Town and country planning — Block of flats in existence on July 1 1948 — Planning permission refused for penthouse flat — Proposed development within Part II of Schedule 8 to the Town and Country Planning Act 1971 — Application for compensation — Claim made for £ 62,388 — Evidence on behalf of local planning authority put cost of constructing enlargement above its value on completion after making allowance for developer’s profit and risk — Tribunal reduces completed value and disregards developer’s profit and risk — Award of £ 12,200 made after adjustments
On February 9
1984, the claimant company applied to Richmond upon Thames London Borough
Council for planning permission for the enlargement of a block of flats at
Cambridge Park, Twickenham, Middlesex. The building was constructed in 1936;
and the enlargement was to have consisted of a large penthouse flat on the
roof. The application for planning permission was refused on May 15 1984. The
claimants’ appeal to the Secretary of State for the Environment was dismissed
on January 18 1985. As the proposed development was of a class specified in
paragraph 3(b) of Part II of Schedule 8 to the Town and Country Planning
Act 1971, the claimants submitted a claim to the local planning authority under
section 169(2) of the same Act. The block of flats in question occupies a
landscaped site running down to the River Thames near Richmond and comprises a
block of 75 flats and a number of lock-up garages and parking spaces. The roof
of the centre portion of the block is flat and has parapet walls. The proposed
flat would have been large with 4 bedrooms, 2 bathrooms, 2 shower rooms, a
dressing room, a study, a dining-room, a lounge, a kitchen and utility room, a
wc, a cloakroom, a store and an entrance hall. The claimants contended that the
penthouse flat could have been sold on the valuation date, the date when the
Secretary of State dismissed the appeal, for £ 250,000. After deducting the
cost of construction the balance would be £ 62,388, which was the amount of the
claim. For the local planning authority, it was said that the sale value of the
flat was £ 170,000; with small adjustments, the construction cost put forward
by the claimants was accepted with the addition of developer’s profit and risk.
However, as the proper claim was in respect of the depreciation in the value of
the freehold interest in the whole block of flats, a deduction had to be made
from any value attributable to the penthouse flat alone, as a purchaser of the
entirety would expect to pay less than the aggregate values of the parts.
Held After viewing the property and the
comparables, the Tribunal decided that the proper sum of compensation was £
12,200. The Tribunal decided that the proposed flat would have sold at £
200,000. It made some small adjustments to the costs of the development and
sale and disallowed any deduction for developer’s profit and risk. A further
small deduction was made to reflect the depreciation in the value of the
freehold interest in the entirety of the property.
the Lands Tribunal
This was a
reference to the Lands Tribunal to determine the proper sum of compensation
payable under section 169 of the Town and Country Planning Act
therefrom, for development of a class specified in paragraph 3(b) of
Part II of Schedule 8 to the Town and Country Planning Act 1971.
(instructed by Green David Conway & Co) appeared for the claimants and
called Mr Andrew Robert Hale, a quantity surveyor, Mr Peter David Nicholson ARICS
and Mr Derek Edward Phillips FRICS.
Harper (instructed by the solicitor to the borough council) appeared for the
local planning authority and called Mr David Adair Russell-Smith BSc ARICS, the
deputy district valuer.
following decision of the Tribunal was delivered.
V G WELLINGS
ESQ QC: This is a reference claiming compensation
under section 169 of the Town and Country Planning Act 1971 for a planning
decision restricting development at a block of flats known as Meadowside,
Cambridge Park, Twickenham, Middlesex. On February 9 1984, the claimants,
Richmond Gateways Ltd, applied to the council of the London Borough of Richmond
for planning permission for the enlargement of Meadowside, being a building in
existence on July 1 1948 (it was erected in 1936), by the erection on top of
the roof of the building of a penthouse flat.
