Lands Tribunal for Scotland

OPINION

Callum Stewart Macfarlane
v
North Lanarkshire Council

Summary

[1] The owner of a lock-up garage, compulsorily acquired by a Local Authority under a scheme of redevelopment applied to the Tribunal for a determination of the compensation due, the amount offered by the acquiring authority being unacceptable to him. There were structural defects in the adjacent blocks of flats and they had fallen into a state of disrepair thus prompting the compulsory purchase order. The lock-ups were not structurally defective but had been included in the order to ensure an adequate area of ground for redevelopment. The lock-up was one of many located in residential areas within a new town. Some were on the ground floor of 4 storey and 2 storey blocks while others were in single storey ranges. The acquiring authority had based their offer of compensation on the comparative basis using sale prices within the new town and also had regard to other settlements for lock-ups within the area of acquisition. The claimant looked at current rental levels, principally asking rents, as well as sale prices and asking prices covering a very wide geographical area of the UK. He maintained that no suitable replacement lock-ups close to his home were available and that even those further away were seeking higher rent levels than could be afforded based on the level of compensation offered. The valuation date is 16 February 2009 being the date of vesting. The Tribunal have determined that the compensation due is £1,300. No separate claim for “disturbance” (Rule 6 of Section 12 of the Land Compensation (Scotland) Act 1963) had been intimated.

Procedure

[2] The claimant’s application for determination of disputed compensation for the property at 1 Ainslie Road Cumbernauld was received by the Tribunal on 13 April 2011. The parties consented to the case being dealt with by way of written representations, a procedure agreed to by the Tribunal under Rule 26 of the Lands Tribunal for Scotland Rules 2003. Both parties submitted appropriate material. The claimant agreed that the photographs included in the respondents’ submission fairly represented the subjects and their surroundings at or close to the vesting date. Although the lock-up and the adjoining residential units had been demolished the tribunal did visit the locality as well as Ivanhoe Road where the claimant had submitted some details of a unit recently placed on the market. The respondents appointed Ms Susan Biggerstaff of the Valuation Office Agency (District Valuer Services) and a Member of the Royal Institution of Chartered Surveyors to provide a valuation. The Claimant represented himself. No surveyor represented his interests.

The Claimant’s Contentions

[3] Although he made no specific reference to any case law the claimant did invoke the underlying principles of the compensation code, namely that the amount of money payable as compensation should so far as reasonably possible put him back in the position he had been in prior to the acquisition. His concern was that there was no supply of suitable properties for sale and that the rents passing and being sought for any lock-ups available for rent would require a much higher level of price than had been offered by the respondents.

[4] In particular the claimant referred to the fact that there was a waiting list for lock-ups in Cumbernauld, that the supply was very limited, that the monthly rent would be of the order of £50 (although he did admit that Cumbernauld Housing Partnership quoted only £35 per calendar month) and that based on £50 and a 10% yield, this would suggest a capital value of £5,000. He had also investigated the cost of purchasing a pre-cast concrete lock-up which he said was £1650 to which would require to be added the cost of land, foundations, obtaining planning consent etc. He had researched the internet and said that at a national level prices were between £5,000 and £14,000, identifying units in Aberdeen, East Ham, East Kilbride, Guildford, South Queensferry and Tiverton in Devon. There was also a lock-up in the west end of Glasgow on the market at a price of £10,000. Finally he had copied entries from Google of enquiries for lock-ups, some of which were for the storage of motor cycles as well as an article suggesting the investment potential for lock-ups was good.

[5] The claimant added a supplemental submission with details of a lock-up in Ivanhoe Road, Cumbernauld which had come on to the market at £1650. This was advertised as being close to the town centre and bus stops and to be suitable for the storage of household goods as well as a 4x4 vehicle. The claimant suggested that in reference to the underlying principles of the compensation code it would be appropriate for the acquiring authority to either base the level of compensation on the price he has to pay for this unit (assuming he is successful in his bid for it) or to endeavour to acquire the lock-up on his behalf and then to pass it over to him.

[6] Finally in response to the respondents’ submission the claimant said that the width of the range of prices paid for lock-ups in Cumbernauld as put forward by the respondents indicated that there was not a normal market operating in the town. He also stated that it had long been known that there were structural problems with the adjacent flats and that they would have to be demolished in due course. As a result they became prone to vandalism which in turn caused the surrounding area to deteriorate.

The Respondent’s case

[7] The respondents provided evidence of sale prices of lock-ups in Cumbernauld as well as settlements reached with the owners of the remaining lock-ups included in this scheme of acquisition. The sale prices were compiled as part of the research for the acquisition of 26 Ainslie Road but were equally appropriate for the present subjects. They included a valuation report for the property at 26 Ainslie Road which was in the sum of £1,300.

[8] In total the respondents listed 17 sales in Cumbernauld over the period October 2008 to November 2009. They were in various streets and roads but all within the G67 (Cumbernauld) post code. They ranged in price from £300 for lock-up 15 at Berryhill Road to lock-up 2 at Park Way which had sold for £2,000. No information other than the address, date of sale and price was provided.

