UK: Comparables That Glitter Are Not All Gold

Last Updated: 26 June 2018
Article by Roy Pinnock

The approach to land value and the application of planning policy were brought into sharp focus by an Inspector's decision to dismiss the developer's appeal against refusal of permission on the grounds that the 'maximum reasonable level' of affordable housing had not been secured. The developer had proposed residential redevelopment of a surplus military site where it was the successful bidder. Holgate, J's judgment – dismissing the challenge to that decision under Section 288 of the Town and Country Planning Act 1990 – in Parkhurst Road Ltd v Secretary of State for Communities And Local Government & Anor [2018] EWHC 991 (Admin) confirms the importance of understanding how land value should reflect planning policy requirements.

The developer relied on nearby sales data to justify its land cost as at the market value for the site, limiting its affordable provision at ten percent. The Inspector accepted the authority's approach, starting with the site's low established use value (EUV) and applying a substantial premium (EUV Plus), to reach an overall benchmark value at which 34% provision was feasible.

In the previous (2015) appeal, an Inspector's finding that the developer's benchmark land value was broadly reasonable in light of 'market signals' (competing bids and comparables) resulted in a threat of legal challenge by the authority and a letter from the Government acknowledging that the Planning Practice Guidance "unambiguous policy position" is "in all cases land or site value should reflect policy requirements and planning obligations...".

The developer ran its new appeal case on the basis that using EUV Plus was inappropriate where the EUV was negligible. The Inspector rejected its evidence on market values, on the basis of the weakness of the comparables used (being unadjusted for variations in policy compliance and EUV). He refused to accept "a market valuation which does not, in my view, adequately demonstrate proper consideration of, or give adequate effect to, the guidance in PPG or the requirements of the development plan". In line with the authority's case, he adopted EUV Plus as a starting point, then having regard to the market as a relevant, not determining factor. The decision letter included a statement that the authority was promoting an EUV Plus method of valuation.

The developer challenged the decision under Section 288 on various grounds, including that the Inspector's misunderstanding of the authority's was partly responsible for rejecting the developer's position that a purely market value approach was "the only reasonable means by which to establish the land value" given the low EUV. It also claimed that the Inspector's decision was vitiated by accepting a (flawed) technical 'fix' for comparing land values relied on by the authority's expert.

Holgate, J dismissed these two grounds: firstly, the Inspector had understood the authority's approach correctly (establishing a site value and then re-expressing it as EUV plus a premium to cross-check the reasonableness of the site value indicated by comparables); secondly, the Inspector had erred on the technical fix but his "wholesale and robust rejection" of the appellant's valuation case and interpretation of development plan policy did not rely on – "had nothing to do with" – that point.

The judgment clearly explains the meaning of the PPG and the upholds the way the Inspector applied it. There is no wider or new principle, but it is nonetheless helpfully clear that in the current PPG regime:

(1) the PPG addresses the problem of 'circularity' – where residual land valuation using land price is based on downgrading policy expectations erode policy – by requiring site value to respect policy expectation, competitive return to willing owners and evidenced market value at the same time;

(2) comparable evidence is one helpful way to calibrate reasonable land value expectation, but may often require adjustment to be fit for purpose (including, for example, to deal with high existing or alternative use values and policy non-compliance). The more adjustment needed – and the harder to do – the less the weight that may be applied (40);

(3) reasonable behaviour matters – proper due diligence and analysis of actual demand are key elements of the reasonable owner (citing Trocette Property Co Ltd v Greater London Council (1974) 28 P & CR and Inland Revenue Commissioners v Gray [1994] STC 360);

(4) policy requirements (depending on how they are expressed) may put the onus of proof on the applicant. An Inspector may reject that party's case as lacking sufficient cogency to satisfy the policy (paragraph 54, applying Vicarage Gate Limited v First Secretary of State [2007] EWHC 768 (Admin));

(5) planning by numbers is tempting but dangerous – "the NPPG recognises that it may not be proper" to "compromise policy requirements" even where there is a viability constraint;

(6) authorities need to be careful too: using EUV Plus as a rule rather than part of an analysis "disregards levels of market value arrived at quite properly in arm's length transactions and consistent with the correct application of planning policies and sound valuation principles" (146). "Local policy statements" may cross the line in this way "especially where the document has not been subjected to independent statutory examination prior to adoption". This is rife in practice, with Supplementary Guidance masquerading as development plan policy;

(7) planning appeal decisions should be taken with a pinch of salt – they are fact specific, cannot establish or change policy, consume "a disproportionate amount of time and may distract parties" from actually getting their own evidence right.

Both the appeal decision and the judgment underline the need to avoid land value expectation becoming self-referential. The decision is a reminder of the need to critically examine evidence of comparable values to weed out those which failed to comply with policy in the first place (i.e. are not truly comparable) and of the risks when bidding for land with low existing value of being too led by future scheme, rather than underlying use, value.

The judgment also underlines the critical importance of properly testing the effect of policies at examination in public if they are to be legitimately treated as the irreducible starting point. Practitioners should take heed on both fronts and hope that the Government does not sweep away too much of the current Guidance, on which there is now judicial clarity.

(This article was originally published in Estates Gazette on 14 May 2018)

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions