Land acquisition compensation with severance, injurious affection and budget pressure
A valuer is appointed by a road authority to advise on compensation for 1.8 acres acquired from a 6-acre mixed-use property in Kurunegala. The property has a three-storey commercial building with shops on the ground floor and offices above, a coconut plantation, and an access road. The acquisition will leave the remaining 4.2 acres landlocked except for a 3 m wide access strip; the building will lose 40% of its parking. The owner claims LKR 480 million, including LKR 120 million for sentimental value, LKR 90 million for loss of business goodwill, and LKR 70 million for injurious affection. The acquiring officer has offered LKR 210 million based on a 2019 government valuation. The valuer's firm also does work for the owner's company on other projects. The valuer is asked to 'keep the compensation within the allocated budget' of LKR 250 million.
1. Explain the statutory compensation principles and which heads of claim are admissible.
Read the worked answer
Principles. Compensation is statutory, not a negotiation based on sympathy. The valuer should identify the date of the relevant notice and the statutory heads: market value of the land acquired, damage by severance, injurious affection, and any disturbance that the law allows. Sentimental value is not compensable. Business goodwill is generally not land value; loss of profits may be relevant only if the statute or case law allows disturbance, and it must be evidenced, not assumed. Injurious affection must be distinguished from severance to avoid double counting. The 2019 government valuation is a starting point, not conclusive; the valuer must test it against current evidence. The budget of LKR 250 million is irrelevant to the valuation.
2. Discuss the valuation methods for the land, building, severance and injurious affection.
Read the worked answer
Methods. Value the 1.8 acres by market comparison with recent sales of comparable commercial or agricultural land in Kurunegala, adjusted for location, frontage, and use. Value the building by depreciated replacement cost or income capitalisation, ensuring that the land and building are not double counted. Assess severance by comparing the value of the whole 6 acres before and the remaining 4.2 acres after, allowing for the landlocking, the 3 m access strip, and the loss of 40% parking. Injurious affection covers the effect of the works on the remaining land, such as noise or access changes, separate from severance. The coconut plantation is valued as part of the land or by capitalising net income. Present a before-and-after table so the adjudicator can see each head.
3. Address the ethical and independence issues and state what the report should contain.
Read the worked answer
Ethics. The instruction to keep compensation within budget is a pressure to produce a predetermined outcome; it creates an advocacy and intimidation threat. The firm's other work for the owner's company is a conflict of interest: disclose it, and if the relationship is material, decline or obtain written consent from all parties. The valuer should be independent of both the road authority and the owner, or clearly act as an advocate for one side with that role disclosed. Report. State the instructions, the statutory basis, the valuation date, the inspection, the comparables, the before-and-after analysis, the treatment of each head of claim, the assumptions, and the limitations. Do not include a budget target. If the authority insists, decline and record why.