UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2012] UKUT 17 (LC)

LT Case Number: BNO/599/2010

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

IN THE MATTER OF A NOTICE OF REFERENCE

BLIGHT NOTICE – business premises – alleged blighted land – claimant’s failure to comply with prescribed form – reasonable endeavours to sell – failure to sell – counter notice - appropriate authority’s intention not to acquire any part of land due to proposed cancellation of prospective scheme – claimants’ objections not upheld – blight notice invalid – Town & Country Planning Act 1990 section 150 (1)(b)&(c); section 151(4)(g) and Schedule 13 paras 21 & 22

BETWEEN MICHEAL WILSON HARRIS

GLENIS HARRIS Claimants

and

THE HIGHWAYS AGENCY Respondent

Re: Units 1 & 2, Station Road, Brompton on Swale,

North Yorkshire DL10 7SN

Before: P R Francis FRICS

Sitting at: Teesside Magistrates Court, Victoria Square,

Middlesbrough TS1 2AS

16 December 2011

Mr Michael Harris, in person, for the claimants

Mark Mullen instructed by Treasury Solicitors, for the respondent authority

The following case was referred to in this argument:

Burn v North Yorkshire County Council (1992) P & CR 81

DECISION

Introduction

1. This is a reference to determine whether or not a counter-notice, served by the Highways Agency (the HA) on the claimants, Mr & Mrs Mike Harris, pursuant to service by them of a blight notice under section 150(1) of the Town and Country Planning Act 1990 (the 1990 Act) to purchase their freehold interest in Units 1 & 2, Station Road, Brompton-on-Swale (the subject premises), was well founded. The HA’s grounds for serving the counter-notice were that the conditions specified in section 150(1)(b) and (c) of the 1990 Act (section 151(4)(g)) have not been fulfilled.

2. Mr Mike Harris, one of the claimants, appeared in person and called no witnesses. Mr Mark Mullen of counsel appeared for the respondent authority and called Mr Michael Spink, who, at the relevant dates, was Senior Project Manager, Development, relating to the A1 Leeming to Barton Road Scheme, and gave evidence of fact, and Mr Richard Alastair Sowerby MRICS, a senior surveyor in the Durham office of the Valuation Office Agency who gave expert valuation evidence.

Facts

3. The subject premises comprise two adjoining industrial units of steel portal frame construction under pitched roofs having brick and blockwork base walling with steel profile sheeting above and to roof coverings. They are occupied as a single unit which trades as The Bed Shop (1bed Richmond Ltd), the Nu-Yu Sleep Therapy Centre and a beauty salon. The warehouse/retail areas extend to about 380sq m, together with ground floor offices of about 78 sq m and first floor offices/treatment rooms of 53 sq m. To the front of the buildings is a full-width car parking area together with access to an enclosed storage/delivery yard which gives on to an open area of land to the rear (backing onto the existing A1 trunk road). This land is predominantly level and contains a large subterranean storage/workshop area (formerly used by previous land owners for processing potatoes) and underground pipework serving a private estate drainage system.

4. The premises front onto a short estate road serving a small industrial park off Station Road, on the northern edge of Brompton on Swale. The freehold of the main units, parking area and approximately half of the land to the rear, immediately behind the buildings and yard, was acquired by the claimants for £260,000 in November 2003, having been leased by them for the previous three years. The land between the rear land and the embankment to the A1 (the development land) was subject to a separate transaction in December 2003, being purchased for £14,000 plus VAT from Raj Developments, a company that specialises in trading potential development land.

5. In June 2002 the Secretary of State for Transport announced proposals for the upgrading of a 24 mile section of the A1 to motorway standard between Dishforth in the south and Barton in the north. The project, known as the A1 Dishforth to Barton Improvement Scheme, was subject to a public inquiry in October 2006 and on 31 March 2008, the Secretary of State accepted the inspector’s report subject to the proviso that the project was undertaken in two discrete sections: the southern Dishforth to Leeming section to be followed by the Leeming to Barton section (the section relevant to this claim) which the Secretary of State said needed further investigation in respect of additional access roads and junctions. The CPO relating to the first section (together with the Appropriation, Line and De-trunking orders for the whole route) having been confirmed, construction commenced in February 2009 and it was anticipated that construction of the northern section would begin in 2011. The CPO relating to the northern section remained in draft form pending the required investigation, recommendations and revisions and included the development land that was subject to the second transaction, but not the claimants’ main business premises, the subject of the first transaction. The extent of the claimants’ land that would be required was 1,078 sq m out of a total site area of 3,616 sq m.

