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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> VRCC Ltd v French [2013] UKUT 627 (LC) (17 December 2013)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2013/RA_20_2013.html
Cite as: [2013] UKUT 627 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0627 (LC)
UTLC Case Number: RA/20/2013
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
RATING – Valuation – Veterinary Treatment Centre in converted warehouse - rebus sic stantibus – whether to be valued on gross or net internal area basis – appeal allowed in part – rateable value assessed at £74,000.
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF THE VALUATION TRIBUNAL FOR ENGLAND
BETWEEN VRCC LIMITED Appellant
and
MRS AMANDA FRENCH Respondent
(Valuation Officer)
Re: Veterinary Treatment Centre and Premises,
1 Bramston Way,
Laindon,
Basildon,
Essex SS15 6TP
Before: P D McCrea FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 28 November 2013
Mr Alex Groves BSc MRICS for the Appellant
Mrs Amanda French MRICS, Valuation Officer for the Respondent
© CROWN COPYRIGHT 2013
The following cases were referred to in argument:
Lotus & Delta v Culverwell (VO) and Leicester City Council [1976] RA141
Scottish and Newcastle Retail Ltd v Williams (VO) [2000] RA 119
Williams (Valuation Officer) v Scottish and Newcastle Retail Limited [2001] EWCA Civ 185
Burvill v Jones (VO) 2013 UKUT 101 (LC)
Lidl (UK) GmbH v Ryder (VO) 2013 UKUT 348 (LC)
DECISION
Introduction
1. This is an appeal by VRCC Ltd (the appellant), the occupier of 1 Bramston Way, Laindon, Basildon Essex SS15 6TP (the appeal property), against the decision of the Valuation Tribunal for England (VT) dated 4 April 2013 determining the rateable value of the appeal property at £78,500 with effect from 1 April 2010.
2. The appeal property was shown in the compiled 2010 local non-domestic rating list as a “veterinary treatment centre and premises” with a rateable value of £105,000. The appellant made a proposal on 1 March 2011 to alter the compiled list assessment to £100. The Valuation Officer (VO) did not consider this proposal to be well founded and the matter was referred to the VT, who determined as above, in line with the figure contended for at that hearing by the VO.
3. Before this Tribunal the appellant argues that the rateable value of the appeal property should be £60,250. The respondent VO argues for £77,000.
4. The appeal was conducted in accordance with the Tribunal’s simplified procedure.
5. Mr Alex Groves BSc MRICS of Aitchison Raffety appeared on behalf of the appellant, both as advocate and expert witness. Mrs Amanda French MRICS, Valuation Officer, appeared on behalf of the respondent VO, again both as advocate and expert witness.
6. I inspected the appeal property accompanied by Mr Groves and Mrs French, on 10 December 2013.
Facts
7. From the evidence I find the following facts.
8. The appeal property forms part of Westmayne Industrial Park, upon which 12 industrial/warehouse units in two terraces were constructed in the early 1990’s. Some of the units have been combined. The appeal property, originally constructed as a warehouse but since converted to a veterinary facility, is at the end of the western terrace with rear elevation to Bramston Way.
9. Westmayne Industrial Park forms part of the Southfields estate in the Laindon area of Basildon. The estate comprises both industrial and office properties and is a few minutes’ drive away from the A127, the Southend arterial road. The M25 (junction 9) is a short drive away.
10. The front portion of the appeal property is mostly glazed with part brick and part metal cladding wall. The side of the building is brick to approximately 3m, then metal cladding with some glazed areas. The property is fully insulated. Outside there is a dedicated area car parking. From my inspection I found, and the parties agreed, that there were 18 spaces.
11. In 2002 the appeal property was acquired by the appellant’s associated property company, VRCCP Ltd, on a 999 year ground lease. It has since undergone significant refurbishment and alteration.
12. There is a lease between VRCCP Ltd and the appellant company, for a term of 20 years from 1 October 2002. The lease is drawn on fully repairing and insuring terms with five yearly rent reviews. The commencing rent was £60,000, including £2,000 for estate management. That remains the rent passing.
13. Planning permission was granted on 21 January 2002 for a change of use from B1/B2/B8 to D1 (veterinary clinic) and B1, B2 and B8.
