UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 322 (LC)

LT Case Number: RA/3/2008

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

RATING – valuation – 2005 list – car showroom and premises – whether evidence of agreed rents and rating assessments nearby sufficient to arrive at accurate value for main space or whether evidence further afield more reliable – whether both showrooms on site to be valued at same rate – whether workshop and valet building of equal value – quantum – whether value to be adjusted to reflect masking – appeal dismissed.

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

SURREY VALUATION TRIBUNAL

 

 

BETWEEN VINES LIMITED Appellant

 

and

 

ANDREW QUENTIN de MAUNY Respondent

(Valuation Officer)

 

 

Re: Car Showroom and Premises

10-12 Bonehurst Road

Salfords

Redhill

RH1 5EG

 

 

Before: N J Rose FRICS

 

 

Sitting at 43-45 Bedford Square, London, WC1B 3AS

on 28 and 29 July 2010

 

 

 

 

Clive Moys, instructed by Bisset Moffatt Hill, chartered surveyors of Crawley, by direct professional access, for Appellant

Timothy Morshead, instructed by HMRC solicitor, for Respondent.

 

 

The following case is referred to in this decision:

 

Land Securities Plc v Westminster CC [1992] 2 EGLR 15

 

 

The following cases were also cited:

 

Allen (VO) v Freemans Plc [2009] UKUT 240 (LC)

Austin Motor Co Ltd v Woodhead (VO) (1968) 15 RRC 3

Bovis Group Pension Fund Ltd v GC Flooring & Furnishing  [1984] 1 EGLR 123

Bradford (VO) v Vitesse [2009] RA 427

BT v Broadway (VO) (1976) RA 297

FW Woolworth v Christopher (VO) (1972) 17 RCC 341

Hill v Thompson (VO) 259 EG 341

Imperial College v Ebdon (VO) [1986] RA 233

Lotus and Delta v Culverhouse (VO) (1976) RA 152

Wyre Forest DC v Stokes (VO) [1974] RA 361

 

DECISION

Introduction

1.           This is an appeal by the ratepayer, Vines Limited, against the decision of the Surrey Valuation Tribunal (the VT), reducing the assessment in the 2005 rating list of a car showroom and premises known as 10-12 Bonehurst Road, Salfords, Redhill, RH1 5EG from £347,500 to £307,000.  The ratepayer contended that the correct assessment was £220,000.  The respondent valuation officer, Mr Andrew de Mauny MRICS, considered that the assessment determined by the VT was not excessive. 

2.           Mr Clive Moys of counsel appeared for the appellant.  He called factual evidence from Mr Adrian Houslop, the appellant’s group financial controller, and expert evidence from Mr Roderick Bisset BSc, MRICS, a director of BMH Properties Limited trading as Bisset Moffatt Hill, chartered surveyors of Crawley, West Sussex and Slough, Berkshire.  Counsel for the respondent VO, Mr Timothy Morshead, called Mr de Mauny to give expert evidence.  Mr de Mauny is a senior valuer in the Reading Group of the Valuation Office Agency, based at the Reigate office in Redhill.  Mr Morshead also called factual evidence from Mr Gordon How, who is employed at the Chelmsford office of the Valuation Office Agency. 

3.           The material day and the effective date is 14 May 2005.  The antecedent valuation date (AVD) is 1 April 2003.  I inspected the appeal hereditament internally and externally, accompanied by Mr Bisset and Mr de Mauny, on 14 September 2010.  On the same day I made accompanied inspections of certain other showrooms which had been cited as comparables. 

Facts

4.           From an agreed statement of facts and the evidence I find the following facts.  The appeal hereditament is situated on the east side of the A23, a busy main road linking Redhill in the north to Horley and Crawley to the south.  It was the main London to Brighton Road prior to construction of the M23 motorway in the early 1970s.  The appeal hereditament is located approximately 2.7 miles south from the centre of Redhill and some 2 miles north of Horley.  Central Crawley is approximately 6.5 miles to the south.  The distance to the nearest point of access to the M25 is approximately 5.75 miles and, to the M23, 4.3 miles. 

5.           A BMW dealership has been established in Salfords for about 20 years.  The appellant took over the dealership from L and C BMW in 2000 and traded from freehold premises at 1 Bonehurst Road, which lie approximately 450m to the north of the appeal hereditament.  The franchise agreement between the appellant and BMW UK Limited is subject to review every five years.  It was renewed for a further five years in 2003, conditional upon the provision of a suitable new showroom.  Such a showroom had to meet BMW’s latest specification, including dedicated facilities for the new Mini franchise.  The site at 1 Bonehurst Road was not capable of accommodating a showroom of the required specification.  The site of the appeal hereditament was therefore purchased by Hillred Limited, a special purpose vehicle owned by the shareholders of the appellant company, who are the trustees of a family trust based in the USA. 

