Issue 1 – extent of the appropriate alternative development (AAD) likely to have been permitted
For the purpose of assessing AAD, the scheme was assessed to have been cancelled on the launch date, 14 June 2014.
The parties agreed that the retained land and at least part of the retained land were capable of accommodating AAD. The dispute centred around the form which the AAD might take as at the valuation date, applying the principles established in the Transport v Curzon Park Ltd and others case .
The claimant’s alternative scheme in its entirety largely followed the form of the building on the land comprising of 53 units, but extended around 3m towards the highway. The tribunal held that:
- Whilst a reasonable planning authority would not expect detail in line with a full planning application, the claimant’s proposal could not be an AAD as fundamental elements of it were not compliant with policy.
- Conditions that can be dealt with at reserved matters stage are the only details that should be left. Whilst it's accepted that elements can be adjusted to become policy compliant, in this case the claimant’s proposed scheme was too far removed from that.
- The planning witness for the claimant failed to appreciate the task facing the tribunal, in that fundamental tweaks need to have already been made for the tribunal to make its assessment.
As such the tribunal concluded that it could “place very little weight on [this] evidence, and [was] unpersuaded that there is a reasonable expectation of planning consent being granted for the claimant’s scheme. It is not AAD”. Indeed, the tribunal described the claimant’s scheme as being “systematically dismantled … in cross examination”.
The authority’s AAD scheme comprised of 29 residential units, with 35% being affordable housing, and 125sqm of commercial area. The tribunal accepted the authority’s scheme envelope as being AAD but with two changes:
- Firstly, it noted that the Housing and Viability Guidance for affordable housing calls for 35% of each development to be affordable. However this must be assessed in line, and balanced with, a viability assessment. The tribunal looked across the local area for similar schemes and the level of affordable housing required. Similar schemes of scale and kind attracted 0% affordable housing due to viability, so the tribunal were agreeable to having a 100% market dwelling development.
- Secondly, the commercial units were ‘removed’ from the AAD, as outline consent was granted for a change of use to residential space instead, and a contribution could be paid to justify this in planning terms.
As such, the AAD compensation was assessed against a scheme of 37 open market residential units essentially as put forward by the authority but with no affordable housing or commercial floorspace.
Issue 2 - the valuation of the site based on that development
The authority initially calculated the land at £15,000, as a stand-alone grass strip which is not immediately developable. However, it's clear from the tribunal’s decision that much work was done by both parties individually, but also through their valuers working in co-operation to agree the basis of valuation and the figures thereby produced.
Whilst various approaches were adopted and/or explored, the parties eventually agreed the value of the reference land as grass verge (as above, £15,000), the capital value of the existing building (£7.11m), and the residual value of the retained land (£590,000). They also agreed a valuation of the tribunal’s preferred AAD scheme of £2.1m, after the tribunal deducted the further section 106 payment for loss of the commercial space, thus giving the residual market value of the whole site, i.e. the reference land and the retained land, at the valuation date.
No discount was allowed by the tribunal for the lack of actual planning permission. To allow that, the tribunal noted, would 'fly in the face of what AAD is premised upon'.
Issue 3 - how such valuation should be applied for the compensation sum
The authority argued that the land should be valued based on rule 2 and 2A of the Land Compensation Act (above). This then called for the no scheme restrictions in section 6A.
The authority’s position was that the reference land should be valued under rule 2, and relied on the Ramac Holdings Limited v Kent County Council case assertion that:
“The Reference Land must be valued as if it alone was being sold on the open market by a willing seller… insofar as the claimant suffers a loss because of a diminution in the value of the Retained and then this will form a claim for compensation for severance and/or injurious affection. It does not justify adopting an artificial approach to valuing the Reference Land as if it still formed part of a larger whole.”
However, the tribunal differentiated this case on its fact to the one at present as the acquired land was only a small percentage of the overall land and was merely a grass verge, already excluded from the fenced off area. This is vastly different to acquiring 37% of a site, as was the case here.
The claimant’s submissions were based on the principle of equivalence, guided by the decision in the Castlefield Property Limited v National Highways case, and that fair and full compensation should be paid for the loss suffered to allow the claimant to, as far as possible, be put in the position they would have been in but for the scheme. But for the scheme, the claimant would have developed the whole site. Losing 37% of the site significantly reduced that developable area.
The tribunal found for the claimant on this ground, preferring an approach more aligned to the principle of equivalence than that put forward by the authority. This was despite it acknowledging the 'slightly artificial' nature of the exercise. It concluded that:
“The basic law of the authority’s approach is that it doesn’t compare apples with apples, in that the costs of construction, finance, marketing, etc of the AAD is allowed for, but the capital value of the Existing Building is included without also deducting on a similar basis the costs etc of constructing it”.
The final award was therefore based on the residual value of the site minus the agreed value of the retained land.
For further information, please contact our planning and infrastructure consenting team.