14. The property has been substantially fitted out as a specialist veterinary treatment facility. A new radiotherapy facility was built within the property in late 2006 to house a “Linac” radiotherapy machine for the treatment of cancers in animals. This was a significant construction, with concrete walls of up to 1m thick, and a piled foundation floor.
15. In the 2010 rating list, the VO, having noticed that rental levels on veterinary properties tended to be higher than those for other users, took the decision to treat these as a separate category of use and to value them within a separate valuation scheme. Within the scheme properties are valued on a net internal area basis with the upper floors at 85% of the main rate if no lift is provided, and car parking is reflected in the value.
16. The parties have agreed the following floor areas, on a net and gross internal basis:
NIA (m2) GIA (m2)
Ground Floor: 397.9 467.3
First Floor: 104.6 137.5
Mezzanine: 163.3 174.3
Total: 665.8 779.1
17. A more detailed breakdown is outlined below.
18. The material day and the effective date for the assessment is 1 April 2010. The antecedent valuation date (AVD) is 1 April 2008.
The Statutory Framework
19. Section 56 of the Local Government Finance Act 1988 gives effect to Schedule 6 to the 1988 Act which sets out the statutory basis on which the rateable value of a non-domestic hereditament is determined.
20. The statutory assumptions for determining the rent at which the hereditament might reasonably be expected to be let from year to year are set out in paragraph 2(1) of Schedule 6, as follows:
“The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non-domestic rating 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 the 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.”
21. The hereditament is to be valued by reference to values pertaining at the AVD. The matters to be considered at the material day are set out in paragraphs 2(7)(a) to (e) of Schedule 6. Those relevant to this appeal are:
(a) matters affecting the physical state or physical enjoyment of the hereditament;
(b) the mode or category of occupation of the hereditament;
…
and
(e) the use or occupation of other premises situated in the locality of the hereditament
The issues
22. Prior to the 2010 rating list, the appeal property was valued by reference to its base value, alongside those other warehouses in the same vicinity, but with uplifts applied to various areas to reflect fit out and the fact that the property was used and occupied as a veterinary treatment centre.
23. The Valuation Officer for that region took the decision in the 2010 rating list to create a new valuation scheme in order to group together veterinary properties in the West Essex area within a separate category of use. The West Essex area covers the billing authorities of Chelmsford, Basildon, Thurrock, Brentwood, Harlow, Epping Forest and Uttlesford. Within this scheme, properties are valued on a net internal area basis, with the upper floors at 85% of the main rate if not benefiting from a lift and with car parking reflected in the value.. The scheme includes a variety of types of property such as shops, converted domestic properties, industrial, ex-farm buildings all of which are occupied by veterinary practices. They are situated in both rural and town centre locations. This new approach was not followed across the whole Valuation Office Agency (VOA), for example veterinary facilities in East Essex are not valued in this way.
24. Mr Groves considered (in his expert’s report) that the 2010 list method of valuation was inappropriate and that the property should be valued having regard to its original industrial nature, on a gross internal area basis, but with areas uplifted for fit out, air conditioning, etc. The VO’s case is that the VT was correct to uphold the basis of valuation by reference to the valuation scheme, but has since made a slight deduction to reflect that some of the mezzanine floor does not have lift access.
25. The principal issue therefore is whether the appellant is correct to value the property on a net internal area basis, or whether the VO’s valuation scheme is the appropriate method.
Evidence for the appellant
26. Mr Groves is a Chartered Surveyor with over 20 years’ experience and is employed by Aitchison Raffety. He submitted a statement of case dated 3 June 2013 within which he contended that the rateable value of the appeal property, measured and valued on a net internal area basis, at the effective date of 1 April 2010 should be RV £61,500.
27. His subsequent expert’s report dated 13 November 2013 revised his valuation approach. At that point he considered that the appeal property should be measured and valued on a gross internal area basis and contended that the rateable value at the effective date of 1 April 2010 should be RV £60,250. Mr Groves confirmed that he revised his approach having had sight of the VO’s statement of case.
28. At the hearing (but not in his statement of case or in his expert report) Mr Groves informed the Tribunal that he was retained on a conditional fee arrangement and I comment on this below.
