England and Wales Lands Tribunal

Hallett v Valuation Officer [2005] EWLands RA_2_2005 (16 August 2005)

RA/2&3/2005

LANDS TRIBUNAL ACT 1949

RATING – hereditament – valuation – tone of list – comparables – Appeal dismissed

IN THE MATTER of an APPEAL from a DECISION of

THE SHROPSHIRE VALUATION TRIBUNAL

BETWEEN SUSAN HALLETT Appellant

and

CHRISTOPHER J STODDART

(VALUATION OFFICER) Respondent

Re: 43a and 43b High Street, Church Stretton, Shropshire, SY6 6BX

Before: P R Francis FRICS

Sitting at: Shrewsbury Employment Tribunal, Prospect House, Belle Vue Road,

Shrewsbury, SY3 7NR

on

10 August 2005

The appellant in person, with permission of the Tribunal

The respondent Valuation Officer in person, with permission of the Tribunal

The following cases are referred to in this decision:

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

Howarth v Price (VO) (1965) 11 RRC 96

DECISION

1. These are appeals from decisions of the Shropshire Valuation Tribunal ("the VT") dated 10 December 2004 relating to the shops and premises known as 43a and 43b High Street, Shrewsbury ("the hereditaments"). They were made by Ms Susan Hallett, the ratepayer, in notices dated 4 January 2005 and were heard under the Simplified Procedure (Rule 28, Lands Tribunal Rules 1996). The VT had dismissed Ms Hallett's appeals for reductions in the Rateable Values ("RVs") and had confirmed them at £2,700 for 43a and £3,400 for 43b. It is agreed that both the material day and the effective date for consideration of these appeals was 1 January 2003.
2. The appellant's principal case is that the VT was wrong to uphold the VO's assessments based upon a rental value expressed in terms of zone A ("ITZA") at £125 per m² in the light of the evidence that had been before it. In her view, the rental value at the Antecedent Valuation date (1 April 1998) was £90 per m² ITZA. I made a full inspection of the appeal hereditaments on 9 August 2005, together with an external inspection of the comparables referred to by both parties.

Facts

3. From a brief statement agreed by the parties, and from the evidence, I find the following facts. The appeal hereditaments comprised, at the effective date, two shops with ground and first floor accommodation making up the whole of an attractive Grade II listed half-timbered building of wattle and daub construction that is believed to have been erected in about 1500 as a barn. The building is located on the south side of Church Stretton High Street, immediately to the west of the junction of Lion Meadow, a link road built in about 1994 to serve a new Morrisons supermarket (now trading as the Co-op) and four public car parks, one of which is immediately behind the hereditaments. At the time of my inspection, the two units had been merged into one and the appellant currently trades therefrom with two partners as a wholefood and craft shop known as 'Entertaining Elephants'. There is access to the building on both the High Street frontage and from the pay and display car park to the rear which, in turn, is immediately adjacent to the supermarket. At the effective date, 43a's sole access was to the High Street, and 43b's only access was from the rear.
4. Church Stretton is a small market town with a population of about 3,000 located approximately 6 miles to the south of Shrewsbury at the foot of the Long Mynd, a range of hills and an area of outstanding natural beauty administered by the National Trust. The town therefore has an influx of tourists, particularly in the summer months. It is agreed that the principal shopping streets are Sandford Avenue, which leads into the town centre from the Church Stretton by-pass, together with the High Street (including a small market square) into which it connects.
5. The appellant took an assignment of an existing lease of 43b in March 2000 at a passing rent of £5,000 per annum. The premises have a ground floor shop area of 33.07 m² with exposed ceiling beams and a supporting cross-beam with a restricted height of 1.79m. The first floor is 42.15 m², with a vaulted ceiling incorporating Velux roof lights, and a central cross-beam at a height of 1.48 m above floor level. In January 2003, she took an assignment of the lease on 43a at £4,250 per annum and on 6 January of that year demolished a dividing wall at ground floor between the two units. 43a comprised a ground floor shop of 25.37 m², kitchen to rear, and first floor storage of 24.24 m². A new lease was then negotiated with the landlord for the whole building at £9,500 per annum. Despite the physical merging of the two units, the appellant let 43a on licence for the sale of local crafts (glazed double doors being installed to separate them) at an initial all-inclusive fee of £260 per month, rising to £280 per month shortly before the licensee left in September 2004. At that time, the appellant began to trade from the whole premises. It is agreed that the building has very small windows onto the High Street elevation; that fact together with the internal height restrictions resulting in the end allowance of 20% incorporated into the VO's assessment.

Background to the Appeal

6. 43a and 43b were entered into the 2000 Rating List at £2,700 and £3,400 RV respectively with effect from 1 April 2000. On 14 May 2003, the VO served notice to merge them in the belief that the building had been occupied as one property from 1 January 2003. As a result of the appellant's representations and a proposal against that merger, the hereditaments were re-entered as separate entries with effect from 1 January 2003. Proposals were made against both assessments on 19 March 2004, these being heard by the VT on 19 November 2004. The VT determined that the VO's assessments were correct and dismissed the appeal, confirming the RV's as assessed. In its decisions, the VT said it was satisfied that the current entries in the rating list were fair and reasonable, and fell in line with the established tone in the area, an analysis of passing rents supporting a zone A figure of £125 per m². It was also satisfied that the 20% allowance made by the VO adequately reflected the physical disabilities in the premises.
7. In her grounds of appeal to this Tribunal, the appellant said that the assessments were incorrect and excessive in relation to other shops in the immediate vicinity, particularly those on the south side of the High Street to the west of the junction with Lion Meadow where the street and footpath were narrow, and shops were fragmented and not easily visible. She expressed the view that her premises were in a markedly inferior position to those within the main shopping areas within High Street and Sandford Avenue.
8. The sole issue for my determination is whether the RV has been correctly assessed.