6. A blight notice under section 150(1) of the 1990 Act, dated 30 May 2010, was served by the claimants on the HA on 1 June 2010. It stated:

“We…HEREBY GIVE YOU NOTICE…as follows:

1. We are entitled to the interest described in Schedule 1 to this Notice…

2. The whole of that property is blighted land within paragraph(s) 21 of Schedule 13 to the Act.

3. Our interest in that property qualifies for protection under Chapter II in Part VI of the Act because the property is a hereditament whose annual value does not exceed the amount prescribed for the purposes of section 149(3)(a) of the Act (rateable value £23,500) and we are the owner-occupiers of that hereditament shown edged in red. The premises on the land are currently leased to our businesses: The Bedshop UK Ltd, 1bed Richmond Ltd and Nu-Yu Sleep Therapy and health and beauty salon.

4. The powers of compulsory acquisition relevant for the purposes of paragraph 21/22 of Schedule 13 to the Act remain exercisable.

5. We therefore require you to purchase our interest in the property described in Schedule 2 to this Notice.”

7. A counter notice under section 151 was served upon the claimants by the HA on 28 July 2010 stating:

“The ground upon which objection is taken is, under section 151(4)(g) of the said Act that the conditions specified in paragraphs (b) and (c) of section 150(1) are not satisfied.”

8. Following the publication of the Government’s Strategic Spending Review on 20 October 2010, the Secretary of State for Transport and the Secretary of State for Communities and Local Government made a joint announcement that the northern, Leeming to Barton section, was to be cancelled. The CPO for the relevant section of the A1 improvement remained as a draft at the date of the blight and counter-notices, and throughout the period that included the date of submission of the notice of reference on 12 November 2010, and the date of the hearing.

Issues

9. The matter for the Tribunal to determine is whether or not the claimants have complied with the conditions specified in paragraphs (b) and (c) of section 150(1), and in that regard I am invited to determine whether the property comprises blighted land within the meaning of paragraphs 21 or 22 of Schedule 13 to the 1990 Act, and if so whether the respondent authority is obliged to purchase the property from the claimants.

Statutory Provisions

10. The relevant statutory provisions are contained in Chapter II of Part VI of the 1990 Act:

“149(1) This Chapter shall have effect in relation to land falling within any paragraph of Schedule 13 (land affected by planning proposals of public authorities, etc); and in this Chapter such land is referred to as ‘blighted land’”

The claimants relied upon paragraphs 21 and 22 of Schedule 13:

“21 Land authorised by a special enactment to be compulsorily acquired, or land falling within the limits of deviation within which powers of compulsory acquisition conferred by a special enactment are exercisable.

22 Land in respect of which—

(a) a compulsory purchase order is in force ; or

(b) there is in force a compulsory purchase order providing for the acquisition of a right or rights over that land;

and the appropriate authority have power to serve, but have not served, notice to treat in respect of the land or, as the case may be, the right or rights.

Notes

(1) This paragraph also applies to land in respect of which—

(a) a compulsory purchase order has been submitted for confirmation to, or has been prepared in draft by, a Minister, and

(b) a notice has been published under paragraph 3(1)(a) of Schedule 1 to the Acquisition of Land Act 1981 or under any corresponding enactment applicable to it.

Note (1) shall cease to apply when—

(a) the relevant compulsory purchase order comes into force (whether in its original form or with modifications); or

(b) the Minister concerned decides not to confirm or make the order.”

Section 149(2) defines an interest qualifying for protection under Chapter II. The parties agree that the claimant has such a qualifying interest.

