England and Wales Lands Tribunal

[2003] EWLands RA_19_2002 (06 January 2003)

RA/19/2002

LANDS TRIBUNAL ACT 1949

RATING – valuation - factory – roof in disrepair – whether defects assumed to have been remedied – whether necessary works constituted repair – whether such works would be considered uneconomic – appeal dismissed – Rating (Valuation) Act 1999, s.1(2)

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

BEDFORDSHIRE VALUATION TRIBUNAL

BETWEEN ARCHER LIMITED Appellant

and

RICHARD HENRY ROBINSON Respondent

(Valuation Officer)

Re: 19-21 Bilton Way

Dallow Road

Luton, LU1 1UU

Before: N J Rose FRICS

Sitting at 48/49 Chancery Lane, London WC2A 1JR

On 11 October 2002

Appearances: Mr J Weintroub, director of the appellant company, for the appellant.

Respondent in person.

The following cases are referred to in this decision:

Anstruther-Gough-Calthorpe v McOscar [1924] 1KB 716

McDougall v Easington DC (1989) 58 P & CR 201

Holding & Management Ltd v Property Holding and Investment Trust Plc [1990] 1 EGLR 65

Fir Mill Ltd v Ryton UDC (1960) 7 RRC 171

Williams (VO) v Scottish & Newcastle Retail Ltd and Allied Domecq Retailing Ltd [2001] RA 41

The following cases were also cited:

Saunders v Maltby (VO) [1976] RA 109, 19 RRC 33

Wexler v Playle (VO) (1960) 175 EG 39

Benjamin (VO) v Anston Properties Ltd [1998] RA53

Murphy (VO) v Courtney Plc [1999] RA 1

Morcom v Campbell-Johnson [1956] 1 QB 106

Lurcott v Wakely & Wheeler [1911] 1 KB 905

Wandsworth LBC v Griffin and Cunningham [2000] 26 EG 147


 


DECISION

Introduction

1. This is the first appeal heard by this Tribunal concerning the application of s.1 of the Rating (Valuation) Act 1999 ("the 1999 Act) to the valuation of a property which is in disrepair. The appeal is by Archer Limited, trading as Albert Packaging. The appellant, the occupier of a factory and premises known as 19-21 Bilton Way, Dallow Road, Luton, LU1 1UU ("the appeal property"), appeals against the decision of the Bedfordshire Valuation Tribunal, determining the assessment of the appeal property in the 1995 rating list at rateable value £32,000.
2. Mr Jeremy Weintroub, a director of the appellant company, appeared for the appellant with leave of the Tribunal. He gave evidence himself and also called another director, Mr Adrian Weintroub. I shall refer to Mr Jeremy Weintroub in future simply as Mr Weintroub. The respondent valuation officer, Mr Richard Henry Robinson, appeared in person with leave of the Tribunal and gave evidence. By order of the Registrar the simplified procedure provided for in rule 28 of the Lands Tribunal Rules 1996 applied to this appeal.
3. It is agreed that the material day for the purpose of this appeal was 1 April 1995. The appellant's case is that the assessment should be reduced to £8,000. Mr Robinson contends that the valuation tribunal's decision was correct. In company with all three witnesses I inspected the appeal property, and certain other properties which had been referred to at the hearing, on 12 December 2002.
4. By rule 28(9) of the Lands Tribunal Rules 1996, hearings conducted under the simplified procedure

"shall be informal and shall take place before a single member of the Lands Tribunal who shall act as if he were an arbitrator and who shall adopt any procedure that he considers to be fair."

After the hearing had concluded, the appellant wrote to the Tribunal, asking that an independent expert in asbestos legislation "be allowed to attend and give evidence to the court on the implications on the valuation of the Control of Asbestos at Work Regulations 1987". I indicated that I was prepared to receive written evidence from such an expert. A report was subsequently submitted by Mr Matthews Jenkins, BSc(Hons), MIoR, currently technical director of RAM Consultancy Ltd., who had inspected the roof of the appeal property in 1999 when he was employed by Glanville Consultants. Mr Robinson has made further written submissions on matters raised in that document.