29. Mr Groves referred to the Tribunal’s decision in Burvill v Jones (VO) 2013 UKUT 101 (LC) where at paragraph 40 the Tribunal (Mr A J Trott FRICS), referring to Scottish and Newcastle Retail Ltd v Williams (VO) [2000] RA 119, (later approved by the Court of Appeal in Williams (VO) v Scottish and Newcastle Retail Limited [2001] RA 41) said:
“Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. There is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation.”
30. Mr Groves said that his revised valuation had had direct regard to the prevailing level of values of industrial properties on Bramston Way, and was valued on a gross internal area basis. He said that there were seven other rating list assessments on Bramston Way, all of which were either “workshop and premises” or “warehouse and premises”, and which can be summarised as:
Unit 2-4 2,018.25 m2 RV based upon £60 per m2
Unit 10/11 1,239.9 m2 RV based upon £65 per m2
Unit 5 809.7 m2 RV based upon £65 per m2
Unit 6 642.48 m2 RV based upon £70 per m2
Unit 7 574.45 m2 RV based upon £72.50 per m2
Unit 9 469.6 m2 RV based upon £72.50 per m2
Unit 8 338.2 m2 RV based upon £72.50 per m2
31. Mr Groves indicated that the assessment of units 2-4 had been settled by agreement with the VO at £60 per m2. Since this was larger than the subject property, he had adopted a rate of £70 per m2 to allow for quantum.
32. His valuation of the appeal property therefore used a base rate of £70 per m2, reduced by 2.5% for lack of heating in the warehouse, and with 20% uplift for offices, 10% uplift for fit out, and 5% uplift for air conditioning. This led to a figure of £61,150, to which he added 16 car parking spaces at £150 per space, and made a 5% end allowance for layout. His final value was £60,372, (say) RV £60,250.
33. In support of his contention for an end allowance, Mr Groves adduced evidence of end allowances on various veterinary surgery hereditaments: Units 7-8, Brownlow Street Parade, Whitchurch, Shropshire (5% for layout); Alphavet Veterinary Surgery, Newport, Wales (10% for layout); Northwick House, Evesham, Worcestershire (5% for layout); and Glenber Cottage, Lyndhurst, Hants (5% for layout).
34. Mr Groves referred to the VO’s ‘notice of information to be used in evidence’ within which there were 46 properties listed upon which the VO may have chosen to rely as evidence. As will be evident from Mrs French’s evidence below, not all of those properties were relied upon by her. However, of the 46 listed Mr Groves considered that only six were properly comparable - those measured and valued on a gross internal area basis. Five of those six were on industrial estates where he said the VO had valued by reference to the industrial tone with uplifts applied. They were:
(a) 5/6 Chelmsford Road Ind Estate, Dunmow, Essex – having a gross internal area of 633.43 m2. The VO had valued this on a basic rate of £43 per m2, with uplifts of 10% for offices, 10% + 10% (compound) for consultation rooms, and -35% for a first floor store. Other hereditaments nearby, all described as being industrial or warehousing in nature, had base rates of £43 to £50 per m2.
(b) Rase Veterinary Centre, Market Rasen, Lincolnshire – having a gross internal area of 417.10 m2. The base rate adopted was £50 per m2. Uplifts were applied of 10% to examination rooms, 20% to ground floor offices, and with stables/feed stores being valued at £35.83. The base rate of £50 per m2 was higher than the surrounding industrial/warehouse properties which were in the range of £20 - £34 per m2.
(c) Unit 4, Meridian Centre, Louth, Lincolnshire – having a gross internal area of 234.50 m2. The VO had valued this on a basic industrial rate of £40 per m2, with a 10% uplift for “workshop used as a surgery”. Surrounding properties described as “workshop and premises” had base rates of £40 to £45 per m2 with one much smaller hereditament at £55 per m2.
(d) 34 Fleet Road Industrial Estate, Spalding, Lincolnshire – having a gross internal area of 139.70 m2. The VO had adopted a base rate of £47.00 per m2. Mr Groves said that an adjustment had been made for lack of heating, but that an uplift had also been applied, resulting in an adopted rate of £45.12 per m2 in comparison with £43 elsewhere on the same estate.
(e) Units 15/16 Haverscroft Ind Est, Attleborough, Norfolk – having a gross internal area of 491.30 m2. The VO had used a base rate of £32.50, with uplifts of around 17% for surgery and office accommodation. Other industrial and warehouse properties on the same estate had base rates of £30.00 to £34.19 per m2.
35. The sixth property he considered relevant was Gibson & Leigh Vets, at Melton Mowbray where he noted that the VO had adopted a lower rate than that at a nearby equestrian centre and a nearby surgery.
36. He considered that his valuation was in accordance with the VO’s valuation practice in these areas.
37. Mr Groves said that a similar mode and category of occupation does not mean that a property is necessarily comparable. He referred to the Tribunal’s decision in Lidl (UK) GmbH v Ryder (VO) 2013 UKUT 348 (LC) where the Tribunal (Mr N J Rose FRICS) said at paragraph 57:
“The greater the differences between the property to be valued and the comparables, the less helpful will be the evidence of the comparable rents.”
38. Mr Groves contended that despite many of the VO’s comparables being within the same valuation scheme as the appeal property, they comprised shops, offices, converted domestic properties and others, and as such were of no assistance in valuing the subject property.
Evidence for the respondent
39. Mrs French is a Chartered Surveyor and is employed as a rating caseworker in the Chelmsford valuation office. She has been employed by the VOA since 1976 and has over 30 years’ experience in rating valuation and negotiations. She has been involved in the discussion and settlement of appeals against the 2010 rating list on veterinary and similar premises in the West Essex area.
40. She considered that a very unusual feature of the appeal property was the “linac” radiotherapy room. She said this was constructed in 2006, at a cost of £250,000. It had reinforced steel concrete walls, of 0.5m to 1m thickness. She was informed that the roof was on beams and that the thickness of the roof with the beams was 3m. The floor had 29 piles, 60 ft deep and that there was approximately 80 tons of steel within the walls. She said that, according to the form of return completed by the ratepayer, the vault weighs over 1,000 tons. She considered that this would not be allowed to be constructed near to schools or domestic properties.
41. Mrs French said that there was a further x-ray room on the ground floor which was surrounded by high density 9-inch block walls together with a CT scanner on the upper floor, also with high-density block walls.
42. She considered that the issues in the case involved:
(a) the mode and category of occupation;
(b) the rental and comparable evidence; and
(c) the breakdown of the valuation.
43. As regards the mode and category of occupation, Mrs French said that the warehouse use of the property ceased and was replaced in 2002 when the veterinary practice took occupation and carried out extensive internal structural alterations to create the specialist property specifically suited to its current use.
44. As regards the rental and comparable evidence, Mrs French submitted that the guidance given by the Lands Tribunal in Lotus & Delta v Culverwell (VO) and Leicester City Council [1976] RA141 in respect of the weighting of evidence was relevant.
45. Mrs French contended that following the guidance of the Tribunal in Lotus, the starting point is the rent on the property. She understood that the rent from 2006, £60,000 per annum, was set when the lease started in 2002 and was based upon industrial use. She said that the rent did not reflect the property as it was now following internal alterations which took several years to complete. She proposed that the cost for the radiation vault and other improvements should be reflected by amortising the cost over the remainder of the term of the lease of 14 ½ years approximately (Mr Groves considered that amortisation, if any, should be over a longer period since the tenant’s property company owned the 999 year headlease). She submitted an analysis which showed that the passing rent equated to £173.06 per m2.
46. However, following the second proposition in Lotus - that the more closely the circumstance under which the rent is agreed relates to statutory requirements, the more weight should be attached to it - Mrs French considered that the rent of £60,000 per annum only provided an indication of a base value for the property. This was because the rent was fixed some 18 months before the antecedent valuation date, that it was a connected party rent, that it was based upon industrial values, and that it did not include the various improvements that had been made - particularly the construction of the radiotherapy facility.
