Pro Investments Limited v London Borough of Hounslow

Compensation for compulsorily acquired land must reflect an open-market sale on the statutory assumptions and disregard value effects attributable to the acquiring scheme. Where comparable sales or apartment values were influenced by that scheme, they require adjustment before use in the no-scheme valuation.

A residual valuation may provide the better guide for a high-density development site, but it must be checked against reliable comparable evidence and assessed using realistic assumptions about the future sales environment, development risk, costs and profit.

Disturbance compensation may include reasonably incurred CAAD and pre-reference costs, and charges caused by early redemption of secured finance. It excludes sums which reduce the claimant's indebtedness and therefore do not constitute loss.

Pro Investments Limited's land, Capital Court at Kew Bridge, was compulsorily acquired on 1 September 2016 for a scheme including Brentford Community Stadium. In an earlier CAAD appeal, the Tribunal held that appropriate alternative development was a mixed-use scheme containing 205 apartments, 40% of them affordable housing: Pro Investments Limited v London Borough of Hounslow [2019] UKUT 0319 (LC).

The parties agreed some compensation items but disputed the land value, CAAD and pre-reference costs, and costs incurred in redeeming secured loans. The central valuation issue was whether scheme-world sales and transactions could be used without adjustment when the stadium scheme had to be assumed cancelled.

1. The Tribunal awarded total compensation of £11,245,413. It assessed the market value of the reference land at £10.25 million, rather than either party's valuation.

2. Under the statutory assumptions, the land was to be valued as sold on the open market by a willing seller on 1 September 2016, with the CAAD permission assumed. Although the statutory no-scheme provisions did not apply, value changes attributable to the stadium scheme had to be disregarded by assuming that scheme cancelled.

3. The residual method was the more reliable primary valuation method, with comparable transactions used as a sense check. Scheme-world apartment sales and nearby land transactions had been affected by the scheme's transformation of the locality. A prudent purchaser in the no-scheme world would instead anticipate sales while the adjoining waste-transfer station and other non-residential uses remained. That prospect would depress achievable apartment values.

4. The Tribunal adopted a private-apartment sales rate of £690 per square foot. It accepted profit rates of 20% on private apartments, 6% on affordable housing and 15% on commercial development, without a separate contingency or cost-overrun-guarantee deduction. Its residual appraisal produced a land value of £10.25 million, or £16,617 per habitable room.

5. The claimant recovered £697,000 for CAAD and pre-reference costs. The Tribunal accepted that costs incurred after the compensation reference began could still be recoverable if the work was for the CAAD appeal or pre-reference process.

6. Early-redemption charges and lender legal costs caused by the compulsory acquisition were compensable disturbance loss. Interest was withdrawn. The Aviva release price was not recoverable because it reduced the claimant's indebtedness and thus caused no loss. The recoverable financial and early-redemption costs were £55,413.08.

The decision was final except as to the costs of the compensation reference.

• Upper Tribunal (Lands Chamber): In the prior CAAD appeal, the Tribunal allowed the claimant's appeal and issued the relevant certificate: Pro Investments Limited v London Borough of Hounslow [2019] UKUT 0319 (LC).
• Upper Tribunal (Lands Chamber): This compensation reference determined the compensation payable following that CAAD decision.