Facts

5. The parties prepared a statement of agreed facts. In the light of that statement and the evidence I find the following facts. The appeal property is situated on the Bilton Way industrial estate off Dallow Road, approximately 1.5 miles west of Luton town centre. It comprises a single-storey factory unit built in 1971 of steel framed single span construction, contained within brick skin outer walls, around a solid concrete and screed floor, and covered, on the material day, by asbestos cement roofing sheets.
6. The accommodation is as follows:

Ground floor
Factory	708.0m2
Staff room	46.7m2
First floor
Offices	65.9m2

7. Toilet facilities are provided on each floor. A gas fired warm air blower provides heating to the factory space. There is no heating in the offices. All main services are connected. Access to the factory is provided by a full height roller shutter door to the main production space. The eaves height is approximately 4.8m. There is on site parking for customer and staff vehicles, although the parking area is not secure.
8. In 1992 the appellant took a lease of the appeal property for a term of five years on full repairing and insuring terms. The rent payable was £41,000 per annum exclusive. The lessor was The Real Estate and Commercial Trust Limited (subsequently acquired by Slough Estates Plc). The agreement for lease provided that, before the building was occupied, the landlord would carry out certain specified works, including replacing the existing roof lights. After the appellant moved in it became apparent that the new roof lights had not been properly installed. They ran the full length of the building on both sides and allowed water to penetrate through the roof into the property. In addition the fragile asbestos sheeting had been cracked and broken by the contractors carrying out the replacement works.
9. A number of attempts were made to remedy the leaks. One of the contractors used was Matrix Industrial Roofing Services Limited, who were first employed in 1993. On 19 October 1994 that company produced a specification of proposed works on the instructions of the landlord. Referring to the specified works Matrix said:

"Unfortunately, due to the random nature of these repairs, we cannot guarantee their success. As we are sure you will appreciate, rainwater can travel from one point in the roof to another and it is for that reason we recommend that a complete treatment be undertaken as soon as possible."

10. The works specified by Matrix were not carried out and, in September 1997, the landlord served a schedule of dilapidations on the appellant. The works required to be carried out included replacing the cracked roof sheet panels to the roof. The appellant did not accept that it was responsible for that work and the landlord did not pursue the matter.
11. The appellant commenced proceedings in the High Court against its landlord for breach of the agreement for lease dated 14 August 1992. These were eventually settled by consent by a court order dated 30 January 2001. The landlord agreed to erect a new roof over the existing one. The resultant contract was for over-roofing involving an Ashgrid system, supporting fluted tin sheets and separated from the original roof by a reinforced vapour controlled layer and a rockwool insulation quilt 100mm thick. In addition, the existing rooflights were removed and replaced with new rooflights to match the existing asbestos cement profile. The consent order also provided that the appellant would enter into a new full repairing and insuring lease for 10 years from 27 November 2000, subject to a tenant only break clause after 5 years. The rent reserved was £44,000 per annum, but this would not become payable until 21 months after the commencement of the lease. Finally, the landlord agreed to pay the appellant's surveyor's fees for agreeing the specification and supervising the works, and the appellant's legal costs incurred in the proceedings. The appeal property has been continuously occupied by the appellant from November 1992 to the present day, including the period of approximately ten weeks in late 2000 and early 2001when the agreed works were carried out.

Issues

12. S.1 of the 1999 Act amends paragraph 2 of Schedule 6 of the Local Government Finance Act 1988 ("Schedule 6"). As amended by s.1(2) of the 1999 Act and earlier legislation, paragraph 2(1) of Schedule 6 now reads:

"The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non-domestic rating shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on these three assumptions:

(a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;

(b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic;

(c) the third assumption is that the tenant undertakes to pay all usual tenant's rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above."

13. The principal issue in this appeal is the effect – in the light of s.1 of the 1999 Act – of the fact that the roof of the appeal property was cracked and leaking. From this two subsidiary issues arise. Firstly, whether the works necessary to remedy the disrepair constituted "repairs" and, secondly, if they did, whether a reasonable landlord would have considered them uneconomic.

Case for the appellant

14. The appellant's case is as follows. The appeal property was used for the manufacture of printed folding cartons. The effect of the ingress of water was to damage raw materials, work in progress and finished goods and to cause machinery to rust. Until the building was over-roofed, the appellant was unable to seek certain classes of work, such as from the food and pharmaceutical industries.
15. The appellant says that the landlord damaged the roof irreparably in 1992. As a result the building was unfit for occupation, especially for the appellant's printing business. In practice, the effect of the damage was the same as if a fire had destroyed part of the roof.
16. Mr Weintroub produced a written report from Mr P J Hill, FRICS, ACIArb, partner in Peter Hill, chartered surveyors, of Luton and elsewhere. Mr Hill explained that, in late 2000, he had been instructed to negotiate with the appellant's landlord to agree how the roof was to be made watertight. He said:

"Bearing in mind the roof was designated as fragile in accordance with HSG 33 Safety in Roof Work 1993, and the fact that the existing roof sheets consisted of asbestos cement and therefore all work had to comply with the Asbestos at Work Regulations 1987 (as amended) it became impossible to carry out repairs without causing more damage to the roof in view of the fragile nature of the existing asbestos.

To resolve matters the landlords agreed to employ Glanville Consultants to re-cover the roof for a total sum of £52,112 plus VAT."

17. Mr Hill made the following additional observations:

"Repair to a roof involves replacing the original roof covering with new and like material, without altering the qualities of that construction.

The original roof surfaces were not repaired and remained in position.

The work included the replacement of the existing uninsulated roof lights with new insulated roof lights and substantially improved insulation between the existing roof covering and over clad metal surface.

The level of insulation was greatly increased."

He concluded:

"The original roof was not repaired, but improved as a result of the installation of insulated roof lights and over cladding, including the insulation material between the original roof and new surface, resulting in improved internal environment.

The works carried out to the roof clearly constituted an improvement and not a repair."

18. Mr Weintroub said that, even though the appellant held a full repairing and insuring lease, the landlord had been prepared to expend approximately £152,000 to settle the litigation relating to the damaged roof, made up as follows:

Work carried out at landlord's expense – say £ 55,000

21 months rent free period £ 77,000

Lessee's legal costs £ 14,500

Lessee's surveyor's costs £ 5,500

£152,000

19. Once the works had been completed, said Mr Weintroub, the new rent remained commensurate with that which had been agreed for the original lease in 1992, namely an increase of only 6.8% over an 8 year period. The building had therefore been put into a condition to recover a rent equal to that which would have been expected if the landlord's contractors had not damaged the roof. If one compared the condition of the roof after the works had been completed with that immediately before they started, it was clear that a major improvement had been effected. The property should be valued as it in fact was on the material day, and not as it became after completion of the works of improvement.
20. Mr Weintroub referred to the following extract from the practice note on the 1999 Act, prepared by the valuation office agency in July 1999:

"5.17 It is essential that VOs distinguish works of repair from works of renewal or improvement because an obligation to repair does not involve a duty to renew or to improve. If the works amount to renewal or improvements, they fall outside the landlord's or tenant's repairing liability and cannot be envisaged in the hypothetical rating world.

21. 18 The Oxford English Dictionary defines repair as 'to restore to good condition by renewal or replacement of decayed or damaged parts, or by re-fixing what has given way; to mend'. It has been held that repair 'connotes the idea of making good damage so as to leave the subject so far as possible as though it had not been damaged' (see Anstruther-Gough-Calthorpe v McOscar [1924] 1KB 716 per Atkin LJ)."

He submitted that, to effect a repair, the landlord would have had to "mend" the existing asbestos structure. This was not undertaken.

22. Referring to the Matrix quotation of October 1994, Mr Weintroub said that the works specified were never carried out because the roof leaked throughout and it was not possible to leave the roof "as though it had not been damaged" as required in the light of the judgment in Anstruther. He suggested that Matrix had recognised this, by refusing to guarantee their work and recommending a "complete treatment." It was therefore unreasonable to suggest that this quotation proved that a repair was possible, or to use it to determine the actual cost of repair.
23. The fact that the landlord had agreed to over-roof the building demonstrated that the works described in the Matrix quotation could not have made the building watertight in a satisfactory manner. Moreover, the Matrix quote ignored additional costs associated with the safety aspects of working with asbestos, including the appellant's costs of vacating the premises for the duration of the work and covering and cleaning all machinery, as well as compensation for losses caused by business interruption.
24. Mr Weintroub referred to another building on the same estate, of identical construction and age, where the landlord had been forced to carry out a "remote demolition" of the asbestos cement roof as a result of its fragile nature. Finally, he emphasised that the appellant had not been called upon to make any contribution to the cost of works effected pursuant to the consent order, even though it was liable to repair the property under its lease obligations.
25. For all these reasons, Mr Weintroub submitted that a "repair" as defined in the valuation office agency's practice note – as opposed to an improvement in the form of the eventual over-roofing – could not have been carried out to the appeal property.
26. Mr Jenkins considered that repairs to the roof were not a feasible option and that the technically preferred remedy, whether the appeal property was occupied or vacant, was to overlay the roof. He was also of the view that the overlay system, which was in fact installed, represented a significant improvement, for two reasons. Firstly, it had enhanced the thermal performance of the roof and, secondly, the previous "cold roof" construction had been converted to "warm roof" construction. This, he said, resulted in a significant overall improvement in the roof's performance.
27. Even if the works required to the appeal property could properly be described as works of repair, Mr Weintroub suggested that they would have been considered uneconomic by a reasonable landlord. There were four reasons for this suggestion. Firstly, he said, it was not economically viable to "mend" the existing structure within the then current asbestos legislation. Secondly, the fact that the landlord had attempted to pass responsibility for the work on to the appellant by means of a schedule of dilapidations, and had refused to undertake the work itself until forced to do so as a result of legal proceedings, showed that it had taken a commercial decision that the works were uneconomic. A further example of the landlord having taken such a commercial decision was provided by its offer, made in January 2000, to settle the dispute on the basis that the rent would remain unchanged and that no work would be done to the roof. Finally, Mr Weintroub said that the landlord was planning to redevelop the appeal property in the near future as part of a larger scheme, which again would make it uneconomic to carry out the necessary works.
28. If the works were not repairs, said Mr Weintroub, then the appeal property must be considered rebus sic stantibus, that is, in its existing physical state. It followed, firstly, that the property had to be valued in its actual condition at the material day. In that respect, the rent of £41,000 per annum which had been agreed in 1992 was not evidence of rental value for rating purposes, since it related to a building in good condition. Secondly, the valuer had to assume a letting to a printer. Mr Weintraub suggested that there was not a single printing company which would consider occupying premises in such a condition as the appeal property, particularly on the basis of a full repairing liability.
29. Mr Weintroub explained that it had not been possible for the appellant to vacate the property for two reasons. Firstly, it would have been extremely expensive to remove all its equipment to another building. Secondly, a move would not have released the appellant from its existing lease obligations. He suggested that the property should be valued by reference to the rent agreed in 1992, together with the terms of the 2000 consent order. The appropriate calculation was as follows:

