UT Neutral citation number: [2010] UKUT 87 (LC)

LT Case Number: RA/20/2009

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – valuation – 2005 list – shop – valuation – comparables – appeal allowed – RV reduced from £13,000 to £11.750

                  IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

                                LONDON NORTH WEST VALUATION TRIBUNAL

BETWEEN                                   SHIRLEY ANN JOHNSON                                Appellant

                                                                           and

                                                      BARRY TIMOTHY LEAHY                            Respondent

                                                              (Valuation Officer)

                                                           Re: 7 The Broadway

                                                                  Southgate

                                                                  London N14 6PH

                                                         Before: N J Rose FRICS

                 Sitting at Care Standards Tribunal, 18 Pocock Street, London SE1 OBW

                                                                on 2 March 2010

Mrs Beverly Meehan, with permission of the Tribunal, for the Appellant

Respondent in person

The following case is referred to in this decision:

Lotus and Delta Limited v Calverwell (VO) and Leicester City Council [1976] RA 141

                                                                    DECISION

Introduction

1.           This is an appeal by the ratepayer, Mrs Shirley Ann Johnson, against the decision of the London (North West) Valuation Tribunal, confirming the assessment in the 2005 rating list of a shop and premises known as 7 The Broadway, Southgate, London, N14 6PH (the appeal property) with effect from 1 April 2005 at RV £13,000.  The material day is 1 April 2005 and the antecedent valuation date (the AVD) is 1 April 2003.

2.           The appeal was conducted in accordance with the Tribunal’s simplified procedure.  The appellant was represented, with permission of the Tribunal, by her daughter Mrs Beverly Meehan, who gave evidence.  The respondent, Mr Barry Leahy MRICS, a rating team leader in the London North (Enfield) Group Valuation Office, appeared in person and gave evidence.  I inspected the appeal property following completion of the hearing, on the afternoon of 2 March 2010.  I was accompanied by Mrs Johnson, Mrs Meehan and Mr Leahy.

Facts

3.           From the evidence and my inspection I find the following facts.  The appeal property is a ground floor retail unit, used as a hairdressing salon, forming part of a parade of shops known as 1 to 25 The Broadway.  The Broadway is in the shape of a horseshoe and lies to the east of a large roundabout known as Southgate Circus.  The roundabout is fronted by a number of parades of shops.  It forms the access to Southgate bus and tube station, and is the nodal point of the junction between (from the north clockwise) Chase Road, Winchmore Hill Road, The Bourne, High Street and Chase Side.  There is a pedestrian crossing across the roundabout leading from the station to The Broadway.  Units 8 to 18 The Broadway front more or less directly onto the roundabout.  Units 19 to 25 front the north side of The Bourne and units 1 to 7 front the south-east side of Winchmore Hill Road.  The latter shopping parade ends, immediately to the east of Unit 1, at Tudor Way, a one-way street linking Winchmore Hill Road and The Bourne and providing rear access to all the properties in The Broadway.

4.           The appeal property has a ground to ceiling steel frame glass frontage.  In addition to the main retail area, parts of the property have been partitioned to form a customer WC and small kitchen/tea room.  There is a small yard at the rear leading to Tudor Way.  It contains a small brick outbuilding, consisting of a boiler room and outside wc.  The net internal area of the shop is equivalent to 54.65m² in terms of zone A, adopting zones 20 ft deep.

5.           The appeal property is occupied under a lease which includes the self-contained residential upper part.  The rent was agreed on review at £13,000 per annum with effect from 25 December 2000.  Of this figure, a rent of £2,750 net was agreed to represent the value of the residential element.  The lease was subsequently renewed with effect from 26 March 2006 at £18,000 per annum, including an agreed £6,000 net for the flat. 

Appellant’s case

6.           Mrs Meehan said that the issue between the parties was the zone A value which was appropriate for the appeal property.  The RV of £13,000 was based on a zone A rate of £240 per m², which had been applied to all the units in The Broadway.  The average rent paid for shops Nos.1 to 8 was £5,000 less than the average rent in the prime section of The Broadway.  Moreover, the shops in the parade on the opposite side of Winchmore Hill Road to the appeal property, known as Dennis Parade, were assessed at £210 per m².  There was no justification for treating the appeal property as being 15% more valuable.  Indeed, Dennis Parade might even be considered to be a better location, since (unlike the appeal property) it could be seen from the underground station.  Moreover, Nos.4 and 5 Winchmore Hill Road, on the same side of the road as the appeal property but immediately north of Tudor Way, were both assessed at £215 per m².  Mrs Meehan said that she would be content with an assessment based on that level of value, even though it was slightly higher than the value adopted for units in Dennis Parade. 

Respondent’s case

7.           Mr Leahy recognised that his valuation of £240 per m² was in excess of the level of rents agreed for the appeal property with effect from December 2000 (£188 per m²)and March 2006 (£220 per m²).  But, he said, rents agreed in 2000 and 2006 could not be considered as strong evidence of values prevailing in April 2003, the valuation date.  Moreover, both the agreed rents included an element for the residential accommodation above.  Accordingly, the agreed rents did not closely match the circumstances as to time and subject matter which were required under the statutory definition of rateable value. 

8.           Mr Leahy said that he had been guided by rents which had been agreed closer to the valuation date.  In his view the most relevant rents were those agreed for Nos.2 and 25 The Broadway.  In his written report he said that the rent for No.2 was agreed on 21 June 2002 and devalued at £250 per m² and that for No.25 was agreed at £291 per m² as at 28 April 2004.  Both rents were agreed on new lettings (as opposed to rent reviews or lease renewals) and were for the retail element only.  They therefore required the minimum amount of adjustment to accord with the definition of rateable value.  Mr Leahy said

“These shops are located at opposite ends of the parade, so should be representative of the range of values across the whole parade.  If one analyses these rents and extrapolates to the antecedent valuation date of 1 April 2003, the resultant rate/ m² zone A rate calculates to £266/ m² ITZA.

9.           In oral evidence Mr Leahy said that, following discussions with Mrs Meehan, he had made further enquiries.  It now appeared that the rent agreed in 2002 for No.2 in fact devalued to £214 per m², not £250 as he had thought.  His opinion of the value of the appeal property was unchanged, however.  Although Units 2 and 25, considered together, showed an average rent of £246 per m², not £266, this was still more than the £240 which he had applied to the appeal property.

10.        Mr Leahy also relied generally on the tone of values of other retail parade in Southgate as being consistent with his approach.  He accepted that Dennis Parade had an established tone of only £210 per m².  However, he said, it was not unusual for different levels of value to exist on opposite sides of the same road.  As an example, he referred to Chase Side, where units 1 to 17 (odd) on the east side were assessed at £250 per m² and 2 to 40 (even) on the west side were valued at £300.  He added

“The different levels of value are simply a reflection of the rents paid for these parades and will reflect the circumstances particular to each location.”

11.        In answer to a question from me, Mr Leahy said that, so far as he was aware, there was no rental evidence in Dennis Parade which had informed the established tone.

Conclusions

12.        In the light of my site visit, I am in no doubt that the shop units in The Broadway which directly front on to Southgate Circus – Nos.8 to 18 – appear to be more valuable than those fronting Winchmore Hill Road (Nos.1 to 7) and The Bourne (Nos.19 to 25).  The fact that a uniform value has been applied to shops in all three sections of the horseshoe is therefore rather surprising. 

13.        As Mr Leahy pointed out, when considering the rent at which a hereditament might reasonably be expected to let from year to year for rating purposes, the starting point is the rent which is actually payable for the hereditament (Lotus and Delta Limited v Calverwell (VO) and Leicester City Council [1976] RA 141).  In this case, a rent equivalent to £188 per m² was being paid for the appeal property at the AVD.  The assessment in the rating list is therefore approximately 27.5% higher than the rent passing.  It is also approximately 9% higher than the rent (£220 per m²) agreed on the subsequent lease renewal.

14.        Mr Leahy has ignored the rents passing for the appeal property for two reasons.  Firstly, he says that the dates with effect from which they were agreed were 2¼ years before and 3 years after the AVD respectively.  They are therefore too distant in time from the valuation date to be of assistance.  There would be some force in that argument if there were reliable evidence, closer to the valuation date, which was inconsistent with the rents agreed for the appeal property.  In fact, however, the rents are broadly in line with the rent of £214 per m² which was agreed for 2 The Broadway with effect from June 2002, which Mr Leahy accepts requires minimal adjustment to accord with the statutory definition of rateable value.

15.        The second reason given by Mr Leahy for disregarding the two rents agreed for the appeal property is that each formed part of a larger transaction which included a residential flat above.  There is, in my view, nothing in this point.  Both rents were agreed following negotiations between surveyors, who ascribed separate figure to the retail and residential elements of the building.  The weight to be attached to the rents agreed for the shops, therefore, is the same as if they had been agreed on rent review or lease renewal for the retail sections alone.

16.        The other rent upon which Mr Leahy relies relates to 25 The Broadway.  That unit is, in my judgment, of no assistance.  Unlike the appeal property it has a prominent return frontage to Tudor Way.  More significantly, it has an established or permitted use as a restaurant;  a use for which planning permission has twice been refused in respect of the appeal property.

17.        I consider that the value of £215 per m² suggested by Mrs Meehan is consistent with all the reliable rental evidence which has been adduced.  It is also broadly consistent with the established tone of £210 per m² for shop units on the opposite side of the street, known as Dennis Parade.  In the absence of any relevant rental evidence in Dennis Parade, I agree with Mrs Meehan’s suggestion that that parade is, if anything, more prominent than units 1 to 7 The Broadway.

18.        The appeal is allowed.  I direct that the assessment of the appeal property in the 2005 rating list be reduced to £11,750 (54.65 m² at £215 per m²) with effect from 1 April 2005.

19.        I make no order as to costs.

Dated: 26 March 2010

N J Rose FRICS