The Upper Tribunal has considered the rateable value of “white space” in a data centre in Ricketts v Cyxtera Technology UK Ltd [2021] UKUT 265 (LC).
The hereditament in question was two two-storey buildings – 630 and 631 Ajax Avenue – in Slough where space is offered to customers on a retail colocation basis: customers pay for space in the data halls where their IT equipment is accommodated in rows of racks, sharing power and cool air. 630 was built in 2007-08 and 631 in 2012-13, and the two buildings were linked by connecting corridors.
White space is space in a data hall not yet adapted for customers. As customers arrive, the data hall is gradually adapted with areas of white space becoming customised. However, white space will remain even when the data hall is full to capacity because the IT capacity depends on its power supply and cooling capacity rather than the space occupied: up to 20% of the floorspace could be unoccupied.
A building is only a hereditament for the purposes of Schedule 6 to the Local Government and Finance Act 1988 if it is ready for occupation. This needs to be assessed in light of the purpose for which it is designed – Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT204 (LC) – but there is a distinction between when the building is ready for occupation as a building and the subsequent installation of equipment and furniture which is necessary for its use for the purpose for which it is intended – Post office v Nottingham City Council [1976] 1 WLR 624. However, these decisions related to offices and a telephone exchange: there are no authorities relating to data centres.
The respondent challenged the rateable values attributed to 630 Ajax Avenue in the 2010 rating list on various dates in 2010 and to the combined figure for units 630 and 631 in 2013. The Valuation Tribunal reduced the figures, agreeing that they were too high because the data centre was gradually increasing its capacity over the period 2008-13. It determined that white space (by contrast with customised white space) was not capable of beneficial occupation for the intended purpose and so did not form part of the hereditament. As 631 was still in the hands of contractors in March 2013 it could not form part of the hereditament.
Allowing the Valuation Office appeal, the UT decided that the extent to which the building was ready for customers was a red herring. It was acknowledged by the parties that the respondent’s customers were not in rateable occupation and so it was the respondent’s own beneficial occupation of the white space that mattered.
The respondent was in control of and actively operating the white space from the point it was handed over by the builders. Consequently, at the material dates in 2010 the whole of the data halls, white space and customised white space were capable of occupation by the respondent and were so occupied. The appellant conceded that 631 did not form part of the hereditament in March 2013 and the UT declined to determine when it did so.
Louise Clark is a property law consultant and mediator
