Developers will be aware of the possibility of claims under the Land Compensation Act 1973, but what does the latest case tell us, and what are the key takeaways?
Factual background
A claim for compensation has been determined by the Upper Tribunal (Lands Chamber) in the case of Fisk v Suffolk County Council [2023].
The claim was made by the owner of a 3-bedroom house following a road being constructed to the rear of his garden as part of a new housing development.
The Claimant argued that his property had been de-valued as a result of "physical factors caused by the use of the public works". This included, he said, all night lighting at the rear of his house, noise issues and exhaust emissions.
The developer had installed acoustic fencing to try to minimise the issues and no evidence was provided to the Tribunal to quantify the levels and extent of noise and pollution caused by construction traffic. Night lighting had also, by the time of the hearing, been reduced to that of a residential street.
The relevant legislation
Although a claim for nuisance via the County Courts could potentially have been pursued, this claim was made under Part 1 of the Land Compensation Act 1973 ("the Act"). The Act provides a statutory basis for compensation for loss of value from "physical factors caused by the use of the public works".
Public works include works on roads and highways and typically include the widening of an existing road or the installation of a new road.
The "physical factors" to be considered include noise, vibration, artificial lighting, the discharge of waste, smell, fumes and smoke.
Any loss is assessed by comparing the value of the property with those physical factors (i.e. the 'switched on value') against the value of the property without those physical factors (i.e. the 'switched off value'). It is also worth noting that loss of amenity, view or convenience cannot be compensated.
Valuation evidence
The Claimant provided valuation evidence to the Tribunal consisting of a letter from an estate agent which assessed his loss at £35,000 and a schedule of comparable sales data in relation to 16 properties.
The Respondent produced an expert report which assessed the 'switched off' value as £400,000. The Claimant's view was that it was £410,000.
As to the 'switched on' value, the Respondent's expert suggested that the loss of value would only be 0.5% of the 'switched off' value of £400,000 i.e. £2,000 but acknowledged that there are difficulties in accurately analysing evidence for small differences.
Decision
The Tribunal decided that a hypothetical purchaser would have discounted their bid for the property in this case to account, in particular, for the disadvantage of all night street lighting to the rear and that traffic noise to the rear would also have been a factor. It concluded that a purchaser in this case would have achieved a discount of £10,000, which is 2.5% of the Respondent's expert's 'switched off value'. That sum was therefore awarded by the Tribunal as compensation.
What this means for developers
Although liability sits with the 'responsible authority', it can be delegated to a developer or third party under a section 106 agreement or other contractual agreement.
Timing is key for claims under the Act as claims cannot be submitted until one year after the public works have come into use. Unless phased, developments may have been completed by that stage, with focus having shifted to the next project.
Developers should be aware of, and factor in, the risk of claims being brought when preparing development budgets.
Indemnity policies could be available to minimise risk and it is likely to be favourable to settle any disputes consensually to avoid the costs associated with litigation.
Our dedicated Strategic Land, Planning and Real Estate Disputes teams would be pleased to discuss options and strategies further.
