England and Wales Lands Tribunal

[2001] EWLands RA_76_1999 (09 July 2001)

RA/76/1999

LANDS TRIBUNAL ACT 1949

RATING – Valuation – 1995 Rating List – Holiday Cottages –Scale of values prepared by Valuation Office – Whether applicable in the Vale of Glamorgan – Evidence of comparable assessments – Assessment reduced to £1,825

IN THE MATTER of an APPEAL against a DECISION of the

SOUTH WALES VALUATION TRIBUNAL

BETWEEN MR AND MRS P ANDREWS Appellants

and

PETER RUSSELL Respondent

(Valuation Officer)

Re: Holiday Cottages,

Llanerch Vineyard,

Hensol, Pendoylan,

Cowbridge, CF72 8JU

Before N J Rose FRICS

Sitting at Swansea Training and Support Office, 1st Floor,

Caravella House, Quay West, Quay West Parade, Swansea, SA1 1SP

on 20 June 2001

Mr J E Lloyd for the Appellants with leave of the Tribunal

Respondent in person with leave of the Tribunal


 


DECISION

1. This is an appeal by the ratepayers, Mr and Mrs P Andrews (the appellants) against the decision of the South Wales Valuation Tribunal (the VT), determining the assessment in the 1995 rating list of two holiday cottages at Llanerch Vineyard, Hensol, Pendoylan, Cowbridge, CF72 8JU (the appeal property) at £2,800. By agreement between the parties the appeal was conducted in accordance with the simplified procedure under rule 28 of the Lands Tribunal Rules 1996.
2. Mr J E Lloyd, a spokesman for the self-catering industry in Wales, appeared for the appellants with leave of the Tribunal. He called Mr Paul Sansom, BSc, MRICS. The respondent valuation officer, Mr P G B Russell, Dip LA (Hons), MRICS appeared in person with leave of the Tribunal and gave evidence. It is agreed that the material date for the purpose of this appeal was 1 April 1995. The appellants' case was that the assessment should be reduced to £1,520. Mr Russell contended that the VT decision was correct. In company with Mr Lloyd and Mr Russell I inspected the appeal property and certain other premises referred to as comparables on 29 June 2001.
3. From the agreed statement of facts and from the evidence I find the following facts. The appeal property is located north of Hensol, which is a typical rural hamlet in the Vale of Glamorgan. It lies approximately 1.2 miles from junction 34 of the M4 motorway, just off the main internal exit road into Llanerch Vineyard in an idyllic rural setting. The property comprises a pair of semi-detached houses constructed of brick/stone, part cement rendered and with a slated roof. Each house has full central heating and contains a living room, kitchen and disabled WC on the ground floor; two bedrooms and bathroom on the first floor; a rear garden and a parking space at the front.
4. Each house contains the equivalent of 4 single bed spaces. Although both are let fully furnished, for the purpose of the valuation it is assumed that all chattels have been removed.
5. The apportioned gross income from the appeal property, before and after the antecedent valuation date, 1 April 1993, was as follows:

1991/92 £6,998

1992/93 £14,749

1993/94 £17,039

1994/95 £14,194

6. Mr Russell has been engaged in the valuation of land and buildings since 1974, principally in the south Wales area and exclusively in the employment of the Inland Revenue valuation office. He has dealt with a variety of classes of leisure property including hotels and guest houses, having most recently agreed the 2000 rating list basis for hotels and guest houses from Cardiff in the east to Porthcawl in the west and the top of the valleys to the north. His involvement with this appeal started between March and June 2000, when he replaced a colleague who has moved to another office. His valuation was as follows:-

8 single bed spaces at £360 per space = £2,880, say £2,800.