6.           The site of the appeal hereditament was formerly part of a large industrial complex, which has now been redeveloped as the Vines BMW dealership fronting the A23 and an industrial estate known as Fairlawn Enterprise Park at the rear.  The site area of the appeal hereditament is approximately 0.875ha.  It is level, but slightly raised above the road.  Fronting the road there is a retaining dwarf brick wall and in part a grass bank, with a grass landscaped strip surmounting both.  There are two sloping access points to the main road and eight semi-mature oak trees and a horse chesnut spaced out along the landscaped strip.  The trees are subject to tree preservation orders. 

7.           The site contains three detached buildings.  One (the Mini showroom) was first occupied in early 2004 and the others in mid 2005.  Building 1 is on two storeys.  It comprises the main showroom, administrative offices, stores and car-servicing workshop.  The showroom fronts the main road and has a high-rise glazed front, extending part way down the flank walls.  The remainder of the building is constructed partly of building block and clad in protected metal under an insulated profiled metal roof covering. 

8.           The quality of the showroom is consistent with a top of the market brand like BMW, and in the main is an imposing full two-storey height.  The floor is either carpeted or has a glazed tile finished.  Apart from those which are glazed, all walls have a painted plaster finish, with spotlight illumination and a ducted air conditioning system.  A customer seating/waiting area and ancillary offices are located on the first floor.  They form a large balcony area over part of the showroom and are approached from the main sales/display floor by an open staircase.  There is also a passenger lift.

9.           The ground floor to the rear of the showroom comprises ancillary office areas and a large parts store, together with male wcs and changing rooms for the workshop staff.  Further to the rear is the main workshop.  It is a full two-storey height, with access doors to the side and rear and natural light from rooflight panels.  The floor is finished with vinyl tiles and the walls and roof are profiled metal.  Illumination is by suspended arc type lamps and heating by overhead bar heaters.  15 double piston hydraulic hoists are built into the floor.  Behind the customer area and ancillary offices on the first floor are further ancillary offices, a large staffroom/canteen and a mezzanine floor used for storage. 

10.        Building 2 is located on the northerly side of the site.  It is used as a car showroom for the display and sale of the Mini brand.  The front is fully double glazed, as are the two flank sides for about half their length.  The remainder of the structure comprises protected metal panelling under a sloping profiled metal roof.  Internally the showroom has a tiled floor and glazed show windows, with the rest of the walls plastered and painted.  The ceiling has part suspended type panels and part plaster finish, with spotlight illumination.  Within the showroom to the rear are a small office, a disabled wc, kitchen and store.  A ceiling ducted system provides heating and cooling. 

11.        Building 3 comprises a large detached valet building, finished externally in profiled metal cladding.  This is a good quality building divided internally into a front area for general  valeting, a rear section with a drive through automatic car wash unit and a central section comprising stores, plant, mess room, wcs and a works office.  Heating is by suspended rod bar or individual heaters to all parts except the drive through car wash areas. 

12.        The external areas are mostly surfaced with asphalt and with surface water drainage.  The central area between the two showrooms is used mainly for the display of cars for sale, is neatly laid out and has external lighting.  The area to the front of building 2 is used for the display of the Mini brand, as is the area between this showroom and the main road.  A steel railing fence effectively divides the major front customer section of the site from the valet building and the rear portion of the main workshop.  The asphalted areas here are in the main marked out and used as workshop, valet and staff parking.

13.        The gross internal areas of the various parts of the buildings on the site are as follows:

	m2
GF Detached Mini Cooper showroom	199.16
GF Kitchen	6.20
GF Internal storage	4.61
GF Main showroom	540.09
GF Office	29.55
GF Office	46.41
GF Office, tea room and corridor	32.05
GF Works Office	19.76
GF Parts store, lockers, toilets	249.43
GF Main workshop	685.62
FF Customer waiting area	107.24
FF Offices	194.81
FF Mess/staff room	89.95
FF Internal storage	53.60
Mez Parts store	105.02
GF Valet/car wash building areas	338.18
GF Mess room and office in valet building	19.54
	2,721.22 m2

 

There are 27 prime open car sales display spaces, 55 secondary open display spaces and 54 ancillary open car spaces.

Issues

14.        The principal issue in this appeal is the rental value per m² which should be applied to the appeal hereditament in terms of main space (ITMS).  Mr Bisset contended for a value of £125 per m².  Mr de Mauny’s original valuation, which he defended before the VT, was £170 per m².  Whilst he did not resile from that figure, he did not appeal against the base price of £160 per m² determined by the VT, which he considered to lie at the bottom of the range of values which might be adopted by a reasonable valuer.  The values of the car spaces are agreed.  It is also agreed that, where appropriate, 5% should be added to the main space value to reflect air conditioning.  In general, the relationship between the values of the various parts of the hereditament and the main space values is agreed.  The remaining issues are how the Mini showroom should be valued in relation to the main BMW showroom; how the detached valet building should be valued in relation to the main workshop; whether there should be a deduction for quantum and whether there should be an adjustment for masking.

Value of main space - evidence

15.        The main thrust of Mr Bisset’s evidence was that the base rate of £160 per m² ITMS was excessive as a result of flaws in the rental evidence from which it was derived, either because the rent was agreed between connected parties, or because it was based on retail warehouse values rather than car showroom values, or because it represented an overbid reflecting the special circumstances of the existing occupier, or because it was derived from an arbitrator’s award, or because it was not comparable by reason of the location, size or physical nature of the showroom premises in question.

16.        In support of his suggested base value of £125 per m² Mr Bisset relied on two rents.  The first related to a car showroom at 8 Imperial Way, Croydon, Surrey.  This was part of a larger property, Nos.8-10, which was leased to Camden Motors Limited for a term of 25 years from 9 December 1999 with five yearly rent reviews.  No.8 was sub-let in 2003 to Drift Bridge Garage Limited at a rent (adjusted to RV terms) of £153,750 per annum, subject to rent reviews to coincide with those in the head-lease.  It was subsequently agreed that the rent would remain unchanged following the December 2004 rent review.  The total floor area was 1,910.7 m^2.  In his expert report Mr Bisset analysed this rent at £131.31 per m² ITMS.  In cross-examination he agreed that the true figure was £136.16.  Mr Bisset’s second rental comparable related to the Suzuki showroom in Dowding Way, Tunbridge Wells, Kent.  This property was let with effect from December 2003 at an RV adjusted rent of £95,000, equivalent to £100.74 per m² ITMS. 

17.        Mr Bisset also placed weight on rating assessments which had been agreed for car showrooms in neighbouring areas.  He said that, in Crawley, which is only 6.5 miles away but falls within the Worthing VO area, several modern car showrooms had been assessed at £135 per m² ITMS.  Mr Bisset considered that the location of each of these properties, which included the appellant’s most prestigious showroom in Stephenson Way, was superior to that of the appeal hereditament.  The existing assessments were the subject of outstanding proposals for a reduction.  In Horsham car showroom assessments based on £80 and £105 per m² ITMS had been agreed.  In the Tunbridge Wells VO area, to the east of the appeal hereditament, the RVs of the best car showrooms had been agreed at £105 to £110 per m² ITMS.  In the Bromley VO area to the north, a car showroom in Coulsden had been assessed at £100 per m² and showrooms in South Croydon at £100 and £107 per m² ITMS.

18.        In Mr Bisset’s opinion, the agreed assessments in the Reigate VO area, where the appeal hereditament was located, and in particular the assessments of other car showrooms in Salfords and Redhill at £155 and £150 per m² ITMS, were out of line with the levels of assessment in neighbouring VO areas.  They were based on questionable rental evidence.  Some had been agreed shortly before the VT which considered the appeal hereditament, by valuers who were not aware that Mr Bisset would be taking a test case at that hearing.

19.        Mr Bisset’s valuation, using a base price of £125 per m² ITMS, produced a value of £220,000.  He prepared a second valuation, adopting a base price of £160 per m² following the decision of the VT, but with an end deduction of 20%.  This reflected the fact that the main Redhill rents upon which Mr de Mauny relied were located in the commercial centre of the town, whereas the appeal property was “in a hamlet located some distance away from the town centre where land is more freely available.”  The second valuation produced a figure of £212,000, but the appellant suggested that the higher value should be determined. 

20.        Mr de Mauny said that there was a paucity of rental evidence in respect of car showrooms in East Surrey.  He produced details of ten rents, which he thought had all been agreed close to the AVD.  He said that most were paid for properties which were inferior to the appeal hereditament in terms of modernity, quality, specification, location or the physical site.  They ranged from £128 per m² ITMS for a poor quality showroom (159 Station Road East, Oxted) to £189 per m² for a very good showroom at 12 Brighton Road, Redhill.  In Mr de Mauny’s opinion the appeal hereditament –which he described as an eye catching, newly built facility on a main road – fell closer to the top end of this range than the bottom.  He also gave details of the rating assessments of seven car showrooms in the Reigate VO area, situated in Salfords itself, Redhill, Dorking, Burstow and Ashford, a further five in the West Surrey area and three in the Reading area.  In particular two of the agreed assessments related to car showrooms located close to the appeal hereditament, but inferior to it in terms of quality and modernity.  They were Lifestyle Ford, Brighton Road, Redhill (£150 per m²) and 1 Bonehurst Road, Salfords, which had formerly been occupied by the appellant and was located 450 metres north of the appeal hereditament.  This evidence, said Mr de Mauny, suggested that the value of the appeal hereditament must be in excess of £155 per m² ITMS. 

21.        Mr de Mauny considered that Surrey was an area of high rental values for most classes of commercial property and that this was supported by the evidence he had produced.  He thought that the comparables submitted by Mr Bisset, relating mainly to properties in Kent and Sussex, were largely irrelevant in determining an accurate rating assessment for the appeal hereditament, situated as it was in south east Surrey.