The proposed
development was of a class specified in para 3(b) of Part II of Schedule
8 to the 1971 Act and satisfied the conditions of that schedule and all other
relevant conditions as to size, area, and cubic content. The application for
planning permission was refused on May 15 1984. The claimants appealed to the
Secretary of State for the Environment, who dismissed the appeal on January 18
1985, which date is agreed to be the valuation date. The following dates are
also agreed:
(1) Date
for receipt of tenders for construction of penthouse: April 18 1985;
(2) Date
for commencement of work: June 18 1985;
(3) Date
for completion of work being the date on which the balance of payment to the
building contractors would become due: October 18 1985;
(4) Date
for sale of penthouse flat: January 18 1986.
Under section
169(2) of the 1971 Act the claimants are entitled to compensation if, on a
claim made to the local planning authority within the time and in the manner
prescribed by regulations, it is shown that the value of their interest is less
than it would have been if the planning permission sought by them had been
granted. The amount of the compensation is to be equal to the difference in
values of the interest with and without the grant of the planning permission
sought. The assessment of compensation is affected by the provisions of section
178 of the 1971 Act under which the rules set out in section 5 of the Land
Compensation Act 1961 are, so far as applicable and subject to any necessary
modifications, to have effect as they have effect for the purpose of assessing
compensation for the compulsory acquisition of an interest in land. The
claimants duly made an application for compensation.
Meadowside is
located between Richmond Road and the River Thames on the opposite side of the
river to Richmond upon Thames. It occupies a landscaped site of approximately
6.1 acres running down to the river; Marble Hill Park immediately adjoins the
site on the west. Meadowside comprises a block of 75 flats and consists of a
four-storey centre section whose axis is generally east-west; a long
three-storey spur running to the south and a short three-storey spur running to
the north. There is also a two-storey detached building much older than the
centre portion and containing two dwellings, one of which is a caretaker’s
flat. There are three single-storey blocks of lock-up garages totalling 53 in
number and also 40 parking spaces. The centre portion of the flats is of solid
brick construction, with walls varying in thickness between 14 inches and 18
inches and is typical of its age and style of
There are central heating pipes along the surface of the roof and there is a
water tank at one end. The proposed penthouse flat, if permitted, would be
erected on the top of the centre portion, the base of the flat being raised
above the pipes.
The proposed
flat would be quite large: it would have four bedrooms, two bathrooms, two
shower rooms, a dressing room, a study, a dining room, a lounge, a kitchen and
a utility room, a wc (additional to those in the bathrooms and shower rooms), a
cloakroom, a store and an entrance hall. There would also be a patio with a
southerly (towards the river) aspect. Access to the centre portion is by a
driveway from Cambridge Park past a block of 20 of the garages, some of which
have a dilapidated appearance. Some of the garages are let to persons who are
not residents of Meadowside. Some are used as stores by the tenants of
Meadowside. It is not proposed that the purchaser of the penthouse flat would
be entitled to a garage as part of the purchase price. He would have to make
his own arrangements to obtain the right to a garage or garages. However, he
could count on at least two garages being available to him if he paid the
appropriate rent.
Access to the
penthouse flat within the centre portion would not be by the main entrance
thereof but by a side entrance on the western side of the centre portion and
thence by a lift to the third floor and then by a staircase to a lobby outside
the entrance to the flat. The lift is manually operated and the staircase is
not very attractive and the same can be said of the entrance. On the eastern
side of the flat and outside it, would be the lift head of a second lift (which
would not give access to the penthouse flat). There was some question as to
whether persons inspecting or maintaining that lift and the water tank in its
vicinity would need a right of access through the flat for the purpose, but I
am satisfied that they would not. Access to them could be obtained without
going through the penthouse flat. The internal partitions of the penthouse
would be of wood (for lightness) as would the floors. There would be a corridor
which would receive natural light from the lobby as well as being lit by
electricity.
After the
valuation date the claimants sold the freehold of Meadowside to Shellpoint
Trustees Ltd, who on March 25 1985 purported to grant to the claimants a lease
of the air space above the centre portion of the block of flats for the term of
125 years from December 25 1984 at the rent of a peppercorn (if demanded)
together with an insurance rent. Notwithstanding the sale of the freehold of
Meadowside, the parties have proceeded on the basis that the claimants retained
the freehold thereof but that the proposed penthouse flat, if built, would have
been subject to a lease for 125 years.