Total rent payable over 5 years £41,000 x 5 = £205,000

Deduct

Cost to landlord of fulfilling its contractual obligations £152,000

Actual rent paid over 5 years £ 53,000

Actual rent as a proportion of total rent = 53/205 = 25.8%

Value of appeal property in repair £ 32,000

Value of property in disrepair - £32,000 x 25% = £8,000

Case for the valuation officer

30. Mr Robinson has had 27 years experience of rating valuation. He has been at the Bedford valuation office since 1999, and a team leader from July 2001 to date. He carried out an inspection of the locality on 6 June 2001 and internal inspections of 11 of the 29 units on the estate on 19 September 2002.
31. He referred to the judgment of the Court of Appeal in Anstruther, approving the determination of an arbitrator that a covenant to repair meant that the tenant must put the premises

"into such condition as I should have expected to find them in if they had been managed by a reasonably minded owner, having full regard to the age of the buildings, the locality, the class of tenant likely to occupy them, and the maintenance of the property in such a way that only an average amount of annual repair would be necessary in the future."

32. Mr Robinson pointed out that the statutory valuation basis assumed a hypothetical tenant. The hypothetical tenant might be the actual tenant, but this was not necessarily so. He considered that a wide range of industrialists might wish to take a tenancy of the appeal property. The effect of water ingress to the building would be more serious for the appellant than for other companies involved in industries (such as plastics, metals and other non-perishables) which were less sensitive to such problems. His investigations had shown that some of the other units on the estate also suffered from rainwater and snow thaw penetration and, whilst this was inconvenient, it did not result in beneficial occupation being interrupted. He concluded from this that the state of repair that an ingoing tenant would have expected would include a roof with its original asbestos covering in reasonable repair, but not necessarily one which never leaked.
33. Mr Robinson said that a landlord, faced with the need to let the appeal property in its existing state at the material day, would have had the choice of four possible options. The first was to carry out no repairs at all, and be prepared to negotiate a reduced rent with the tenant. This had been put forward by the landlord during a meeting with the appellant on 28 January 2000. The landlord had offered to renew the lease at the original passing rent. This was not attractive to the appellant, as it had an outstanding claim against the landlord. The second option was to carry out the repairs in accordance with the Matrix specification. The third was to renew the roof of the property. This would have been costly for the landlord, as it would have been very expensive to move the tenant out whilst the works were undertaken. The final option was to over-roof the property. This was what had happened in practice, not least because the appellant had a substantial claim for damages against the landlord.
34. On the basis of the statutory rating hypothesis, said Mr Robinson, the first option would not have been open to the landlord, since repairs were assumed to have been carried out to put the property into a reasonable state of repair. The second option was a real possibility, as the specified works could have been carried out by Matrix or any specialist roofing contractor. It would also have been possible to adopt the third option. Although Mr Robinson had no evidence as to the actual cost of renewing the roof, he considered it likely that it would have been cheaper than over-roofing, because several other units on the estate had new roof coverings, but none had over-roofs. The over-roofing option, in Mr Robinson's view, would have been the most expensive of all.
35. Mr Robinson said that the vast majority of units on the estate that he had inspected still had their original roofs which suffered, or had suffered from varying degrees of disrepair. Indeed, even unit 8, which had a "new" metal profiled roof, showed evidence of leaking. In his opinion, a hypothetical landlord seeking to put the appeal property into a reasonable state of repair in preparation for letting, would have carried out the repairs in the Matrix report, that is, the second option.
36. Mr Robinson then considered whether the works required to bring the property up to the assumed state were repairs or improvements. In this connection he referred to a number of previous decisions of the courts and this Tribunal. He had regard in particular to the decision of the Court of Appeal in McDougall v Easington DC (1989) 58 P & CR 201, where Mustill LJ said:

"Assuming, therefore, that the steps which the council took were capable of amounting to repairs, the question is whether the works done to No.37 in fact fell into this category. There are many reported cases on this topic. In addition to those already mentioned we were referred to Lister v Lane & Nesham, Lurcott v Wakely & Wheeler, Quick v Taff Ely BC, Brew Brothers Ltd v Snax (Ross) Ltd, Stent v Monmouth DC. Some of the problems discussed in these cases do not arise here. In particular we need not consider the position which exists where the defects in design do not lead to structural disrepair, but merely to lack of amenity; for there is no doubt that there had been in the past, and would continue to be in the future, deterioration in the structure which needed to be put right by one means or another. Nor do I think it necessary to attempt a complete reconciliation of the whole body of authority by means of a single statement of principle: for I believe that whatever particular formula one selects from the various judgments, the result in the present instance must be the same. It is sufficient to say that in my opinion three different tests may be discerned, which may be applied separately or concurrently as the circumstances of the individual case may demand, but all to be approached in the light of the nature and age of the premises, their condition when the tenant went into occupation, and the other express terms of the tenancy:

(i) whether the alterations went to the whole or substantially the whole of the structure or only to a subsidiary part;

(ii) whether the effect of the alterations was to produce a building of a wholly different character than that which had been let;

(iii) what was the cost of the works in relation to the previous value of the building, and what was their effect on the value and life-span of the building."

37. Mr Robinson applied these three tests to the Matrix specification and the over-roofing option in the following way. He said that neither option went to the whole or substantially the whole of the structure. The Matrix works were clearly works of repair. So was the over-roofing, which was carried out only to the roof and not to the whole or substantially the whole of the structure. Nor did the works produce a building of a wholly different character. The premises still constituted a factory, the floor area was the same and no internal alterations were made. The building now had a roof which did not leak, whereas before it had leaked. The over-roofing option, with its improved insulation, had made the inside of the building a little warmer as well as drier, but this could not reasonably be said to have wholly changed the building's character.
38. As for the cost of the required works, Mr Robinson said that the landlord would view the matter differently from the tenant, since the landlord would anticipate receiving the benefit, in terms of rental income, over the life of the building rather than the term of the lease, which is the period to which the tenant would have regard. The landlord would therefore look at costs over the long term. For rating purposes the property, once in a reasonable state of repair, was assumed to be let on a full repairing and insuring lease, so that any future repairs would be the responsibility of the tenant. The landlord would only be liable for the repairs that were needed at the appeal property on a single occasion, immediately prior to the start of the lease. He would not need to establish a sinking fund to cover the cost of future repairs, as these would be the responsibility of the tenant. When the property was returned to the landlord at the end of the lease, the landlord would not have to carry out any further repairs, as the tenant would have kept the property in repair in accordance with its lease responsibilities.
39. Mr Robinson considered that both the Matrix works and the over-roofing passed the McDougall tests. They were both repairs and both could be carried out in compliance with the Control of Asbestos at Work Act 1987. He accepted that the improved insulation barrier in the over-roofing scheme constituted an improvement. He considered, however, that its contribution to the total cost would be minimal, and did not prevent the remaining elements of the work from constituting works of repair.
40. In order to be able to apply the economic test required by paragraph 2(1)(b) of Schedule 6, Mr Robinson first considered the cost of the necessary repairs at 31 March, 1993, the antecedent valuation date (AVD). The estimate of repairs in the only available copy of the Matrix specification had been blanked out, so he had obtained an estimate of those costs at the AVD from the valuation office agency regional building surveyor in the sum of £6,750. This estimate had to be adjusted. Firstly, it related to a building which was being occupied, whereas the rating hypothesis assumed a vacant property. He deducted 10% to reflect this factor. He then added 15% for fees and 17.5% for VAT and arrived at a total cost at the AVD of £8,209. He considered that a reasonable landlord would seek to spread those costs over the five years of the lease. He therefore divided the total cost by the figure of years purchase for five years at 6% and arrived at an annual equivalent of £1,670.
41. Mr Robinson also considered the cost of over-roofing, in case that were found to be the appropriate method of remedying the disrepair. He had been informed by the regional building surveyor that the actual cost of £52,112 plus VAT, expressed in terms of costs at the AVD, was £31,294. From this figure he deducted 5%, being his estimate of the cost of the insulation and vapour barrier, which he agreed was not required in order to put the property into repair. He deducted a further 10% to reflect the fact that the works were carried out while the property was occupied. Finally, he added consultants' fees of 5% and VAT at 17.5% to arrive at a total AVD cost of £33,010. He considered that the landlord would expect to spread these costs over a longer term. Using the years purchase figure for 20 years at 6% gave an annual equivalent cost of £2,878.
42. Mr Robinson concluded that, whether the necessary works comprised the Matrix option or the over-roofing option, since the rental value in repair was £32,000, any reasonable landlord would have undertaken them.
43. Mr Robinson's estimated costs of the two options at the AVD – including the deduction to be made from the cost of over-roofing to reflect the improved insulation – were not challenged by the appellant. Nor did the appellant criticise the deduction made by Mr Robinson to reflect the assumption that the property was deemed to be vacant.
44. In answer to a question from me, Mr Robinson said that the value of the freehold interest, if the property were in good repair, would be in the region of 10 years purchase (£320,000). Again, the appellant did not seek to challenge that assessment.

