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UPPER TRIBUNAL
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UT Neutral citation number: [2011] UKUT 309 (LC)
UTLC
Case Number: RA/27/2010
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
RATING
- public house - valuation - application of Approved Guide - lack of evidence of trading
accounts for appeal hereditament at AVD for 2005 list - appellant’s use of 2009/10
accounts rejected -
comparables - assessment
confirmed at £30,750 -
appeal dismissed
IN
THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
VALUATION
TRIBUNAL
BETWEEN KEVIN HAROLD EDWARDS Appellant
and
CATHERINE HOWARTH
(Valuation Officer)
Respondent
Re:
The Woolpack Inn,
Whitley Road,
Whitley,
Dewsbury,
West Yorkshire,
WF12
0LZ
Before:
A J Trott FRICS
Sitting
at: UTIAC, Phoenix House, Rushton Avenue, Thornbury, Bradford BD3 7BH
On
8 June 2011
Appellant in
person
Respondent in
person
The following
case is referred to in this decision:
Wetherspoon
(JD) plc v Day (Valuation Officer) [2008] RA 129
The following
cases were referred to in argument:
Watney
Mann Ltd v Langley [1964] RVR 22
Brown
(Irving) and Daughter v Smith [1996] RA 53
DECISION
Introduction
1.
This is an appeal by Mr Kevin Harold Edwards (the appellant) against a
decision of the Valuation Tribunal dated 11 October 2010 confirming the
compiled list assessment in the 2005 non-domestic rating list of the public
house and premises known as the Woolpack Inn, Whitley Road, Whitley, Dewsbury,
West Yorkshire WF12 0LZ at a rateable value of £30,750.
2.
The respondent is Mrs Catherine Howarth MRICS, the duly authorised
valuation officer.
3.
Both parties appeared in person.
4.
The appeal was heard under the simplified procedure.
5.
I made an unaccompanied visit to the appeal property on 7 June 2011. I
also made external inspections of two comparable public houses, the Hare and
Hounds on the B6118 near Mirfield and the Kaye Arms on the A642 at Grange Moor.
Facts
6.
The appeal hereditament comprises a two storey stone and slate-roofed
public house fronting Whitley Road at its junction with Scopsley Lane, approximately
1.5 miles west of Thornhill. The premises are located in a hamlet which is
centred on Scopsley Lane and Scopsley Green. The building has been extended
with a conservatory at the rear and by the addition of 10 letting rooms located
in an annexe attached to the main building and in a separate annexe across the
rear yard. There is a small car park to the rear of the building and another
car park, with 65 spaces, directly opposite the property in Scopsley Lane.
7.
The then owner, the Laurel Pub Company, undertook improvement works
sometime between 1 April 2003 and 1 April 2005. These works included the
renovation of the bedrooms, the repositioning of the bar, levelling the floor
and the provision of a disabled access.
8.
The appeal hereditament was shown in the 2005 compiled list as a public
house and premises with a rateable value of £30,750. An appeal against this
assessment was made by Commercial Valuers and Surveyors (CVS) on behalf of the
then ratepayer, Mrs A McGurran, but this was withdrawn in February 2007.
9.
The appellant, who occupied the appeal hereditament as a tenant of
Greene King Ltd from October 2009 to June 2010, submitted a proposal to alter
the 2005 rating list on 19 February 2010. It was accepted by the valuation
officer as a compiled list proposal as the appellant had stated as the grounds
for the proposed list alteration that the rateable value in the rating list on
1 April 2005 was inaccurate. However he also stated that he wanted the
rateable value altered to the “current turnover” with effect from 14 October
2009. The appellant did not specify any material change in circumstances to
justify this alteration of the list and the Valuation Tribunal, when the
valuation officer referred the disagreement to them as an appeal, proceeded on
the basis that it was a compiled list appeal.
The Valuation Tribunal’s decision
10.
The Valuation Tribunal commented upon the lack of reliable trade figures
to support the compiled list assessment and the absence of data based upon
completed forms of return. But it said that it could have no regard to the
current economic climate when setting an assessment for the 2005 rating list,
even though it accepted that trade at the appeal property “had clearly fallen
by March 2008”. It concluded:
“Accordingly, having regard to the
parameters set out in the current case and the lack of any alternative trade
information at the AVD, the panel considered that it was with regret that the
appeal had to be dismissed.”
Valuation method
11.
For the 2005 rating lists an Approved Guide for the Valuation of Public
Houses was agreed between the British Beer and Pub Association and the
Valuation Office Agency.
12.
Public houses were valued by reference to fair maintainable receipts
(FMR). The method of valuation was to assess separately, on the one hand the
FMR of the liquor trade (including net income from gaming and other machines)
and, on the other, the FMR of the food trade. A separate figure was included
for letting accommodation where such accommodation exceeded six bed spaces (as it
did in the appeal hereditament).
