Rating – Non-domestic rates – Valuation – Rateable value of vacant retail unit – Unit containing asbestos and falling within site proposed for redevelopment – Rating list altered to reduce rateable value of unit to nil – Valuation officer appealing – Para 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988 – Whether unit to be valued as if in state of reasonable repair – Whether works to remedy asbestos problem amounting to works of repair which reasonable landlord would consider economic – Relevance of redevelopment scheme to valuation – Appeal dismissed
The respondent ratepayer appealed to the Valuation Tribunal for England (VTE) against the rejection of its proposal, submitted in December 2012, to reduce the value shown in the 2010 rating list for a retail unit in Tunbridge Wells from £57,000 to nil. The unit formed party of a wider site, encompassing a redundant cinema building and various retail and office premises, which formed part of a redevelopment scheme first proposed in 2000. At the material day in April 2010, the unit was vacant and had been vandalised, exposing the presence of brown asbestos. Most of the other properties within the redevelopment site were also standing empty and hoardings had been erected around many of them. The unit was demolished in July 2013.
In its decision dated July 2014, the VTE allowed the respondent’s appeal and decided that the rateable value of the unit should be assessed at nil with effect from April 2010. It found that the unit was not capable of beneficial occupation owing to the present of asbestos and that the works necessary to remedy that situation went beyond works of repair, so as to fall outside the statutory rating hypothesis of reasonable repair posited by para 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988.
The appellant appealed. He contended that, following the decision of the Court of Appeal in SJ & J Monk (a firm) v Newbigin [2015] EWCA Civ 78; [2015] EGLR 28, the question of beneficial occupation was irrelevant and the test under para 2(1)(b) was instead whether: (i) the unit was in a state of disrepair; (ii) the necessary remedial works were works of repair; and (iii) a reasonable landlord would consider it economic to carry them out. He submitted that the works to remedy the asbestos problem were works of repair that a hypothetical landlord would consider economic. On the issue of how the planning permission for the proposed redevelopment might affect the valuation, he submitted that the hypothetical landlord, unlike the respondent, could not be assumed to own the whole redevelopment site and that, in the absence of any evidence that a compulsory purchase order was likely, the hypothetical landlord would not necessarily want to participate in any redevelopment if it he could repair and re-let his property without it.
Held: The appeal was dismissed.
In light of the Court of Appeal decision in Newbigin, the VTE’s decision could not stand and the rateable value of the unit fell to be determined afresh. However, applying the correct test, the respondent’s unit should still be valued at nil. It was common ground that, in April 2010, the unit was not in such repair as, having regard to its age, character and locality, would make it reasonably fit for the occupation of a reasonably minded tenant. It had deteriorated from its previous condition and was not in a state of reasonable repair. The works required to make the unit reasonably fit for occupation, including overhauling the roof, gutters, coping stones, windows and doors, clearing the yard, removing asbestos, replacing first-floor beams and timber floor, renewing ground-floor ceiling and carpet, redecorating and re-commissioning services, were properly characterised as works of repair, since they involved “restoration by renewal or replacement of subsidiary parts of a whole”, not reconstruction of the entirety or substantially the entirety of the property, and would not produce a building of an entirely different character: Lurcott v Wakely [1911] 1 KB 905 and McDougall v Easington District Council (1989) 58 P&CR 201; [1989] 1 EGLR 93 applied. However, even though the cost of the works was estimated at £112,000, which could be described as modest in relation to the value of a building lettable at £57,000 pa in a state of reasonable repair, a landlord would nonetheless consider it uneconomic to carry out those works in the light of all relevant factors including the redevelopment scheme.
In that regard, the rating hypothesis required the physical nature of the property in question and the surrounding property and circumstances to be reflected in the valuation. At the material day, the unit and every other property within the development site were vacant and hoardings had been erected around many of them. The existence of long-standing redevelopment proposals would be regarded by a hypothetical landlord as a positive indication that redevelopment was going to take place. Owners who had allowed their premises to be surrounded by hoardings or boarded up and become derelict or neglected over such a long period of time would be looking to redevelop sooner rather than later. In the real world, no landlord had sought to repair or re-let retail properties within the area covered by the planning permission. In those circumstances, it was unlikely that the hypothetical landlord would be willing to spend £112,000 on repair works. The hypothetical landlord would be faced with the choice of joining the likely redevelopment or continuing to own a property entirely surrounded by building works and then new development. In 2010, the hypothetical landlord could have had no confidence that his investment in the repairs would yield much, if any, profit and would accordingly have considered such repairs uneconomic. The repairs should therefore be ignored for the purposes of valuation and the rateable value of the unit should be assessed at nil.
Cain Ormondroyd (instructed by the legal department of HM Revenue and Customs) appeared for the appellant; the respondent did not appear and was not represented.
Sally Dobson, barrister