47. Mrs French then took the third proposition in Lotus - that rents of similar properties should be considered in order to confirm or otherwise the level of value indicated by the actual rent on the subject hereditament. She submitted a schedule of rental evidence which comprised 22 transactions covering 21 properties used as veterinary surgeries (one property having two transactions at different dates) in Essex or just outside. Not all of the properties were within the West Essex scheme and for those that were not she had analysed them on the relativities within that scheme. She noted that many of the rents were from smaller premises than the appeal property and that a number of the transactions were agreed after the AVD.
48. She considered that the nearest comparable having regard to size was The Claredon House Veterinary Centre at Galleywood Road, Chelmsford, at 798.7 m². However, the rent of £96.18 per m2 was from 2011 and Mrs French considered that this was too far away from the AVD to be of assistance.
49. In summary, she considered that the rental evidence did not show an obvious pattern, varying from area to area and with no obvious consistent pattern for size. She said that the analysed rents show a range from approximately £71 per m2 to £270 per m2, if one excluded one transaction (£653.01 per m2) as an outlier.
50. At the hearing, Mrs French indicated that there did not seem to be a quantum effect on the rent. By way of example she noted that 281 Eastwoodbury Lane, Southend on Sea (net internal area 205.3 m2) had a rent of £225.41 per m2, whereas 199 Furtherwick Road, Canvey Island (net internal area 206.38 m2) had a rent of £89.81 per sq m2. 1 Bridge Street, Great Yeldham (net internal area 55.1 m2) had a rent of £199.10 per m2, whereas 132 Cappell Lane, Stanstead Abbotts (net internal area 57.39 m2) had a rent of £270.51 per m2.
51. She said that of the rents in the range of £71.00 to £300.00 per m2, eight were below the adopted rate for the appeal property, and 14 were above it. If analysed in groups, three rents were below £100.00 per m2, five rents were between £100.00 to £125.00 per m2, three were between £125.00 to £150.00 per m2, two were between £150.00 to £200.00 per m2, four were between £200.00 to £250.00 per m2, and four were between £250.00 to £300.00 per m2.
52. The rental transactions fell within a period from 2006 to 2012. Having regard to the AVD, Mrs French considered that the best evidence was:
Taylors Vets, Runwell, Wickford £125.35 per m2 September 2007
22 Highbridge Street, Waltham Abbey £114.82 per m2 July 2008
46 Maldon Road, Great Baddow £121.29 per m2 October 2008
370 London Road, Benfleet £226.70 per m2 June 2007
59 Hullbridge Road, South Woodham Ferrers £203.39 per m2 September 2008
281 Eastwoodbury Lane, Southend £225.41 per m2 March 2009
343 Springfield Road, Chelmsford £226.08 per m2 July 2007
53. Of these, one was at the adopted figure for the appeal property of £125.00, two were below and four were above.
54. Mrs French considered the fourth proposition in Lotus - that assessments of other, comparable properties are also relevant. She provided a schedule (amended at the hearing) of appeal properties within West Essex during the 2010 rating list. The schedule had 19 assessments on 18 properties (again, one hereditament was subject to 2 entries) including a combination of agreed appeals, withdrawn appeals, and appeals that had been dismissed by the VT.
55. In her expert’s report she commented on four of the settlements. The first was 24 the Green, Writtle - a much smaller property at 64 m² but the agreed rateable value of £7,600 was based upon a basic rate of £118.75 per m2. The second was 230 Prince Avenue, Westcliff on Sea. This was a converted commercial property behind a row of terraced properties. The appeal was withdrawn as the property had a rateable value based upon £110 per m2 and there was a rent passing equating to £250.94 per m2. Mrs French consider that this property was not comparable owing to its location. The third property was The Barns at Woodham Ferrers in a rural location. The property consists of two barns totalling 365.8 m². The agreed rateable value was £50,500 equating to a base value of £150 per m2 within the West Essex scheme. The final property that Mrs French specifically referred to was 53 Cherrydown, Basildon. This was a converted house built in the 1960s with a 1980’s extension. The total size is 590.4 m². The property is largely surrounded by domestic properties. Mrs French considered that this was not as good a property as the appeal property and that the assessment had been agreed at £120 per m2 with a local firm of surveyors to reflect the age and quality of the property.