11. Section 150 deals with the service of a blight notice:

“150(1) Where the whole or part of a hereditament…is comprised in blighted land and a person claims that –

(a) he is entitled to a qualifying interest in that hereditament …,

(b) he has made reasonable endeavours to sell that interest [or the land falls within paragraph 21, paragraph 22 (disregarding the notes) or paragraph 24 of Schedule 13] and [except in the case of land falling within paragraph 24(c) of that Schedule] the powers of compulsory acquisition remain exercisable, and

(c) in consequence of the fact that the hereditament…or a part of it was, or was likely to be, comprised in blighted land, he had been unable to sell that interest except at a price substantially lower than that for which it might reasonably have been expected to sell if no part of the hereditament… were, or were likely to be, comprised in such land

he may serve on the appropriate authority a notice in the prescribed form requiring that authority to purchase that interest to the extent specified in, and otherwise in accordance with, this Chapter.

…”

The “appropriate authority” in this reference is the Highways Agency. The “prescribed form” means the form contained in Regulation 16 and Schedule 2 of the Town and Country Planning Regulations 1992 (No.1492) as amended.

12. Section 151(1) and (2) provide that within two months beginning with the date of service of the blight notice the appropriate authority may serve on the claimant a counter-notice in the prescribed form objecting to the notice. Section 151 continues (insofar as relevant to this reference):

“151(3) Such a counter-notice shall specify the grounds on which the appropriate authority object to the blight notice (being one or more of the grounds specified in subsection (4)…)

(4) Subject to the following provisions of this Act, the grounds on which objection may be made in a counter-notice to a notice served under section 150 are –

…

(g) that the conditions specified in paragraphs (b) and (c) of section 150(1) are not fulfilled.

…”

13. Where the claimant has referred the objection in a counter-notice to the Upper Tribunal (Lands Chamber) in accordance with section 153(1) and (2):

“153(3) On any such reference, if the objection is not withdrawn, the [Upper Tribunal (Lands Chamber)] shall consider –

(a) the matters set out in the notice served by the claimant, and

(b) the grounds of the objection specified in the counter-notice;

and, subject to subsection (4), unless it is shown to the satisfaction of the Tribunal that the objection is not well founded, the Tribunal shall uphold the objection.”

Subsection (4) is not material to this reference.

Claimants’ case

14. Mr Harris said that he bought the area of land to the rear of the units, shortly after those had been acquired, for the purposes of development and expansion. He said in his statement of case that Land Registry searches revealed no cautions against the land, and initially in cross-examination said that he was at the time unaware that it might be required as part of the road widening scheme. However, he was referred to a letter that his solicitor had written to the HA on 3 October 2003 in connection with the proposed purchase (and which had been copied to him) which stated:

“We act on behalf of the prospective purchasers of the land edged in red on the attached plan. We understand that this land was at one time earmarked for road widening works. We shall be pleased if you will advise as to whether or not there are any proposals at the present time for widening the A1 and if so, please let us have full details as to how such proposals will impact upon this land.”

Mr Harris then acknowledged that he had been aware of the road scheme as it had been “on and off the cards for over 20 years” but insisted that, even though no response to that letter was produced or available to the Tribunal, nothing showed up on the searches in respect of the buildings. He said that in any event, other parties were interested in the development land and he did not want to miss out on the opportunity to acquire it.

15. Immediately following the purchase he approached Randall Orchard Construction (the original developers of units 1 & 2) to assist him in respect of his proposed expansion project. However, following initial inquiries made by them to the planning office it became apparent that no permission for additional units on the development land would be possible due to the road widening proposals. With no planning consent possible, any opportunity to obtain development grants from Yorkshire Forward (a Yorkshire County Council initiative) was also forfeited. A letter from Randall Orchard headed “To whom it may concern” and dated 1 November 2011 was produced within Mr Harris’s bundle of documents confirming that that was what their representative had been told in February 2004.

16. Although the draft CPO relating to that land has not been confirmed, it has not yet been cancelled and remains exercisable, Mr Harris said, and thus as the land is no longer fit for the purposes to which it could otherwise have been put (nor for any other purpose), it should be purchased at full value by the respondent authority “by way of the definition set out in paragraph 21 of section 13 to the 1990 Act.” Although the main units and associated parking area, yard and the land immediately behind the buildings was not included within the CPO, Mr Harris said they were blighted anyway due to the noise, dust and disturbance which construction of the scheme would create. He said that he had initially taken matters up with the HA and had enlisted the assistance of the Rt Hon William Hague MP but had got nowhere and was eventually invited to make a blight notice application.

