England and Wales Lands Tribunal

[2003] EWLands RA_53_2001 (13 April 2003)

RA/53/2001

LANDS TRIBUNAL ACT 1949

RATING – rateable value – telecommunications mast and associated equipment located in highway – operator's right to locate equipment in highway free of charge – whether effect of right that land of no value on rating hypothesis – land held to be of value – rateable value of land and rateable plant confirmed at £1,100

IN THE MATTER OF AN APPEAL AGAINST A DEICSION OF THE

NOTTINGHAMSHIRE VALUATION TRIBUNAL

BETWEEN ORANGE PCS Appellant

and

ALAN ROY BRADFORD Respondent

(Valuation Officer)

Re: Communication Station and Premises

Orange Pcs Ltd

Rotherham Baulk

Carlton in Lindrick Worksop

Notts SS1 9LD

Before: The President

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

on 25 March 2003

The following cases are referred to in this decision:

Hoare (VO) v National Trust [1998] RA 391

Trocette Property Co Ltd v Greater London Council [1974] RVR 306

Williams (VO) v Scottish & Newcastle Retail Ltd [2001] RA 41

Poplar Assessment Committee v Roberts [1922] 2 AC 93

Dawkins (VO) v Leamington Spa Corporation (1961) 8 RRC 241

Monsanto plc v Farris (VO) [1998] RA 107

Distillers Company v Fife Assessor [1983] RA 228

The following further cases were referred to in argument:

Railway Assessment Authority v Southern Railway Co [1936] AC 266

Amalgamated Relays Ltd v Burnley Rating Authority [1950] 2 KB 183

Robinson Bros (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee [1937] 2 KB 445

Royal Hong Kong Golf Club v Commissioner of Rating and Valuation [1977] HKTLR 236

Richard Glover instructed by Erdman Lewis Rating, chartered surveyors, for the appellant

Timothy Morshead instructed by Solicitor of Inland Revenue for the respondent


 


DECISION

Introduction

1. This appeal, from a decision of the Nottinghamshire Valuation Tribunal dated 16 November 2001, concerns a short but important point on the rateable value to be ascribed in the 1995 rating list to a hereditament consisting of an aerial mast and associated steel equipment cabinet and telecommunications cables and the land on which they are sited. The land is within the limits of a public highway, and the appellant, as a licensed telecommunications operator under the Telecommunication Act 1984, is entitled to locate its apparatus in a public highway free of charge. The contention which it advances, and which was rejected by the valuation tribunal, is that, in view of this entitlement, nothing should be included in the valuation for the value of the land. The parties are agreed that, if this contention succeeds, the hereditament should be entered in the list at £100 RV (representing the decapitalised cost of the rateable plant and machinery); while if it fails the entry should be at £1,100 RV, the figure determined by the valuation tribunal. The issue is of considerable importance to Orange and other operators because there are a large number of similar installations throughout the country.