56. Mrs French considered that none of those four properties had the potential to offer radiotherapy treatment as they were too close to residential properties.
57. She summarised the range of settlements as £95 per m2 to £255 m2, with most being in the range of £118 per m2 to £200 per m2. Mrs French considered that the agreement at 53 Cherrydown, Basildon at £120 per m2 was instructive.
58. Based on the rental and settled appeal evidence, Mrs French was of the opinion that her adopted basic value of £125 per m2 was fair and that an uplift to the rate for the radiotherapy room to reflect the extra costs was entirely reasonable. Mrs French had adjusted the rateable value determined by the VT of £78,500 to reflect that there was no lift access to the rear mezzanine floor. She adopted a revised valuation of RV£77,000.
59. As an alternative approach, Mrs French also valued the property on a gross internal area basis, adopting normal uplifts of 20% for the office area, valuing the mezzanine at 20% of main space rate and adding the car parking and the amortised cost of the radiation vault at £25,365. This arrived at an end value of £75,099. However this did not reflect the fitting out to veterinary premises standard nor the D1 use and Mrs French considered that it was a basic minimum rental value. She stressed at the hearing that she was not relying on this as the correct valuation approach, but submitted it as rebuttal to Mr Groves’ valuation.
Conclusions
60. I deal first with the issue of mode or category of occupation. It is not in dispute that the appeal property was fitted out to a high standard as a veterinary facility. A substantial radiotherapy room was constructed at a cost in the order of £250,000 or thereabouts, and involved deep piling for foundation purposes. Mr Groves accepted in cross examination that the structure would not be easy to remove. Planning permission was granted for the change of use to a veterinary surgery, and that is the principal use of the appeal property.
61. It is a basic principle of rating valuation that the hereditament should be valued as it was on the valuation date. This rebus sic stantibus concept has two limbs. Under limb 1, matters affecting the physical state or enjoyment of the hereditament must be taken into account as they were on the material day. It is not in dispute that on the material day the property was fully fitted out as a veterinary facility. Works that the hypothetical tenant might make to the appeal property may be taken into account if, taken overall, these works are minor (Scottish and Newcastle). Having regard to the evidence and my inspection of the appeal property, I do not consider that work to convert it back to a warehouse use could be construed as being minor. The property is extensively fitted out, split into a number of different areas on ground, first and mezzanine floors. Substantial equipment has been installed, including the radiotherapy room, x-ray rooms, and the patient lift. Accordingly under limb 1, the property must be treated as being fully fitted out as a veterinary surgery including having a substantial radiotherapy facility.
62. The second assumption which must be made is the assumption that the hereditament could only be occupied for a purpose within the same mode or category of occupation as that for which it was being occupied on the material day. Again, it is not in dispute that the property was being used as a veterinary surgery at the material day.
63. There is no doubt in my mind that the veterinary surgery use is in a different mode or category of occupation to a warehouse use. Accordingly, the appeal property must be valued as a fully fitted veterinary facility, with a substantial radiotherapy unit having been constructed.
64. Having applied the rebus sic stantibus principle, I now consider whether Mr Groves’ evidence of rateable values of warehouses or workshops on the same estate and wider evidence of other veterinary facilities is relevant.
65. Mr Groves referred to the Tribunal’s findings in Burvill. There, the Tribunal was confronted with a similar situation – in that the appeal property was on an industrial estate, had originally been a warehouse, but that the mode or category of occupation had changed to an MOT test centre. The Tribunal found (para 41), that:
“In my opinion the rental evidence from the other units on the … estate is relevant to the valuation of the appeal hereditament as vacant and to let. They immediately adjoin the appeal property, their rents reflect the locational and many of the physical characteristics shared by the subject property and the appeal hereditament could be used other than an MOT test centre by undertaking minor physical works”.
66. In this instance, the evidence Mr Groves considers relevant is of rateable values of hereditaments immediately adjoining or adjacent to the appeal property. Their assessments would reflect the locational and the original physical characteristics shared by the subject property.