Decision

45. I deal firstly with the extent of the works which were necessary to remedy the defective roof. The appellant says that over-roofing was necessary, whereas Mr Robinson thinks that the repairs specified by Matrix in October 1994 would have been sufficient.
46. In support of his opinion, Mr Robinson referred to a number of units on the same estate which, he said, suffered from water penetrating through the roof. Thus, he argued, the Matrix specification was not disqualified from being considered as a suitable remedy merely because it may have been inadequate to prevent further water ingress in the future. I am unable to accept that approach. Information obtained during the limited internal inspections and enquiries made by Mr Robinson in September 2002, unsupported by any oral or written evidence from other occupiers on the estate, is wholly insufficient to persuade me that an industrialist would have been prepared to take a full repairing lease of the appeal property in March 1993, knowing that there was a real possibility that the roof would continue to leak.
47. In any event, I am not satisfied that it is appropriate to look at other buildings in the locality, when deciding whether it was necessary to make the appeal property water-tight in order to put it into repair. Mr Robinson referred in support of his approach to the arbitrator's award which formed the subject of the Court of Appeal judgment in Anstruther. It is true that, in that case, Scrutton LJ agreed that the arbitrator's statement, on the matters to be taken into account when determining the meaning of a covenant to repair, was accurate. The approach adopted by the remaining members of the court, however, was not identical. Bankes LJ said:

"provided the age of the buildings is regarded as the dominant feature, and the locality and class of tenant is only taken into account in relation to, or as a consequence of, the age of the buildings, then I consider the rule laid down by the arbitrator a good working rule of general application."

48. Atkin LJ went further. He said:

"Speaking generally, I have not seen a better statement of the duties of a tenant under such a covenant as this than the statement in the present case by the arbitrator of the principles on which he proceeded in arriving at the higher sum, which has been read by my Lord. It is true that he refers to the class of tenant likely to occupy them as being one of the matters a prudent owner would have regard to, but I gather from the whole report that he does not regard this consideration as involving a fluctuating standard. I would myself prefer to eliminate the possible tenant, and would be content with the arbitrator's earlier test when he is dealing with the pointing as being 'needful and necessary for the maintenance of the structure so that it may be expected to last for its normal life if properly kept in repair'".

49. In the light of these observations I would be cautious about relying upon the arbitrator's formulation in Anstruther. In deciding the extent of the works that were required to put the appeal property in repair, I prefer to be guided by two more recent judgments of the Court of Appeal, namely McDougall (where the remaining members of the Court agreed with Mustill LJ) and a subsequent case which was not referred to by the parties to this appeal, Holding and Management Limited v Property Holding and Investment Trust Plc [1990] 1 EGLR 65. In Holding and Management Nicholls LJ (with whom the other two members of the Court agreed) said:

"The first question to be answered is whether McHallam scheme A constituted repair within para 2 of the fifth schedule to the leases. It was common ground that in para 2 'repair' bears the meaning which it normally bears in leases. In such cases, the question is whether, having regard to all the relevant circumstances, the proposed works can fairly be regarded as 'repair' in the context of the particular lease. As Hoffmann J said in Post Office v Aquarius Properties Ltd [1985] 2 EGLR 105 at p107C:

In the end … the question is whether the ordinary speaker of English would consider that the word 'repair' as used in the covenant was appropriate to describe the work which has to be done.

Likewise, in the oft-quoted words of Sachs LJ in Brew Brothers Ltd v Snax (Ross) Ltd [1970] 1 QB 612 at p640:

It seems to me that the correct approach is to look at the particular building, to look at the state which it is in at the date of the lease, to look at the precise terms of the lease, and then come to a conclusion as to whether, on a fair interpretation of those terms in relation to that state, the requisite work can fairly be termed repair. However large the covenant it must not be looked at in vacuo.