The claimants
say that the price at which the penthouse flat could have been sold on the
valuation date was £ 250,000. They say also that, after deducting the cost of
construction of the penthouse flat, the balance would be £ 62,388 and that is
the amount of compensation which they claim. They say also that that sum
represents the difference in value of the freehold estate with and without the
grant of the relevant planning permission. Mr Phillips said that the value of
the penthouse flat and the cost of its construction are the only variables. The
penthouse would not enhance the value of the remainder nor depreciate it.
Bearing in mind that, under section 169 of the 1971 Act, the interest to be
valued is that in the entirety, the district valuer, as will be seen, took a
different view.
According to
Mr Russell-Smith, the cost of construction of the penthouse would exceed the
price which could be obtained for it as at the valuation date and, therefore,
the compensation to which the claimants are entitled is nil.
For the
purpose of assessing the price at which the penthouse flat might have been sold
at the valuation date, only one of the existing Meadowside flats (No
16) was referred to (by Mr Nicholson). I was referred to five penthouse flats,
all at Teddington, and to a house in Cambridge Park (by Mr Nicholson). I find
no assistance from any of the properties referred to other than 37 Cherwell
Court, Broom Park, Teddington. That consists of a block of flats built in 1974
with a penthouse flat erected on the 7th floor thereof in 1984 and sold on
September 17 1984 for £ 180,000. The total floor area of the penthouse flat of
that property is 130.3 square metres. Mr Nicholson made a number of adjustments
to the purchase price of that penthouse flat in order to take account of
differences in the valuation date, location, standard of finish, environment
and services. By such adjustments he reached the conclusion that the
transaction in question justified a purchase price for the proposed penthouse
flat at Meadowside of £ 272,343, which figure more than justified, he thought,
the price of £ 250,000 which in his opinion could be obtained for the proposed
penthouse flat at Meadowside.
The district
valuer took the view that the penthouse flat at 37 Cherwell Court is more
favoured in every way than the proposed penthouse flat at Meadowside would be,
having regard to approach, view, availability of garages (as part of the
price), the age and modernity or lack of it of the buildings, means of access
and lifts, layout of the flat, views and availability of mooring of boats are
concerned. It would not seem that mooring of boats would be possible at
Meadowside although it clearly is at Cherwell Court (for a price). The district
valuer’s opinion of the price at which the penthouse flat at Meadowside could
be sold on the valuation date was £ 170,000. In reaching that conclusion he
took into account, he said, the following factors:
(1) The
quality and age of construction of Meadowside did not compare with that of 37
Cherwell Court;
(2) Meadowside
was unattractive and out of character in the surrounding locality; the lift in
the centre portion was old fashioned and noisy; it reached the third floor
only; the stairs to the fourth floor had a cheap look about them and were
noisy;
(3) The
entrance was unimposing;
(4) There
would be no security device such as an entry phone at the entrance; resident
porters would be available but would not be sitting at a desk at the entrance;
(5) The
proposed penthouse flat would not blend in with the existing construction and
would not look very attractive;
(6) The
flat would be large and appropriate to occupation by a family; such
accommodation was not normally found on top of a block of flats; wood
construction within the penthouse would not be as good as block construction;
(7) There
were 15 statutory tenants in the block; that fact would deter a purchaser as
would the lower quality of the flat beneath;
(8) No
garage would be allocated to the purchaser though one would be available at a
price;
(9) There
would be no direct access to the river; there is a gate to the towpath but not
exclusive frontage to the river;
(10) The
gardens at Meadowside of approximately 6 acres were very pleasant;
(11) At
Cherwell Court the access was cramped; there was limited parking space; there
were gardens for residents’ use; access to the penthouse flat was through the
front door of the block; there was an entry phone; and a modern lift to the
seventh floor.
Mr
Russell-Smith took the view that the costs of construction and selling the
penthouse flat would exceed £ 170,000. His valuation of the claimants’ interest
on the assumption that planning permission for the construction of the
penthouse had been granted was therefore as follows:
|
(a) Value of |
£ 63,000 |
|
Plus (b) Value |
£ 47,250 |
|
Plus (c) Value |
£ 335,000 |
|
Plus (d) The |
Nil |
|
Aggregate |
£ 445,250 |
Items (a), (b) and (c) and the values set against them by Mr
Russell-Smith are all agreed. In order to ascertain the value of the claimants’
interest in the entirety, that is to say all the above notional interests
combined, Mr Russell-Smith then deducted approximately 10% from the aggregate
of £ 445,250 and reached £ 400,000 as the value of the interest within the
meaning of section 169 of the 1971 Act.
Secondly, Mr
Russell-Smith valued the claimants’ interests on the assumption that planning
permission for the construction of the penthouse flat had been refused. His
valuation on that basis repeated items (a), (b) and (c) of his first valuation
and the amounts set against them. Accordingly, in his second valuation the
aggregate of the values of the several parts was again £ 445,250. The claimants
agree the second valuation to that point. However, Mr Russell-Smith again, in
order to find the value of the claimants’ interest in the entirety, deducted
10%, thus reducing his valuation on the second basis to £ 400,000. Since the
result in each of his valuations is the same, Mr Russell-Smith says that the
compensation payable to the claimants for depreciation in the market value of
their interest on account of the refusal of planning permission is nil because
there was no such depreciation. Mr Phillips was unwilling to agree to any
deduction from the aggregate of £ 445,250. In his opinion that sum represented
the value of the claimants’ interest in the entirety before taking into account
any value attributable to an assumed planning permission. Mr Russell-Smith,
however, justified his deduction on the ground that a purchaser of the entirety
would expect to pay less than the aggregate values of the parts because he
would seek to sell off the parts and make a profit in so doing. If the sum
attributable to item (d) in Mr Russell-Smith’s first valuation were in excess
of nil so that the aggregate were a greater sum than £ 445,250, he would
nevertheless reduce the new aggregate by 10%.
The parties
agreed the following costs of construction:
|
|
£ |
|
(1) |
123,500 |
|
(2) |
18,525 |
|
(3) |
12,350 |
|
(4) |
1,000 |
|
(5) |
2,002.50 |
|
(6) |
6,391 |
|
(7) |
745 |
|
Total |
£ 164,513.50 |
There were some disputed items. Mr Phillips added to the agreed
costs of construction £ 15,000 in order to upgrade certain interior design
features of the
additional sanitary wear and kitchen fittings, to a standard suitable to a sale
price of £ 250,000. VAT at 15% on that sum would be £ 2,250. Mr Russell-Smith
thought that £ 15,000 was not enough and he produced a calculation showing that
a sum between £ 3,502.85 and £ 4,502.85 (plus VAT) ought to be added to £
15,000.
Mr
Russell-Smith thought that an allowance of £ 2,000 for provision of a security
alarm system should be made. Mr Nicholson disagreed. He said that there would
be an entry phone at flat level. That feature taken together with the resident porter
meant that security of the penthouse flat would be quite adequate. No
additional expenditure was necessary, he said.
As to the
costs of the sale, the following items were agreed:
(1) Agents’
fees at 1.5% on the sale price;
(2) VAT
at 15% on such fees;
(3) An
advertising allowance to be paid to the agents in addition to fees (on a sale
price of £ 250,000), £ 1,000.
It was agreed
that if the claimants’ solicitors were employed in order to do the conveyancing
they would charge 0.5% on a sale price of £ 250,000. Mr Russell-Smith thought
that other solicitors would charge 1% on such a sale price. It would seem,
also, that if the sale price were less than £ 250,000 legal costs, whether
charged by the claimants’ solicitors or other solicitors, would vary from 0.5%
and 1% respectively. I do not know what the variation would be.
Mr
Russell-Smith wished to make an allowance of £ 32,000 for developer’s profit
and risk. That sum represents 20% of £ 160,000 which Mr Russell-Smith
originally thought would be the sale price. When he changed his estimate of the
sale price to £ 170,000 he did not change the allowance for developer’s profit
and risk. Mr Phillips thought that there should be no allowance for developer’s
profit and risk. Mr Phillips thought that there should be no allowance for
developer’s profit because, if the claimants were the sellers, they would not
employ developers. The claimants are a property company experienced in carrying
out developments of the kind postulated at Meadowside. They employ builders but
not developers. Mr Phillips thought that the purchaser would be a property
company similar to the claimants and developers would not be employed. He also
thought there should be no deduction for risk. Both profit and risk would be
comprehended in the selling price.
