The Lands Chamber (HH Judge Huskinson & AJ Trott FRICS &) determined preliminary issues of law arising in respect of the recoverability of compensation under the second part of rule 6 of Section 5 of the Land Compensation Act 1961 (… any other matter …).
The Chamber considered a number of issues arising from the facts that: the claimants were not in possession; the losses were of rental income; they were related to a failure to redevelop rather than existing premises; and they arose in respect of land including, ie not limited to, the land taken. It considered also the relationship between compensation under rules 2 & 6 and the purpose of the closing words of rule 6 (not directly based on the value pf land), ie avoidance double-counting.
The Chamber summarised its findings as follows:
(1) Where a landowner is carrying on a business on land which is the subject of compulsory purchase procedures and which is all ultimately taken by the acquiring authority and where in the shadow period (when the prospective compulsory purchase is known about but possession has not been taken) the landowner sustains business losses which are reasonably attributable to the prospect of the compulsory acquisition, such losses are recoverable under rule 6. This is the Shun Fung case.
(2) The question arises whether a claim for losses is impermissible as a matter of legal principle if the business which the landowner is carrying out on the land is a letting business, such that the landowner is in effect an investor deriving profits from rental income of units on the land taken. We consider the answer is no, see paragraphs 37 to 44 above and see the decision of Judge Rich QC in Ryde. We do not read the analysis in Ryde in the Court of Appeal as being contrary to this. That case was concerned with a claim for profits prospectively available to the landlord after the valuation date, rather than with losses already sustained prior to that date.
(3) The question next arises whether, if only part (rather than the whole) of the land upon which such a letting business is carried on is subject to compulsory purchase and is ultimately taken, a claim for such losses is impermissible as a matter of legal principle in respect of (a) rents lost to the letting business from the land prospectively and actually taken or (b) rents lost to the letting business from the land which was never at risk of acquisition pursuant to the compulsory purchase procedures. We consider the answer is (a) no and (b) no. It will of course be necessary for the claimant landowner to establish that each category of loss is reasonably attributable to the prospective acquisition of that part of the land which is subject to the compulsory purchase and ultimately taken. The landowner may have difficulties in establishing this causal link in (b). Also questions of remoteness and reasonableness will need to be considered. But we see no reason why such a claim must necessarily fail as a matter of legal principle in advance of consideration being given on the evidence to causation remoteness and reasonableness.
(4) The question next arises as to whether, if the claim for losses to the letting business are losses calculated by reference not to lowered rents or rent voids from the land in its existing state but by reference to the land in a redeveloped state which the landowner could and would have put the land into were it not for the prospective acquisition of that part of the land which is subject to the compulsory purchase, this means that a claim for such losses is impermissible as a matter of legal principle in respect of (a) rents lost to the letting business from the land prospectively and actually taken or (b) rents lost to the letting business from land which was never at risk of acquisition pursuant to the compulsory purchase procedure. We consider the answers are (a) no and (b) no. In relation to a claim such as is considered in subparagraphs (2) and (3) above we see no reason why as a matter of law the claimant landowner must calculate his lost rents by reference to the land in its precisely existing state such that the extra rents which the landowner could have obtained from some obvious and minor refurbishment must be disregarded. Once this is conceded we see no reason in principle why a potential minor refurbishment can be taken into consideration but a potential redevelopment cannot. Once again it will of course be necessary for the claimant landowner to establish that each category of loss is reasonably attributable to the prospective acquisition of that part of the land which is subject to the compulsory acquisition and is ultimately taken. The landowner may have particular difficult in establishing this in case (b). There will also be questions of remoteness and reasonableness. In a case (b) situation the landowner may have difficulty in resisting an argument that he could and should reasonably have carried out his proposed redevelopment (in an abridged form) on that part of the land which was not at risk of compulsory purchase. However the claim should be allowed to proceed beyond a preliminary hearing stage so that causation remoteness and reasonableness can be considered on the evidence.
For a copy of the decision, follow this link: http://www.landstribunal.gov.uk/Aspx/view.aspx?id=616