Summary: Mr X complained about the Council’s refusal to complete the purchase of his property by agreement, which caused him much stress and financial hardship. We found no fault in the Council’s decision not to complete the agreed sale.

The complaint

1. Mr X said the Council wrongly refused to complete its purchase of his property before a fixed date (‘the Vesting Date’) although it was then empty. Mr X said this caused him much stress and anxiety. It also led to financial hardship as the Council reduced its offer to buy his property and refused to pay his costs. Mr X wanted the Council to pay the previously agreed price, his costs and professional fees, and compensation.

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The Ombudsman’s role and powers

2. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word fault to refer to these. We consider whether there was fault in the way an organisation made its decision. If there was no fault in how the organisation made its decision, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
3. The law says we cannot normally investigate a complaint when someone has a right of appeal, reference or review to a tribunal about the same matter. However, we may decide to investigate if we consider it would be unreasonable to expect the person to use this right. (Local Government Act 1974, section 26(6)(a), as amended)
4. If we are satisfied with an organisation’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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What I have and have not investigated

5. The Council has now bought Mr X’s property using its compulsory purchase powers. When Mr X complained to the Ombudsman, he and his solicitors had not agreed on the compensation payable following the compulsory purchase of his property. The Upper Tribunal (Lands Chamber) is responsible for dealing with disputed compensation claims for the compulsory purchase of land. Mr X’s complaint to the Ombudsman sought various financial outcomes that arise from the compulsory purchase. If Mr X and his solicitors cannot agree with the Council, the Tribunal may deal with their compensation dispute. And the Tribunal, not the Ombudsman, is best placed to deal with any dispute about compulsory purchase compensation and costs payable to Mr X. I saw no good reason or grounds to find it unreasonable to expect Mr X to apply to the Tribunal if necessary. So, I did not investigate those parts of Mr X’s complaint about compensation and costs of the compulsory purchase. (See paragraph 3.)
6. My investigation focused on what happened before the Council’s compulsory purchase of Mr X’s property. Specifically, how it came to not complete the voluntary purchase of the property under terms agreed with Mr X before the Vesting Date.

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How I considered this complaint

7. I have:

• considered Mr X’s written complaint and supporting papers;
• asked for and considered the Council’s comments and supporting papers about the complaint;
• shared Council information with Mr X; and
• shared a draft of this statement with Mr X and the Council and considered any comments received before making a final decision.

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What I found

Background

8. Councils have powers to make legal orders to compulsorily buy land and buildings. This means they can force a sale when an owner does not want to sell. Councils must follow a detailed legal procedure to compulsorily buy property and people have legal rights to object and to compensation. The Upper Tribunal (Lands Chamber) decides compensation disputes (see paragraph 3).
9. Compulsory purchase is a last resort. So, normally, councils will negotiate with people to buy their property by agreement. Negotiations to buy will continue while councils follow the procedure for making a compulsory purchase order. After an order is confirmed, negotiations may continue. But, if the negotiations are unsuccessful, the council can use the order to buy the property. An agreed purchase is usually based on compulsory purchase compensation rules.
10. Once a compulsory purchase order is confirmed, people may claim an ‘advance payment’. An advance payment represents 90% of the agreed or estimated compensation due to a person affected by the order.
11. Where a landlord’s property is compulsorily bought, they may claim for their expenses in buying a replacement investment property within a year.
12. If councils need to implement a compulsory purchase order they may use a general vesting declaration (‘GVD’) to gain control of property. Once it takes effect a GVD legally transfers ownership and gives the council a right to enter and take possession of property. The vesting date becomes the date for assessing compensation. And, once property is vested in a council, it must pay compensation in line with the legal rules.