13.
The Guide required that for liquor sales the public house be placed
within one of three geographical areas and one of three valuation bands. Each
band for each geographical area had a minimum and a maximum percentage which
varied according to the size of the turnover. The “change points” in turnover
were at intervals of £100,000.
14.
For food sales the Guide made no distinction between geographical areas
and gave a choice of only two valuation bands. Each band had a minimum and a
maximum percentage which again varied with the level of turnover, this being
measured at smaller intervals than for liquor sales for amounts less than
£100,000 but thereafter with change points every £100,000.
15.
For accommodation sales the Guide said:
“The appropriate percentage will
be derived from the rate determined for the fair maintainable receipts for food
sales … plus an addition of from zero to 3%, depending on circumstances.”
The case for the appellant
16.
Mr Edwards criticised the lack of reliable trading information upon
which the compiled list assessment was based. The trading figures that had
been provided by CVS when acting for Mrs McGurran in the earlier appeal were
not taken from a form of return but had been provided verbally and made no reference
to income from letting out rooms. He did not consider that they fairly
reflected the FMR. Because of this lack of reliable evidence Mr Edwards asked
that the burden of proof be reversed and that the valuation officer be required
to justify the compiled list entry.
17.
Mr Edwards said that the trading figures from his own period of
occupation gave a more accurate picture of the trading potential of the appeal
property. These accounts, for the period ending 30 June 2010, showed an
operating loss of £11,681 on a turnover of £116,299 (equivalent to an annual
turnover figure of £174,448). Mr Edwards said that had the FMR been as high as
the respondent said then there would not have been as many changes of landlord
over the last few years. He also referred to trading figures provided on a
form of return made by Daisychain Inns for the 30 week period ending 29 March
2008. These showed an annual equivalent turnover of £146,300 which again was
substantially lower than the figures relied upon by the respondent when
compiling the 2005 rating list. Mr Edwards did not accept that the trading
figures for 2009/10 would reflect the effects of the recession and that
consequently they would be expected to be lower than the FMR in 2003.
18.
Mr Edwards said that the appeal hereditament was not located in a
residential area with a large local catchment population. The respondent had
wrongly proceeded on the assumption that there were a significant number of
patrons living within walking distance. The two other public houses referred
to by the valuation officer, namely the Hare and Hounds and the Kaye Arms, were
not comparable to the Woolpack. They were both traditional country public
houses and were located on much busier roads than the appeal property which Mr
Edwards described as a normal village inn.
The case for the respondent
19.
Mrs Howarth valued the appeal hereditament by reference to the Approved
Guide. She firstly estimated the FMR of liquor, food and accommodation sales
as at the antecedent valuation date (AVD) of 1 April 2003 but having regard to
the actual physical state of the hereditament as at 1 April 2005. Mrs Howarth
said that since the hearing before the Valuation Tribunal she had discovered
that the trading information provided by CVS at the time of the earlier appeal
was supplied on a form of return rather than verbally and that it also provided
details of the income from room lettings. She had reviewed her valuation in
the light of this new evidence and adopted the following figures of FMR:
Liquor
and machines: £132,500
Food: £210,000
Accommodation: £60,000
20.
These figures were said to be broadly in line with the trade that was
actually achieved in 1999 and 2000. As such they did not reflect the
improvements that had been made to the appeal hereditament by the Laurel Pub
Company between 2003 and 2005.
21.
Mrs Howarth then determined the bands to which the liquor and food trade
should be allocated and also the point in the range of percentages appropriate
to the FMR of each type of trade. She informed her decision by reference to
two comparable public houses; the Hare and Hounds at Mirfield and the Kaye Arms
Inn and Brasserie at Grange Moor. This analysis produced the following
results:
Hare and Hounds
FMR
liquor: £120,000 - valued at 0.6 of Band 2 (7.0%)
FMR food: £645,000
- valued at 0.6 of Band A (10.1%)
Kaye Arms
FMR
liquor: £200,000 - valued at 0.8 of Band 2 (9.2%)
FMR food: £500,000 - valued at 0.7 of Band B
(9.7%)
22.
Mrs Howarth valued the appeal hereditament as follows:
Woolpack Inn
FMR
liquor: £132,500 - valued at 0.6 of Band 2 (7.28%)
FMR
food: £210,000 - valued at 0.6 of Band B (7.85%)
FMR accommodation: £60,000
- valued at 7.85% (0% addition)
Applying these percentages to the FMRs gave a total valuation
of £30,841 which Mrs Howarth rounded down to a rateable value of £30,750.
23.
Mrs Howarth explained that her choice of bands and percentages reflected
the nature of the trading location, the physical characteristics of the appeal
hereditament and the style of trade that was maintainable by the hypothetical
tenant. For liquor trade the Approved Guide said that Band 2:
“comprises good quality houses in poor trading locations,
average quality houses in average locations and poor quality houses in good
trading locations.”
She considered that the Woolpack was a good quality house in a
good location which led her to adopt a point slightly above the middle of the
appropriate percentage range. Her choice of band and position in the band for
food trade reflected the comparison with the two comparable houses. Mrs
Howarth did not consider that the occupancy level of the accommodation
justified the addition of any percentage to that derived for the food trade.
24.
Mrs Howarth acknowledged that her evidence of the FMR of the appeal
hereditament was derived from data in 1999 and 2000 and not as at the AVD. She
therefore investigated how the trade at the two comparable houses had changed
over that intervening period. She said that the total trade at the Hare and
Hounds had increased by 22% between September 1999 and September 2002, while
trade at the Kaye Arms had increased by 6.8% between the years ending December
1999 and March 2003. Given this pattern Mrs Howarth considered that her
adoption of FMRs at 1 April 2003 which were only slightly above the declared
1999 and 2000 trading figures was “not unreasonable”.
25.
Mrs Howarth rejected the appellant’s argument that the reduced trading
figures of his period of occupation or those of his predecessor, Daisychain
Inns, for the 30 weeks ending on 29 March 2008 were relevant to the appeal.
She said that although there was irrefutable evidence that turnover had
declined over the years this had nothing to do with the determination of the
FMR at the AVD 5 years earlier. This was an appeal against the compiled list
entry and events that happened subsequently were beyond the scope of the
appeal.
26.
Although Mrs Howarth argued that there should be no reduction in the
compiled 2005 list assessment she explained that because of a material change
in circumstances the rateable value of the appeal hereditament had been reduced
to £20,500 with effect from 7 August 2007. The rateable value under the 2010
list had been reduced to £23,000 with effect from 1 April 2010. She considered
that these reductions had in fact satisfied what the ratepayer had been hoping
to achieve in his appeal, namely that the rateable value should reflect the
“current turnover with effect from 14 February 2009”.
27.
Mrs Howarth concluded that the appellant had adduced no evidence to
justify a reduction in the compiled 2005 list assessment of £30,750.
Conclusions
28.
I accept the respondent’s view that the appropriate method to value the
appeal hereditament is that contained in the Approved Guide for the 2005
lists. In Wetherspoon (JD) plc v Day (Valuation Officer) [2008] RA 129
the President said at 143 [43]:
“Guidance of this sort, agreed by the Valuation Office
Agency and on behalf of a particular category of ratepayers, ought to be
followed unless there is a good reason not to do so.”
There is no good reason not to use the Approved Guide in this
appeal.
29.
The key issues in the appeal are the determination of the FMR as at the
AVD and the allocation of the appeal hereditament to the appropriate position
within the relevant bands contained in the Approved Guide.
30.
I begin my consideration of the FMR by rejecting Mr Edwards’ argument
that weight should be given to the trading figures for 2008 (Daisychain) and
2009 (the appellant). These are 5 and 6 years after the AVD at a time when the
economic climate was very different. The two sets of figures that Mr Edwards
urges me to consider were both representative of a trading period of less than
a year and in each instance took place after a period of closure of the
Woolpack. I find them to be of no assistance.
31.
There is no direct evidence of trading at the appeal hereditament at or
around the AVD. Mrs Howarth produced figures from a form of return for the
year ending 31 March 1999 that were not available to the Valuation Tribunal.
These figures were for a period of only 26 weeks and had apparently been
doubled to arrive at the full year’s figures as relied upon by the respondent.
Such an adjustment does not take account of any seasonal fluctuations in
trade. The figures for the year ending 31 March 2000 were categorised under
“other rental information” which Mrs Howarth explained was oral or written
evidence other than a form of return. Accommodation turnover was not
separately identified in the 2000 figures and is assumed to be included under
the FMR for food.
32.
I consider that Mrs Howarth has acted fairly by only making marginal
upward adjustments to the 1999/2000 FMRs to reflect growth over the period
until the AVD. Her use of two other nearby destination public houses to
calibrate the changes in trade over that period is, in my opinion, a reasonable
proxy for such growth. She has also made no adjustment to reflect the
improvements to the Woolpack that were made by the Laurel Pub Company in the
period between the AVD and 1 April 2005. However I do not accept her figure of
£250,000 as representing the cost of those improvements since this figure was
apparently derived from an uncorroborated local press report.
33.
I accept Mrs Howarth’s figure of £132,500 for the liquor FMR which is
less than the figure shown in the form of return for the year ending 1999
before any addition for machines. Her figure of £210,000 for food FMR is an
increase of 5% over the 1999 figure. This increase is less than the equivalent
figures for the Hare and Hounds and the Kaye Arms both of which had agreed
compiled 2005 list assessments based upon full trading disclosure. I consider
this increase to be reasonable in view of the comparable evidence and given the
appeal hereditament’s identity as a destination style public house offering
good food in pleasant surroundings.
34.
Mrs Howarth takes the FMR of accommodation at £60,000 which is less than
the 1999 form of return figure. I accept this as being a reasonable estimate.
35.
There are three valuation bands into which the appeal hereditament could
be placed for the purposes of determining the appropriate percentage to apply
to the liquor FMR. Mrs Howarth adopts Band 2. She says that the “Woolpack is
a good quality house in a good location.” This is actually the criterion to
place a house into Band 1. In my opinion the Woolpack is a good quality house
in an average location in a rural hamlet and with a reasonable amount of
passing traffic. I therefore accept that the appeal hereditament should be
included within Band 2.
36.
The Approved Guide states that the choice of percentage values within
each band at any given level of liquor FMR “is a matter of judgement”. It goes
on to explain:
“This allows for the ‘fine tuning’ of the valuation to
reflect the operation of the house and the significance of the expenses required
to maintain the particular type of trade being carried on. Factors to be
considered include whether the house is, or is not, trading at its optimum
potential, the level of prices charged, staffing costs (taking into account the
level and scope of services offered), maintenance, insurance, marketing,
provision of entertainments, etc. in relation to the fair maintainable receipts
adopted.”
While there are no contemporary financial accounts upon which
to base such a judgment, I am satisfied that Mrs Howarth’s adoption of a point
which is 0.6 of the difference between the minimum and maximum percentages for
Band 2 is reasonable and is consistent with the evidence of the two comparable
public houses.
37.
There are two valuation bands into which the appeal hereditament may be
placed for the purposes of determining the appropriate percentage to apply to
the food FMR. The Approved Guide says that these bands:
“reflect the nature of the trading
locality, the physical characteristics of the house and the style of trade
which is maintainable. The ability of the house to conduct food trade and the
style and profitability of the food operation will finally determine the
correct band.”
38.
Mrs Howarth says that:
“From my records I understand that the property had a good
reputation as being a ‘destination’ style pub offering good food in pleasant
surroundings.”
At the hearing she said that the Woolpack was known for good,
a la carte meals served in open plan surroundings with a new conservatory and
the benefit of a large car park and overnight accommodation. The operation was
easy to run. Mrs Howarth allocated the appeal hereditament to Band B (the
lower of the two bands) and adopted a percentage that was at 0.6 of the range
between the minimum and the maximum. In my opinion that is a reasonable
assessment of the food trade at the appeal hereditament and places the Woolpack
at a lower point in the percentage range than either of the comparable houses.
39.
Where the letting accommodation exceeds 6 bed spaces the Appeal Guide
says that:
“an appropriate judgement as to the correct rate percent
to be applied to the fair maintainable receipts for accommodation sales will
have to be made.”
The appropriate percentage is
taken as the rate determined for the food FMR plus an addition of from zero to
3% “depending on circumstances.” The Approved Guide offers the following
guidance on the point:
“In considering the appropriate
additional percentage, account will have to be taken of whether the
accommodation is an integral part of or ancillary to the main business, the
type and class of the letting bedrooms, the number of bedrooms available, the
level of receipts, the proportion of these receipts as compared with the total
receipts of the business, the degree of occupancy and the probable
profitability of the letting business (bearing in mind additional staffing,
advertising, etc. attributable solely to the business of the letting
accommodation).”
40.
There is limited information about the income from the letting
accommodation at the appeal hereditament. There is historic data from the
forms of return for the years ending 31 March 1997, 1998 and 1999. This shows
that such income represented 11.7%, 14.6% and 15.5% of total turnover
respectively. The occupancy rate over those years was 32%, 43% and 40%
respectively. (By the time of Mr Edwards’ occupancy in 2009/10 the income from
accommodation had dropped to under 3% of turnover.) In my opinion, given the
limited evidence available, Mrs Howarth acted fairly when deciding not to make
any addition to the food FMR percentage of 7.28%.
41.
I consider that Mrs Howarth’s application of the Approved Guide to the
circumstances of the appeal hereditament was appropriate, fair and accurate. I
accept her figures for the FMR and her choice of bands, and of the percentages
within those bands, for liquor, food and accommodation sales. The appeal is
therefore dismissed and the assessment of the appeal hereditament is confirmed
at a rateable value of £30,750 with effect from 1 April 2005.
42.
Costs are only awarded under the simplified procedure in exceptional
circumstances. In my opinion there are no such circumstances in this appeal
which would justify the award of costs and neither party submitted that there
were. I therefore make no award as to costs.
Dated 2 August 2011
A J Trott FRICS