67. However the subject situation departs from the scenario in Burvill in an important sense which proves fatal for the concept to be applied here. In Burvill the work required to convert the MOT station to a warehouse use was minor. Here the work required to remove the specialist fit out of the appeal property could not be considered to be minor, not least owing to the radiotherapy facility. Thus in my judgement the adjoining settlement and assessment evidence cannot be relied upon owing to the rebus sic stantibus concept – under which the appeal property is caught by both limbs.
68. As originally constructed the appeal property would be valued on a gross internal area basis, having regard to comparable rents or settlements also on a gross internal area basis. However, for rating purposes at the material day regard must be had to its physical characteristics following the occupier’s extensive alterations.
69. Having inspected the appeal property there is no doubt in my mind that it should be valued on a net internal area basis. The property now comprises a series of discrete areas, each with its own purpose and used in different ways, including the radiotherapy room, x-ray rooms, preparation areas, kennels, cattery, reception, consulting rooms and offices. The alterations are sufficiently extensive to render a gross internal basis meaningless in the context of a rating valuation.
70. For this reason and owing to the mode or category of occupation, I do not find Mr Groves’ evidence, based on gross internal area, to be of assistance.
71. The evidence provided by Mrs French on a net internal area basis is not immune from criticism. The properties are generally much smaller than the appeal property, and some are on a zoned retail basis. However whilst the range of values submitted is too wide to be considered a tone, she has provided evidence that appears to show that there is no quantum discount effect.
72. Mr Groves refers to the Tribunal’s comments in Lidl. Ordinarily the application of the concept in Lidl would leave Mrs French’s evidence open to significant question. However on balance I am not convinced that the concept applies here. I accept Mrs French’s evidence that almost exclusively veterinary surgeries occupy converted properties that had previously been in other uses, and therefore they are likely to occupy a variety of properties that would not usually be comparable. The range of evidence that Mrs French has submitted has wider parameters than is entirely comfortable for valuation purposes. But compared with both her rental evidence and settlement evidence the rate she has adopted is towards the lower end of the range of evidence. On balance, I find that the basic rate of £125 per m2 is reasonable in all the circumstances.
73. The parties have agreed the net internal area and breakdown. This leaves the rates and uplifts to the various areas and any end allowances to be determined.
74. In respect of the ground floor reception/consulting rooms, internal storage, kennels, Linac control room, theatre area, and x-ray areas I prefer Mrs French’s approach. It adopts a basic rate of £125 per m2 and uses conventional uplifts. I find that her aggregate of £42,249.00 for those areas is reasonable.
75. As regards the radiotherapy room, I prefer Mrs French’s rate of £142.50 per m2 as this properly reflects the significant fit out costs of the installation. I find that her £4,247.00 for this area is sound.
76. The first floor and mezzanine area are less straightforward. From my inspection I have two observations about the lift. First, I am satisfied that it is a very slow moving patient lift, and does not afford the upper floors that it serves the same degree of amenity as a normal passenger lift would. Secondly, it does provide step-free access – but only to part of the upper floor – the preparation/ultrasound/CT control area and the CT scanner room (lines 1.9 and 1.10 of the agreed net internal area). It does not provide level access to the staff room, nor to the offices. I therefore consider that the VO’s normal 15% allowance (for un-lifted upper floors) should be made for those areas.
77. Mrs French’s revised valuation of the rear mezzanine allows a 15% discount and I see no reason to disturb this.
78. In respect of the staff shower and W.C, Mrs French said that this should be included in net internal area and valued because it is over and above what would normally be required. I do not consider that she has provided sufficient evidence to show that this is the case. Bearing in mind the mode or category of occupation I am satisfied that this should not be included in the net internal area and I have not placed a value upon it.
79. As regards the disputed rear mezzanine floor, Mr Groves said that this is unused save to service the boiler. Mrs French said that the mezzanine is physically there and, despite it not being used by the occupier, it is rateable. I am satisfied that this is the case. However, access is via the disputed shower room and I consider that a discount should be applied to reflect that. I use 30% of the unheated, un-lifted rate (as opposed to the VO’s 50%).
80. In his statement of case Mr Groves contended for an end allowance of 10% for quantum and 5% for poor specification and quality/converted building (on a net internal basis). In his expert’s report, these were altered to a 5% end allowance for layout (on a gross internal basis).