17. In the meantime, Mr Harris said, in respect of his efforts to sell the property and businesses, he had instructed Redwoods, a national firm of business agents to place them on the market in 2007/2008. They had formally valued the property and business at £795,000, he said, and after he paid an initial fee of £750 plus VAT they advertised nationally through Daltons Weekly and the usual avenues. No board had been erected on the premises as this could have had a detrimental affect upon business. On being asked why the agents had based their figure on the businesses’ 2006 accounts which were better than those for 2007, Mr Harris said he, along with many others, had experienced problems with his then accountants, Vantis, and the 2007 accounts were not available at the time the property went on the market. The property remained on the market until 2010 and Mr Harris acknowledged, in answer to a question from me, that he had no viewings and thus no offers as a result of Redwoods’ marketing campaign. He had also received from them no marketing reports, updates or advice during this period.

18. The only interest that had been shown was from Lee Construction, run by a friend of Mr Harris, who had considered acquiring just the development land to run a franchise selling Caterpillar earthmoving equipment, but they had withdrawn their interest once it was known that the land might be compulsorily acquired.

19. In 2010, Redwoods advised they would require a further £750 fee to continue marketing the property, but Mr Harris said that he decided not to “throw any more money at it”.

20. Mr Harris said that he did not agree with Mr Sowerby’s valuation, it being well below a valuation that had been undertaken for re-financing purposes by Rook Matthews Sayer Commercial of Newcastle upon Tyne on the instructions of Barclays Bank in January 2010. That valuation, of £435,000, was purely of his business units and the immediately surrounding land, and did not include the development land or the goodwill of the businesses. Furthermore, Mr Sowerby had indicated that the development land was landlocked and could not be accessed except over third party land. This was incorrect, as access would be made available through the yard to the south of the units.

21. As to the counter notice, Mr Harris said it inaccurately referred to the scheme’s Dishforth to Leeming section when it should have been the Leeming to Barton section. Furthermore, in advising him as to his rights to take the matter to the Upper Tribunal (Lands Chamber), the HA had given an incorrect address (from which the Tribunal had moved some 2 – 3 years previously) and the initial notice therefore went astray. By the time the correct address had been established, and a revised reference had been sent, it was 22 days after the government’s announcement of the cancellation of the northern section of the scheme.

22. Whatever the outcome of this reference, Mr Harris said, the HA had the power of discretionary purchase under section 246 of the 1990 Act, and should exercise it.

Respondent authority’s case

23. Mr Spink set out the background to the scheme and the CPO (the relevant evidence being summarised in “facts” above), and said that compared to other road improvement schemes which have been cancelled pursuant to the Strategic Spending Review, this case was unusual. Due to the fact that the Appropriation, Line and De-trunking Orders were made for the entire Dishforth to Barton scheme the route protection can only be removed by making a Variation Order to those orders. This would require public consultation and a possible public inquiry should objections be received. However, he said that the remaining existence of the three Orders should not be seen as an intention by the Secretary of State to revive the scheme. If it were to be included in a future Government highways programme, the draft CPO and Side Road orders would need re-publication and could result in a further public inquiry.

24. Mr Spink said that he had overarching responsibility for approving the decision to serve the counter notice, and that in taking that decision he relied upon advice received from Mr Sowerby. In a letter dated 14 July 2010, Mr Sowerby had said:

“This notice should be rejected on the basis that this claimant does not appear to have made reasonable endeavours to dispose of the property, he has not demonstrated that the property is unsaleable except at less than market value. The asking price appears to be excessive and there is no indication that the market has been fully tested. Furthermore, it would appear that the land required for the new scheme does not affect the retained property (Units 1&2) adversely and that Mr Harris could continue running his business.”

Mr Spink said that he was satisfied that the respondent authority had made the correct decision in the light of the advice received, particularly now that it was known that the scheme would not be proceeding. He also said that the claimants had attempted to persuade the HA to purchase the property by agreement under section 246 of the 1990 Act, but “the authority declined to consider this.”

25. In response to a question from Mr Harris regarding the incorrect scheme reference, Mr Spink said that this was an error, but due consideration had been given to the relevant part of the scheme.

