[2025] UKUT 00189 (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 mortgagors have 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 they have agreed. 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 14 Graham Street, Padiham, Burnley, BB12 8RW (“the property”). The absent borrowers are Mr Patrick James McAleenan and Mrs Marie Elizabeth McAleenan (“the borrowers”).

The property is a two-bedroom, two-storey, mid-terrace house of stone construction under a slate roof, dating from around 1890. On 21 May 2007 the borrowers acquired the leasehold of the property for a price of £75,000. They granted a legal mortgage over the property to Halifax plc, which was registered on 8 June 2007. The Bank of Scotland PLC (“the bank”) is a successor to Halifax plc as mortgagee.

The property eventually became vacant and fell into disrepair. Burnley Borough Council (“the authority”) made The Burnley (14 Graham Street Padiham Burnley) Compulsory Purchase Order 2024 (“the CPO”), the purpose of which was to bring the property back into residential use by renovating it so that it could be sold on the open market. The CPO was confirmed on 4 March 2024 and notice given to the bank on 15 March 2024.

By a notice dated 22 April 2024 the authority informed the bank that a General Vesting Declaration (“GVD”) had been executed and that the property would vest in the authority on 23 July 2024 (“the vesting date”). The authority took possession of the property on the vesting date, which is the date for assessment of compensation.

The authority’s surveyor assessed the market value of the leasehold interest in the property for compensation at £40,000 - £45,000 and the bank has accepted £45,000 as the market value of the property at the vesting date.At that date the outstanding balance of the mortgage was £76,164.80.

The bank has supplied evidence of correspondence addressed to the borrowers at the correspondence address held for them in their mortgage records, to which they have received no response. Accordingly, without the agreement of the mortgagor to the compensation sum the jurisdiction of the Tribunal is engaged.

On 8 May 2025, the bank made a reference to the Tribunal to determine the level of compensation payable, naming the authority as respondent and requesting that the matter be dealt with on the papers under the Tribunal’s written representations procedure.

On 16 May 2025 notice of the reference, together with supporting documents and Tribunal directions, was served on the authority and also served by post on the borrowers at their correspondence address.

The directions required a response to the notice of reference by 13 June 2025. The authority served a notice in response on 3 June 2025, confirming agreement to the compensation claim of £45,000 and to determination of the reference under the written representations procedure. No response was received from the borrowers.