Rating – Non-domestic rates – Rateable value – Valuation Tribunal determining appellant’s office building to be listed in rating list with nominal rateable value of £1 – Decision based on lack of demand for the property on open market – Upper Tribunal allowing respondent valuation officer’s appeal – Appellant appealing – Whether lack of demand justifying nominal valuation – Whether tribunal wrongly concluding that rating hypothesis required valuer to assume demand not existing in reality – Appeal allowed (by a majority)
The respondent was the ratepayer in respect of Mexford House, a substantial three-storey block of offices in the North Shore area of Blackpool, a primarily residential area near the town centre. The appellant valuation officer listed it in the non-domestic rating list with a rateable value of £490,000 with effect from April 2010.
At the antecedent valuation date (AVD) of April 2008, the property was subject to a lease to the secretary of state for the environment for a term of 42 years from September 1972, although the respondent had taken a virtual assignment of that lease subject to seven-yearly, upwards-only rent reviews. The current rent was £417,000 pa. The respondent held a reversionary lease of the property.
The property had been occupied by two public sector bodies but shortly before the AVD, they announced that they would be vacating the premises. The property was unoccupied at the material day in April 2010. In October 2011, the respondent proposed to alter the entry in the rating list on the grounds that the appellant’s assessment was inaccurate when the list was compiled. The appellant rejected the proposal but the Valuation Tribunal for England (VTE) determined that the property should be listed with a rateable value of £1 from April 2010 because there was no market demand for it.
The Upper Tribunal allowed an appeal against that decision, determining the issue between the parties as a matter of law upon agreed facts: [2016] UKUT 258 (LC); [2016] PLSCS 185.
The Court of Appeal allowed the respondent’s appeal and restored the VTE’s assessment of the value at £1, on the basis that there was no demand in the market for occupation of Mexford House: [2018] EWCA Civ 26; [2018] EGLR 12. The appellant appealed.
Held: The appeal was allowed (by a majority).
(1) Lord Carnwath (Lord Reed and Lord Lloyd-Jones agreeing) The court could not look beyond the agreed facts to evidence which was not referred to by the tribunal, nor attempt to resolve issues which were by agreement left unresolved. However, the agreed statement did not have to be looked at in a vacuum. In so far as there were differences as to its interpretation, the court was entitled to look at the context in which it was arrived at, and the state of the evidence as recorded by the tribunal at that time.
(2) Where there was no general market for the use in question, the tribunal had extracted from London County Council v Church Wardens and Overseers of the Poor of the Parish of Erith in the County of Kent [1893] AC 562, the proposition that in such a case the true test was whether the occupation was of value, contrasting the case where the land was struck with sterility in any and everybody’s hands. The Court of Appeal’s criticism that, in that respect the tribunal had been wrongly influenced by passages directed to the logically prior question whether the premises were in rateable occupation at all, was misplaced. Cases such as Tomlinson v Plymouth Argyle Football Co Ltd (1960) 31 DRA 788 and Hoare v National Trust [1999] 1 EGLR 155, to which the Court of Appeal referred, did not assist the respondent as in those cases the absence of alternative tenants was due to the inherently burdensome nature of the properties, rather than the state of the market.
(3) The distinction drawn in previous Lands Tribunal cases, between a property which was unoccupied merely because of a surplus between supply and demand in the market, and a property which had reached the end of its economic life, was endorsed. The guidance of the Valuation Office Agency on whether a property was obsolete included whether the property was occupied at the antecedent valuation date, and whether there were other similar properties in the locality that were occupied. That highlighted the issues of fact which might become relevant in drawing the distinction in particular cases but which, by agreement, the tribunal in the present case was not required to resolve: Lambeth London Borough v English Property Corpn Ltd and Shepherd (VO) [1980] RA 279 LT and Shiel (VO) v BorgWarner Ltd [1985] RA 36 LT considered.
Whether the hereditament was occupied or unoccupied, or an actual tenant had been identified, at the relevant date was not critical. Even in a “saturated” market the rating hypothesis assumed a willing tenant, and by implication one who was sufficiently interested to enter into negotiations, to agree a rent on the statutory basis. As to the level of that rent, there was no reason why, in the absence of other material evidence, it should not be assessed by reference to general demand derived from occupation of other office properties with similar characteristics.
(4) Lord Briggs (dissenting) (Lady Black agreeing) Although there was sufficient general demand for comparable properties in the locality to justify a substantial rateable value for them, there was nobody in the real world who would pay or bid a positive price for Mexford House as at the AVD. The tribunal had been in no doubt about the artificiality of that agreement about the facts. In the real world the existence of comparable properties at substantial rents would ordinarily have compelled an examination of the question whether one or more of the tenants in those properties would have been prepared to re-locate to the subject property at a lower, but still more than nominal, rent. The evidence would rarely show that there was no demand at all for the subject property where there were comparables in the locality let at substantial rents. But if that was what the evidence showed, or the parties agreed, the rating hypothesis did not require a departure from that real world conclusion, merely because the subject property was in theory capable of beneficial occupation.
Hui Ling McCarthy QC and Hugh Flanagan (instructed by the legal department of HM Revenue and Customs) appeared for the appellant; Richard Glover QC and Cain Ormondroyd (instructed by DLA Piper UK LLP, of Sheffield) appeared for the respondent.
Eileen O’Grady, barrister
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