How R.H.E. Values Property
Page 50
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By K. Firth Butterfield,
THE proceedings before the Transport Arbitration Tribunal, in which. Liss Transport, Ltd., appealed against the valuation of premises by the Road Haulage Executive, revealed for the first time the methods adopted by the Executive's valuers in assessing compensation.
In one instance I detected -mathematical errors in computing offers. In another,; a loss made on the company's trading over a' certain period was taken into account in assessing the value of property. A delay of .10, months in bringing the matter to arbitration siniS
also noted. ' -' ••
The „case was; reported . in "The Commercial Motor" last week, but I will briefly .recall the facts.
The First Steps
Liss Transport, Ltd., owned freehold property and land at Liss, on the main London-Portsmouth road, It was inspected by Messrs. Reynolds and Young, valuers appointed by the R.H.E., in the middle of January, 1949. Towards the end of the month, Mr. Neill, F.R.I.C.S., a partner of that firm, had an interview, at Liss, with the managing director and the chairman of Liss Transport, Ltd.
At this meeting an offer of £13,500 was made by Mr. Neill On behalf of the R.H.E. The company required.£18,000, based on a valuation made 12 months earlier by its own architect. After much discussion the parties agreed to accept, and " shook hands" upon, . a figure of £14,500:. Mr. Neill stated in evidence that he told the directors that this figure was subject to approval by the R.H.E., but, •in. cross-examination, the managing director said that he did not remember this phrase being used. The' Matter then 'lay. dormant until April, 1949, when Messrs. Reynolds and Young, in a letter to Liss Transport. Ltd., said that they had been informed by the R.H.E. that a portion of the office block at the front of the garage had been built (with the permission of the county council) over the building line. Should the road be widened at any time the block would have to be demolished and new offices erected. Consequently, the R.H.E. was not willing to offer more than £10,000.
R.H.E. Raises Offer Liss Transport, Ltd., then instructed Messrs. Bridges and Sons, Leatherhead, to make a valuation.. They submitted that the. property was worth £16,500. Some negotiations took place during the next few months and in September, 1949, the R.H.E. increased its offer to £11,000. This was refused and the matter referred to the Tribunal.
An astonishing item of news which the evidence brought to light was that the R.H.E. knew in September, 1949, that the matter was to be referred to the Tribunal, yet nothing was done until July, 1950. There-can be no eXcuse for such a delay. It is absolutely wrong
A40 that anyone should be kept in the dark as to the final value of any of his assets for 10 months, merely because the purchaser happens to be a State organization.. Mr. Pope, the first •witness for Liss Transport, Ltd., stated that he valued the .premises at £15,000. This figure had been arrived at in two ways :— (a) Replacement cost . of the buildings (less depreciation ranging from 5 per cent. to 25 per cent., dependent on their age), plus site value; total, £15,500.
(b) Rental value and scarcity value . (total, £925 a year) capitalized at 6 per cent; total, £15.400.
During his examination particular reference was made to the office block. Two letters were read from the county councils concerned with the possible road-Widening. One stated that the possibility was "so remote as to be negligible." The other said that "a new by-pass road was now mooted, therefore, it was unlikely that this old road would ever be altered." Mr. Pope's opinion was that the offices could be rebuilt at a present-day cost of £940.
Valued at £16,572 In evidence, Messrs. Bridges and Sons stated that their valuation had been arrived at on the basis of value per cubic foot and totalled £16,572. They had made a check valuation computed on a rental value of £960 a year and capitalized this at 6 per cent.
Mr. Neill, giving evidence for the R.H.E., said that he originally valued the premises on a rental basis of £816 and capitalized this sum at 6 per cent., giving a total of £13,600. To reach a settlement he had agreed with Liss Transport, Ltd., to recommend the R.H.E. to pay £14,500.
On being informed of the new position in respect of the offices, he amended his original valuation by deducting 20 per cent. He then made the Liss company a new offer of £10,000, this later being increased to £11,000.
This evidence was rather startling, as the new offers were mathematically
incorrect. Twenty per, cent. from £13,600 is £10,880 and 20 per cent. from the previously agreed figure of £14,500 to £11,600. Mr. Neill's statement meant that he valued the disturbance of the office block at either £2,720 or £2,900.
Continuing his evidence, Mr. Neill said that he valued the offices at a rental value of £73 a year. This sum, capitalized at 6 per cent.. equals £1,216. He also stated that, in his opinion, the present-day cost of erecting similar offices would be £1,600.
Mr. G. K. Hearne, F.I.Arb., another R.H.E. witness, placed a rental value, on the premises of £830 'a 'year, after allowance in respect of the possible alteration to the office block. This he capitalized at 61per cent., giving a total value of £12,450.
In examination he stated that in calculating his valuation he had made a deduction because the business, during two of the last three years, had made 'a loss. Such a deduction, in a valuation of this type, was hotly contested by Mr. T. G. Roche, on behalf of Liss Transport, Ltd., as being grOssly unfair.
Vital Principles During the hearing, Mr. Montgomery White, chairman, made two statements (neither of which was'. seriously challenged by either side) of the utmost importance. They were :
(a) Any of the businesses, acquired must be viewed as a whole and, therefore, should be purchased as going concerns at the date of acquisition.
(b) The Tribunal was not bound by any .figure previously—discussed by either side before the hearing. The members of the Tribunal, after hearing the evidence, must assess a figure
• which they believed to be equitable.
Another point of major importance which was raised, concerned claims under the Town and Country, Planning Act, 1947, for loss of development rights. Up to the present the R.H.E. has instructed its valuers to make valuadons strictly in accordance with the provisions of that Act.
Where the Executive was acquiring an undeveloped plot of land, it purchased it at approximately agricultural value. The vendor, of course, would later receive some compensation in respect of any S.1. claim which he had made for loss of development rights.
£500 for £50
In this particular instance the R.H.E. was purchasing for about '£50 a plot of land which was valued by both parties at some £500, had the Town and Country Planning Act not been passed. Liss Transport, Ltd., had made a claim for loss of development rights and at some future date it would receive the finally assessed compensation.
It was submitted that this was not equitable and the vendor should assign to the Executive his right to such compensation. The R.H.E. would then acquire the land on a mutually agreed valuation figure which took into account the total amount of the S.1. claim.
Thisquestion, on which a decision will be. announced later, is of the utmost importance to'hattliers, as it affects all 'previous property valuations and settlements made where undeveloped land has been acquired by the R.H.E.