7. Mr Russell was not aware of any market rental evidence that would assist in the valuation as most, if not all, self-catering properties were owner-occupied. He had paid particular regard to the assessments of seven comparable properties in similar rural areas in the Vale of Glamorgan and adjoining Bridgend areas. There were relatively few self-catering holiday cottages there and in the Cardiff area, in contrast to west Wales which contained substantial numbers of such properties.
8. The appeal property was close to Cardiff and this, together with its location on the site of the Llanerch Vineyard, was advantageous. It had featured on BBC television and had received recommendations from various well-known personalities. He felt that this added weight to his contention that the property was one of the most highly sought-after locations for a holiday break.
9. Mr Russell said that this highly desirable location was further evidenced by the tariffs. His researches indicated that the current tariff for the appeal property was broadly "head and shoulders" above the tariffs quoted on the internet for other holiday cottages in south, west, mid- and south-east Wales. He did not consider that this relativity would have been significantly different on 1 April 1993. This supported his contention that the appeal property had special and attractive characteristics, which would enhance the tenant's income stream and prolong the letting season throughout the year, when other rural or seaside holiday cottages would have been closed. Moreover, the appeal property lent itself to mixed holiday and business use, such as by people visiting the Cardiff area for work purposes, accompanied by their families who stayed for a holiday. The various leisure opportunities in Cardiff were a further attraction of holiday accommodation in the area.
10. Mr Sansom has been a director of Landsker Property Services Limited since its formation in 1998. He was engaged in the valuation of all classes of property for the valuation office between 1970 and 1997, subject to a short period with the property department of Croydon borough council and a two-year period in West Africa, on secondment to the World Bank. During his time in the valuation office he served as a principal valuer in North Yorkshire, with particular responsibility for the North York Moors and the coastal area from Filey to Whitby. He also had an "all office" responsibility for leisure properties, which included a significant number of caravan parks, hotels, bed and breakfast establishments and a large number of self-catering units, both in coastal areas and in the immediate locality of the city of York.
11. When he returned to the United Kingdom in 1987 he spent four months in Cardiff regional office and from late 1987 to 1997 he was the district valuer and valuation officer in Carmarthen. Because of his expertise in the rating valuation of leisure properties he was also appointed as a national leisure specialist in 1994, with a national responsibility for caravan parks and holiday camps and a regional responsibility for bed and breakfast establishments and self-catering units. Since joining Landsker Property Services he has acted for the Welsh Association of Self-Catering Operators and other principality-based leisure organisations.
12. He said that in 1991 he had been asked to assist the regional office of the valuation office in dealing with concerns which had been expressed by the Welsh Tourist Board (WTB) about inconsistent methods being adopted for the valuation of self-catering accommodation in different parts of Wales. Together with Mr A Perrin, a first-class valuer from the superintending valuer's office, he had met two representatives of the WTB, one of whom was Mr J E Lloyd. At the meeting Mr Perrin had assured the WTB that the same method of valuation was used throughout Wales.
13. There was no market evidence available of actual annual lettings of self-catering complexes or bed and breakfast establishments and, in their absence, an examination of accounts was the accepted method of valuation. The basis of the method was as follows:

1. To assess the anticipated annual occupancy rates in an area, by reference to actual figures obtained from operators.

2. To translate that occupancy rate into a reasonably anticipated gross income .

3. To compare that theoretical figure with the actual gross receipts (where known) and to adopt a consistent level of gross income (the fair maintainable trade).

4. To deduct from that adopted figure of gross receipts operating costs that had been arrived at empirically from the examination of a large number of returns of income and expenditure.

5. The resultant figure, calculated by deducting 4. from 3., was the "divisible balance", which was to be shared between the hypothetical tenant and the hypothetical landlord. The percentage attributed to the landlord was taken at 30% because of the high input required by the hypothetical tenant and the bad weather and cancellation risk that he had to bear. The resultant landlord's share represented the notional rental value in rating terms and hence the adopted rateable value.

6. For ease of comparison the resultant figure was then expressed in terms of a value per single bed unit. It was evident that the values for single bed units varied according to location, quality of accommodation and length of potential season.

14. As a result of such an exercise being carried out in south and west Wales, the valuation office prepared a scale of values for self-catering properties for the 1995 rating list, varying according to age, quality and location. The values on this scale were expressed in terms of "per bed space". They were derived from an analysis of approximately 100 sets of accounts, for 1992,1993 and 1994, obtained from self-catering complexes in the Dyfed and Swansea valuation areas. The scale had been applied to all self-catering complexes in the old Dyfed area, comprising in excess of 300 properties. By contrast, there were only eight such complexes in the Vale of Glamorgan.
15. Mr Sansom said that if the appeal property had been valued in accordance with the scale, its quality would have fallen into category D ("luxury: central heating, all mod.cons.") and its location would have been either KL ("village location: good shopping, some transport") or ML ("small village location: village store, no transport"). The resultant value per single bed unit would have fallen between £190 and £200. In accordance with the scale, this would have been subject to a further abatement of 5% to reflect the fact that the cottages were semi-detached.
16. The number of self-catering complexes in the Vale of Glamorgan was in single figures, which clearly indicated the limited demand for such accommodation in this location. Mr Sansom produced details of tariffs, obtained from properties of similar quality in more rural areas. These indicated, he said, that the appeal property was not regarded by the market as exceptional. He accepted that, unlike many properties, visitors to the appeal property would not be restricted to the summer months. Nevertheless, a number of the better quality self-catering units in west Wales also enjoyed a similar level of occupancy.
17. Having regard to the high level of tariffs obtained from the comparables and their occupancy rates, he did not think that the appeal property should be regarded as a special case. It was similar to many of his comparables. There was no justification to adopt an unusually low level of deductions from gross receipts, which would be necessary to justify a higher divisible balance and hence a higher rateable value. Mr Sansom's valuation was £1,520, calculated as follows:

8 single bed spaces @ £200 per space = £1,600

Less 5% for semi-detached £ 80

£1,520

Decision

18. This appeal concerns the correct level of assessment of two holiday cottages in the Vale of Glamorgan. The valuation office produced a scale to be used in valuing such properties for the 1995 list, with the intention that it should be adopted across Wales, subject to appropriate regional variations where supported by local evidence. There is no rental or accounts-based evidence relating to self-catering accommodation in the Vale of Glamorgan. The principal difference between the experts in this case is that Mr Russell considers that the assessments of seven similar properties in the Vale and neighbouring Bridgend areas support a substantially higher rate per bed space there than that suggested by the scale, whereas Mr Sansom considers that there is no justification for departing from the scale.
19. I therefore start by considering the settlement evidence relied upon by Mr Russell. This may be summarised briefly as follows:

(1) Llwyn-Nwydog Farm, Talygarn, Pontyclun – 30 spaces at £350; 17.5% quantum discount.

