Rating – Public lavatories – Rateable value – Lavatories let to respondent council – Respondents making them available to the public and paying high maintenance costs – Whether such hereditament having more than a nominal rateable value – Appeal of valuation officer allowed
The respondent parish council were the tenants of a building containing three public lavatories, a bus shelter and a store at the entrance of a car park in the centre of Steyning, near Worthing. The landlords were the local district council, which had a statutory power, but not a duty, to provide public conveniences within their area. The building had been refurbished at a cost of £75,000 and the existing male, female and disabled toilets replaced with three unisex toilets that could all be used by the disabled. The cost of the works had been divided between the district council and the respondents. The district council had then let the building at a peppercorn rent to the respondents, who made it available for the convenience of the public. The annual cost of maintenance was £10,000 pa.
The building had previously been entered into the 2005 rating list with a rateable value of £2,750. The respondents made a proposal that the entry should be altered, on the ground of a material change of circumstances, to exempt the building from rates since it now incorporated three disabled public toilets. The matter went to the valuation tribunal as an appeal. The tribunal found that the premises were not exempt, since they were not wholly for disabled use, but determined that the rateable value should be reduced to £1 on the ground that a hypothetical landlord would accept a nominal rent to avoid the burden of maintenance.
On appeal against that decision, the appellant valuation officer contended that the valuation tribunal had erred in considering the value of the premises to the hypothetical landlord rather than to the hypothetical tenants and in treating high overheads as a factor diminishing rateable value. On the latter point, she submitted that a willingness to incur such overheads in relation to a hereditament indicated that its occupation was of value to the occupier.
Decision: The appeal was allowed.
The value of the occupier’s occupation of a hereditament fell to be established by applying the rating hypothesis, to determine a rent representing the value of the occupation to a hypothetical tenant. The rent reflected a hypothetical negotiation between a hypothetical landlord that had a property it wished to let and a hypothetical tenant that wished to occupy that property. The actual rent paid, or the fact that no actual rent or a peppercorn rent was paid, was not a criterion, and nor were the actual personal circumstances of the landlord or the tenant; the personal motives of real landlords and tenants had nothing to do with the valuation of the hereditament. It made no difference that the occupier would not make any money out of occupying the premises. Nor did it make any difference to the hypothetical tenancy what, if anything, the landlord’s liabilities were. The real occupier put a real value on its occupation, which was powerful evidence that a hypothetical tenant would be prepared to pay more than a nominal rent. “Real life” transactions where the tenant covered the high maintenance costs of the premises might be convincing indications that the hereditament would have real value to a hypothetical tenant. Accordingly, occupying premises with high overheads was likely to be an indication that the occupation had value to the occupier, rather than the reverse.
The public lavatories were a facility that the respondents had chosen to provide in the exercise of their powers. They had spent a large sum of money on refurbishing those facilities and were prepared to spend £10,000 pa on their maintenance. The respondents clearly regarded them as a useful facility for the inhabitants of their area and thought that use of the premises was valuable. The valuation tribunal had therefore erred in law; the hypothetical tenancy of the hereditament had a value that was more than nominal: Erith Borough Council v Draper (VO) (1952) 45 R&IT 315, Allen v English Sports Council [2009] RA 289 and Roxburghe Estates v Scottish Borders Council Assessor [2004] RA 15 applied; Hodgkinson (VO) v Strathclyde Regional Council Superannuation Fund [1996] RA 129 distinguished. On the evidence, the rateable value of the appeal hereditament was £600; the rating list should be altered accordingly, with effect from February 2009.
Timothy Morshead QC (instructed by the legal department of HMRC) appeared for the appellant; the respondents did not appear and were not represented.
Sally Dobson, barrister