The facts

2. There is no dispute about the relevant facts. There is an agreed statement of facts, and expert reports by Julian F Crowley, BSc, MRICS of Erdman Lewis Rating and Martin Entwistle, BSc, MRICS, the Central Acquisition and Estates Manager for the appellant, Orange Personal Communications Services Limited, and by the respondent valuation officer, Alan Roy Bradford MRICS, Dip Rating, were not the subject of cross-examination. The appeal hereditament is located on the grass verge of Rotherham Vault, a publicly maintained highway, in Carlton-in-Lindrick, Workshop, Nottinghamshire, adjacent to the Chartan-Aldred warehouse. It consists of a hollow metal pole mast, 11.5m high and about 250 cm in diameter at the base, supporting mobile telecommunications aerials, a steel equipment cabinet measuring 1.25m wide by 0.65m deep by 1.30m high and standing on a concrete base; telecommunication cables that link the aerials to the telecommunications equipment in the cabinet; and the land on which these are constructed. The aerials and the equipment are not rateable.
3. This type of mobile telecommunications installation is commonly known as a micro cell base station and this particular one forms part of the Orange cellular mobile telecommunications network. Orange, like the other licensed communications operators during the currency of the 1995 rating lists, Vodafone Limited, BT Cellnet (now mmO2) and One2One (now T-Mobile), had constructed a very large network of aerial sites consisting essentially of two types, macro cells and micro cells. Macro cells are situated on masts that vary in size and construction. Their height can be anything from 15 metres to 200 metres and more. Sometimes they are erected on rooftops. They can transmit signals up to a distance of 8 km, although the transmission distance will be limited by the topography of the area and the location and size of nearby buildings. Micro cells have a range of 500 to 800 metres and are constructed to provide service in areas that would otherwise be blind spots and to enhance service during busy periods.
4. There is generally a degree of latitude in siting a micro cell. It must be within a certain distance of the issued cell centre, and the amount of latitude will depend on the specific characteristics of the location. Constraints include the topography, building and trees, and the accessibility of the power and telephone lines to which connection must be made. In the present case the area within which the installation could have been located is more constrained than usual but other positions would have been possible, including a location on the other side of the road. Orange seeks to locate lamp post cell sites like the one under consideration on highway land wherever possible, and as at 1 November 1999 211 out of the 259 such installations that it had were on highway land and the other 48 were on private land. Installations on private land are normally subject to rental payments made under the provisions of lease or licence agreements negotiated with the landowner.
5. Before 3 June 1995 telecommunications masts and poles less than 15 metres in height were permitted development under Part 24 of Schedule 2 to the Town and Country Planning General Development Order 1988, subject to what is commonly referred to as a 28-day prior approval procedure. From 3 June 1995 such masts and poles have been permitted development under the Town and Country Planning (General Permitted Development Order) 1995, as amended, unless located on article 1(5) land, provided that notice of the proposed development has been given to the local planning authority and the authority has not objected within 56 days thereafter to its siting or appearance. The planning regime is the same for these purposes on highway land and on private land.
6. The appeal hereditament was entered in the 1995 non-domestic rating list for Bassetlaw District with the description "Communication Station and Premises" at a rateable value of £2,200 under an alteration to the list made by the valuation officer with effect from 1 November 1999. Notice of the alteration was given to the appellant on 30 March 2000, and on 25 January 2001 the appellant made a proposal to the effect that the entry was incorrect, excessive and bad in law and that the rateable value should be reduced to £1. Before the valuation tribunal the valuation officer contended for a rateable value of £1,100, and in its written decision of 16 November 2001 the tribunal accepted the valuation officer's contention that there was inherent value to the ratepayer in his occupation of the land and concluded that a rateable value of £1,100 was fair and reasonable. It ordered that the list be amended to show this value.

The Telecommunications Code

7. The licence under which the appellant operates incorporates the Telecommunications Code contained in Schedule 2 of the Telecommunications Act 1984. The code confers powers and imposes duties on the operator and contains ancillary provisions. Under para 2(1) the agreement in writing of the occupier of any land is required for conferring on the operator a right, for the purposes of establishing and operating its system, to install and maintain telecommunications apparatus on that land. In general, such consent will not bind the owner of the land, whose agreement to the installation will therefore also be required. Para 5 contains power to dispense with the need for any required agreement. Where an operator has given notice to the person whose agreement he requires and has not within 28 days received that agreement, he may apply to the county court for an order conferring the proposed right. Para 5(3) provides that the court may make such an order if, but only if, it is satisfied that any prejudice caused is capable of being adequately compensated for by money or is outweighed by the benefit accruing to the person whose access to a telecommunications system will be secured by the order. Under para 5(4) the court may impose terms and conditions on the exercise of the right conferred by the order; and under para 7(1) those terms must include such terms as to consideration as it appears to the court would have been fair and reasonable if the agreement had been given willingly and subject to the other provisions of the order.
8. Para 2(9) excludes the need for an agreement required under that paragraph where para 9 applies. It is this paragraph that confers the powers to install and maintain telecommunication apparatus in a highway. As amended by the New Roads and Street Works Act 1991, para 9(1) provides:

"The operator shall, for the statutory purposes, have the right to do any of the following things, that is to say -

(a) install telecommunication apparatus, or keep telecommunication apparatus installed, under, over, in, on, along or across a street …

(b) inspect, maintain, adjust, repair or alter any telecommunication apparatus so installed; and

(c) execute any works requisite for or incidental to the purposes of any works falling within paragraph (a) or (b) above, including for those purposes the following kinds of works, that is to say -

(i) breaking up or opening a street …

(ii) tunnelling or boring under a street …

(iii) breaking up or opening a sewer, drain or tunnel."

The code contains no provision for the payment of consideration or compensation where the power contained in para 9(1) is exercised, either to the highway authority or to the owner of land within the lateral limits of the highway that is not vested in the highway authority.

The Arguments

9. For the appellant, Mr Richard Glover advances a straightforward and simple contention. In the light of the agreement that the hypothetical tenant would not have agreed a rent higher than £100 unless he was prepared to pay a rent for the land on which the pole and the cabinet sit, he says that, since the only potential hypothetical tenant was a licensed telecommunications operator and since all such operators had the right without payment to install and maintain such equipment in the highway, the hypothetical tenant would not have been prepared to pay any rent for the land. The appeal hereditament, he says, was not the only location from which a potential occupier could provide the service that Orange actually provided from the mast. It could have been located elsewhere in the highway. The potential occupier would not have paid by way of rent for the hereditament being offered any more than the annual cost of obtaining other means of providing the services. Since he could have located the apparatus elsewhere in the highway free of charge he would not have paid any rent for the land on which it was in fact located.
10. In advancing this argument, Mr Glover places reliance on the "principle of reality". In Hoare (VO) v National Trust [1998] RA 391, Peter Gibson LJ at 415 quoted from the judgment of Lawton LJ in Trocette Property Co Ltd v Greater London Council [1974] RVR 306 at 311:

"It is important that this statutory world of make-believe should be kept as near as possible to reality. No assumption of any kind should be made unless provided for by statute or by decided cases."

Peter Gibson LJ went on to say:

"…subject to the specific statutory provisions the general principles which have been held to apply to statutory and other hypothetical transactions seem to me consistent with the rating authorities, which Schiemann LJ has reviewed, and are pertinent to the rating hypothesis mutatis mutandis. In particular I would emphasise the necessity to adhere to reality subject only to giving full effect to the statutory hypothesis, so that the hypothetical lessor and lessee act as a prudent lessor and lessee. I would call this the principle of reality, which is, to my mind, of fundamental importance in this case."

11. Mr Glover says that the principle was re-affirmed by the Court of Appeal in Williams (VO) v Scottish & Newcastle Retail Ltd [2001] RA 41 at paras 62 and 63 per Robert Walker LJ. What it requires in the present case, he says, is that the valuer should not assume away the option that the tenant would have had in the real world to locate elsewhere in the highway free of charge unless such an assumption is provided for by statute or by decided cases; and there is, he says, no such provision.
12. For the respondent valuation officer Mr Timothy Morshead advances four principal contentions. Firstly he says that the ratepayer's approach offends another principle of rating, the principle of equality (as referred to in Poplar Assessment Committee v Roberts [1922] 2 AC 93 by Lord Atkinson at 109) or, as it is otherwise called (by Robert Walker LJ in Scottish & Newcastle at para 63) the principle of uniformity. The appeal hereditament is, he says, functionally equivalent to a micro cell site on private land. The benefit derived by the ratepayer is the same, whether the installation is in the highway or on private land, and it should follow that the rateable value should be the same.
13. Secondly, Mr Morshead says, the ratepayer's approach involves misusing the concept of the tenant's alternative. He submits that the fact that the hypothetical tenant has the right of statutory rent-free occupation at the hereditament or nearby must be irrelevant, in the same way that it would be irrelevant if he owned the freehold of other land nearby that he could put to the same use. The concept of the tenant's alternative applies in the case of a contractor's basis valuation (see Dawkins (VO) v Leamington Spa Corporation (1961) 8 RRC 241 at 251), but a ratepayer wishing to rely upon it must subject his valuation to the discipline of that basis of valuation (see Monsanto plc v Farris (VO) [1998] RA 107 at 143). Neither party suggested that a contractor's basis valuation was appropriate here. Except under the contractor's basis a hypothetical tenant's alternative are only meaningful to the degree that they are evidence of the state of the market. But the relevant market consists of the market for yearly tenancies; and where there are no yearly tenancies in the market the terms on which other sites are available are either irrelevant or, alternatively, they need to be adjusted to accord with the statutory hypothesis. In the present case the potential to occupy other sites in the public highway without payment of rent is not evidence of the market for yearly tenancies.
14. Thirdly, Mr Morshead submits that Poplar v Roberts is good authority for the proposition that the ratepayer's right of rent-free occupation under the Telecommunications Code is to be disregarded. It is clear, I think, that this case is the principal authority that requires to be considered for present purposes, and both counsel refer to it fully in their arguments. I quote below what seem to me to be the key passages from the speeches. At this point it is sufficient to note the concise headnote to the report, and the grounds on which Mr Glover says that the case can be distinguished. The headnote says:

"In arriving at the valuation for the purposes of the Valuation (Metropolis) Act, 1869, of a hereditament to which the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920, applies the maximum gross value to be assigned to that hereditament is not limited to the standard rent of the hereditament together with the additions thereto permitted by the latter Act."

