Land – Option to purchase – Valuation – Appellant local authority granting lease of land to develop golf course with option to purchase – Respondent exercising option – Appellants fixing value of land with development potential – Court declaring land to be valued on basis of full market value as agricultural land or open space for golf course – Whether full market value including assessment of development potential – Appeal allowed
The appellant local authority granted a lease of land to the respondent tenant for a term of 50 years from June 1999. Under the terms of the lease, the respondent, which had an option to purchase, developed a golf course on the land within five years of the date of entry. By clause 18.2, the option price was to be equal to the full market value of the land, to be fixed by the appellants “as at the date of entry for the proposed purchase… of agricultural land or open space suitable for development as a golf course”.
The respondent contended that the effect of clause 18.2 was that the sole use of the land to which the appellants were to have regard in fixing the full market value was development and use as a golf course. The appellants argued that an assessment of that value had to include an estimate of the development potential of the land apart from its use as a golf course. The issue was important to the parties because, in 2006, the land had been identified as a potential area for housing-led area expansion.
In 2007, the respondent served the appellants with a notice to exercise the option and the appellants fixed the price at £5.3m. They then served formal notice requiring the respondent, within 28 days, to pay that sum in exchange for a valid marketable title, failing which they would be entitled to rescind the option contract. The respondent did not comply with those conditions and the appellants served formal notice of rescission.
The respondent obtained a declaration from the court that, on the proper construction of clause 18.2, it was entitled to purchase the land for a price to be fixed on the basis of the full market value of the land as agricultural land or open space suitable for a golf course. The appellants appealed.
Held: The appeal was allowed.
The court’s inquiry as to the true meaning of “full market value” in the context of the option to purchase had to start and finish by reference to the ordinary meaning of the words used. It was clear that, by clause 18.2, the parties had intended that the appellants were to value the land as at the date of entry on purchase, not at the date of entry under the lease. Further, the land was to be valued as though it were still agricultural land or open space suitable for development as a golf course, ignoring any work carried out by the respondent to develop the golf course in the meantime: Charter Reinsurance Co (in liquidation) v Fagan [1997] AC 313 followed.
The term “full market value” had to be construed as meaning what it said. Any considerations that might be relevant to market value were not to be ignored unless there were express words to that effect: Gajapatiraju v Revenue Divisional Officer, Vizagaptam [1939] AC 302, Little Hayes Nursing Home Ltd v Marshall (1993) 66 P&CR 90 and Griffiths v WE & DT Cave Ltd (1999) 78 P&CR 8 considered; Investors’ Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 distinguished.
There was no evidence as to whether, in 1999, the land had foreseeable development potential other than for development as a golf course. However, it had to be borne in mind that the lease was for a period of 50 years and that, in the nature of things, much might happen in that relatively long time-frame to alter the value of the subjects. There was nothing to indicate that the parties had intended to disregard all uses other than those of agriculture or open space that might become possible or desirable within that 50-year period.
That did not mean that the land was to be valued as being ready for residential development. The structure and local plans did not confer any right on the owner to undertake such a development and it was conceivable that the appellants would take the view that the pay-and-play golf course should be retained as a valuable amenity in a residential area. There were many potential imponderables in assessing full market value and it could not be assumed that the appellants were justified in valuing the subjects at £5.3m. However, the respondent had fought the case on the basis, not that the appellants’ valuation was excessive, but that the subjects had to be valued solely as agricultural land or open space suitable for development as a golf course. Accordingly, the respondent had to fail on that issue.
James Mure QC and James Findlay (instructed by the legal department of North Lanarkshire Council) appeared for the appellants; Rhoderick McIlvride (instructed by Anderson Fyfe LLP, of Edinburgh) appeared for the respondent.
Eileen O’Grady, barrister