Rating – Non-domestic rates – Valuation – Rentals basis – Small private independent primary schools – Rateable value of three small independent primary schools in north London – Tribunal valuing schools on contractor’s basis – Whether sufficient rental evidence to justify valuation on rentals basis – Appeal dismissed
The Valuation Tribunal for England (VTE) was asked to determine the rateable values of three independent primary schools in north London which were owned and operated by the three respondents. The first school was located in Mil Hill in two interconnected Victorian former houses with a large rear extension. The second was a purpose-built primary school dating from the 1930s and located in a conservation area in Barnet. The third, in Blackbird Hill. occupied a former residential bungalow with substantial extensions.
The VTE valued those premises at £34,250, £8,00 and £18,750 respectively. In doing so, it took the view that there was insufficient rental evidence to value the properties on the rentals basis and it instead adopted the contractor’s method of valuation, estimating the interest payable on the capital value of the properties as a guide to the rent that they might fetch.
On appeal from that decision, the appellant valuation officer contended that there was sufficient evidence to support the use of the rentals basis of valuation. He argued that there was a rental market in small private independent primary schools and he produced a sample of rental evidence which he sought to use as comparables to order to determine the rateable value for the respondents’ schools. The sample comprised 10 comparables, excluding those in inner and south London but including some in Camden. Two of the comparables were day nurseries and one, located in Harpenden outside Greater London, was not itself a school but was a business that provided music lessons. The respondents contended that the comparables provided were insufficient to support the use of the rentals basis.
Held: The appeal was dismissed.
It was well established that, where possible, the rentals basis of valuation should be used, by examining the evidence of rents obtained from the property itself if possible and otherwise those from similar properties. Not all relevant rental evidence would be of equal value since properties would vary in their degree of similarity, whether in their physical characteristics and the way they were used or in the locality in which they were situated. There were no rules about how close the comparables had to be to the property to be valued, nor did the comparables have to be used in exactly the same way: Shrewsbury Schools (Governors) v Shrewsbury Borough Council (1960) 7 RRC 313, Fir Mill v Royton Urban District Council (1960) 7 RRC 171 and Williams (VO) v Scottish & Newcastle Retail Ltd [2001] EWCA 185 applied. Relevance had to be weighed in each case: Garton v Hunter (VO) [1969] 2 QB 37 applied.
There would be cases where the rentals basis could not be used because there was either no rental evidence or insufficient rental evidence, whether in the sense that there was too little evidence or that the comparable properties were insufficiently similar to the property to be valued to give a real indication of the rental value of the latter. In such situations, the only alternative was the contractor’s method. Private independent secondary schools were valued using the contractor’s method, as were hospitals, museums and state schools: Howarth v Price (VO) (1965) 11 RRC 196 considered.
The fact that the contractor’s method tended to produce a lower value than the rentals basis, such that a small private school valued on the rentals basis might have a higher rateable value than a larger one valued by the contractor’s method, was not a reason to ignore a rental market if it existed and if there was sufficient evidence of it to be used. Further, the fact that state schools were valued according to the contractor’s method did not provide a reason to ignore a rental market in private school premises if it existed.
However, the appellant had not discharged the burden of proving that there was sufficient satisfactory, appropriate and relevant comparable rental evidence available in the market place for the rentals basis to prevail.
The flaws in each item in the appellant’s sample were such as to make each either useless or of very limited value. Standing back and looking at the sample as a whole did not improve its value. The rents for the comparable premises, individually and taken together, showed no evidence that there was in fact a market in small private independent primary schools, rather than a collection of rents determined on rent review or otherwise than through negotiation, and the quality of each item was such that little or no useful information could be drawn from it as to the rent that any of the respondents’ schools would fetch on the open market. Moreover, there were far fewer items of evidence than would be expected in an exercise of that kind. Whether looked at as individual items or as a whole, the rental evidence presented by the appellant was not sufficient to determine the rateable value of the premises of the three schools, which should accordingly be valued on the contractor’s method.
Ned Westaway (instructed by HMRC Solicitors) appeared for the appellant; Christopher Lewsley (instructed by JMA Chartered Surveyors) appeared for the respondents.
Sally Dobson, barrister
Click here to read transcript: Turnbull (VO) v Goodwin School and others