Appellant's case

9. Mrs Hallett had produced an extensive report setting out her statement of case, the background to the appeal and a comprehensive description of the locality and the appeal hereditaments, together with detailed comparable evidence upon which she relied. The valuations that had been included were based upon the floor areas that had been before the VT, these being somewhat less than the revised figures that have subsequently been agreed with the VO. On 43a, she had a floor area of 27.3 m² ITZA which, on the basis of her assessment of a value of £90 zone A gave a figure of £2,457 from which she deducted an end allowance to reflect the hereditament's disabilities of 25% to give £1,843 – say £1,800. 43b was shown to have an area of 34.21 m2 giving £3,078 at £90 zone A which, less 25% became £2,309 – say £2,300. At the commencement of the hearing, Mrs Hallett handed in revised valuations based upon the newly agreed areas, these being as stated in the facts set out at para 5 above. On the same basis of £90 zone A 43a became £2,560 but the end allowance had been reduced to £512 – being 20% (in line with the VO's opinion). This gave a suggested RV (rounded) of £2,050. 43b became £3,355 but the end allowance had been reduced to 22.5% (£755) giving a proposed RV of £2,600. Before me, the parties agreed that on the basis of the appellant's revised end allowance figures, there was virtually nothing between them on that issue, and it was the value in terms of zone A that was the key factor in the appeal.
10. The appellant said that she had no disagreement with the VO's assessments in terms of zone A of £125 for the shops and premises on the south side of Sandford Avenue from the junction with High Street as far as no. 32 (which was on the corner of Easthope Road) and the main part of the High Street (including The Square) as far as the junction with Lion Meadow. However, there was no way that the part of the High Street south of Lion Meadow could have similar values. The street became very narrow outside the appeal hereditaments, there was no permitted parking (whereas there was in Sandford Avenue, 2/3 of the upper part of the High Street and on The Square) and there were only a few shops interspersed with private dwellings. Since the construction of the supermarket and the link road (Lion Meadow), the part of the High Street from which she trades has become a secondary backwater. As an example of how values fall as one moves away from the main shopping areas, Mrs Hallett referred to the shops in the eastern section of Sandford Avenue, where the assessments had been based upon £85 ITZA. Even though, as a result of his investigations into this case, the VO had recently increased the assessments on 40/42, 44 and 46 Sandford Avenue from £85 to £100 ITZA, they were still less than the subject hereditaments yet were in a better trading position being in an area where there was a substantially higher pedestrian count, and between the main shops and the station and Post Office.
11. As to rentals in the vicinity, the appellant agreed with the VO that the evidence, overall, was far from conclusive, there being large gaps where rental figures were either not available or not known. The rent paid on the appeal hereditaments (which equated to between £120 and £138 per m²) could not be taken as representative, she said, as the figure that had been agreed with her landlord was far more than the premises were worth, and she had not taken advice when entering into the lease. The appellant referred to nos 49 and 49a High Street, which were a few yards to the south of the appeal hereditaments. The rent of £3,120 pa currently paid on 49 devalues to £134 per m² and although she did not know the circumstances at the Antecedent valuation date in 1998, she said there had been many changes of occupier over the years, suggesting the rent level is too high, making it difficult for occupiers to sustain their businesses. They also appeared to now be used as offices rather than a shop. The adjoining shop, 49a, had a rental of £1,200 pa which equates to £64 per m² but was still assessed by the VO on the basis of £125 ITZA. On the opposite side of the road, number 54 has a rental that devalues to £62 per m², and that was assessed by the VO at £75 ITZA. The adjacent shop, no 52, is assessed at £125 ITZA and Mrs Hallett said she could not understand why there should be a sudden 40% drop in value. It would be much fairer to have a stepped drop in values from Lion Meadow southwards, and in the light of all the evidence available, she felt £90 ITZA to be appropriate for the appeal hereditaments.
12. The tone of the list, Mrs Hallett said, was difficult to establish at her end of the High Street but it was evident from the tone in Sandford Avenue that logical steps had been taken to reduce values away from the main shopping area. She could see no comparison between the location of her premises and those in the main shopping areas in terms of trading potential as her footfall survey had conclusively shown. She said that whilst most of the Sandford Avenue shops were open on Sundays, her attempts to trade successfully on that day had been an utter failure – there was just no-one around in this part of the town, this being despite the supermarket being open between 10 am and 4 pm.
13. Although not central to her case, Mrs Hallet referred to a number of reported rating cases. In Robinson Bros (Brewers) Ltd v Houghton and Chester-le Street Assessment Committee [1937] 2 KB 445, Scott LJ had said:

"It is the duty of the valuer to take into consideration every intrinsic quality and every intrinsic circumstance which tends to push the rental value up or down…"

In Howarth v Price (VO) (1965) 11 RRC 96 the Lands Tribunal said:

"Where however there is a paucity of satisfactory direct rental evidence, then the best evidence as to rental value is likely to be the "indirect" evidence provided by the gross values of similar hereditaments…"

In her view, the appellant said that these and other cases supported the approach she had taken and the conclusions she had drawn from all the evidence. Having studied the assessments on the 2000 rating list and upon close examination of the rents on shop premises in the town, Mrs Hallett said she believed the VO, in drawing up the list, had taken little or no notice of either the actual circumstances in the vicinity, or the changes that had occurred in the town since the 1990s.

14. In response to a question from the VO, Mrs Hallett accepted that her footfall survey, which showed 3 times as many people passing the fish and chip shop on the opposite side of Lion Meadow, and twice as many passing Barclays Bank on the corner of High Street and Sandford Avenue as passed the appeal hereditaments was undertaken in late 2004, and not at the material date. However, she said that things had not really changed during that period, and this was designed purely to give weight to her arguments. In answer to a question from me, Mrs Hallett said that the vast majority of her customers approached the shop from the car park at the rear, rather than from the High Street entrance. As to why so many more pedestrians appeared to pass the fish and chip shop, the appellant said that this was due to people leaving the car park in Lion Meadow, and making their way towards the main shopping area.

Valuation Officer's case

15. Mr Stoddart is a member of the RICS and a rating case worker within the West Midlands Group Valuation Office based at the Shrewsbury office. He was responsible for overseeing the compilation of the 2000 rating list in Church Stretton and produced two expert witness reports (one for each hereditament) together with analyses of all the comparable evidence to which he referred. He said that the approach taken in the 2000 revaluation regarding shops in Church Stretton was to analyse rents to a standard zone A basis. In arriving at a zone A value to be applied to Sandford Avenue (south side of High Street to Easthope Road) Mr Stoddart said there was reasonable amount of rental evidence available at the time, and rents payable ranged from £91 to £206 ITZA. This was acknowledged to be a particularly wide range of figures, and it was considered that £125 ITZA would be fair and reasonable. Further down Sandford Avenue, from Easthope Road towards the station, it was considered that this was less valuable due to it being poorly placed for public car parking, and remote from The Square in the High Street which on Thursday market day was a particularly important draw for shoppers. This part was entered at £100 ITZA although Mr Stoddard did acknowledge that the 3 shops referred to by the appellant had been mistakenly entered at £85 ITZA and it was only when investigating evidence for this appeal that the error had been noticed.
16. It was acknowledged that the number of rents available for analysis was much less plentiful for the length of the High Street between its junction with Sandford Avenue and no. 54 High Street. At the Sandford Road end there were rents that analysed from £124 to £169 ITZA. There was then a large gap before the subject hereditaments (which analysed at £121 and 138 ITZA respectively on the rents that were agreed with the appellant's predecessor in 1997). No 49, which was beyond the subject hereditaments, was £134 ITZA and 49a was £63 ITZA. No. 54 (virtually opposite but slightly south of 49a) analysed to £63 ITZA. On the strength of these analyses, Mr Stoddart said that it was decided that the same zone A price as had been set for the upper part of Sandford Avenue should be applied – namely £125. No. 54 onwards should be at the rate of £75 ITZA because at and beyond that point, the shops petered out and more of the properties were domestic dwellings.
17. As to the end allowance, Mr Stoddart said that the banks in Church Stretton had received discounts of 8% for lack of retail display frontages and the shoe shop at 10 Sandford Avenue had a 6.8% discount for poor layout, particularly to its storage area. Otherwise, no discounts had been given on any of the comparables referred to. It was acknowledged that the appeal hereditaments had a poor ground floor layout and restricted headroom, particularly at first floor, and thus a 20% allowance had been made. In the light of all the evidence, Mr Stoddart said that his assessment based upon £125 ITZA less a 20% end allowance was fair and reasonable. When allowing for the recently agreed revised floor areas, this increases the assessment on 43a from £2,700 RV to £2,850 and on 43b from £3,400 to £3,700.
18. In accepting the paucity of rental evidence in the part of the High Street in which the appeal hereditaments were located, Mr Stoddart said that the rents paid by the appellant were instrumental in the decision to apply £125 in this location. Not only did Mrs Hallett take an assignment of leases at rents that had been agreed with a previous occupier, but she had also entered into a new lease, in 2003, at a higher (albeit by only £250) overall rent. In his view, he felt it was right to apply a zone A rental value in accordance with the tone that had been established, and give a 20% allowance rather than reduce the rental value and give no, or a reduced allowance.
19. In summary, Mr Stoddart said that the appellant was asking him to ignore her own rent that had been freely negotiated, and to ignore the established assessments which in his view supported the assessment that had been made and entered into the 2000 rating list. Those established assessments included 45 High Street, the hairdressers adjacent to the appeal hereditaments, 25 and 39-41 High Street (fish and chip shop) all of which had been calculated on a zone A rate of £125 and had not been appealed.

Conclusions

20. I deal firstly, and shortly, with the question of the end allowance. Although there was 2.5% between the parties on one of the assessments (43b), it was accepted that there was little between them. In my view, on the basis of the evidence of discounts applied elsewhere, the allowance of 20% more than adequately reflects the particular disabilities that apply to the appeal hereditaments. In any event, Mrs Hallett had sought an additional discount on 43b (to the layout/headroom aspects which were accepted by the VO) for the fact that, on gaining access to the rear of the shop, two shallow steps had to be negotiated from the car park – one down and one up. I do not consider there to be any justification for such a discount. None of the other premises had such a discount applied and, even in terms of providing easy access for the disabled, it would not be difficult to provide a ramp that would act as a bridge between the down step from the car park, and the up step to the shop.
21. Turning to the assessment in terms of zone A, whilst the appellant has undoubtedly carried out a considerable amount of research into the subject, and produced a detailed, thorough and well presented case, I cannot find any evidence to support her contentions. Although her argument that the more structured and less severe "scaling down" of rental values in the eastern part of Sandford Avenue carries some weight in attempting to justify a rate midway between the £125 and £75 figures applied to this part of the High Street, I have to consider the analysis of the rent applicable to the appeal hereditaments both in 1997, and on assignment. They clearly support the VO's reasoning.
22. Furthermore, the appellant clearly dismisses any advantage in terms of trading opportunities resulting from the close proximity of the supermarket, the four car parks surrounding it and the fact that one of the two main access routes to them passes immediately adjacent to 43b. It was apparent to me that the appeal hereditaments occupy a highly visible position in the town (especially from the rear). Although the number of pedestrians passing on the High Street side are (as was readily evident to me) substantially less than those passing the shops in both the main and eastern sections of Sandford Avenue the potential for trade from those using the supermarket and the adjacent car parks puts the appeal hereditaments, in my judgment, unquestionably into the £125 ITZA category. Whether or not those remaining shops to the south of the subject premises justify such an assessment is another question, which I do not have to answer, but certainly as far as 43a and b are concerned, their "rear frontage" onto the public car parks and supermarket are, as I have said, a clear determinant that for assessment purposes, they should be in the highest category.
23. The appellant certainly put forward a strong case for some reduction in the level of assessment. She said that her own premises should not be considered as a basis for rental value comparison as it was previously let as an office, and when she took 43b they were the only premises available in the town. There was thus not the opportunity to negotiate on the rent. However, although well past the material date, I have taken into account that the new lease terms agreed in 2003 were at a level above the former combined rents of the two shops. If trading opportunities in this part of the town were so bad, and the business was struggling as much as Mrs Hallett said it was, I have to conclude that she considered the rent still reflected the premises' open market value. In my view therefore, the VO was right (and thus so was the VT) in setting the assessment at the level he did. Even if I had been persuaded that the ITZA value should be a little less than the "prime" level (and £100 ITZA springs to mind), I do think that the end allowance of 20% is more than generous and, on the evidence of other such allowances, perhaps unjustified. If 43b were to be valued on the basis of £100 ITZA with an end allowance of, say, 10% the resultant RV would be £3,456 – in line with the figure in the original assessment and only £250 less than the VO's assessment based on the newly agreed floor areas. Valuation is, of course, a matter of opinion rather than a precise science and on the basis of the evidence and the conclusions I have drawn from my inspection of the appeal hereditaments and the surrounding area, I am satisfied that there are no grounds for finding that the Valuation tribunal was wrong to find in favour of the VO.
24. The appeal is therefore dismissed. However, the RVs currently in the rating list and which were confirmed by the VT at £2,700 for 43a and £3,400 for 43b will need to be amended to reflect the parties' subsequent agreement on revised areas. As set out in SI 1993/291, reg 47(5):

"(5) The Lands Tribunal may confirm, vary, set aside, revoke or remit the decision or order of the tribunal, and may make any order the tribunal could have made".

The VT could, and indeed would, have confirmed the RVs at the revised rates argued for by Mr Stoddart if the floor areas had been as submitted to this Tribunal. I therefore determine that the rating list shall be altered to RV £2,850 for 43a and £3,700 for 43b with effect from the date of this decision (see SI 1993/291 reg 44(4)).

25. The matter having been heard under the Simplified Procedure, I make no award as to costs.

DATED 16 August 2005

(Signed) P R Francis FRICS