[2024] UKUT 020 (LC)

This decision, determined under the Tribunal’s written representations procedure, concerns the payment of compensation to the former mortgagee of a property which has been compulsorily acquired, where the level of that compensation does not meet the outstanding mortgage debt.

Where, as here, the borrowing mortgagor has not agreed the level of compensation nor taken any part in the proceedings, it is not open to the mortgagee and the acquiring authority simply to settle the level of compensation. Instead, it is for the Tribunal to determine the compensation to be paid by the acquiring authority under section 15 of the Compulsory Purchase Act 1965 (‘the Act’).

The property concerned is 28 Spenser Street, Padiham, Burnley, BB12 8RD (‘the property’). The absent mortgagor is Mr David Geoghegan.

On 4^th May 2006, Mr Geoghegan bought the 999 year long-leasehold interest in the property for £67,500. On 7 March 2008, he mortgaged the property, granting Lloyds Banking Group plc (‘the bank’) a first legal charge over it. The bank’s charge was registered on 25 March 2008.

The property was subsequently damaged by tenants. Falling into further disrepair, it came to the notice of the empty housing team of Burnley Borough Council (‘the authority’), which takes a proactive approach to bringing dilapidated housing back into use, having done so in more than 100 cases in the last ten years. During their inspection, the council’s officers found evidence of damp, water damage to ceilings, and general dilapidation. They concluded that only full refurbishment could bring the property back into habitable condition.

Between late 2020 and mid-2021 the authority corresponded with Mr Geoghegan who acknowledged the property’s poor condition but said he did not have the funds to repair it. Discussions about funding remedial works came to nothing. The authority offered to buy the property, but at a price which was less than the bank’s outstanding mortgage, and communications between the authority and Mr Geohegan then tailed off.

On 18 March 2022, the authority advised the bank that owing to the property’s poor condition, a recommendation would be made to acquire it compulsorily. On 28 April 2022, the authority confirmed the Burnley (28 Spenser Street Padiham) Compulsory Purchase Order 2022. On 8 June 2022, the authority made a General Vesting Declaration under section 4 of the Compulsory Purchase (Vesting Declarations) Act 1981, and the property was vested in the authority on 13 September 2022. This is the valuation date for the purpose of calculating compensation.

Both the bank and the authority made further attempts to communicate with Mr Geoghegan, without success. The mortgage balance as at 23 March 2023 was £80,363.24.

On 23 November 2023, the bank made a reference to the Tribunal to determine the level of compensation payable. The reference was subsequently transferred to the Tribunal’s written reference procedure for determination on the papers submitted.