Land Compensation Manual Section 2: Compensation for land taken

Practice note 2/4: Use of post valuation date evidence

The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.

Use of post valuation date evidence

The valuer is entitled to look at post valuation date evidence that has a bearing on the value as at the valuation date. Thus subsequent events that could be anticipated (eg the completion of the scheme) could be taken into account but extraneous events taking place after the valuation date could not. In this way the claimant’s true loss consequent upon the execution and use of the scheme can be ascertained.

Bwllfa and Merthyr Dare Steam Collieries (1891) Limited v Pontypridd Waterworks Company [1903] AC 426 concerned compensation payable for losses incurred subsequent to the sterilization of a coal seam. After the date of valuation the price of coal rose (during the two year period in which the coal would have been worked) so the loss to the appellant was more than if the price of coal had remained the same or fallen. The House of Lords held that the increase in the price of coal should be taken into account. The price of coal could have risen or fallen after the valuation date and the arbitrator’s decision, if taken solely on the evidence available at that date, would have been subject to conjecture about the future price of coal. Since the matter was clarified by taking into account matters that occurred after the valuation date, that evidence was valid.

In Festiniog Railway Company v CEGB (1971) REF144/1958 (unreported) the Lands Tribunal, in assessing the disturbance compensation due to the claimant, had regard to events that took place between dates of entry in 1956 and 1958 and the date of the hearing in 1971 on the basis of the Bwllfa principle. (This was the case referred back to the Tribunal following the rejection of an ‘equivalent reinstatement’ basis of compensation by the Court of Appeal).

In ADP&E Farmers v Department of Transport [1988] RVR 58 the Tribunal was required to assess the amount of injurious affection suffered by land with development potential following the construction of a road scheme. It had to be decided whether certain events following the date of valuation should be taken into account. The Tribunal Member held that it would be wrong in valuing damages due to severance to take account of subsequent events that had no bearing on the valuation as at the date of severance but that subsequent transactions in land could be called in aid to establish a valuation at a previous date or where damages for injurious affection could be better identified or valued at a date after the date of severance.

Bolton MBC v Waterworth [1981] 2 EGLR 7 concerned compensation for severance and injurious affection to the retained land of the claimant which was ripe for development prior to the acquisition but which suffered from access problems as a result of the acquisition. The Tribunal had determined that planning permission for the retained land would have been forthcoming in seven years’ time and based the compensation on that deferment figure. Fortuitously for the claimant, 3½ years after the acquisition a neighbouring owner came forward and acquired the retained land from the claimant in order to develop it in conjunction with his own adjoining land. However, the Tribunal declined to have regard to that in determining the compensation. The acquiring authority appealed the Tribunal’s decision (because the shorter deferment period would have reduced the amount of compensation payable). The Court of Appeal determined that the subsequent actual events were not relevant to the assessment of the compensation for severance. After the acquisition the claimant had retained ownership of the land in question and did not sell it until a later date. The subsequent events did not throw any light on the quantum of the claimant’s loss as at the date of valuation.

The valuer’s task is to determine the claimant’s true loss having regard to the full effect of the scheme as completed. It would therefore be correct to have regard to the completed scheme (even if it had not been completed by the date of severance), since the assessment of the claimant’s loss at that date would otherwise be subject to conjecture as to the full effects of the scheme.

Section 5A(2) of the Land Compensation Act 1961 (inserted by the Planning and Compulsory Purchase Act 2004) states ‘No adjustment is to be made to the valuation in respect of anything which happens after the relevant valuation date’. The precise effect of this subsection has been clarified in two recent cases.

In Bishopsgate Parking (No 2) Limited v The Welsh Ministers [2012] UKUT 22 (LC) the acquiring authority, in order to establish an appropriate investment yield, relied on 15 comparable transactions, eight of which post-dated the valuation date including its primary comparable. The claimant argued that post valuation date comparables were inadmissible because Rule (2) of section 5 Land Compensation Act 1961 envisages a sale in the open market at a specific valuation date and the restrictive wording of section 5A(2) quoted above.

The Tribunal disagreed with the claimant’s contention. It determined that the word ‘adjustment’ in section 5A refers to any increase or decrease in value that occurred after the valuation date. However, post valuation date evidence could be taken into account to establish an objective fact as at the valuation date. The Tribunal relied on the decision of the Privy Council in Melwood Units Pty Ltd v Commissioners of Main Roads [1979] AC 426 to support its decision. The degree to which a post valuation date comparable transaction would assist in determining the value of the property at the valuation date would depend upon how similar the factors material to the valuation were at the date of the comparable transaction and the date of valuation.

However, hope value at the valuation date could not be established by reference to post valuation date events (such as the ultimate date of development of the land) because the circumstances obtaining at the valuation date and the subsequent event would be significantly different.

Allen v Leicester City Council [2013] UKUT 16 (LC) concerned the compulsory acquisition of a dwelling house under the Housing Act 1985 in order to secure its repair and improvement and re-use as housing. The property was in a neglected and semi-derelict condition. The claimant submitted a Statement of Case but did not attend the hearing.

The acquiring authority valued the house at £91,000 based on three sales and two asking prices of houses in the same road. The acquiring authority had adjusted these sales to reflect the extremely poor condition of the subject property. The valuation date was January 2006. The property was acquired via a General Vesting Declaration and was subsequently ‘sold on’ at auction for £120,000 in October 2006. The claimant argued that he should receive the sale price as compensation.

The Tribunal criticised the acquiring authority’s approach, whereby it had deducted estimated costs of repair from a notional ‘value in good condition’, as being essentially a residual valuation, which included some errors. The Tribunal considered that the best evidence was the sale of the property itself and relied on the decision in Bishopsgate Parking (No 2) Limited v The Welsh Ministers [2012] UKUT 22 (LC) – (see above). The only differences between the valuation date and the subsequent auction date were that it was nine months later and the house had been cleared of contents and rubbish by that time.

The Tribunal reluctantly adopted the use of the House Price Index produced by DCLG as proposed by the acquiring authority to reflect the difference in date and also made a deduction for clearing the house and a contingency sum for unforeseen costs. It disallowed the cost of clearance as a disturbance item because the items and rubbish in the house were a liability not an asset. The Tribunal determined compensation at £113,625.