Summary: Ms C says the Council delayed in making a decision on whether to allow an electrical cable to cross its land to her father’s commercial unit. She also says it wrongly refused to allow connection until the property had been valued by a surveyor and insisted on using an overpriced surveyor for the valuation. The Council was at fault for a lengthy delay. This caused injustice. However, it was not at fault for insisting on the valuation or using its pre-approved surveyor.

The complaint

1. The complainant, who I have called Mr C, is represented by his daughter, Ms C. She says the Council:
1. Delayed in reaching a decision as to whether to allow Mr C to run an electricity cable across its property into his office/storage property;
2. Refused to allow the connection until a surveyor had valued the property with and without electricity, ‘holding the electricity connection to ransom’;
3. Insisted on using its own surveyor to carry out the assessment which provided an inflated assessment of the differential and refused to allow Mr C to provide his own surveyor’s valuation.
2. Ms C says Mr C has incurred injustice as a result of Council fault in that:
1. He lost a client who had agreed to a five-year lease for his property once electricity had been connected but withdrew because of delay; and
2. He has been required to pay excessive surveyors’ fees for a biased valuation.

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The Ombudsman’s role and powers

3. We investigate complaints about ‘maladministration’ and ‘service failure’. I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

5. I spoke to Ms C, Mr C’s daughter and representative. I wrote an enquiry letter to the Council. I considered the Council response and the accompanying evidence. I applied any relevant law and guidance before reaching my decision.
6. I sent my draft decision to Ms C and the Council and invited their comments.

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What I found

7. The Town and Country Planning (Use Classes) Order 1987 sets out the use classes for land in England. Developed land is placed in a class and planning permission is generally required to change it. However, it is permissible to change use between certain categories. The categories relevant to this decision are:
• B1: Offices, research and development and light industry; and
• B8: Storage.
8. It is permissible to change use from B8 to B1, and vice versa, without permission.

Uplift in property

9. The case of Stokes v Cambridge Corporation (1961) 13P&CR77 concerned the value of a ‘ransom strip’ – a piece of land required in order to increase the value of another piece of land and the valuation of it. If a developer wishes to develop a site but cannot do so without access over the ransom strip, then the owner of the strip can charge a premium for access. The amount payable is a matter for negotiation between the parties.

Council’s duty to gain best value

10. Councils have a duty under the Local Government Act 1972 s.123 and generally to obtain best value for the taxpayer in matters concerning council land. In this case, the Council intends to ask Mr C to pay a fee which would be calculated with reference to the uplift in the value of the property caused by the change of use and the connection to the electric network.

What happened

Background

11. Mr C holds title to two storage units behind a row of shops in the Council’s area. The first, Unit A, he holds as freeholder. The second, Unit B, he holds as the holder of a sublease. The head lease owner of Unit B is a company, Company B. The two properties are each single-story outbuildings and are not next door to each other. Both were previously registered as B8 storage units.
12. Mr C wanted to develop both and applied to the local electricity network company (‘the network company’) to connect them to the electric grid. The company said it could not do so unless the properties had a street address. The Council refused to give them a street address unless their class was changed from B8 to B1.
13. In June 2017, Mr C changed the use of both units to B1 office and storage. In September 2017, the Council gave the properties their own addresses, creating a new street name for them and other units behind the row of shops.
14. The network company then wrote to the Council asking it to connect not only Units A and B but the entire newly named street. The cable had to be run under a pavement owned by the Council. The network company first contacted the Council in September 2017 to ask for permission. An employee discussed the matter with various Council officers and departments. She sent the required form requesting permission to run a cable to the entire new street in November 2017. The form asked for permission to connect the entire street.
15. In early October 2017, Mr C began conversion works. He too wrote to the Council requesting permission to connect water, electricity and gas to Unit B.
16. Mr C, Ms C and the network company contacted the Council on numerous occasions in late 2017 and early 2018. The electricity company received no response until July 2018.
17. Originally, the network company asked for connection for the whole street and then for Unit B, for which the Council owned the freehold. But, in December 2017, it sent an email asking it to connect Unit A, which Mr C owned freehold. The Council’s street works team initially denied that the Council owned the pavement.
18. Mr C received a response in early March 2018 from a Council officer, Officer O. Officer O refused to connect Unit B. He said Mr C was the holder of an underlease to Unit B. He said the Council could not deal with Mr C as it only had a contractual relationship with Company B.
19. Officer O told Mr C he would need to gain consent from Company B to apply for planning permission. Company B would then have to apply to the Council for permission to change the building’s use. They would need to apply for a deed of variation of the original lease. He made no mention of Unit A.
20. In May 2018, Ms C having still received no response from the Council, the network company made a formal complaint to the Council. It received a response on July 2018 saying the matter had been referred to the street works team and the Council would contact them by 9 August 2018. The street works team continued to say the pavement was not owned by the Council.
21. Also in May 2018, Mr C wrote to the Council to say that he intended to pursue connection to Unit A only.
22. On 29 August 2018, Mr C wrote to the Council saying he had had tenants waiting to move into the property for months but they could not do so without electricity. He received no response.
23. The council continued to claim that it did not own the pavement in question.
24. Mr C engaged a solicitor who wrote to the Council on 3 October 2018 enclosing Land Registry plans showing the pavement was owned by the Council. The solicitor said Mr C’s prospective client had now withdrawn from the deal to rent the office space. He said, if the Council did not respond by 5 October 2018, he would consider taking legal action. On 4 October 2018, the solicitor made a formal complaint to the Council making the same demand.
25. Internal emails show the Council’s acting divisional director for property and major programmes told the chief executive on 5 October 2018 that it could only deal with Company B. He added that he had asked officers to ‘set out what needs to be done and by whom. Once these issues have been resolved, then the Council would be in a position to grant the wayleave for the electricity supply – but if we were to do so now we would be removing any control we have over the possible breach of the user restriction in our head lease and also the potential to extract any value that we would be entitled to by virtue of a more valuable use being made of part of our freehold’.
26. On 30 October 2018, the Council wrote to Mr C’s solicitor restating its position that Mr C owned an underlease and Company B owned the head lease. Therefore, Mr C would have to ask Company B to apply for a change of use. The next day, the solicitor wrote to the Council explaining Mr C was the freeholder of Unit A. He asked the Council to process Mr C’s application.
27. On 19 November 2018, Officer O wrote to Mr C and his solicitor saying ‘there was a misinterpretation of the requests’ made by Mr C and the network company about connection in late 2017 and early 2018.

He said this was because the original request was for connection to Unit B. This had been ‘refused with clear reasons as to why and how that could be resolved. This matter was deemed to have been closed in March 2018’. He did not apologise.

28. Officer O wrote to the Council’s legal department to ask if it could demand a sum from Mr C in recognition of the uplift of the value of the property due to its change of use or charge him a sum to connect the electricity. The legal department advised that, on the information provided, this would probably be possible.

Complaint response

29. The Council provided a stage two complaint response to Mr C on 22 November 2018. It accepted it had delayed in dealing with the network company’s application to connect the property. The Council apologised unreservedly but said it had a standard procedure to follow in such cases. It said the Council would only consider granting consent if:
1. Mr C entered into an easement or similar arrangement with the Council;
2. Mr C ‘must cover the cost of a valuation (quotes and instructions to come from the Council to independent valuers) of the property’. He must pay the valuation figure determined to the Council. The property would be valued with and without electricity.
3. Mr C must pay any legal fees.
30. The letter said, ‘given the delay and frustration this has caused you I have instructed that these costs be kept to the absolute minimum required to meet our statutory obligations.’
31. On 27 November 2018, Mr C
32. wrote to Officer O asking if he could appoint his own surveyor. Officer O said that would not be necessary and, one week later, told Mr C a survey would cost £2,850 + VAT (£3,420). He said, ‘if you accept the quote, please let me know so I can instruct the valuer as soon as possible’.
33. On 13 December 2018, a second solicitor instructed by Mr C wrote to Officer O saying he would not pay more than £2000 + VAT, (£2400) for the valuation. He also said the valuation should be only as B8 storage as this was the current use. He said the valuation should compare the unit as a storage unit with mains power and battery power.
34. On 19 December 2018, Officer O replied, ‘the matter is not a negotiation. There is a set process which the Council follows for this type of matter’ and ‘the property has planning approval for a change of use and an increased density. The addition of electricity supply will allow this potential to be realised and thus enhance the use and value of the property. As such, a valuation ‘as is’ and ‘as if complete’ is required’. He said that, as soon as Mr C agreed, the matter could progress.
35. Mr C wrote to the chief executive copying in Officer O saying he had obtained three quotes from surveyors ranging between £1,000 and £2,000. He said, given the obligation to conduct matters in a cost-efficient way, he could not understand why the Council insisted on his paying £2,850. He also said he would not see the Council’s surveyors as independent. He asked to be allowed to appoint a surveyor at his own expense.
36. Officer O replied the next day seeking clarification that the quotes obtained by Mr C were for valuations before and after the property was extended, changed use and had electricity connected. Mr C wrote back saying the valuation should be for storage with and without electricity as the unit was still used for storage.
37. Officer O responded saying, whether Mr C converted the unit immediately or at a later date, the unit was more valuable with permission for use as an office. Therefore, this must be considered to protect the Council’s position.
38. Mr C did not agree. He complained to the Ombudsman.
39. Ms C says, Council delay has continued. Mr C has paid the Council’s surveyor to carry out a survey according to Council specifications. He has also paid for his own survey. This has cost over £6,000. The Council has sent its survey to Mr C.

Was there fault causing injustice?

Delay

43. The Council took seven months to provide a response to the initial application for connection. This was unacceptable and was fault. The Council has already issued a partial apology but offered no other remedy.
44. The Council accepts there was delay but says it was minimal. It says the network company did not contact it until November 2017 and asked only for permission to connect Unit B. It says it responded at the end of February 2018.
45. However, the evidence shows that, in fact, the network company contacted the Council in September 2017 and thereafter did so frequently as did Mr and Ms C. Therefore, the period of delay began two months, at least earlier than the Council accepts. During this time the Council incorrectly denied it owned the pavement.
46. The Council also says the network company and Mr C originally only asked to connect Unit B. Therefore, it says, when the Council responded in late February 2018 saying it would only deal with Company B, the top lease holder, the matter was closed until Mr C’s first solicitor contacted the Council in October 2018.
47. Again, the evidence I have seen does not support this claim. The network company originally asked to connect the whole street as is borne out by emails and the wording of the application document, of which I have seen a copy.
48. Further, an email shows that, on 14 December 2017, the network company told the Council Mr C also wanted to connect Unit A. Therefore, the Council was on notice that Mr C had two properties from the beginning and were told explicitly that Mr C also wanted to connect Property A from December 2017. It was on notice that Mr C intended to pursue only Unit A from May 2018.
49. There was, nonetheless, no progress with the case at all throughout 2018. During this time, the network company and Mr C continued to contact the Council.
50. It is clear the acting divisional director for property and major programmes was not aware on 5 October 2018 that there were, in fact, two properties. It was only in November that Officer O understood this. He did not apologise. He did not accept the Council was at fault but, for the reasons given above, I find it was.
51. Officer O emailed Mr C on 19 November 2018 and said he had refused the connection request with clear reasons in February 2018. Firstly, he was not clear. Nowhere did he explicitly refuse to connect the property. Secondly, the Council had known, or should have known, there were two properties for a year.
52. Three days later, the Council apologised but, at the time, it accepted only partial fault for minimal delay. I have found it was primarily responsible for delay which went on for well over a year from September 2017 until November 2018. The Council now accepts this. Since then, Mr C says the delay has continued.

Holding the connection to ransom

53. In his complaint response, while he offered no remedy for the delay, the chief executive did set out what Mr C would need to do to progress his connection. Firstly, he said, a Council-appointed surveyor, paid for by Mr C, must survey the property to find out how much the value of the property would be uplifted by the works and its new use. The Council would then demand a share of this uplift.
54. Mr C says this is holding the connection to ransom. Mr C is correct. However, this is a common occurrence in property disputes as set out in the case of Stokes v Cambridge. Any ‘ransom payment’ is a matter of negotiation between the parties.
55. Councils, particularly in the difficult financial circumstances they face, are obliged to use assets they have, such as the ownership of pavements, to raise funds. I cannot find fault with them for doing so.

Use of Council-approved surveyor

56. Mr O also says the Council should not make him use the Council’s surveyors as they are too expensive and he cannot be sure of their independence.
57. I cannot find fault. Mr C says the Council has a duty to obtain services at best value. While this is true, this duty only applies to expenditure incurred by the Council. It does not extend to third parties.
58. In order to ensure consistency and best value for itself, Councils often pre-approve trusted suppliers of services. This removes the need to carry out due diligence every time a council engages a service provider. The surveyor in question has been pre-approved by the Council’s procurement team. The Council is not be at fault for insisting on their use.
59. Mr C also doubts the surveyor’s independence. He was able to engage another surveyor to provide an alternative valuation which he did. Again, I do not find fault.

Loss of tenant due to Council delay

60. Ms C says Mr C lost a tenant who wanted a five-year lease on the unit because of Council delay. She provided evidence to support this claim; a preliminary agreement drafted by Mr C’s solicitors which she says both parties had signed.
61. Nonetheless, I do not believe I can find the lease would have gone ahead but for Council fault. Mr C’s solicitors found the prospective lessees in August 2018. At this time there was no electricity supply so any agreement was tentative and dependent on electricity connection.
62. The potential lessees withdrew from the agreement in October 2018. The Council was responsible for delay until November 2018. However, this does not mean that, but for Council fault, the lease would have been signed. As of September 2019, there is still no electricity connection.
63. The primary reason for this continuing delay is the dispute over the independence of the Council’s surveyors and their fees. I have found the Council was not at fault and, therefore, the continuing delay is not its fault.
64. Our remedies must attempt to restore complainants to the position they would have been but for Council fault. I cannot say that, but for Council fault, the lease would have been signed. Therefore, I cannot recommend the Council should recompense Mr C for lost income.

Remedy

65. Mr and Ms C say they and the network company spent a great deal of time pursuing the Council. I have recommended a payment in recognition of the time and trouble Mr C was put to in line with our remedies guidance.
66. I have found Mr C needed legal help because of Council delay. The Council has agreed, on production of receipts, to refund reasonably incurred legal costs.
67. The Council agrees to draft new procedures to prevent similar delays in future.

Agreed action

68. The Council has agreed to do the following within four weeks
1. Apologise to Mr C for the full extent of its fault; and
2. Pay Mr C £300 in recognition of the time spent and trouble caused.
69. The Council has agreed to do the following within three months:
1. Pay Mr C’s agreed, reasonably-incurred, legal costs;
2. Formulate new procedures to ensure similar fault does not occur in future; and
3. Inform the Ombudsman of the steps taken.

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Final decision

70. I have investigated the complaint and decided the Council was at fault for delay but had the right to use an approved surveyor and a right to require Mr C to pay a fee for passing the cable over its land. I have closed my investigation.

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Investigator's decision on behalf of the Ombudsman