81. As regards a quantum discount, Mrs French has provided evidence that there is no quantum effect within the valuation scheme, and I am satisfied that a quantum discount should not be made. In respect of Mr Groves’ end allowance for quality/converted building, I do not consider that sufficient evidence has been submitted in support of this. Many of the comparables referred to were in converted buildings of one form or another.
82. In respect of end allowances for layout, I do not find Mr Groves’ evidence of end allowances on properties across the country to be persuasive, owing partly to their remoteness from the appeal property, and partly to the lack of reasoning or detail as to why the allowances were given in each case. I prefer Mrs French’s view that the appeal property has been adapted by the ratepayer to their own requirements that no end allowance should be made. I do not make one.
83. I would add that my departure from the approach taken by the VT was heavily influenced by my inspection of the property. Other than adjustments made following that inspection, I consider the VT’s decision to be reasonable on the facts available to them.
Determination
84. My valuation of the appeal property is as follows:
|
Ref |
Floor |
Description |
Area |
Rate |
Value |
|
|
|
|
|
|
|
|
1.1 |
Grd |
Reception/Consulting Rooms |
86.70 |
£125.00 |
£10,838 |
|
1.2 |
Grd |
Internal Storage |
52.50 |
£59.38 |
£3,117 |
|
1.3 |
Grd |
Kennels/Linac Control Room |
41.70 |
£118.75 |
£4,952 |
|
1.4 |
Grd |
Linac Radiotherapy Room |
29.80 |
£142.50 |
£4,247 |
|
1.5 |
Grd |
Theatre Area/X Ray/Kennels |
187.20 |
£124.69 |
£23,342 |
|
1.6 |
First |
Offices |
102.10 |
£106.25 |
£10,848 |
|
1.7 |
First |
Kitchen |
2.50 |
£106.25 |
£266 |
|
1.8 |
Mezz |
Mess/Staff Room |
31.80 |
£105.98 |
£3,370 |
|
1.9 |
Mezz |
Prep/Ultrasound/Ct Control |
31.50 |
£118.75 |
£3,741 |
|
"1.10 |
Mezz |
Ct Scanner Room |
26.40 |
£124.69 |
£3,292 |
|
1.11 |
Mezz |
Cattery |
51.00 |
£105.99 |
£5,405 |
|
1.12 |
Mezz |
Staff/Shower Room |
4.90 |
£0.00 |
£0 |
|
1.13 |
Mezz |
Internal Storage |
17.70 |
£30.28 |
£536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
£73,953 |
|
|
|
|
|
|
|
|
|
|
|
|
say |
£74,000 |
|
|
|
|
|
|
|
85. The appeal succeeds in part and I determine that the appeal property must be entered into the local non-domestic rating list as “veterinary treatment centre and premises” with an assessment of £74,000 with effect from 1 April 2010.
86. The appeal was held under the simplified procedure where costs are only awarded in exceptional circumstances. Neither party suggested that there were any such circumstances and I make no award as to costs.
87. As indicated above, Mr Groves disclosed at the hearing that he was acting on a conditional fee arrangement.
88. The 3rd Edition of the RICS Practice Statement and Guidance Note for Surveyors acting as Expert Witnesses is currently in force. It does not prohibit conditional fee arrangements for Chartered Surveyors who provide expert evidence, but PS 3.4(b) says that there is a risk that the Tribunal:
“….may view evidence given under a conditional fee arrangement as being tainted by bias, and may attach less weight to it; it may even refuse to admit it at all, or find the whole conditional fee arrangement void. You must only proceed to act on a conditional fee arrangement where the client has so consented expressly in writing. You are required by PS 5.1(j)(iii) to make a declaration to the tribunal in respect of conditional fee arrangements.”
89. In the subject appeal, I was not required to test the weight of the majority of Mr Groves’ evidence per se, as his case was largely one of rebuttal of the VO’s evidence, and I found that the VO’s approach was, in the main, sound. However experts providing evidence to the Tribunal must continue to be aware that if acting on a conditional fee basis their evidence is susceptible to the Tribunal giving it little or no weight owing to the risk of it being tainted by unconscious bias.
Dated: 17 December 2013
P D McCrea FRICS