UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 106 (LC)

LT Case Number: RA/23/2009

 

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

                                                                             

RATING – valuation – warehouse – state of repair to be assumed – held necessary repair works would not have been considered uneconomic and therefore valuation must assume state of reasonable repair – Rating (Valuation) Act 1999, s1

 

                  IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

                                     WEST YORKSHIRE VALUATION TRIBUNAL

 

 

BETWEEN                                          J MILES LIMITED                                       Appellant

                                                                           and

                                                              JOANNE MOORE                                    Respondent

                                                              (Valuation Officer)

 

 

                                                      Re: Warehouse Premises,

                                                             Grove Street,

                                                             Stanningley,

                                                             Pudsey,

                                                             West Yorkshire,

                                                             LS28 6JN

 

 

                                                         Before: N J Rose FRICS

 

 

                Sitting at Bradford Magistrates Court, 187 The Tyrls, Bradford, BD1 1JL

                                                                on 9 March 2010

 

 

 

 

 

 

Mr Jeffrey Miles, with permission of the Tribunal, for the Appellant

Respondent in person

 

 

The following cases were referred to in argument:

 

Proudfoot v Hart [1890] 25 QBD 42

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

McDougall v Easington District Council (1989) 25 EG 104

Archer Limited v Robinson (VO) [2003] RA 1

Midland Bank Limited v Lanham (VO) [1978] RA 1

 

                                                                    DECISION

Introduction

1.           This is an appeal by the ratepayer, J Miles Limited, against the decision of the West Yorkshire Valuation Tribunal (the VT), confirming the assessment in the 2005 rating list of the appellant’s warehouse and premises in Grove Street, Stanningley, Pudsey, West Yorkshire, LS28 6JN at RV £13,750.  The VT’s decision followed a proposal by the appellant to delete the assessment from the rating list on the grounds that the property was not fit for occupation.  The VT concluded that the reasonable landlord would not have considered the repairs which were required to be carried out to the appeal property to be uneconomic, with the result that the property fell to be valued on the assumption that it was in reasonable repair.  Subsequent to the VT decision to dismiss the appeal a valuation officer notice of alteration was made, reducing the assessment to RV £8,900 with effect from 1 April 2005.

2.           The material day for the purpose of this appeal, on which the physical state of the property and its locality must be considered, is 6 April 2008, which is also the effective date.  The antecedent valuation date is 1 April 2003.

3.           The hearing was conducted in accordance with the Tribunal’s simplified procedure.  The appellant was represented, with permission of the Tribunal, by its chairman, Mr Jeffrey Miles.  Mr Miles produced a witness statement from the appellant’s company secretary, Mr Paul Carlisle, which was not challenged.  He also called expert evidence from Mr Ashley France BSc (Hons), MSc, MRICS, MCIoB MCIArb, MSoEW, FQSI, FInstCPD, FRSA, a partner of the Batty France Consultancy, chartered surveyors and chartered building consultancy of Shipley.

4.           The respondent valuation officer, Mrs Joanne Moore IRRV (Hons), appeared in person and gave expert evidence.  She also called, as expert witness, Mr Ronald Allan Heeley MRICS, MCIoB, Head of National Assets and Building Surveyors at the Valuation Office Agency.  Following the conclusion of the hearing I inspected the appeal property, and certain other properties cited in evidence, accompanied by Mr Miles, Mrs Moore and Mr Heeley.

Statutory provisions

5.           Paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988, as amended by section 1 of the Rating (Valuation) Act 1999, provides that

“The rateable value of a non-domestic hereditament 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.”

Facts

6.           In the light of my inspection and the evidence I find the following facts.  The appeal property is situated a short distance to the north of Town Street, Stanningley, approximately 7 miles north-west of Leeds city centre.  The surrounding area contains a mixture of commercial, industrial and residential properties.  The appeal property stands on the east side of Arthur Street, with the entrance doors fronting the north side of Grove Street, an unmade road, to which it has an overall frontage of 36.68m. 

7.           The property is a detached, single storey warehouse, with a gross internal area of 418.8m².  It is of basic warehouse design, constructed of a concrete floor and a steel frame supporting steel roof trusses with tie members and bracing.  The walls are of single thickness concrete blocks and the concrete blocks are built around the supporting columns.  The roof is covered with corrugated iron sheeting with inset Georgian wired glazed roof lights to both pitches.  The doors consist of corrugated iron sheeting on a steel frame.  The main structure and roof cladding were originally a Ministry of Defence storage building of Second World War vintage, built elsewhere and purchased by the appellant after a fire at its premises in 1974.  The frame and roof structure were erected on the present site in 1976 and the walls were clad in concrete blockwork rather than the original corrugated iron sheeting.

8.           The site on which the building stands falls from east to west by approximately one metre over the length of the building.  At the western end, adjacent to Arthur Street, there is a raised blockwork plinth.  At the eastern end, where the building is below ground level, there is protective blockwork around bitumastic type tanking to resist water ingress into the building.

9.           Access to the building is via a pair of full height hinged metal doors, which open outwards.  There are two other pairs of doors alongside the opening doors.  They are set behind an internal concrete kerb on the inside.  They are not used for vehicular access, because the ground outside is at a lower level.  There are no internal walls and no services connected to the property.

10.        The appeal property was shown in the 2005 rating list with effect from 1 April 2005 as Warehouse and Premises, with a rateable value of £18,250.  On 7 December 2005 the valuation officer received from the appellant a proposal requesting that the rateable value be reduced to £4,500.  It was subsequently agreed that the rateable value should be reduced to £13,750 from 1 April 2005 and the rating list was altered accordingly on 28 February 2007.  Mrs Moore was later persuaded to agree to a further reduction in the assessment to RV £8,900, resulting in the notice of alteration referred to in paragraph 1 above.  

Appellant’s case

11.        Mr Miles submitted that the appeal property had no value for the following reasons.  The roof was beyond repair and the cost of replacing it was uneconomic.  The building had no planning permission or certificate of lawful use.  It had no water supply, drainage, sewerage or power.  It had no secure boundary, and there was a restrictive covenant which prevented one from being erected. 

12.        Mr Carlisle’s witness statement outlined the history of the appellant’s ownership of the appeal property.  It was originally erected as a temporary structure on land rented on a yearly tenancy from Leeds City Council to cover the period required to rebuild the appellant’s warehouse which had been badly damaged by fire.  The tenancy was renewed annually until 2004, when the freehold interest in the land and the building upon it was sold to the appellant.

13.        Because the property could not be fenced off, fly tipping took place in Grove Street and no improvement works were carried out to the appeal property.  Mr Carlisle concluded: 

“we are left with an unusable, unsaleable, or unlettable building which, in the current economic climate is beyond economic repair.  It also has the following shortcomings:

(1)        The planning consent was originally granted for only 12 months and only to be used in connection with J Miles Limited business as furniture storage. 

(2)        The building is definitely pre-war.

(3)        The roof was temporary in 1975/76.

(4)        No planning permission.

(5)        No certificate of lawful use.

(6)        No guarantee planning will be granted.

(7)        No water supply/drainage/sewerage.

(8)        No power/electric/gas.

Under these circumstances, and given the Government’s avowed intention to help smaller businesses, we do not see it as appropriate that such a property should attract rates. 

If we are ever to see green shoots in this country we cannot be expected to sustain additional unnecessary extra costs.”

14.        Mr France prepared a schedule of what he considered were the essential remedial works necessary for the appeal property to become beneficially occupiable, together with their estimated costs.  They may be summarised as follows:

Provide main services                                                   £10,391.22

Replace roof                                                                 £25,088.00

Rainwater goods                                                           £  2,657.00

Fire protection                                                              £  2,850.30

External doors                                                               £  2,588.00

WC                                                                                £  1,879.54

Electrics                                                                        £  3,575.00

Building Regulation Fees                                              £  1,500.00

Professional Fees                                                          £  3,716.00

Total                                                                              £54,245.06       Plus VAT

15.        Mr France concluded his report as follows:

“In conclusion, it is my expert opinion that:

(1)         The building at issue is presently economically unoccupiable, unlettable and unsaleable;

(2)         The cost of remedial work to make the building occupiable, lettable or saleable is prohibitive at present.”

Respondent’s case

16.        Mr Heeley considered that the concrete floor of the appeal property was in fair condition with no signs of breaking up.  He said that the whole floor area was dry with no evidence of either rising or penetrating damp.  There were signs of staining in some areas, which appeared to be from either stored materials or vehicle emissions.  The main steel frame and roof trusses were also in fair condition with no sign of bowing.  The single skin blockwork walls were generally in good order, although there were areas of staining on the external elevations due to the defective guttering.  A section of the blockwork adjacent to the opening doors had been rebuilt in more recent times and on the north elevation there were two areas of brickwork which would benefit from being repointed.  The corrugated iron roof was rusting in places and there were approximately six minor holes which required sealing.  There was no evidence of water penetration through the holes.  One of the wired glass roof lights had been broken and was allowing birds to fly into the building.  Two other roof lights were badly damaged, apparently by the impact of stones.  They all required replacement.  The guttering and downpipes had not been maintained in good order and were broken, misaligned or missing in quite a few areas. 

17.        The doors were generally in poor condition, with rusting and bent corrugated iron cladding panels and the frame required overhauling and painting together with replacement of damaged sheets.  The doors were well secured with padlocks, preventing unauthorised access to the building.  There was evidence of previous internal lighting and power, but all electrical supplies had been disconnected and none were operable.  No other services were connected to the property.  Old blanket and Hessian sheeting had been fixed to some of the bays on the inside of the north wall, apparently to protect stored items from being damaged by coming into contact with the walls.

18.        Mr Heeley considered, based on his experience as a quantity surveyor, that the reasonable cost of repairing the appeal property to put it into a state of repair such that it would be suitable for rental was £9,000 including VAT and fees.  This figure was broken down as follows:

1.	Replace damaged roof light panels including                  rebedding and reglazing	£   600.00
2.	Inspect and check roof lights including minor repairs	£   750.00
3.	Replace defecting guttering to both elevations – 50% of total	£   875.00
4.	Repair defective fascia boards	£   100.00
5.	Replace damaged or defective rainwater downpipes	£   400.00
6.	Overhaul and repaint entrance doors including replacing the five defective sheets	£   600.00
7.	Check and refix any loose sheeting panels and seal holes	£1,047.50
8.	Repoint defective blockwork joints to external and retaining walls	£   500.00
9.	Generally clean, remove stored items and wall protection	£   838.00
	Subtotal	£5,710.50
	Add   contingency for unforeseen items	£   571.05
	Subtotal	£6,281.55
	Add   access plant and scaffold board	£   500.00
	Subtotal	£6,781.55
	Add   professional fees for supervision, approval and specification	£   678.16
	Subtotal	£7,459.71
	Add   VAT @ 17.5%	£1,305.44
		£8,765.15
	Say	£ 9,000.00

                                                                                                                               

19.        Mr Heeley said that his costs estimate specifically excluded any planning or building regulation costs, since these were not normally associated with repairs of this nature.  Nor had he allowed for the replacement of any services, or the connection of any new services, as there were none presently available at the property.

20.        Mrs Moore accepted that the appeal property had limited access and no main services, and that the restrictive covenant had an adverse effect on parking and security.  These disadvantages, however, had been reflected in her decision to reduce the assessment to £8,900 (equivalent to £21.41 per m²) from the figure of £13,750, which the appellant had been prepared to agree in 2007.  In support of this assertion she referred to the assessments of a number of other properties in the area, including 57 Bradford Road, Stanningley (1930s construction, uninsulated walls and roof, no services, poor access – assessment agreed with ratepayer’s agents at £21.53 per m²); and Unit 1, 334 Meanwood Road, Leeds (1960s construction, uninsulated corrugated asbestos/iron walls and roof, no services, poor access – assessed at £23.36 per m², uncontested).

21.        Mrs Moore noted that Mr Heeley’s estimated cost of repairs was virtually identical to the rateable value of the appeal property.  She considered that, for an industrial property in the location of the appeal property at the AVD, a lease term of 3 to 5 years was typical.  She produced details of seven similar properties in the Pudsey area, which had been let in 2003 and 2004.  Of these, four had been let for three years, two for five years and one for ten years.  Thus, she said, the hypothetical landlord would recover the cost of repairs to the appeal property in just over a year, leaving him a profit for the remainder of the term and also with the prospect of its continuance.  Mrs Moore concluded that the work required to bring the appeal property up to a reasonable state of repair would not be considered to be uneconomic.

22.        Mrs Moore did not consider that the absence of planning permission or a certificate of existing lawful use would affect the minds of potential tenants in the real world, given that the property has been occupied from 1976 to 2008 and no steps have been taken by the local planning authority to terminate its use. 

Conclusions

23.        I accept Mrs Moore’s opinion that the absence of planning permission or a certificate of lawful use for warehousing would not have affected the rent obtainable for the appeal property on a tenancy from year to year, given that the local planning authority had taken no steps to interfere with that use since the building was erected in 1976.

24.        In the light of my inspection of the appeal property and the comparable properties at 57 Bradford Road and Unit 1, 334 Meanwood Road, and in the absence of any material evidence to the contrary from the appellant, I accept that the existing assessment of RV £8,900 fully reflects the following disadvantages of the appeal property: its basic construction, its poor access, its lack of main services and the lack of security and parking facilities.  The questions I have to determine, therefore, are firstly the extent of the works required to put the property into a reasonable state of repair in order to command an annual rent of £8,900, and secondly whether a reasonable landlord would consider it economic to carry out those repairs.

25.        There is a striking difference between the works considered necessary by Mr France on one hand and Mr Heeley on the other.  Even excluding the cost of providing main services – the absence of which I have found to be reflected in the RV at present in the list – Mr Heeley’s figure is £9,000 including VAT, compared with Mr France’s estimate of £43,953.84 plus VAT.  Having seen and heard the two experts giving evidence, and having inspected the appeal property, I have no doubt that Mr Heeley’s opinion is to be preferred.  The reasons for this conclusion are these.  Firstly, Mr France’s suggestion that the entire roof needs to be replaced to bring the building to an occupiable state is inconsistent with the agreed fact that the appellant occupied the property from 14 November 2008 until 27 December 2008.  Secondly, the works considered necessary by Mr France included removing and renewing the head and base tracks to the external doors, whereas in fact the doors are hinged and no such tracks exist.  Most significantly, however, when I asked Mr France why he had concluded that the building in its present state was unoccupiable, unlettable and unsaleable, he replied that his statement had been based on what he had been told by his client.  I regret to say that that answer suggested that Mr France had not adopted the impartial approach which is required of an expert giving evidence to the Tribunal. 

26.        I accept Mr Heeley’s opinion that it would cost approximately £9,000 to put the appeal property into a state of reasonable repair.  I also accept Mrs Moore’s opinion that a reasonable landlord would consider it economically viable to carry out the necessary works in order to obtain an annual rent of £8,900 for a term of three or more years. 

27.        The appeal is therefore dismissed.  The appeal having been conducted under the simplified procedure, I make no order as to costs.

Dated 27 April 2010

 

 

N J Rose FRICS