Quite clearly this approach involves in every instance a question of degree …

Thus the exercise involves considering the context in which the word 'repair' appears in a particular lease and also the defect and remedial works proposed. Accordingly, the circumstances to be taken into account in a particular case under one or other of these heads will include some or all of the following: the nature of the building, the terms of the lease, the state of the building at the date of the lease, the nature and extent of the defect sought to be remedied, the nature, extent, and cost of the proposed remedial works, at whose expense the proposed remedial works are to be done, the value of the building and its expected lifespan, the effect of the works on such value and lifespan, current building practice, the likelihood of a recurrence if one remedy rather than another is adopted, the comparative cost of alternative remedial works and their impact on the use and enjoyment of the building by the occupants. The weight to be attached to these circumstances will vary from case to case.

This is not a comprehensive list. In some cases there will be other matters properly to be taken into account. For example, as in the present case, where a design or construction fault has led to part of the building falling into a state of disrepair, and the proposed remedial works extend to other parts of the building, an important consideration will be the likelihood of similar disrepair arising in the other parts of the building if remedial work is not undertaken there also, and how soon such further disrepair is likely to arise."

50. The conclusions I draw from McDougall and Holding & Management are as follows. In deciding whether works intended to remedy a defect in a building constitute repair, various matters are to be taken into account, the number of which and the weight to be given to each will vary from case to case. The factors that may be considered include those listed by Mustill LJ and Nicholls LJ. Although those lists are not exhaustive, it is in my view noteworthy that in neither case was the locality or the likely class of tenant referred to as being a material consideration.
51. In my judgment, the most important considerations in the present appeal are these. The appeal property was approximately 24 years old. In a report on the condition of the original roof, prepared on the instructions of the landlord in May 1999, Glanville Consultants suggested that, if properly maintained, the original asbestos cement roof should have had a total life expectancy of at least 40 years, of which some 15 years remained unexpired on the material day. Although no direct evidence was presented as to the design life of the over-roofing option, Mr Jenkins considered that it had significantly improved the roof's performance. I therefore think it is reasonable to infer that the life of the over-roofing would not have been shorter than that of the original roof. Since the remaining major elements of the building – the brick walls and the concrete floor – are of more solid construction than the roof, and it was not suggested that they were in any way defective, I conclude that the appeal property would have had a remaining lifespan of at least 40 years if the over-roofing option were implemented. If, on the other hand, the roof had remained in its damaged condition, it would have been unusable without causing serious disruption to most potential occupiers. If the works suggested by Matrix were carried out, there was a strong possibility that the leaks would recur. The cost of the remedial works would have been £8,209 for the Matrix option and £33,010 for the over-roofing. All these works would have been the responsibility of the landlord immediately before the grant of a full repairing lease. The freehold value of the property, if in good repair, was in the region of £320,000. The roof was only a subsidiary part of the entire structure. Eight of the original asbestos roofs on the estate have been replaced, seven of them with profiled metal coverings. Current building practice is therefore to prefer metal to asbestos as a roofing material. The only other differences in the character of the building resulting from the over-roofing were that its insulation would be improved and, in consequence, it would became rather warmer. Even that minor difference would be reduced or eliminated if, as Mr Robinson has assumed in his calculation, the insulation and vapour barrier were excluded.
52. With these matters in mind, I firstly consider whether the work specified by Matrix constituted repair. I have no doubt that, even assuming in Mr Robinson's favour that that work could have been carried out in conformity with the then current control of asbestos legislation, it was insufficient to put the appeal property into the "state of reasonable repair" postulated by paragraph 2(1)(b) of Schedule 6. In my opinion a building which has had a history of serious leaks and which has been repaired by a contractor who is not prepared to guarantee his work, and who has recommended that "a complete treatment be undertaken as soon as possible", is not in reasonable repair.
53. On the other hand, I am equally in no doubt that, in the light of the matters referred to in paragraph 50 above, the over-roofing option did amount to repair. That conclusion is subject only to the proviso that the cost of the improved insulation works should be left out of account, as Mr Robinson has done in his approach.
54. Mr Weintroub pointed out that the consent order dated 30 January 2001 was expressed to be in full and final settlement of all claims by the appellant against its landlord

"save to the extent that any past or present employee of the Claimant does develop an asbestos related illness including and confined to pleural plaques pleural thickening asbestosis and mesothelioma at a future date which is proved to result from works carried out to the roof of the premises from 1992 to the date of completion of the Works as set out in the specification attached to the lease dated 27^th November 2000."

I understood Mr Weintroub to suggest that this qualification showed that the over-roofing option could not be implemented in conformity with the control of asbestos legislation. I do not agree. The terms of settlement do not suggest that there was any health risk once the works had been completed. The possibility that an employee of the appellant might contract an asbestos related illness only arose because the appeal property had been occupied after the roof had been damaged and would continue to be occupied while the over-roofing was carried out. No such injury could be suffered by an employee of the hypothetical tenant for rating purposes, since the property is deemed to be vacant and in a state of reasonable repair before the assumed tenancy begins.

