concern. However, it was not contended that the local authority had any special interest in the purchase as such. It was simply an opportunist purchase of land which could conveniently be added it to the proposed development.

Held: Although the local authority had had to compete on the open market with potential purchasers who might have wanted the “comparable” subjects as a going concern, the authority had justified the price as appropriate for a cleared site. The transaction was accordingly an appropriate comparable. Adjustment should be made to reflect the evidence that they had allowed “two overbids” in making their successful offer. Evidence of other transactions relied on as potentially comparable should be adjusted to reflect the dates of the transactions involved. Such adjustment was required when making the comparison and not at the end of the process. The Retail Prices Index was, in the circumstances, a suitable tool for such adjustment.

Authorities referred to:

Horn v Sutherland Corporation [1941] 2 KB 26
Cornton Caravans and Chalets Limited v Anglian Water Services Limited ACQ/19/2001
Clinker & Ash Limited v Southern Gas Board [1967] EGD 533


See full decision:  LTS/COMP/2003/8