Rating – Non-domestic rates – Valuation – Appellant ratepayer owning factory and warehouse separated by estate road but connected by conveyor bridge – Appellant seeking to merge both hereditaments in 2010 rating list – Respondent valuation officer refusing proposal – Valuation Tribunal allowing appellant’s appeal – Appellant appealing quantum of end allowance – Respondent cross-appealing – Whether tribunal erred in treating two buildings as single hereditament – Appeal allowed – Cross-appeal dismissed
The appellant carried on business manufacturing and supplying filing cabinets and office furniture from the Reevesland Industrial Estate at Newport in South Wales. In 2012, it consolidated its UK production and warehousing on its Welsh site after acquiring a second building directly opposite its first. The premises were used for the manufacture, storage and dispatch of its full product range and included its own offices.
The appeal premises were located on both sides of Caswell Way, an estate road near junction 24 of the M4 motorway and Newport city centre. In order to integrate the two buildings, the appellant obtained planning permission to erect a high-level conveyor bridge which spanned Caswell Way. A licence obtained from the local authority under section 177 of the Highways Act 1980 allowed the bridge to cross the public highway.
An issue arose whether the two industrial properties were a single hereditament, rather than two separate hereditaments for rating purposes. The valuation tribunal allowed an appeal by the appellant against a refusal by the respondent valuation officer to merge the two hereditaments in the 2010 rating list. In determining the rateable value of the newly merged hereditament to be £1,040,000, the tribunal applied an end allowance of 4% for the split site.
The appellant was dissatisfied with the quantum of the end allowance and appealed to the Upper Tribunal. The respondent cross-appealed challenging the respondent’s determination that the original units of assessments should be merged and replaced in the list by a single hereditament.
Held: The appeal was allowed. The cross-appeal was dismissed.
(1) When considering whether distinct spaces under common occupation formed a single hereditament, the primary test was geographical, based on visual or cartographic unity. It was important not to dilute that test by reference to functional considerations. Contiguous spaces would normally possess that characteristic, but unity was not simply a question of contiguity. If adjoining houses in a terrace or vertically contiguous units in an office block did not intercommunicate and could be accessed only via other property (such as a public street or the common parts of the building) of which the common occupier was not in exclusive possession, that would be a strong indication that they were separate hereditaments. Where, in accordance with that principle, two spaces were geographically distinct, a functional test might nevertheless enable them to be treated as a single hereditament, but only where the use of the one was necessary to the effectual enjoyment of the other. That depended not on the business needs of the ratepayer but on the objectively ascertainable character of the subjects: Woolway (VO) v Mazars [2015] UKSC 53; [2015] EGLR 56 applied.
(2) The present appeal was concerned only with the geographical test. A test based on appearance and impression might properly be treated as part of the geographical test. Any physical link between two units would have an important part to play in the proper application of a geographical test of separation. It might also help demonstrate a functional dependence between two units, such as parts of a factory. A physical link carrying units of work from one area to another might be regarded as important in relation to both the geographical and functional tests and to the issue of separate lettability: Rootes Motors (Scotland) Ltd v Assessor for Renfrewshire [1971] RA 21, Burn Stewart Distillers plc v Lanarkshire Valuation Joint Board [2001] RA 110 and Harding and Clements v Secretary of State for Transport [2017] UKUT 135 (LC) considered.
Each case would depend on its own facts, but the approach should be based on an assessment of the particular physical characteristics of the premises as a whole, rather than on the application of prescriptive rules. The means and extent of intercommunication between different parts of a site were critical but no special significance should be afforded in the context of industrial premises to any intercommunication which existed for the purpose of transferring the very thing which was manufactured on the site. When answering the geographical question, it was important to focus on the physical premises themselves and not on the use made of them by a particular occupier.
There were no rigid tests or qualifying conditions which would always cause properties to be regarded as a single hereditament. A broad analysis of the premises was required and a judgment whether they could sensibly be said to comprise a single unit of property. The exercise of judgment largely depended on the impression which the subject matter made on the decision maker and was not one which only an expert rating surveyor or specialist tribunal could perform.
(3) When considering the geographical test in the present case, how the bridge was used in practice was less important than the substantial physical connection it created between the two parts of the site. Anyone standing on the factory side of the road and facing the warehouse would notice that the two buildings were connected by a massive steel structure spanning the road. The fact that the bridge was supported high above ground level emphasised the unity of the two sites, reaching across from one side of the road to the other and overcoming the obstacle represented by the road.
The three components in the appellant’s occupation (the factory, the warehouse and the bridge) could realistically be regarded as a single unit of property. They satisfied the cartographic test, in that they could be ringed round on a plan. They were visually connected by the bridge and the shared colour scheme and branding which immediately made it obvious that they comprised a single unit of occupation. The connection between them formed a massive and highly visible link between the two parts of the site.
(4) As regard the split site end allowance, the expert valuers had taken divergent approaches. The appellant selected comparables by location and the respondent applied the greatest weight to the property most closely aligned with the configuration of the appeal property. The appellant’s selection was preferable and the end allowance to reflect the split nature of the site would be determined at 7.5%.
Luke Wilcox (instructed by Conneely Tribe) appeared for the appellant; George Mackenzie (instructed by HMRC) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of FC Brown Steel Equipment Ltd v Hopkins (VO)
