Zumred Quadir Khan v Stockton-on-Tees Borough Council

For compulsory acquisition, a residual valuation may be used to assess a severely dilapidated property, but the result must reflect the price obtainable for the property in its actual condition. Refurbishment costs should reflect what an average purchaser would expect to pay, rather than an unsupported estimate or an uneconomic full specification.

A claim for consequential rental loss requires a direct causal link with the acquisition and reliable evidence of the loss. Under section 33A of the Land Compensation Act 1973, a basic loss payment is 7.5% of the market value of the acquired interest. It does not extend to professional fees, boarding-up costs, disturbance, or other items not directly based on land value.

The claimant's vacant terraced house was compulsorily acquired under a regeneration scheme. On the valuation date it was exceptionally dilapidated, following a long period of vacancy, vandalism and fire damage.

On a notice of reference, the claimant sought compensation based on a substantially higher residual value, rental loss, professional fees, boarding-up costs and a basic loss payment calculated on the whole claim. The acquiring authority contended for a nominal market value and calculated basic loss by reference to market value only.

The Tribunal determined the property’s market value, the claimed rental loss, the statutory basis for the basic loss payment, and the treatment of costs.

1. Compensation was determined at £16,413. The Tribunal assessed the market value of the acquired property at £15,000, awarded £1,125 as a basic loss payment and allowed the agreed boarding-up costs of £288.

2. The Tribunal preferred the acquiring authority’s evidence of the value of the house in refurbished condition, fixing that figure at £50,000. It accepted the residual method adopted by both valuers, but held that it must produce a realistic assessment of the price obtainable for the actual property at the valuation date. The claimant’s refurbishment estimate was unsupported and overly approximate. Conversely, the acquiring authority’s full contractor quotation exceeded what an average purchaser would be likely to spend on a modest property. The Tribunal therefore fixed the residual value at £15,000.

3. The rental-loss claim was dismissed. Applying the requirement of a direct causal link identified in Director of Building and Lands v Shun Fung Ironworks Ltd [1995] 1 All ER 846, the claimant had not proved that she would have refurbished and re-let the long-vacant property but for the scheme. The asserted rent and deductions for management and voids were also speculative and unsupported.

4. Section 33A of the Land Compensation Act 1973 required the basic loss payment to be calculated at 7.5% of the value of the acquired interest. Read with rule (2) of section 5 of the Land Compensation Act 1961, that value was the conventional open-market value obtainable on a notional sale. It excluded professional fees, boarding-up costs, disturbance and other items not directly based on land value. The applicable payment was therefore 7.5% of £15,000.

5. The Tribunal reserved the determination of pre-reference and reference costs for further submissions. By addendum, the parties’ agreement was recorded and the acquiring authority was ordered to pay £1,845 inclusive of applicable VAT.

This was an original compensation reference in the Upper Tribunal (Lands Chamber), following compulsory acquisition under a general vesting declaration. No lower-court or tribunal judgment was under appeal.