Introduction The Upper Tribunal (Lands Chamber) (“Tribunal”) has issued its first major and important decision on the level of compensation for land compulsorily acquired in the Olympic site at Stratford in East London in Halpern, Gladwell, Clearun Limited & Dominion Mosaic & Tile Company Limited v Greater London Authority [2014] UKUT 116 (LC). This decision importantly (a) sets a tone and scope for the valuation of other land in the Olympic site and (b) sets out with some clarity the Tribunal’s approach when valuing the development potential of land as well as producing guidance on disturbance and extinguishment. There are also some useful comments on safeguarded land. Squire Sanders acted for Greater London Authority.

Brief Facts

The reference land was used as a waste transfer station. At the vesting date the land and company operating from the site, Clearun Limited (“Clearun”), were in the process of being sold by Patrick Gladwell (“Mr Gladwell”) to David Halpern (“Mr Halpern”). The transaction was not, however, completed (even though some monies had been paid). There was an attempt made to sell some of Clearun’s assets shortly after the vesting date, but evidence was produced by the Greater London Authority to show it had continued trading. The right to compensation was assigned by Mr Gladwell to Mr Halpern who pursued claim for compensation for extinguishment of Clearun and the land’s development value.

When valuing the land the Tribunal had to determine whether the land was allocated for residential or merely had hope value. The Tribunal heard evidence about the prospects of development of the land if the Olympics had been cancelled on the valuation date of 2 July 2007. Part of the site was safeguarding for Crossrail 2.

Decision

The Tribunal (HHJ Mole QC and Mr Francis FRICS) reached the following key decisions:

Land Value

  • Section 9 of the Land Compensation Act 1961 technically only relates to the reference land but common sense suggests that a purchaser would not expect that safeguarding north and south of the reference land would impede development on the reference land
  • Development of the area around Stratford without the CPO would have occurred around 7 years after the valuation date
  • The reference land was not allocated for residential development The reference land had hope value which added 15% to the existing use value
  • Planning Permission assumed for residential 18 months after vesting date
  • Density of development would be 450 habitable rooms per hectare
  • Valuation on rental of £2.50 psf with yield of 6.5%
  • Assumption developer would discount full valuation by 40% for risk
  • Atis Real Bank valuation was good contemporaneous evidence (as was the sale of the land by Mr Gladwell to Mr Halpern) and both of these factors were highly relevant to the Tribunal’s task in assessing the value of the land

Disturbance

  • Clearun was not totally extinguished but, on the evidence, it continued trading
  • While part of Clearun was sold as a going concern, the rump was retained and continued trading
  • Compensation was payable for items paid by Clearun. These included redundancy costs, some rubbish disposal and prepossession loss of profits
  • No award made for management time because no evidence produced of any loss by any of the Claimants

Comment

This is an important case both for setting the baseline for compensation awards on the Olympic site in terms of its no scheme development potential and also in dealing with compensation awards generally.

The Tribunal dealt with the legal issue of Section 9 with a common sense approach and found that although the legal assumption was potentially absurd it did not affect the overall valuation. This may not always be the case.

The case also reviewed the steps taken by the claimant to mitigate its loss once it became clear that it was not going to be possible to relocate. The Tribunal was aware that the proposals by Mr Halpern to acquire the reference land and Clearun had been taken in the scheme world, where the likely outcome was that Mr Halpern would inherit a compensation claim. Nevertheless the Tribunal attached weight to the terms of the sale and were able to conclude that on the evidence there was consistency with the market at the vesting date.

Key Learning Points

  • Where hope value is the basis of compensation, a claim can include disturbance and loss of profits if it can be shown a business would have continued to trade after the valuation date. The claims must, however, be consistent.
  • Evidence must be provided to support losses and the Tribunal will not award compensation without evidence which satisfies the burden of proof.
  • Section 9 only applies to the relevant land and not any other land in the CPO.
  • A site is unlikely to be ‘allocated’ under Section 16 of the Land Compensation Act 1961 if it is a large site or a further plan needs to be approved for development of part of the site (but Section 16 has, of course, been repealed by the Localism Act 2011 for CPOs made on or after 6 April 2012).
  • Contemporary evidence from developers and other key personnel who were active on the Olympic site before and at the vesting date can be determinative in assessing the extent of any uplift for hope value.
  • The extent of the discount of 40% to reflect a 7 year deferral is a useful guide to the way hope value can be assessed.