[9] The respondents also listed 6 lock-ups, all in Ainslie Road Cumbernauld which had been acquired as part of this scheme of acquisition. Compensation of £1,000 had been paid for 5 of the lock-ups and £1,300 for the one at 26 Ainslie Road. No information was given as to whether any of the claimants had been professionally represented.

The Tribunal’s Consideration

[10] We inspected the locus of the subjects under consideration and also endeavoured to inspect as many of the subjects listed in the respondent’s list of sales as possible. We also inspected the Ivanhoe Road area in an attempt to identify the unit referred to by the claimant in his additional submission. All of the inspections were external only. It was not easy to identify individual postal numbers but we are satisfied that we were able to obtain a good overall appreciation of the types of lock-ups involved and their locality.

[11] The subjects have now been demolished, as have the houses involved in the scheme. We saw where the unit was situated. It was convenient for one of the main arterial roads in the town. It was also close by at least two of the locations where sales, as provided by the respondents had taken place, namely Afton Road and Clouden Road. It seemed to us that there were quite a large number of similarly designed and constructed lock-ups throughout the town. Many were arranged in large groups, on occasions with a semi-circular shape and, particularly at Clouden Road on the ground floor of 2 storey blocks. There were two main blocks at Ivanhoe Road, one containing approximately 30 and the other about 15 lock-ups. Generally they appeared similar in design and age but some had been improved with new doors. It was not possible to identify which unit in Ivanhoe Road was currently on the market.

[12] No legal issues were raised with us; neither party referred us to the legislation under which we require to operate. Compensation payable on compulsory acquisition is governed by the terms of the Land Compensation (Scotland) Act 1963 and in particular Section 12. This section contains all of the rules under which compensation is to be assessed. Rule (2) is the relevant rule in this case and is as follows:-

“The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise: …”

It follows from the terms of this rule that the most appropriate comparisons are sale prices of similar property in the locality. This is what the respondents have provided in their list of sales of 17 lock-ups in Cumbernauld. We have accordingly had regard to this information. It has also been held that settlements reached in negotiations, again of similar property, can be of assistance although in a hierarchical sense they are deemed to be of a little less weight than outright open market sales. The settlements in Ainslie Road fall into this category. At a much lower level of assistance are asking prices simply because there is no certainty as to the final level of price.

[13] Against this background we have rejected the claimant’s evidence from outwith Cumbernauld. We also do not consider that any assistance can be gained from commentary on the market for lock-up investments. The cost of buying a new pre cast lock-up again adds nothing to the matter when there is a sufficiency of evidence available from open market sales and from settlements. We should add for completeness that Rule (5) of Section 12 allows for compensation to be assessed on the basis of the costs of equivalent reinstatement and is most commonly used in the acquisition of religious establishments where there is no open market evidence. That basis does not apply here.

[14] The date of valuation is 16 February 2009. Of the sales provided by the respondents, ten are before the date of valuation and seven are after. Strictly speaking, sales after the valuation date would not be available if the valuation was being carried out at the actual valuation date. However if market conditions had not changed in a short period after the relevant date and since it might reasonably be argued that sales in the immediately succeeding period would continue to reflect the market at the valuation date it can be appropriate to take cognisance of them. Of the total list of 17 the lowest is £300 in November 2008 and the highest are two at £2,000, one of which was in October 2008 and the other in November 2009. The average of the 17 sales is £1247. Excluding the sales after the valuation date the lowest remains at £300 and the highest also remains at £2,000. The average increases slightly to £1290.

[15] The second level of assistance from settlements of claims for compensation show five transactions at £1,000 and one at £1,300.

[16] We are prepared to accept the information given by the claimant of current asking rents even although no independent source has been provided. However the information is of little assistance. The rents would require to be converted to capital sums and there is no evidence of the appropriate capitalisation factor. Adjustments might also be required to allow for the costs of insurance, possibly repairs etc. which could be expected to fall on a landlord or owner. From the Tribunal’s own knowledge we would reject the suggestion that a 10 times multiplier could be appropriate. If viewed as an investment their overall condition as seen from our inspection, the need of an investor to allow for potential voids and the real risk of significant repairs as well as the costs of rent collection would suggest a significantly lower capitalisation factor. This would allow for a potentially higher return reflecting the risks associated with this type of investment.

[17] The potential sale of the unit at Ivanhoe Road could have been relevant but we do not know the full circumstances, or indeed if the unit sold and if so at what price. In any event the transaction if it does take place will be well over 2 years after the valuation date. We have also noted that this unit is advertised as having the potential of garaging a 4x4 vehicle suggesting it must be one of the larger units as we would doubt that standard units would be capable of doing this.

[18] The valuation of 26 Ainslie Road by the District Valuer, intended as we understand it to also apply to No. 1 Ainslie Road, seems to us to fairly reflect the market evidence available.

Decision

[19] We accordingly determine the value of the subjects at 1 Ainslie Road Cumbernauld at the valuation date of 16 February 2009 in accordance with the statutory basis set out in Section 12(2) of the Land Compensation (Scotland) Act 1963 to be the sum of £1,300. No other matters required to be determined.