I have
inspected Meadowside and Cherwell Court (externally only). I do not think that
Mr Russell-Smith’s criticisms of Meadowside are fully justified. The approach
is not as bad as he says it is. The situation and gardens are most pleasant.
The views from the penthouse flat will be lovely towards the river. In other
directions the view may be obscured to some extent by trees in summer but the
trees themselves will be pleasant to look at. I do not think that the erection of
a penthouse flat on the top of the centre portion of Meadowside would be
incongruous. I do not agree that Cherwell Court has all the advantages. A flat
on the fourth floor of a building has some advantages compared with one on the
seventh floor. The lift may go up to the seventh floor, but if it is out of
order or cannot be used because of maintenance it is a long climb to the
seventh floor. I am not satisfied that the sale price of the penthouse flat
would be as high as £ 250,000 nor that it will be as low as £ 170,000. I think
that it would be more than £ 180,000 (the price obtained for 37 Cherwell Court
in 1984). I would not myself make the rather artificial adjustments to that
price which Mr Nicholson made, but I would adjust it upwards if I were to treat
37 Cherwell Court as a comparable. I doubt whether it is. The date of the
transaction was slightly different but, more important, there is a considerable
difference in location. I have no difficulty in concluding that the sale price
of the proposed penthouse flat would be £ 200,000. I so hold.
Having regard
to the quality of a flat which will sell at a price of £ 200,000, I do not take
the view that any addition is to be made to the interior design costs of £
15,000 plus VAT. As to legal costs, it appears that they are a matter of
negotiation and I intend to apply an average rate of 0.75%. I assume that the
advertising allowance payable to estate agents in addition to fees of £ 1,000
relates to a price of £ 250,000 and that on a lower price a smaller figure
would be appropriate: I intend to substitute £ 800 on that account. As to the
need for a security alarm system, I accept the evidence of Mr Nicholson and
disallow the whole of the proposed additional cost of £ 2,000. As to
developer’s profit and risk, I accept the evidence of Mr Phillips. It appears
to me that the purchaser is likely to be a company very similar to the claimant
company if not the claimant company itself (it is to be treated as a bidder for
the flat). Such a company would not employ developers. The risk is comprehended
in the sale price achieved. I therefore disallow the additional cost of £
32,000 or any sum for developers’ profit and risk.
The cost of
construction of the penthouse and of the sale are therefore as follows:
|
|
£ |
|
(1) Building costs |
123,500 |
|
(2) VAT |
18,525 |
|
(3) Interior |
15,000 |
|
(4) VAT |
2,250 |
|
(5) Architects’ |
12,350 |
|
(6) Consulting |
1,000 |
|
(7) VAT on |
2,002.50 |
|
(8) Interest |
6,391 |
|
(9) Legal |
1,500 |
|
(10) VAT |
225 |
|
(11) Agents’ |
2,500 |
|
(12) VAT |
375 |
|
(13) Advertising |
800 |
|
(14) Building |
745 |
|
Total |
£ 187,163.50 |
|
|
|
After deducting £ 187,163.50 from the sale price of £ 200,000, the
balance is £ 12,836.50. I agree with Mr Russell-Smith, for the reasons given by
him, that in order to find the value of the claimants’ interest in the entirety
of Meadowside, on the basis that planning permission had been granted for the
erection of the penthouse flat, that sum must be adjusted downwards. I shall
deduct 5% from it. The final figure is therefore £ 12,194.68 which I shall
round up to £ 12,200.
I award to the
claimants by way of compensation under section 169 of the Town and Country
Planning Act 1971 the sum of £ 12,200.
The
compensating authority will pay the costs of the claimants such costs if not
agreed to be taxed by the Registrar at the High Court Scale of costs.
