Rating – Non-domestic rates – Valuation – Appellant occupying distribution warehouse – Valuation Tribunal for England reducing assessment of rating list valuation – Appellant appealing – Whether rental evidence sufficient to determine rateable value – Whether tone of rating list preferable in determining rateable value – Appeal allowed in part
An issue arose concerning the 2017 rating list assessment of a distribution warehouse in Hemel Hempstead, Hertfordshire. It dealt primarily with the question whether the rent on the property, with only a limited amount of other evidence, formed the best guide to rateable value, or whether evidence of other assessments, and the tone of the rating list should be preferred.
The property was originally assessed in the 2017 Rating List at a rateable value of £880,000 with effect from 1 April 2017 and the Valuation Tribunal for England reduced the assessment to RV £875,000. The appellant, which occupied the property from 2014, sought an assessment of RV £750,000. The respondent valuation officer sought to restore the original assessment.
The appellant’s case was that there was sufficient rental evidence from local transactions agreed close to the antecedent valuation date (AVD), including that of the property, to indicate the level of value that parties were prepared to agree on the property and other comparable properties. Analysis of those transactions supported an assessment of RV £750,000 based on a main space rate of £52.21 per m2.
The respondent argued that greater weight should be attached to the basket of comparable evidence. The 2014 rent appeared out of line with the rents achieved on the comparable properties in the locality and required significant adjustment to bring it into line with the statutory definition of rateable value. The result was RV £880,000.
Held: The appeal was allowed in part.
(1) Statute required that the appeal property be valued reflecting certain matters as they existed on the material day (1 April 2017), and by reference to values pertaining at the AVD (1 April 2015). The matters to be taken at the material day were set out in paragraph 2(7) of schedule 6 to the Local Government Finance Act 1988.
For the purposes of the 2017 rating list, the valuation office had adopted a factorised approach to the analysis of rents and the subsequent valuation of distribution warehouses. That involved the adoption of a rate in terms of main space which effectively expressed the value of each part of the building as a factor of the rate applied to the warehouse.
(2) The correct starting point was the rental evidence available to the hypothetical tenant at the AVD. There was no evidence that the market at the AVD was showing signs of growth and the hypothetical parties would not be certain that the concessionary rent would grow to the level of the headline figure by the first review. Therefore, the rental concession should be spread over the term of the lease, namely ten years.
Using the methodology adopted by the parties but ignoring the three month rent-free period and amortising the concession over ten years the tribunal arrived at an analysis of £57.43 per m2. That figure represented the rent for the property taking account of the rental concessions but devoid of any rateable plant and machinery.
Whilst it was evident that rents grew strongly between 2013 and 2019, there was no evidence to show exactly when that growth took place. The tribunal was inclined to the view that the two lettings demonstrated that the rent for the property, on the basis that the statute defined, should be based on a figure of £65.71 per m2, which would be rounded to £65.75.
(3) When preparing a rating list the valuation officer was required to value each hereditament individually and to have regard to the underlying principle of uniformity, fairness and equality. Although rents might vary greatly assessments had to show a uniform pattern.
In Futures London Ltd v Stratford (VO) [2005] RA 75, the Upper Tribunal considered that three stages led to establishing a tone of the list. At first, when a new rating list was put on deposit, assessments would carry relatively little weight: they were opinions of value by the valuation officer, as yet unchallenged and untested by negotiation. Over time assessments would be challenged and agreed or determined by a tribunal or accepted by lack of challenge. Finally, a stage would be reached when enough assessments had been agreed or determined or were unchallenged to establish a pattern of values, a tone of the list. The list was then said to have settled: rents would be largely subsumed into assessments. At that stage rating surveyors would have little regard to rents and pay considerable attention to assessments.
The position at any time regarding the tone of the list was a question of fact. When an assessment was challenged before a tribunal, the correct time for deciding whether the tone of the list had been established was immediately before the hearing. The weight to be given to comparable assessments as evidence of value would depend on the circumstances in each case. Those might indicate that little or no weight should be given to comparable assessments, eg, where acceptance of value was more acceptance of rate liability or where a body of settlement evidence rested on a single agreed assessment.
The introduction of the check, challenge and appeal methodology for the resolution or determination of appeals had changed the approach of ratepayers and their advisors to alteration of the rating list. It appeared that the stages set out in Futures London Ltd were now less easily defined and establishment of a tone was less clear cut.
(4) Both parties agreed that the property warranted an end allowance, it was just a question of quantum. The difference between the analysed rents of £65.71 per m2 for the comparable property and £57.43 per m2 for the appeal property was 12.6%. That would be used as the end allowance.
An analysis of the two pieces of rental evidence available at the AVD, and the finding that there was no discernible evidence of rental growth between the dates of those lettings and the AVD, led to the conclusion that a main space rate of £65.75 per m2 was appropriate for distribution warehouses in the area.
When that figure was applied to the property, with an area in terms of main space of 14,183m2, the unadjusted assessment was £932,525. Applying an end allowance of 12.6% for the various disabilities brought the figure to £815,027. The addition of plant and machinery at £12,091 led to a final assessment of £827,118 rounded to RV £825,000.
The parties appeared by their representatives.
Eileen O’Grady, barrister
Click here to read a transcript of Robert Dyas Holdings Ltd v Moore (VO)