The Valuation (Metropolis) Act 1869 contained the same basis for rateable value as that in the Parochial Assessments Act 1836 and the one that now applies under para 2(1) of Schedule 6 to the Local Government Finance Act 1988: the rent at which it is estimated that the hereditament might reasonably be expected to be let on a tenancy from year to year. The hereditament in question was a beerhouse the rent of which was restricted under the 1920 Act.

15. Mr Glover says that the most that can be drawn from Poplar v Roberts is that, in some cases, restrictions that in the real world apply to the actual landlord are to be ignored. Under the 1920 Act any increase in rent beyond the standard rent was recoverable by the tenant. Thus, says Mr Glover, there was a restriction on what the landlord could lawfully accept by way of rent. In contrast there was no such restriction in the present case. The essential distinction, he says, that the majority of the law lords were making (Lord Sumner at 116, Lord Buckmaster at 104 and Lord Parmoor at 120 to 121) was between the hypothetical occupier and the actual landlord, the rent that the hypothetical tenant might be prepared to pay not being limited by what the actual landlord is able to demand.
16. Mr Morshead's fourth principal contention is that the Telecommunications Code ought to be disregarded as being in the nature of a subsidy. The availability of Government funds to reduce the construction costs of a project is, he says, not permitted to reduce the capital value ascribed to a property under stage 2 of the contractor's basis, and he relied on Distillers Company v Fife Assessor [1983] RA 228 at 237, 241. In the present context no distinction should be drawn between the availability of a government grant and a statutory provision bestowing a right of rent-free occupation. The principle in Distillers was, he says, approved by the Lands Tribunal in Monsanto. Mr Glover submits that Scottish contractor's basis cases cannot be relied on for the proposition that a statutory power under the Telecommunications Code is a kind of subsidy. All they show is that, on the particular variant of the contractor's basis used in Scotland, grants do not fall to be deducted at stage 1. In Monsanto ([1998] RA 107 at 143) the Member had accepted that where grant was at play in the market in an assisted area, because it was meant to boost industrial activity, it was a factor that needed to be reflected by some means in the valuation.

Discussion

17. The essence of the decision in Poplar v Roberts in my judgment is that the statutory hypothesis is the means of establishing the value of the occupier's occupation and that the amount that the occupier actually pays in the real world in order to occupy the hereditament, whether that amount arises from an agreement or by force of statute, will not be evidence of this value unless it accords, or can be adjusted to accord, with the statutory hypothesis. Thus Lord Buckmaster said ([1922] 2 AC 93 at 103-4):

"The tenant referred to is, by common consent, an imaginary person; the actual rent paid is no criterion, unless, indeed, it happens to be the rent that the imaginary tenant might reasonably be expected to pay in the circumstances mentioned in the section…

Just as the tenant is hypothetical, so also is the rent; it is only used as a standard which must be examined without regard to the actual limitation of the rent paid by virtue of covenant as between landlord and tenant, and also, as I regard it, to statutory restrictions that may be imposed upon its receipt. From the earliest time it is the inhabitant who has to be taxed. It is in respect of his occupation that the rate is levied, and the standard in the Act is nothing but a means of finding out what the value of that occupation is for the purposes of assessment. In my opinion, the rent that the tenant might reasonably be expected to pay is the rent which, apart from all conditions affecting or limiting its receipt in the hands of the landlord, would be regarded as a reasonable rent for the tenant who occupied under the conditions which the statute of 1869 imposes."

18. Lord Atkinson said at 107-108, referring to the imaginary rent that would be paid on the rating hypothesis:

"This imaginary rent is not to be confounded with the rent which an actual tenant in possession in fact pays. It may naturally be assumed that the hypothetical tenant would take this latter into consideration, along with many other things, including the capacity of the hereditament and its adaptabilities, in calculating the amount of the rent he might be expected to pay; but the actual rent paid by the actual tenant is not, and cannot be, treated as a measure of, or a substitute for, the hypothetical rent which conceivably might be expected from a hypothetical tenant."