Value of main space - conclusions

22.        I start by considering the principal rents relied upon by Mr de Mauny. 

Unit A, Kiln Lane, Epsom, Surrey

23.        This is a good modern showroom built in 1995 on the Kiln Lane industrial estate, about a mile from Epsom main shopping centre and approximately 9 miles north of the appeal hereditament.  There are two other showrooms adjoining, but there is a distinct industrial feel to the immediate surroundings.  Total area 741.95m² ITMS.  Let on FRI lease.  March 2005 rent review determined at £145,750 per annum.  Rent equivalent to £179.35 per m² ITMS before 5% end allowance for shared access.

24.        Mr Bisset contended that this rent was not admissible as evidence, since it was determined by an arbitrator.  I agree (see Land Securities Plc v Westminster CC [1992] 2 EGLR 15) and place no weight on this comparable.

12 Brighton Road, Redhill, Surrey

25.        This is a good modern showroom built in 1994 just south of the main town centre and 2.75 miles north of the appeal hereditament.  One of three units set back from the main road with extensive car parking areas to the front.  The showroom building is visible prominently from the road, but the open car display spaces are partly masked by landscaping.  Total area 1,180 m².  Rent review December 2003 agreed at £185,000 (£189.24 per m² ITMS).  Rent excludes tenant’s improvements including air conditioning.  In his written report Mr Bisset discounted this evidence, on the grounds that the agreed rent was based on A1 retail values, less 30% to reflect the fact that the hypothetical tenant would have had to apply for planning permission for change of use from car showroom to retail.  Mr Bisset also pointed out that the revised rent represented only a nominal increase on the passing rent of £180,850.  He said that the tenant would have been tempted to agree a nominal increase rather than face the costs and uncertainty of proceeding to determination by a third party.

26.        Mr Bisset repeated his contention that the agreed rent was a discounted retail warehouse rent in the agreed statement of facts which was signed by the two experts on 6 July 2010, shortly before the hearing.  By then it was clear that the contention was unsustainable.  The landlords of 12 Brighton Road were represented in the rent review negotiations by Messrs DTZ.  On 30 April 2009 DTZ wrote to the VO at Redhill with information about the rent review.  They said this:

“The construction of the lease combined with the lack of planning for a retail warehouse restricted the basis of review to that of a car showroom … The evidence supported a rate of £16.00 psf and this was agreed.”

27.        A copy of that letter was attached to Mr de Mauny’s further rebuttal report dated 13 October 2009.  Mr Bisset took no steps to contact DTZ or the lessee’s representative to investigate the position further.  In those circumstances, his persistence in suggesting that the agreed rent was not based on car showroom values was unattractive.  So also was his admission in cross-examination that his deduction of 30% (stated elsewhere to be 22%) for the absence of retail planning permission was not based on an assessment of the risks, costs or delay involved in obtaining such permission, but on what he described as reverse engineering. 

28.        In cross examination Mr Bisset accepted that the showroom at 12 Brighton Road was not physically better or more prominent than the appeal hereditament and that its weight as rental evidence was not diminished by the fact that it was a rent review or that the valuation date was some months after the AVD.  I am not persuaded that the location of the appeal hereditament for the purposes of a car showroom is significantly inferior to that of 12 Brighton Road.  In the absence of any evidence – apart from Mr Bisset’s assertion – that the agreed rent was influenced by the level of rent previously payable, I find that this evidence, considered in isolation, is a very strong indication that the assessment of the appeal property at £160 per m² ITMS is not excessive.

Lifestyle Ford, Brighton Road, Redhill

29.        This is a 1970s showroom, now looking rather old fashioned and dated, situated in a very prominent position on a busy main road.  It is located just south of Redhill town centre, approximately 2.75 miles north of the appeal hereditament.  It lies on a front corner plot on a small industrial estate.  A new FRI lease was granted from January 2002 at £149,029 pa in terms of rateable value (£151.45 per m² ITMS).

30.        Mr Bisset said that this property had previously been let to Hancock Motor Group (HMG) which failed in February 2001.  The management team of the Redhill branch of HMG bought the business of the branch from the administrators of HMG.  The franchise, stock and staff were in place and the management buyout team (known as Lifestyle Ford) had to negotiate a new lease with the landlord.  Lifestyle Ford’s negotiating position was weak as there were no alternative premises on the market.  The site had goodwill as it had been a Ford dealership for several years.  Mr Bisset reduced the agreed rent by 20% to reflect the tenant’s weak negotiating position, goodwill and marriage value, the latter reflecting the fact that a company related to the tenant owned the freehold interest in part of the site.

31.        Mr de Mauny rejected the contention that the freeholder had a negotiating advantage.  He suggested that the circumstances were in effect no different from any new lease being granted to an occupier already in possession.  Above all, he said, it was impossible to put oneself in the shoes of the respective parties.  Any claim to be able to do so and to be able to translate it into an adjustment of the rent was pure speculation.

32.        I do not agree with Mr de Mauny’s suggestion that the letting in 2002 was indistinguishable from a lease renewal to an existing tenant.  The majority of such renewals are granted pursuant to the provisions of the Landlord and Tenant Act 1954, Part II which, with certain exceptions, entitles a tenant in occupation of business premises to a new lease at the market rent.  The landlord therefore does not have a negotiating advantage in these cases.  Whilst Mr de Mauny is right to point out the difficulty of assessing the relative bargaining positions of the parties, it is precisely that difficulty that reduces the evidential value of the rent which was agreed by Lifestyle Ford.  Whilst that rent does not of itself suggest that £160 per m² is too high for the appeal hereditament, the circumstances of the letting mean that little weight can be attached to this evidence.

10-12 Bonehurst Road, Salfords

33.        This is the appeal hereditament itself.  It was leased to the appellant for 20 years from May 2005 at £430,000 per annum exclusive, equivalent to £231.35 per m² ITMS.  Mr de Mauny recognised that the rent was agreed between connected parties two years after the AVD.  He accepted that it was not primary evidence.  Nevertheless, it was substantially in excess of the RV.  It was, he said, a rent which the appellant had been prepared to pay in order to occupy the property, and should not be excluded from the basket of evidence to be considered.

34.        In his initial report Mr Bisset said that the rent was agreed between related companies with a view to maximising the profit to be made on the eventual sale of the property as an investment.  The letting did not accord with the rating hypothesis and was of no use in establishing the RV.

35.        Mr Houslop said that he had not been involved in the negotiations to acquire and develop the appeal hereditament.  The move from the appellant’s previous premises at 1 Bonehurst Road had been handled by two former directors of the appellant and the shareholders’ advisors in the USA.  The appellant was instructed by the shareholders to accept the financing details which had been arranged and it complied with those wishes.  Mr Houslop said that he had had no contact with Hilldred Limited, the freeholders, save for paying the contractors working on the new development on their behalf. 

36.        The lease of the appeal hereditament was varied by a deed of variation dated 5 January 2007, which increased the rent from £430,000 to £494,839, subject to further rent reviews on 5 January 2012 and five yearly thereafter.  The freehold was then sold to an unconnected party in January 2007 to produce an initial yield of 5.74%.  Hilldred Ltd were asked to supply documentation concerning the negotiation of the letting in 2005, but declined to do so.  In the absence of such information, I conclude that this evidence can be given very little weight.

292-294 Walton Road, West Molesey, Surrey

37.        This is an inter-war building converted into a car showroom with no workshop facility.  The standard of finish is reasonable.  The property is prominent to the road, but passing traffic is local only.  A new FRI lease was granted in October 2003 at a rent of £47,500 pa (£143.35 per m² ITMS).

38.        Mr Bisset did not attach significant weight to this evidence.  He pointed out that, at 288m² overall, the showroom was exceptionally small.  I agree with Mr Bisset’s opinion and disregard this evidence.

159 Station Road East, Oxted, Surrey

39.        This showroom is approximately 25 years old, located on the periphery of a large village shopping centre about 8 miles east of Redhill, with no real through traffic.  It was let on FRI terms for 21 years from 15 March 1990.  The rent review with effect from March 2005 was agreed at £88,000 pa (£128.74 per m² ITMS).

40.        Mr Bisset dismissed this evidence on the grounds that the property was not of similar age or size to the appeal hereditament and the location was different.  Mr de Mauny, on the other hand, considered that the deficiencies of 159 Station Road East were such that the appeal hereditament was worth significantly more than the agreed rent of £128.74 per m².  He pointed out that the property was an old style type of operation, with a garage servicing building, a showroom promoting car sales and a petrol filling station element.  In the last 10 to 15 years such a combined facility in this location was no longer particularly viable.  Petrol sales ceased in 1996.

41.        I prefer Mr de Mauny’s approach.  This is a much less attractive property than the appeal hereditament.  The total floor area (1,282m²) is not so different from that of the appeal hereditament (2,721m²) as to disqualify it as a comparable.  In my judgment this evidence adds support to Mr de Mauny’s valuation of the appeal hereditament at £160 per m².

42.        Although Mr de Mauny referred to 15 agreed assessments of properties of varying quality, he placed particular reliance on the agreed assessments of the Lifestyle Ford unit at Redhill and the appellant’s former premises at 1 Bonehurst Road, Salfords.  Mr Bisset did not suggest that either of these assessments supported a base rate of less than £160 per m² for the appeal hereditament.  His case was that, when they agreed the assessments, the ratepayers’ agents were not aware that Mr Bisset would be taking the appeal hereditament to the VT as a test case on 4 December 2007.  He further suggested that Autohouse Associates, who agreed both assessments on behalf of the ratepayers, were unaware that the rent for 1 Bonehurst Road was suspect, since it was payable by the appellant for only a short period while it remained in occupation following the sale of its freehold interest. 

43.        I am satisfied that neither of Mr Bisset’s criticisms of this evidence is justified.  The assessments of 27 car showrooms were listed for hearing by the Surrey VT on 4 December 2007.  Seven were settled by agreement shortly before the hearing.  Mr de Mauny said that he wrote to all the rating surveyors concerned on 9 November 2007.  He informed them that the basis for car showrooms was still unresolved following central discussions with a committee of surveyors representing the ratepayers, but that discussions were continuing, and that this did not preclude individual negotiations on particular cases.  He added that if the central discussions failed to result in a basis for settlement, it might be that one case should be heard by the VT and the rest adjourned.  In cross examination Mr Bisset accepted that the three firms of surveyors who reached agreement in the days before the VT hearing would have received Mr de Mauny’s letter of 9 November.  They would thus have been aware of the possibility that there would be a test case on 4 December.  As for the evidence of the rent payable for 1 Bonehurst Road, it is true that Autohouse Associates were originally unaware of the background to the short term letting to the appellant.  However, Mr de Mauny said that by the time he reached agreement with Mr Brown of Autohouse, Mr Bisset had provided correct details about the letting and he had informed Mr Brown accordingly.  That evidence was not challenged.

44.        Although I have rejected Mr Bisset’s criticisms of Mr de Mauny’s primary settlement evidence, which supports a main space rate of £160 per m², this remains settlement evidence which, in the absence of an established tone, carries less weight than rental evidence.  In that connection it must be borne in mind that some three quarters of the car showroom assessments which were listed for hearing on 4 December 2007 remain outstanding.  Mr de Mauny’s settlement evidence therefore adds comparatively little to his rental evidence. 

45.        It is, however, important to bear in mind that this is an appeal by the ratepayer, not the VO.  The onus, therefore, is on the ratepayer to show that the base rate of £160 per m² is too high, not on the VO to prove the opposite.  I therefore turn to consider Mr Bisset’s evidence, and firstly the rent paid for 8 Imperial Way, Croydon.  This is a converted 1960s industrial building.  Although it is finished to a reasonably high standard internally, it lacks the features of a purpose built ultra modern showroom.  In fact, viewed from the road, it has the appearance of a converted warehouse.  It is located on an industrial estate of mixed age containing no other car showrooms.  It is not visible at all from the main road, Purley Way, off which the estate is accessed.  To the very limited extent that evidence in Croydon is of assistance in this appeal, the letting of this property at a main space rate of £136 per m² does not suggest that a value of £160 for the appeal hereditament is too high. 

46.        The second main rental comparable relied upon by Mr Bisset is the letting of the Suzuki showroom at Dowding Way, Tunbridge Wells.  This property was let from July 2003 at approximately £100 per m² ITMS.  Again, I am satisfied that this evidence does not prove that £160 is too high for the appeal hereditament.  Dowding Way is 20 miles away.  The rent was not tested on the open market, but agreed between the freeholder who now occupies the adjoining showroom and the present lessee, without any professional advice, for a showroom on what was at the time largely a building site, and which would remain uncompleted until three and a half years later.  It is noteworthy that, acting on behalf of the occupier, Mr Bisset himself agreed the assessment in the 2005 rating list at 10% more than the rent agreed in 2003 and that, in the course of his oral evidence, he accepted that the agreed assessment could itself be too low, having regard to assessments elsewhere. 

47.        In view of the deficiencies of Mr Bisset’s rental evidence, it is understandable that, in opening, Mr Moys suggested that the evidence which carried the most weight was the assessment of the appellant’s showroom in Stephenson Way, Crawley.  That assessment was based on £135 per m² ITMS, producing a rateable value of £347,500.  This showroom is of similar appearance and finish to the appeal hereditament.  In view of the importance that he placed upon this assessment, it is surprising that Mr Bisset did not disclose that the property was let at a rent of £540,000 per annum, payable with effect from 15 November 2004.  That information was provided to the valuation office on page 3 of a rent return received on 2 September 2005, after the Worthing VO had produced his valuation at less than two-thirds of the agreed rent.  In cross-examination Mr Bisset suggested that the rent was based on a sale and leaseback.  This was inconsistent with the rent return form, which indicated the contrary on page 5.  Even if the return form was completed incorrectly, Mr Bisset’s failure to inform the Tribunal of this potentially relevant information was regrettable.  Moreover, when asked why he had not referred to this evidence in his report, Mr Bisset replied that there was other rental evidence in Croydon, Crawley and Tunbridge Wells to which he had not referred, because he assumed that the evidence of settled rating assessments reflected all the rental information.

48.        Since there is no settled tone for any of the car showroom assessments upon which Mr Bisset relied, and no evidence as to the rental evidence used in arriving at them, I find that they are of no assistance.  The only assessments Mr Bisset quoted which are arguably part of an established tone are in Tunbridge Wells, where a number of showrooms in Dowding Way are assessed at an agreed £110 per m² ITMS.  As I have said, however, Mr Bisset accepted in cross-examination that these assessments appeared to be too low.  In any event they relate to properties 20 miles from the appeal hereditament, with a very different catchment area.  In my judgment they carry virtually no weight by comparison with what I consider to be the most helpful evidence, namely the rent of £189 per m² ITMS agreed for 12 Brighton Road, Redhill, which fully supports Mr de Mauny’s valuation.  That valuation is also consistent with the only other reliable rental evidence, namely the rent paid for 159 Station Road East, Oxted.  The appeal on the main space rate issue therefore fails.

The Mini showroom

49.        Mr Bisset valued the BMW showroom at £131.25 per m² and the Mini showroom at £125 per m², in both cases to include 5% for air conditioning.  He said that the Mini showroom was of lesser height, lesser visual impact and orientation and, unlike the BMW showroom, it did not directly face the main road, but was at right angles to it.

50.        In Mr de Mauny’s opinion there was no difference in value between the two showroom buildings.  He said that they had been designed to assist in selling two different brands of car on the same site.  The appellant’s other premises in Crawley were laid out in similar fashion.  He valued both buildings at £168 per m² ITMS, being a base value of £160 plus 5% for air conditioning. 

51.        In the course of his oral evidence, Mr Houslop said that the height and orientation of both showroom buildings had been dictated by BMW, who required premises of the optimum size and height for the sale of their two brands.  When he gave evidence before the VT Mr Bisset did not suggest that Mr de Mauny was wrong to value both showrooms at the same rate.  In the light of my inspection I am satisfied that the height of the Mini showroom is more than adequate.  I agree with Mr de Mauny that any greater height would distort the external appearance of what is not a large building.  Although the Mini showroom is at right angles to the road, it has a significant flank showroom window facing the road.  The showroom faces out across the main open car sales area and the main frontage is visible to traffic travelling north on the A23.  I find that there is no justification for differentiating between the two buildings and I accept Mr de Mauny’s valuation of £168 per m². 

The valet shed

52.        Mr Bisset valued the workshop building at £56.25 per m², equal to 45% of his base rate of £125.  He reduced the value of the valet area to £50 per m², or 40% of the base rate.  He justified this approach on the grounds that the height of the valet building was lower than that of the workshop.  Again, this represented a departure from his approach at the VT, where he had agreed a relativity of 45% for both buildings.

53.        Mr de Mauny valued the valet shed at £72 per m², or 45% of the base rate of £160.  I accept that approach.  Although there are differences, the construction of the valet shed is broadly similar to that of the main workshop.  It is a good height, heated in the main, and has a works office, mess room and wc facilities.  It is a good quality detached building, providing a service which is of considerable importance when selling and servicing high quality cars.  It is in effect a further valuable workshop area forming part of the overall operation on site.  There is in my judgment no justification for valuing it differently from the 45% relativity agreed for the main workshop. 

Quantum

54.        Mr Bisset made an end deduction of 5% in both his valuations to reflect the size of the appeal hereditament.  He said that the rental evidence upon which Mr de Mauny placed most weight related to smaller car showrooms, as did the agreed rating assessments in Crawley, Tunbridge Wells and Sevenoaks. 

55.        Mr de Mauny did not agree that an allowance for size was warranted.  He said that, in October 2002, European legislation removed previous restrictions on multi-brand showrooms, so that dealers could sell more than one brand of car under the same roof.  Furthermore, from October 2005 dealers would no longer be tied to exclusive sales territories, but would be free to open new outlets where they wished.  Although the latter change did not come into effect until after the AVD, its impact on the car market was being planned for by car dealerships at that date.  As a result quite a few older, less viable showrooms closed down across east Surrey.  Mr de Mauny concluded that larger, well located premises, and those that offered several showrooms linked into shared servicing facilities were more in demand at the AVD than the traditional, smaller outlets, outweighing any element of discount for size. 

56.        Shortly before the hearing, on 3 July 2010, Mr Bisset produced an additional report.  In it he stated that he had recently agreed quantum adjustments of 20% in the 2005 list assessments of car showroom at Elettra House, Westway, Chelmsford and Lind, Ipswich Road, Colchester.  The total floor area of Elettra House was 6,373 m².  The agreed assessment was arrived at taking into account rental evidence of a showroom at 12 Bilton Road, Chelmsford, which only extended to 2,168 m².  In the case of Lind, with an area of 4,029m², rental evidence was used from 475 Ipswich Road, Colchester where the area was 2,367m².  Mr Bisset considered that the 20% reduction he had agreed in Chelmsford and Colchester showed that his allowance of 5% for the appeal hereditament was not excessive.  Although the properties which had been used as rental comparables by Mr de Mauny were half the size of the appeal hereditament, a smaller adjustment was appropriate than had been agreed in Essex, where the properties concerned were much larger. 

57.        Mr How is the valuer who agreed the assessments of Elettra House and Lind with Mr Bisset.  He said that, although in both cases he and Mr Bisset had agreed the main space price, areas and rateable value, they did not agree, or attempt to agree how they had arrived at the main space prices. 

58.        The agreed valuation of Elettra House was based on £80 per m² ITMS and 12 Bilton Road was rented and assessed at £100 per m².  Mr How considered, however, that the difference in rent was not simply due to quantum.  He and Mr Bisset had agreed that the Elettra House office block of over 3,000 m² – nearly half the total area of the hereditament – was largely superfluous to the needs of any car showroom occupier.  On 1 April 2005 Elettra House was not a car showroom.  It was an industrial building with extensive office accommodation which had been partially converted to be used as a car showroom. 

59.        Turning to Lind, Mr How disputed Mr Bisset’s assertion that the agreed assessment had been derived from the rent for 475 Ipswich Road.  He said that he had told Mr Bisset that he had concerns about the reliability of that rent and he therefore rejected it as a comparable.  Based on a review of the other rental evidence he proposed reducing the rateable value of Lind from £400,000 (using a main space price of £120 per m²) to £370,000 (£110 per m²) and this was agreed by Mr Bisset.  In reaching this conclusion Mr How had regard to the fact that Lind was five or six times as large as the other good car showrooms in Colchester where rental evidence was available.  In addition, Lind comprised 3 separate dealership buildings.  This meant that a tenant would need to obtain three franchises, which would restrict the number of prospective tenants that would be in the market.

60.        It is agreed that it requires only comparatively slender evidence to establish that a quantity allowance is made by the market.  The mere fact, however, that the only available rental evidence relates to showrooms that are half the size of the appeal hereditament does not of itself constitute such evidence.  In that connection it is worthy of note that, in Dowding Way, Tunbridge Wells, upon which Mr Bisset relied in support of his main space rate, the largest car showroom, Motorline Volkswagen (total area 2,225.28 m²) is twice the size of the smallest, Suzuki (1,032.32 m²), yet all six showrooms are assessed at £110 per m².

61.        The only support for a quantity allowance that Mr Bisset produced is provided by the assessments of Elettra House and Lind.  Those properties are much further from the appeal property even than Dowding Way.  In the light of Mr How’s evidence, I am entirely satisfied that the circumstances relating to both are such that they are of no assistance in deciding whether the market for the appeal hereditament would have made any allowance for quantum.  The appeal on this issue therefore fails. 

Masking

62.        Mr Bisset said that the appeal hereditament was masked by the retained oak trees on the A23 frontage between the showroom and the road.  He reflected this disability by making a 5% end allowance.  He said that he had agreed similar adjustments on two showrooms in Tonbridge and also on the Norman Motor Group premises at South Road, Twickenham.

63.        Mr de Mauny did not consider that any masking allowance was justified for the appeal hereditament, which he described as being fully visible from the main road.  Mr Bisset did not argue for such an allowance before the VT, which in its decision described the property as being situated in a prominent position on the A23.  In the light of my inspection I am satisfied that the VT’s description was accurate and that there is no justification for a masking allowance.

Conclusion

64.        The appeal is dismissed.  I confirm the assessment of the appeal hereditament in the 2005 rating list at £307,000 with effect from 14 May 2005.  A copy of Mr de Mauny’s valuation at that figure is attached (Appendix 1).  The parties are now invited to make representations on costs and a letter relating to this accompanies this decision, which will take effect when the question of costs has been determined.

Dated 20 September 2010

 

N J Rose FRICS

 

Appendix 1

 

 

VINES BMW, 10-12 BONEHURST ROAD, SALFORDS, REDHILL, SURREY RH1 5EG

 

MR DE MAUNY’S VALUATION

 

 

Floor	Description	Area m2	Relativity	Price per m2 (£)	Value £
Ground	Mini showroom	199.16	1.05*	168.00	33,459
Ground	Kitchen	6.2	0.63*	110.80	625
Ground	Internal storage	4.61	0.45*	72.00	332
Ground	BMW showroom	540.09	1.05*	168.00	90,735
Ground	Office	29.55	0.63*	100.80	2,979
Ground	Office	46.41	0.63*	100.80	4,678
Ground	Office, tearoom & corridor	32.05	0.60	96.00	3,077
Ground	Works office	19.76	0.5175	82.80	1,636
Ground	Parts, lockers, wc’s	249.43	0.45	70.00	17,959
Ground	Workshop	685.62	0.45	72.00	49,365
First	Customer waiting area	107.24	0.63*	11.80	10,810
First	Office	194.81	0.63*	100.80	19,637
First	Mess/staff room	89.95	0.5434*	86.94	7,820
First	Internal storage	53.60	0.45	72.00	3,859
Mezzanine	Parts store	105.02	0.10	16.00	1,680
Ground	Valeting/carwash	338.18	0.45	72.00	24,349
Ground	Mess room & office	19.54	0.5175	82.80	1,618
				Sub total	£274,618
Outside	Prime car display spaces	27		@ £450	£12,150
Outside	Secondary car display spaces	55		@ £250	£13,750
Outside	Ancillary car spaces	54		@ £130	£  7,020
				Sub total	£32,920
				TOTAL	£307,538
				Say	£307,000

 

* Includes 5% addition for air conditioning.