What happened

13. The Council intended making a compulsory purchase order so it could carry out a land regeneration scheme (‘the CPO’). Mr X had a leasehold interest in a property within the regeneration area, which he rented to tenants. Before making the CPO, the Council opened negotiations to buy Mr X’s property by agreement. About a year after first contacting Mr X, the Council made the CPO. Negotiations to buy Mr X’s property continued and, about 10 months after making the CPO, Mr X and the Council agreed terms for the voluntary sale of the property.
14. The Council told Mr X it did not usually offer upfront payments for expenses in buying replacement investment properties. However, the agreed terms included a payment to cover Mr X’s future expenses in buying another investment property within a year (‘the Disturbance Payment’). (See paragraph 11.)
15. The agreed terms also said the sale was with vacant possession. The Council wrote to Mr X shortly after agreeing terms, about his ensuring his tenants moved and the property was empty before completion of the sale. Mr X told the Council he had already spoken to an agent about moving the tenants as soon as possible.
16. About three months after agreeing terms, the Council wrote to Mr X asking when his tenants would be moving. Mr X said he was not sure why there was delay but would check and provide an update.
17. About a month later, the CPO was confirmed and took effect. The Council wrote to Mr X and told him his tenants were entitled to compensation linked to their move to another property. The Council also said it could put the tenants in touch with its housing officers if they wanted to talk about alternative housing.
18. About five months passed from the CPO taking effect and about nine months from Mr X and the Council agreeing terms for the sale of the property. Mr X had not found alternative accommodation for his tenants and had not given them a section 21 notice. (A section 21 notice is a legal notice from a landlord to a tenant giving the tenant a minimum of two months’ notice to leave the property.) The Council became concerned Mr X would not complete the sale of the property with vacant possession and this might delay the regeneration scheme.
19. The Council issued a GVD (see paragraph 12) for the properties covered by the compulsory purchase order that it had not yet bought by agreement. The GVD gave the Vesting Date as the date for possession of the property, which date was over three months later.
20. During the following three months, Mr X and the Council were in touch. Mr X said he would complete the sale once his tenants secured alternative accommodation. The Council confirmed it was ready, and hoped, to complete the purchase by agreement before the Vesting Date. Mr X also changed solicitors to get legal advice on compulsory purchase matters.
21. Mr X’s new solicitors contacted the Council. In the correspondence that followed, the new solicitors said Mr X had not found alternative accommodation for his tenants. The new solicitors asked the Council to confirm it would provide support to ensure the tenants did not become homeless. The Council said it appeared Mr X would not provide vacant possession of the property on completion as agreed before the Vesting Date. So, it would need to review the terms for buying the property. The Council confirmed its housing officers would consider housing options for Mr X’s tenants given it appeared they would still be living in the property on the Vesting Date.
22. The Council’s housing officers first identified possible suitable accommodation for Mr X’s tenants about six weeks before the Vesting Date. And, fourteen days before the Vesting Date, Mr X’s tenants viewed such a property. About a week later, the tenants signed a tenancy agreement, with a start date for the following week and three days before the Vesting Date. The Council said the tenancy agreement included a right for Mr X’s tenants to withdraw up to the tenancy start date. It was therefore only certain Mr X’s tenants would move two days before the Vesting Date.
23. Meanwhile, Mr X said his tenants contacted him about their move. And, ten days before the Vesting Date, Mr X and both his old and new solicitors contacted the Council about completing the agreed sale. In its replies, the Council said Mr X had not given vacant possession as agreed. The property would be empty on the Vesting Date only because it had stepped in to rehouse Mr X’s private tenants. The Council repeated it would send Mr X a revised offer to buy the property after the Vesting Date. Mr X complained to the Council.
24. Mr X’s tenants then asked the Council for help in moving their belongings. The Council arranged to move most of the tenants’ belongings the day before the Vesting Date. Mr X said he asked the tenants to stay in the property overnight for insurance reasons. The Council knew members of the tenants’ household remained in the property overnight and collected the keys from them on the Vesting Date.
25. Mr X’s new solicitors sent the Council a claim form for compensation for the compulsory purchase of his leasehold interest in the property. The Council acknowledged the claim and within a week of the Vesting Date sent the solicitors its revised offer for Mr X’s property.
26. The Council’s revised offer was for less than the amount set out in the solicitors’ claim form. The Council said the legal date for valuing Mr X’s claim was the Vesting Date. The housing market had declined since its last offer, but to secure a quick settlement it had not reduced its price for Mr X’s property. The Council also said the agreed sale had not taken place because Mr X had not complied with the terms for vacant possession. So, it would not pay the costs of Mr X’s old solicitors for the abortive sale by agreement. The revised offer did not include the previously agreed Disturbance Payment (see paragraph 14) as there was no legal right to an upfront payment. The Council confirmed it would consider a claim for such a payment if Mr X bought a replacement investment property within a year. The Council said its offer was reasonable given it incurred costs rehousing Mr X’s private tenants when he could not provide vacant possession of the property. (The Council said it bore these costs and they did not affect its revised offer.) The Council asked the new solicitors to confirm if Mr X accepted the offer and or wanted to proceed with an advance payment given his complaint.
27. The new solicitors wrote to the Council increasing the amount claimed by Mr X. They also said, if the Council could not agree the claim, Mr X wished to take further advice about the value of his leasehold interest.
28. Meanwhile, the Council had replied to Mr X’s complaint. In summary, it said Mr X was responsible for providing vacant possession of the property under the agreed sale terms. It could not complete the sale without compliance with the agreed terms. Six months after agreeing the terms, Mr X had not secured vacant possession of the property and expressed concerns about using the section 21 notice procedure. If he had complied with the agreement, it would not have become involved in rehousing his private tenants shortly before the Vesting Date. It had made clear, and Mr X had accepted, that not providing vacant possession meant the sale would not go ahead and terms would be renegotiated.