19. Lord Sumner said at 116:

"…I think that the word 'rent' must now be held to mean something which at any rate is not conditioned by the legal relations which exist between an actual landlord and an actual tenant. An occupier under a beneficial lease cannot require the annual value to be cut down to the rent actually reserved. Equally a hypothetical occupier, although he will occupy, if he occupies at all, under a beneficial statute, must not be supposed to limit what he is prepared to give in order to get the occupation of the hereditament, merely to the amount, the giving of which will enable him to retain it in the face of anything that an actual landlord could legally do against him."

20. Finally, the fourth member of the majority, Lord Parmoor, said at 118:

"The occupation value of property may be, and often is, distinct from its value to the owner. This distinction would probably be emphasized where an artificial statutory maximum is fixed, and a statutory restriction prevents an owner from recovering from any tenant a greater amount, as rent, than the statutory maximum. It has long been recognized that actual rents based on the contractual relationship between tenant and landlord are not the test of the value of a property for rating purposes. I do not think that there is any difference in this respect between a contractual or a statutory rental. In either case the same objections apply, and in either case the rateable value must be assessed in accordance with statutory directions."

And at 121 he said:

"The fundamental distinction remains that the assumed rental, based on statutory directions for the purpose of ascertaining occupation value, is in itself a different thing from an actual rental which denotes the liability between owner and tenant, and which may depend on a variety of conditions other than those affecting the beneficial or profitable occupation of the property."

21. In the present case what is crucial to the contention of the ratepayers is not the fact that a telecommunications operator has power under the code to locate his apparatus in the highway but the fact that the code does not require him to make payment for doing so. It is important to bear in mind that the operator is not exercising a public right of highway, the right to pass along the highway without charge. He is exercising a specific statutory right, conferred upon him by virtue of his licence, to locate his apparatus on land that is within the lateral limits of the highway. The land occupied by the apparatus may be vested in the highway authority, as it will always be if it is part of the surface of the highway or that part of the soil below or the air above as may be reasonably required for its control, protection and maintenance as a highway; or the land (for instance land beneath the highway in which cables are laid) may be in private ownership. The code could have provided for a payment to be made to the owner of the land, whether highway authority or a private owner, and the ratepayer in the real world would thus have been liable to make such a payment wherever on the highway he might choose to locate his equipment. The code could have prescribed the basis for such payment. That basis could have been the annual value of the right to install and maintain the apparatus, or some other basis. It could have restricted the payment to a proportion of the annual value of the right. That the code in fact requires no payment does not show that the right has no value in terms of the rating hypothesis, any more than provision in the code for a payment of 50% of the annual value of the right would have established the hypothetical rent at that restricted level.
22. Although it was a matter of dispute in Poplar v Roberts whether the Increase of Rent and Mortgage Interest (Restriction) Act 1920 had the effect of preventing the tenant paying more than the standard rent or simply of enabling him to refuse to pay more than this (see the final sentence of the speech of Lord Buckmaster at 106), it is clear in my judgment that the decision was not narrowly based on any such distinction. It was founded on the general proposition that I have referred to above. It applies to the present case. The fact that under the code the operator makes no payment for the right to locate his equipment in the highway and could thus locate it in any suitable position free of charge is no evidence that on the rating hypothesis the hypothetical tenant (who would be such an operator) and the hypothetical landlord would agree that the tenant's occupation was valueless. On the contrary the fact that, where similar equipment performing a similar function is located on private land, rental payments are normally made suggests very strongly that the land, as well as the equipment on it, is of value to the occupier, and I so find.
23. I should add that I do not think that the characterisation of the free right conferred by the code as a subsidy (Mr Marshead's fourth point) assists in the resolution of the issue in this case. The question is simply whether the operator's occupation of the land is of value to him.

Conclusion

24. Since the rateable value on the basis of the finding I have made is agreed at £1,100, the amount determined by the valuation tribunal, the appeal must be dismissed.
25. I was told that the parties had agreed that there should be no order as to costs, and I therefore make no order.

Dated 8 April 2003

George Bartlett QC, President