North West office block subject of important Court of Appeal ruling
An important decision has just been handed down by the Court of Appeal that saw rateable value on an office block in Blackpool reduced from £490,000 to a nominal £1.
It has taken almost eight years to get to this decision however it is a landmark ruling that will have wider repercussions.
It centres on the matter of Telereal Trillium v Hewitt (VO) (2018) EWCA Civ 26 and Mexford House, a 1970’s office building in North Shore, Blackpool.
The property was occupied by HMRC and the Department of Work and Pensions back in 2008 but was vacated shortly after and completely empty by 31 March the following year.
It was entered in the 2010 rating list at an RV of £490,000 but this was appealed by the ratepayer and heard by the Valuation Tribunal for England. This determined the RV should be reduced to £1 on the basis that the evidence showed there was no demand for the property at the relevant date – 1 April 2008.
However, and not surprisingly, the Valuation Officer appealed to the Upper Tribunal (Lands Chamber) arguing that the property should be assessed at an RV of £370,000 since other office buildings in the area were still occupied and offered a comparison. The VO contended this showed a “general demand” for this type of property, even if it wasn’t possible to identify a potential tenant.
During the Upper Tribunal hearing the parties agreed that the case could be determined by the Upper Tribunal on a point of law only, using a position paper agreed by both parties.
The position paper set out that if the correct approach was “to consider whether, had the subject hereditament been on the market at the antecedent valuation date (1 April 2008), anybody would have been prepared to occupy the property and pay a positive rent”, if not then the appeal should be dismissed and the value of £1 determined by the VTE should be confirmed.
Alternatively, if the correct approach was to assume the existence of a hypothetical tenant and to assess value “by reference to the general demand as evidenced by the occupation of other properties with similar characteristics”, then the appeal should be allowed and the property assessed at RV £370,000.
In the end the Upper Tribunal allowed the VO’s appeal. The Upper Tribunal determined that the property should be entered in the rating list at RV £370,000 from 1 April 2010.
The saga continued and the ratepayer went to the Court of Appeal.
Before the Court of Appeal the ratepayer contended that, as it was accepted there was no demand for the property, the Upper Tribunal was wrong to conclude that the hypothetical basis of valuation required the valuer to assume a demand that did not in reality exist.
The VO still maintained its position that the basis of valuation for rating assumes a hypothetical tenant and a demand for the property must be assumed to exist. As other similar properties were occupied nearby, they stuck by their “general demand” for properties argument.
The Court of Appeal unanimously allowed the ratepayer’s appeal because “in the absence of any actual demand, there is no principle of law which requires such demand to be assumed.” As no realistic demand for the property could be identified, they concluded the hypothetical tenancy would be engaged on a nominal rent. The ratepayer’s appeal was allowed and the assessment of the appeal property reduced to RV £1, from 1 April 2010.
The interpretation is that an assumption of a tenancy does not carry an automatic assumption of a substantial rental value. If there is no demand for the property, the question of valuation is whether just a nominal rent applies. The Court of Appeal made it clear that this case was determined on specific facts, one being that it was agreed there was no demand for the subject property at the relevant date.
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