Shop owners find there's no return on Jubilee Line

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SMALL businesses near the construction site of the Jubilee Line extension in London claim they are being pushed to the point of bankruptcy because they may not claim compensation.

Sales are down because access is more difficult, and the firms have been plagued by burglaries, dust and increasingly unsympathetic insurance companies. Yet London Underground has not had to fork out a penny.

Malcolm Kehoe runs a long-established shoe repair and leather goods shop on Borough High Street, a few yards from London Bridge Station. There have been roadworks outside his shop since December 1991, when work began to move electricity, gas and water services in preparation for the Jubilee Line. The shop-front has been obscured by hoardings since the New Year, which means that potential customers cannot see it or cross the road to reach it; the hoardings also provide cover for burglars.

'Business is down by 40 per cent since 1991,' Mr Kehoe said. 'I have had my armoured- glass windows broken 11 times since Christmas, which cost pounds 300 in excess each time, and the insurance company has said I should spend pounds 1,500 on roller blinds.'

Briefcases and handbags have been stolen, and Mr Kehoe has had to drop the top end of his range. The insurance company has 'intimated' that his cover could be withdrawn, he says. Yet, as the law stands, he is not entitled to claim compensation.

The Jubilee Line works - to construct a new ticket hall - will continue on the surface until the end of the year, and below ground for another two to three years. 'I wouldn't have thought we will survive,' Mr Kehoe said. 'When I was a lad, you could get anything down Borough High Street: by the time this is finished, there will only be a supermarket and a bank.'

Pratap Patel, owner of the City Drug Pharmacy close by, says his turnover is down 35 per cent since 1991. 'People can't cross from the other side of the road,' he says. The shop has been able to keep going only because the freeholder has reduced the management charge. 'I made an application to the council for a rate reduction, but it was rejected. I have put in appeal, but I have been told they are still dealing with appeals from 1991.'

Dust creates a lot of problems, he says. 'My photo-processing machine broke down twice in March. The engineer said the film motor went because of dust, and the filter lens was cracked by vibration.' Mr Patel says he feels impotent. 'The impression I have is that London Underground has immunity - it only has to pay for structural damage.'

Duncan Field, at the local surveyor Field & Son, says these problems are typical for the many small businesses in London that are not compulsorily purchased but see their trade affected by the work. 'The law as it stands is woefully inadequate at looking after the interests of people who are adversely affected,' he says. 'It's all very obscure and doubtful.'

When the Jubilee Line Bill was before Parliament, London Underground and the contractors defused much opposition by stressing that everything would be done to minimise disruption. But an LU spokeswoman said this did not include compensation. 'Our hands are tied by the legislation,' she said. 'We just can't hand money over.'

Many of the legal precedents were set in the last century. In 1874, the construction of Victoria Embankment in London destroyed a dock next to Messrs McCarthy's premises, through which they shipped their goods. They claimed and were awarded compensation, because it was judged that the value of their property had been permanently damaged. This case gave rise to the McCarthy Rules, now embedded in the 1965 Compulsory Purchase Act.

However, the shopkeepers of London are losing out on McCarthy compensation for two reasons: the loss must be permanent, and compensation is paid only for the loss in land value - not for lost business. In 1867, a Mr Rickett, proprietor of the Pickled Egg pub, sued the Metropolitan Railway Company because it had obstructed the building with hoardings for 20 months. He lost because there was 'no injurious affection to the value of his interest' - the land had not lost value - and he had no claim for the loss of profits.

Another case in 1974, when a motor dealer was cut off from the road by the reconstruction of the approaches to the Mersey Tunnel, confirmed the principle.

Even though the Jubilee Line works are likely to run for at least five years, they are not intended to be permanent. Furthermore, most of the businesses affected are run by leaseholders, who find it much more difficult to claim for a fall in land value. Because of the complexities of the system, it is possible to translate a lease into a capital value - but only if the market is rising.

When rents are falling, as they have been, the lease has a negative value which, Mr Field says, 'means there can be no claim'.

He says he is considering mounting a test case to see if the law can be changed. Mr Kehoe is philosophical.

'I don't have to give my name when I call the police any more,' he says. 'And the glaziers say they going to invite us to their Christmas party.'

(Photographs omitted)