Consideration

29. At the centre of this complaint is the failure to complete the sale of Mr X’s property by agreement. Mr X and both his solicitors contacted the Council about completing the sale saying the property would be empty the day before the Vesting Date. That contact was ten days before the Vesting Date and so Mr X’s position was that completion was achievable. The Council pointed to Mr X’s tenants having a right to withdraw from their new tenancy, and so not moving out of the property, up to two days before the Vesting Date. I therefore found that, in practice, the Council did not have ten days to complete the agreed sale before the Vesting Date. Rather, there were, potentially, two days before the Vesting Date when Mr X’s property might be empty. And that potential would not become a certainty until the start of those two days.
30. However, the Council’s position, from before the ten days Mr X referred to, was that completion could not go ahead as he had not complied with the agreed terms of sale. Specifically, Mr X had not provided vacant possession of the property. The property might be vacant shortly before the Vesting Date but only because it had taken on Mr X’s responsibility under the agreement and found a possible new home for his private tenants. The evidence showed the Council told Mr X and his solicitors, within a month of the GVD, why it considered the agreed sale could not go ahead and it would revise its offer for the property. The Council reached this view about nine months after it had agreed sale terms with Mr X. After nine months, Mr X’s tenants remained in occupation and Mr X had not served a section 21 notice. The Council therefore considered Mr X would not comply with the agreed sale terms and provide vacant possession of the property. While I recognised Mr X’s concern for his tenants if he issued a section 21 notice, he had agreed with the Council to sell the property with vacant possession.
31. Mr X also said the Council failed to give his tenants, who were vulnerable and unable to find a new home, housing advice. The Council is a local housing authority and so has powers and duties to help local people with housing. The Council told Mr X it had a housing department that could provide advice and help with housing. The Council also provided contact details for a housing officer and within two months, but after making the GVD, the Council’s housing team had identified a possible property for the tenants. So, while I recognised what Mr X said, I saw no evidence the Council did not engage with his tenants. However, if there was any failure to engage, that did not affect Mr X’s responsibility under the agreed sale terms to secure vacant possession of the property. And Mr X’s new solicitors had confirmed he had been unable to secure vacant possession and they had also asked for the Council’s support in housing the tenants. Fortunately, Mr X’s tenants accepted a tenancy of a property identified by the Council that allowed them to move shortly before the Vesting Date.
32. Mr X pointed to the Government’s Compulsory Purchase and Compensation Guidance saying it needed the Council to rehouse his tenants. I recognised Mr X’s point however he and the Council had agreed a sale of the property. The Council was looking to avoid using the CPO to buy the property. The agreed sale terms required that Mr X provide vacant possession. This meant Mr X was responsible for moving his tenants and or ending their tenancy so the agreed sale could be completed.
33. Overall, the Council’s view, that the agreed sale could not go ahead as Mr X was unable to provide vacant possession of the property, was justified and sustainable. The evidence did not show that Mr X complied with the agreed terms and secured the vacant possession of the property. The property was empty on the Vesting Day because the Council identified a new home for Mr X’s tenants. And Mr X’s tenants had found that new home acceptable and signed a new tenancy agreement. I therefore found no fault in the Council not completing the agreed sale of Mr X's property.
34. The Council acquired Mr X’s property compulsorily, having issued the GVD and taken possession on the Vesting Date. The Council needed to then value Mr X’s leasehold interest in the property on the Vesting Date and send him a revised offer. There were two key differences between the agreed terms and the Council’s offer. First, the Council refused to pay the fees of Mr X’s old solicitors being the costs incurred in the abortive sale by agreement. Second, the Council removed the Disturbance Payment. The claims made by Mr X’s new solicitors included the abortive fees and an increased sum for a Disturbance Payment. If Mr X and his solicitors cannot agree, eventually, it would be for the Upper Tribunal (Lands Chamber) to decide any disputed compensation claim.

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Final decision

35. I completed my investigation finding no fault in the Council’s decision not to complete the agreed sale of Mr X’s property.

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman