Scottish Court of Session Decisions

Woodrow v. Lothian Region Assessor [2002] ScotCS 128 (7th May, 2002)

LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Coulsfield Lord Philip	XA14/01 OPINION OF THE COURT delivered by THE LORD JUSTICE CLERK in STATED CASE in the cause ELIZABETH M. C. WOODROW Appellant; against LOTHIAN REGION ASSESSOR Respondent: _______

 

Act: Haddow, QC ; Archibald Campbell & Harley, WS (Appellant)

Alt: R.W.J. Anderson QC ; Drummond Miller WS (Assessor)

7 May 2002

The appeal

1. This is an appeal against a decision of the Lothian Valuation Appeal Committee dated 21 September 2000 to refuse the appellant's appeal against the following entry in the Valuation Roll:

	Description and Situation of Property	Appellant	NAV/RV
	Hotel, 10 Mayfield Gardens, Edinburgh	Elizabeth Woodrow per Peter Henry, 9 St. Vincent Street, Edinburgh	£16,700 (C - £16,2000; D - £5000)

 

The entry was made as part of the 1995 revaluation, which is no longer current.

2. At 1 April 1995, when the 1995 revaluation came into effect, the appellant ran the subjects as a licensed hotel. In May 1995 she let the hotel for five years at an annual rent of £28,800. In September 1999 the tenant gave one month's notice of his intention to quit the premises. On 7 October 1999 the appellant resumed occupation of the premises.
3. The appeal is made on the ground that with effect from 7 October 1999 there was a material change of circumstances affecting value, namely that the appellant thereafter ran the premises as a guest house. On that basis, the appellant contends that the subjects should be entered in the Roll as from that date to the end of the 1995 revaluation period as a guest house at a net annual value of £6450, allocated as to £5950 for the commercial element and £500 for the domestic.

The 1995 revaluation

4. At the 1995 revaluation hotels and guest houses were valued by the Assessor under separate schemes, hotel valuations being based upon turnover and guest house valuations being based upon guest spaces. If this appeal succeeds, it will affect the value of the subjects for the remainder of the 1995 revaluation period. We understand that in the current revaluation, and no doubt on different facts, the subjects have been entered in the Roll as a guest house.

The Committee's findings

5. The Committee found that upon resuming occupation of the premises the appellant ran a bed and breakfast business only and that she removed the bar counter that had been in the residents' lounge together with the pipes for draught beer that had run to the basement cellarage.
6. At the date of the hearing before the Committee the appellant was in the process of converting the former ladies' and gents' toilets and the former residents' lounge to form additional bedroom and office accommodation.
7. The Committee also found that the liquor licence for the hotel was transferred from the previous tenant to the appellant's husband on a temporary basis in October 1999 and was transferred to him permanently in January 2000.
8. The Committee then found that the property "had not been so materially altered as to lose the capacity to trade as a hotel." The rooms all had en suite facilities and were probably of a better standard as well as having more guest spaces available than in the average guest house. There was more substantial car parking available behind the building than would be expected at the average guest house. It had a substantial dining room and a much larger kitchen than a domestic kitchen. The Committee also found that it was shown as a 2-star hotel in the Tourist Board Accommodation Register for 2000; but counsel have agreed that that advertisement was placed by the former tenant.
9. The appellant cited 25 guest houses in the immediate neighbourhood as comparisons. The Committee found that none of them had a hotel liquor licence; that 23 of them did not have full en suite facilities and that most of them had smaller dining rooms and less car parking space.

The Committee's reasons

10. The Committee gave its reasons for refusing the appeal as follows:

"The Committee came to the conclusion that the appellant's decision to change the use to bed and breakfast only after resumption of occupation and the minor alterations she had made to the premises had not reduced their capacity for beneficial occupation as a hotel. The appellant's husband held a liquor licence for the premises. It was said that the licence had been invalidated by removal of the bar counter and the alterations to the public toilets but the Committee was not satisfied that the licence had been lost and it certainly had not been surrendered ... A hotel liquor licence remains in place. The subjects were operated as a hotel until October of last year and the rent was certified in the return to the Assessor of £30,000 per annum. The subjects have not been so materially altered as to lose the capacity to trade as a hotel. The rooms have en suite facilities and probably there are more guest spaces than in the average guest house. There is substantial car parking available behind the building, unlike most guest houses. It has a substantial dining room and a much larger kitchen than a domestic kitchen. The value contended for by [the expert witness for the appellant] is enormously below the recent rent achieved. For these reasons the Committee refused the appeal".

 

The case for the appellant

11. Counsel for the appellant submitted that the Committee erred (a) in holding that the change to guest house use was not a material change of circumstances and (b) in rejecting the contention for the appellant that the valuation of the subjects had to be made in accordance with their actual use. He argued that the Committee had applied the wrong test. It had decided the question on the basis of the capability of the premises to be used as a hotel. The proper test was to consider their actual use (Armour, Valuation for Rating, 5th ed., paras. 18-05 - 18-10; Assessor for Stirlingshire v Myles and Binnie, 1962 SC 530, Lord Patrick at pp. 533-4). On the Committee's findings there could be no dispute that at and after the material date the subjects were used as a guest house.

The case for the Assessor

12. Counsel for the Assessor did not dispute the general proposition that the subjects fell to be valued on the basis of actual use. He argued that the findings in fact established that from the relevant date the actual use of the premises continued to be that of a hotel. Although, for reasons of her own, the appellant had chosen to confine herself to a bed and breakfast business, the character of the premises remained that of a hotel. The alterations made to the premises at that time were insignificant. The liquor licence had been retained from the relevant date until the end of the revaluation period. The plans which the appellant had at the date of the hearing for further alterations were not relevant to the question whether a material change of circumstances had occurred on 7 October 1999. On completion, those alterations would become significant in the ensuing revaluation. In short, as at 7 October 1999 there had not been a change of use but merely a change in the mode of operation of premises, which remained within the broad character of hotel use. The point was essentially one of fact for the Committee.
13. Counsel for the Assessor informed us that if a guest house basis of valuation were to apply, the Assessor did not accept the valuation proposed for the appellant. He moved us, if we were to sustain the appeal on its merits, to return the case to the Committee so that the Assessor could lead evidence of his valuation of the premises as a guest house.

Decision

14. In our opinion the Committee misdirected itself on the fundamental distinction between actual use and capability for alternative use. On a fair reading of the Committee's findings and reasons, it is clear that the Committee accepted that after 7 October 1999 the premises were used as a guest house. In our view, the superior quality of the bedroom accommodation, the amount of car parking space available, and the size of the dining room and kitchen, although relevant to the capability of the premises for hotel use, were not incompatible with the use of the premises as a guest house during that period. If the premises were in use as a guest house, the amount of rent formerly passing under a let for hotel use was irrelevant.
15. The Committee refused the appeal on the basis that after 7 October 1999 the premises were capable of being used as a hotel. In our view, that approach was contrary to principle. Lands and heritages must be valued in their physical state at the valuation date, and according to the use to which they are then put, and not on the basis that there is some other more profitable use to which they are capable of being put (cf. Assessor for Stirlingshire v Myles and Binnie, supra; Armour, op. cit., para. 18-10). On its findings in fact the Committee should have sustained the appeal.
16. In any event, we are not convinced that in concluding that the premises were capable of use as a hotel, the Committee was entitled to rely on the continued existence of the liquor licence. Counsel agree that the Committee was given no clear information as to the effect of the alterations to the premises upon the conditions of the licence. There is at least a possibility that those alterations might have precluded the use of the licence for the remainder of its currency.
17. We refuse the proposal by counsel for the Assessor that we should remit the case to the Committee for a further hearing. Since the appeal was based upon there having been a material change of use, the appellant rightly put forward an alternative valuation based on the methodology of the Assessor's guest house scheme. If the Assessor did not accept that valuation, he should have put forward his own valuation under the same scheme. We have been given no reason for his failure to do so. We are unwilling to prolong these proceedings by a further remit to the Committee. In the absence of an alternative valuation we shall adopt that given by the appellant's expert witness.
18. We shall therefore allow the appeal; and in consequence of section 2(1A) of the Local Government (Scotland) Act 1975 the subjects will be entered in the former Roll as from 7 October 1999 as a guest house at a net annual value and rateable value of £6450 (£5950 (C) and £500 (D)).