55. I should add that I consider Mr Robinson's third option, namely the renewal of the roof, would also have constituted a repair. His opinion that this work would have been cheaper than the over-roofing option may well be justified. Since, however, no evidence has been produced as to the precise cost of such renewal, I disregard it as a possibility.
56. In the light of these findings, it is not strictly necessary for me to decide whether the appellant was right to contend that the hypothetical tenant must be engaged in the printing industry. I shall, nevertheless, deal with the point, since Mr Weintroub placed some importance upon it. It is in my view answered by the following extract from the decision of this Tribunal (Sir William FitzGerald QC, President, J R Laird FRICS and J A F Watson FRICS) in Fir Mill Ltd v Royton UDC (1960) 7 RRC 171, concerning the basis upon which a property is to be valued for rating purposes:

"In our opinion only two assumptions are permitted. The first assumption is that the hereditament is vacant and to let – vacant in the physical sense and in the sense that the existing business has ended and any process machinery has been removed. The second assumption – and here we accept counsel for the respondents' second proposition – is that the mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house; a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory."

57. That decision was considered by the Court of Appeal in Williams (VO) v Scottish and Newcastle Retail Ltd and Allied Domecq Retailing Ltd [2001] RA 41. Robert Walker LJ said:

"Counsel for the valuation officer criticised the formulation in Fir Mill as unhelpful in that it was referring only to general categories of use. He urged the court not to treat its language ('a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not any particular kind of factory') as if it were a statutory text. I would certainly not treat that as a statutory text. But Parliament's adoption of the expression 'mode or category of occupation' must be taken as recognising that the formulation in Fir Mill is on the right lines, even if its precise scope has to be worked out on a case by case basis."

58. Accordingly, the appeal property falls to be valued as a factory, capable of occupation for a wide variety of industrial purposes, and not merely as a printing works.
59. Finally, I must determine whether a reasonable landlord would have considered that remedying the defect in the building by means of the over-roofing option was uneconomic. Here the relevant considerations appear to me to be as follows. The rental value of the property, in repair, was £32,000 and its lifespan, in repair, was at least 40 years. Mr Adrian Weintroub said, and I accept, that the effect of the damage was that water ingress occurred in numerous parts of the building, the areas affected on any particular occasion depending on the precise weather conditions. I think that Mr Weintroub probably went too far in suggesting that the building was wholly unfit for occupation, since a limited number of industrialists might have been prepared to put up with the inconvenience, provided the rent was set at a sufficiently attractive level. In any event, Mr Weintroub's valuation of the appeal property in disrepair at £8,000 is logically inconsistent with his suggestion that it was unfit for occupation in that state. Mr Robinson, however, did not submit a valuation of the appeal property in disrepair and so Mr Weintroub's figure of £8,000 is the only evidence before me on the point. In the absence of any other evidence, the valuation of £8,000, although calculated on an incorrect basis, seems to me to be about what would have been necessary to attract one of the few industrialists willing to take a lease of the appeal property in its damaged state. The cost of the necessary works was £33,010. Once those works had been effected, responsibility for keeping the property in repair would pass to the tenant.
60. Looked at in the light of these various considerations, it seems to me to be self-evident that the prudent hypothetical landlord would have considered it economic to carry out the necessary works, since they would have improved the marketability of the property considerably and the cost of doing them would have been recouped by way of additional rent after a period that would have been short in comparison with the remaining life of the building.
61. Mr Weintroub suggested that the landlord's policy was to redevelop the appeal property as part of a larger scheme "in the near future". However, no such redevelopment had taken place when I inspected the area more than seven years after the material day and I am not satisfied on the evidence before me that a serious intention to redevelop existed on that date. Mr Weintroub also sought to demonstrate that the over-roofing was uneconomic, because the landlord had been reluctant to carry it out when requested to do so by the appellant. The landlord did indeed adopt that approach, but it did so when the property was occupied by the appellant under a full repairing lease. That is not the situation under the rating hypothesis, where the premises are deemed to be vacant and to let. The actual approach of the landlord in the real world, therefore, is not relevant to a consideration of the approach of the hypothetical landlord in the hypothetical rating world.
62. It follows that the appeal property is to be valued on the assumption that, immediately before the tenancy begins, it has been repaired by way of over-roofing. On that basis, it was not suggested that the assessment determined by the valuation tribunal was excessive. The appeal is therefore dismissed. I confirm the assessment of the appeal property in the 1995 rating list of rateable value £32,000.
63. In proceedings determined in accordance with the simplified procedure, 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: 6 January 2003

(Signed) N J Rose