The Upper Tribunal (Lands Chamber) has determined the amount of compensation payable in respect of the compulsory purchase of a former prison site for the regeneration of Salford Central in Timec 1209 LLP v Salford City Council [2021] UKUT 269 (LC). The case highlights the perils of expert evidence.
It concerned an office building and land on the Salford side of the River Irwell known as City Wharf. The respondent acquired City Wharf from the claimant on 2 February 2015 by compulsory purchase order made on 24 December 2010. The dispute centred on the claim for compensation under the Land Compensation Act 1961. The claimant valued the land at £11.18m and the respondent at £3m.
The value of the land for the purposes of compensation was the amount which the land would be expected to realise on 2 February 2015 if sold on the open market by a willing seller with no account taken of any diminution in value attributable to the regeneration of Salford Central, the scheme underlying the acquisition. The main issue was whether a profitable development of the land by implementing a planning permission (“the Timec permission”) obtained by the claimant in 2012 for the demolition of City Wharf and erection of a mixed-use development, would have been possible in a no-scheme world.
The UT approached the question in two parts as parties negotiating a sale would have done. What was the value of City Wharf taking into account the costs of refurbishment; and how did that value compare to the value of the site if City Wharf was demolished and the Timec permission implemented?
The UT criticised the valuations of both parties in relation to City Wharf. The claimant’s valuer relied on 22 comparable transactions which were unsuitable because they were not office sales with vacant possession: he accepted in cross examination that he had not analysed the comparables and could not explain his valuation figure. The UT did not find the respondent’s residual valuation to be credible concluding that he had not considered the value of City Wharf on an objective basis. The UT relied upon evidence of the Manchester office market to determine the value of City Wharf at £5.5m.
With regard to the Timec permission, the basis of valuation was agreed and there was some common ground but the valuers could not agree on rental levels and incentives and expert witnesses in the office market gave evidence on these issues. It became clear that the claimant’s expert had not been properly briefed on the assumptions he should make in preparing his evidence on the rental value of new offices on the land. Consequently, the UT placed no weight on his evidence. The claimant’s valuer who had adopted the expert’s views as his own was also discredited.
The UT was satisfied that no prudent purchaser would realistically base their bid on the value of the Timec permission without the prospect of the comprehensive development of the surrounding land. The most likely purchaser was a speculator who would undertake a light touch refurbishment of City Wharf before letting it. The compensation payable was £5.5m.
Louise Clark is a property law consultant and mediator
