Salford City Council must pay a landowner £5.6m after compulsorily purchasing its site, well below the £11.2m claimed but more than the council’s £3m valuation.
In TIMEC 1209 LLP v Salford City Council (COMPULSORY PURCHASE - COMPENSATION)  UKUT 269 (LC) the Upper Tribunal (Lands Chamber) ruled that owner Timec 1209 had claimed an excessive amount.
Martin Rodger QC, Deputy Chamber President and surveyor Peter McCrea, who heard the case, noted that changes in the value of the reference land attributable to the council’s later Salford Central regeneration scheme must be disregarded and said they were concerned with the land’s value at the valuation date of 2 February 2015.
Timce 1209 brought its case under rule 2 of section 5 of the Land Compensation Act 1961.
The tribunal said: “In summary the value of the claimant’s land for the purpose of compensation is taken to be the amount which the land would be expected to realise on 2 February 2015 if sold in the open market by a willing seller.
“No account is to be taken of any diminution in the value of the claimant’s interest which is attributable to the scheme underlying the acquisition. It is necessary therefore to identify development which was in prospect or had already been undertaken by the valuation date as part of that scheme and to consider whether it would have been likely to have been carried out if the [council] had not acquired any of the scheme land.”
Timec 1209 is owned by property group M&R, which bought Salford City Wharf and the reference land in March 2007 for £15m.
In 2012 it gained planning permission for the demolition of the existing building and construction of offices and a hotel.
Meanwhile the council planned an extensive regeneration of the area, later named New Bailey Quarter.
It had no objection to redevelopment being delivered by existing landowners provided their proposals were consistent with its wider regeneration objectives and could be integrated with the council’s timetable.
Salford and its development partner English Cities Fund though became frustrated with the lack of progress on the site.
Timec 1209 and M&R felt they were close to finalising an acceptable agreement scheme and resented what they saw as ECF’s unwillingness to allow them further time before the Salford resorted to compulsory purchase.
“That sense of betrayal and resentment was very clear from the evidence given by Mr Stephen Surphlis, managing director of the investment and development arm of M&R,” the tribunal noted.
Its ruling said the main issue for decision was “whether a profitable development of the reference land by implementing the Timec permission would have been possible in the ‘no-scheme’ world”.
Timec 1209 argued development of its land independently of the regeneration of neighbouring sites would have been viable in 2015 and that the benefit of planning permission gave it a value of around £10m at the date of acquisition.
Salford though said absent the comprehensive regeneration made possible by the CPO - which the tribunal had to disregard - the land would have remained an isolated site in an area otherwise devoid of high quality office buildings “and could not have generated a positive value through the implementation of the Timec permission”.
The tribunal noted: “We place no weight on the evidence of [expert witness for Timec] Mr Skelton because the rental levels, incentives and letting velocity he spoke of assumed that the Timec consent would be implemented side by side with the larger CPO scheme.
“[Witness] Mr King explicitly adopted Mr Skelton’s figures and his evidence on those matters is accordingly tainted by the same valuation heresy and is fundamentally unreliable.”
Mr Rodger and Mr McCrea concluded that despite the site’s proximity to the Spinningfields office quarter and high demand for Grade A office space in the city centre, “we are satisfied that the market would have continued to view the reference land as a fringe location…we have no doubt that, in the no-scheme world, the reference land would have been regarded by the market as incapable, at that time, of sustaining the rental values required to justify the cost of developing a high quality office and hotel scheme”.