26. A witness statement of fact from Mr Allan Duckworth who is the current project manager for the scheme was produced, but he was not called. This confirmed that the relevant CPO and Side Road Orders are still “live” and the route protection has not yet been removed. He said it was the HA’s current intention to publish the required Variation Orders in draft in January 2012 and, providing objections are not received and a public inquiry is not required, it was hoped that they may come into force by August 2012.

27. Mr Sowerby produced his professional opinion of the value of the claimants’ property in both the scheme and no-scheme worlds, and said that in doing so he had regard to evidence of transactions involving similar properties in the Brompton on Swale area and other similar light industrial locations. Details of these transactions, both in respect of industrial/retail units and of bare land were provided in an appendix. He said that, in considering the value once the scheme had been completed, he took account of the HA’s standard mitigation measures, the fact that the land to be acquired was an unused and undeveloped surplus area and the fact that there would still be some 34 metres between the rear of the units and the proposed new embankment.

28. On the basis of the transactional evidence, his valuation of the property was undertaken by applying an all-risks yield of 11% to a rental value for the trading areas of 610 sq m at £53.82 per sq m which gave £300,000. He also produced a figure of £310,000 based upon a capital value approach (owner occupied units at £510 per sq m), and adopted the higher figure. He then added £20,000 for the surplus “development” land which he said was landlocked. Thus its value was limited as development could only occur if access was acquired from a third party. As to the value of the business, he said that he had only very limited information in respect of the claimants’ accounts. From this information he estimated average annual net profit at £35,000 to which he applied a multiplier of 1.5 based upon sales evidence from business transfer agents. This produced a value of £52,500 – say £55,000 giving a total valuation disregarding the scheme of £385,000.

29. It was Mr Sowerby’s opinion that if the scheme were to proceed, there would be no detrimental affect upon the value of the retained land or the business, and thus all that needed to be removed from the equation was the value of the land to be acquired - £20,000.

30. As to the claimants’ asking price, Mr Sowerby said that it was clearly too high, even in 2008 when it was first marketed. Although values had fallen since then due to the economic situation, his opinion remained that there was no chance of attracting interest in the property or business at a figure which was virtually double his own opinion.

31. I asked Mr Sowerby whether the fact that access was clearly available to the prospective development land would affect his valuation of it. He said it would not as he had previously been unaware that there was a large underground area beneath the land, and that there were estate drainage pipes also running under part of it. These factors would mean that development of the site would be all but impossible, or at least prohibitively expensive.

32. Mr Mullen submitted that the issue to be determined solely concerns the validity of the blight notice and the grounds of the objection set out in the counter notice (see section 153(3) of the 1990 Act). He said that, under section 153(2) the burden is on the claimants to show that the objection to the blight notice is not well founded. The Tribunal is confined to the consideration of the grounds that appear in the respondent authority’s counter notice (Burn v North Yorkshire County Council (1992) P & CR 81).

33. In respect of the blight notice, Mr Mullen explained that the claimants’ land does not fall within paragraph 21 of Schedule 13 because it is not land authorised to be acquired by a special enactment as defined at section 171(1)(c). It was accepted that the blight notice, at paragraph 4, also refers to paragraph 22 albeit to simply state that the powers of compulsory purchase remain exercisable for the purposes of both paragraph 21 and 22. Here, he said, the CPO remains in draft form and notices were served upon the claimants pursuant to the Acquisition of Land Act 1981, so it could be said that the property falls within paragraph 22 by reason of the notes.

34. The counter notice contends that the claimants have not complied with the requirements of section 150(1)(b) and (c). Section 150(1)(b) requires the claimants to have made reasonable endeavours to sell unless the land falls within paragraph 21 or 22, and Mr Mullen submitted that not only does it not it does not fall within paragraph 21 for the reasons given, it also does not fall within paragraph 22 disregarding the notes because that paragraph relates only to land over which there is a compulsory purchase order in force whereas here it remains in draft form. Thus, the claimants are required to prove that they have made reasonable endeavours to sell the property. He said that even if paragraphs 21 and/or 22 did apply so as to absolve the claimants from the requirement to show that they had made reasonable endeavours, they must in any event show that section 150(1)(c) is satisfied, in that, as a result of the land being blighted land, they have been unable to sell it except at a price which is substantially lower than that for which it might reasonably have been expected to sell if no part of it were blighted land.