(2) Moorshead Farm, Sigingstone – 10 spaces at £375

(3) Morfa Lane, Llantwit Major – 7 spaces at £330

(4) Treguff Farm Cottages, St Mary Church – 10 spaces at £330

(5) Abbottscroft, Cae Abbott Farm, Llangeinor, Bridgend – 3 spaces at £350

(6) Pennycroft, Cae Abbott Farm, Llangeinor, Bridgend – 2 spaces at £350

(7) Sunnycroft, Cae Abbott Farm, Llangeinor, Bridgend – 2 spaces at £350.

20. Although, on their face, these valuations appear to indicate an established tone of value, I have come to the conclusion that they do not do so. The reasons for this view are as follows. Firstly, the Moorshead Farm assessment is subject to an outstanding appeal, an earlier proposal having been withdrawn without any discussion with the valuation officer. Secondly, although the Treguff Farm assessment was calculated on the basis of 10 bed spaces, there are in fact 20 spaces at that property. The assessment in the rating list – which has been accepted by the ratepayer – is therefore actually equivalent to £165 per space. Thirdly, the current assessments of the three hereditaments at Abbott Farm resulted from valuation officer notices dated 8 December 2000. Prior to that date Abbottscroft had appeared in the list at £433.33 per space, Pennycroft at £500 per space and Sunnycroft at £575 per space. The only assessment which has been the subject of an agreement by a firm of rating surveyors is that of Llwyn-Nwydog Farm. The basis of £350, which represented a reduction from the original list figure, was agreed on 26 August 1999, just before a VT hearing. At the time that basis compared very favourably with the three assessments at Cae Abbott Farm. It is therefore understandable that the ratepayer's surveyor decided to accept the valuation officer's reduced assessment, rather than proceeding to the VT with no rental evidence to support a lower basis. It does not follow that the same agreement would necessarily have been reached if the assessments at Cae Abbott Farm had already been reduced. Moreover, it is at least possible that the ratepayer's surveyor was not aware of the basis which the valuation office had adopted for holiday cottages elsewhere in Wales; certainly, Mr Russell did not refer to it in his expert report for the instant case.
21. I therefore derive no assistance from the assessments of other holiday cottages in the general vicinity of the appeal property.
22. Mr Russell also supported his argument for a much higher basis than the normal scale by the fact that the tariffs currently charged at the appeal property were head and shoulders above those elsewhere in Wales. In the course of cross-examination, he conceded that the relevant tariffs were not those currently payable, but those that had applied on the antecedent valuation date; on that date the appeal property's tariff fell within the general range for holiday cottages in Wales, albeit at the upper end of the spectrum. Rather surprisingly, he did not consider it appropriate to amend his valuation to reflect the erroneous assumption upon which it had been based.
23. In the absence of any reliable evidence of rents, accounts or settlements to justify a departure from the general scale of values in the case of the appeal property, I do not consider it appropriate to make such a departure. I bear in mind that both experts agreed that the length of the letting season at the appeal property was at the upper end of the general range. I think, however, that this is due, not to its general location close to Cardiff and in the Vale of Glamorgan, but to the particular attractions of the neighbouring vineyard and its visitor's centre. If the Vale were a much more attractive location for holiday cottages than areas further to the west, one would have expected it to contain a relatively large number of properties devoted to that purpose; in fact, the vast majority of holiday cottages in south Wales are situated west of the Vale.
24. As I have indicated, I consider that the presence of the vineyard is a factor which increases the attractiveness of the appeal property. The valuation office's general basis for the 1995 list provides, among others, for the following additions to be made:

(a) shared use of covered swimming pool by five or less units – 10% open, 20% covered.

(b) shared use of complex facilities – games room, disco, laundry etc – 10%.

25. Against that background, I find that 20% should be added to the base value of the appeal property to reflect the attractions of the vineyard and its associated facilities. I accept Mr Sansom's evidence that the appropriate value, based on a strict interpretation of the scale, is £200 per space. My valuation is therefore £1,825, calculated as follows:

8 single bed spaces @ £200 = £1,600

Add for vineyard – 20% £  320

£1,920

Less for semi-detached – 5% £   96

£1,824

Say £1,825

26. The appeal therefore succeeds. I direct that the assessment of the appeal property in the 1995 rating list be altered to £1,825.
27. In proceedings determined in accordance with rule 28 no award is made in relation to costs except in circumstances which the Tribunal regards as exceptional. No such circumstances have arisen in this case and accordingly I make no order as to costs.

Dated: 9 July 2001

(Signed) N J Rose