35. Mr Mullen said that the claimants’ only evidence was the sales particulars produced by Redwoods in which a price of £795,000 was sought for the business and premises. As Mr Sowerby’s evidence had shown, that asking price was clearly unrealistic and that on its own would be enough to deter potential buyers. There was no evidence produced to support the suggestion that it was the scheme which had put buyers off. Thus, the claimants have not discharged the required burden of proof showing that the objections in the counter-notice are not well founded, and they should therefore be upheld.

Conclusions

36. The HA’s arguments and submissions as to the law are, in my view, undoubtedly correct. Whilst the CPO certainly still exists in draft form, as the HA said, the notes to section 22 have to be disregarded, and as the CPO has not been confirmed, the claimants have to discharge the burden of proof that they made reasonable endeavours to sell, and that as a result of the land being blighted, either they could not do so or could only do so at a significantly reduced figure. They have not, in my judgment, done so. Apart from the sales particulars, and a schedule of the advertising that had been carried out during the marketing period that was submitted after the hearing, there was no evidence whatsoever to support the claimants’ contentions. No copy of the valuation that Redwoods were said to have carried out when they were first instructed was produced, and, as Mr Harris said, no subsequent marketing reports, advice or correspondence had been received. No representative of Redwoods was called to give evidence and neither was the representative of Lee Construction, who was said to have been interested in the development land. I do not accept Mr Harris’s argument that he did not call him because he was “a friend” and might thus have been adjudged not to be impartial. Any witness to a hearing under the Tribunal’s standard procedure is required to give evidence on oath.

37. As to the re-financing valuation that had been carried out for Barclays, this was for different purposes and was not carried out in connection with this reference. No weight can therefore be given to it. There has thus been no evidence produced to support the contention that, whatever the value of the prospective development land might have been, the premises or the business have been blighted.

38. I thus determine that the objections made in the counter-notice served by the respondent authority are well founded, and the blight notice is not, therefore, valid or effective.

39. The claimants also said that the counter-notice served by the HA stated, wrongly, that the blight notice had been considered as part of the Dishforth to Leeming section of the A1 Improvement Scheme when it was actually the Leeming to Barton section that would affect their property. Although that mistake had been pointed out to them, the matter appears to never have been addressed, and the claimants said that they were thus unclear as to whether or not that matter had been considered within the correct context. I note that the blight notice itself made no reference to the particular section, and the error to which the claimants referred was in the accompanying letter. I consider that the claimants have suffered no prejudice as a result of the error.

40. I think it apposite to mention here that, on a number of occasions prior to the hearing, the Tribunal suggested to the claimants that they would be well advised to take legal and professional advice on the matter, but they failed to do so. If they had approached a solicitor they would undoubtedly, in my view, have been urged to arrange professional representation by a chartered surveyor and at the very least obtain a formal valuation that reflected the circumstances of the claim. That is what Mr Sowerby had done.

41. In the light of my decision above, it is not necessary for me to determine the value of the premises or the business but I am satisfied that, in respect of the value of the premises and land, the analysis of the comparables referred to by Mr Sowerby demonstrates a thorough and reasonable approach to his task. As to his valuation of the business, if I were required to make a judgment on it (which I am not) I would certainly ask him if he wished to revisit the issue on the basis of fuller financial information being available.

42. Subject to any such advice that the claimants may wish to take following this decision, the respondent authority did confirm that there is no bar on service of a fresh blight notice which could be made before the scheme is finally cancelled.

43. This decision determines the issues in this reference, and will become final when the question of costs is decided. A letter relating to costs accompanies this decision.

DATED 17 January 2012

P R Francis FRICS

ADDENDUM

44. Submissions on costs have been received from the claimants who, I suspect, may have misunderstood the purpose for which submissions were sought. They claimed a total of £178,833.12 representing the total amount of “costs incurred because of the restrictions on developing my businesses, property and land ….” However, Mr Harris did say costs in respect of the reference had been kept to a minimum by “doing everything himself.”

45. No submissions on costs have been received from the respondent authority. In the circumstances, I make no order for costs.

DATED 6 February 2012