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UPPER TRIBUNAL
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UT Neutral citation number: [2013] UKUT0482 (LC)
UTLC
Case Number: RA/3/2013
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
RATING – valuation – 2010
list – self catering holiday cottages – comparable assessments – valuation
approach – re-assessment by VO – appeal dismissed on grounds stated, but RV
reduced from £7,400 to £5,900 on VO’s re-assessment
IN
THE MATTER OF AN APPEAL AGAINST A DECISION
OF
THE VALUATION TRIBUNAL FOR WALES
BETWEEN MONICA
CALVER Appellant
and
ELIZABETH THOMAS
BSc (Hons) MRICS
(Valuation
Officer) Respondent
re:
Castle Cottages, Manorbier, Tenby SA70 7 SX
Before:
P R Francis FRICS
Sitting
at: Carmarthen County Court, Hill House, Picton Terrace,
Carmarthen SA31 1BS
on
28
August 2013
Mr Lewis Malcolm Calver, on
behalf of his wife, the appellant.
Ms Elizabeth Thomas, Valuation
Officer, for the respondent
The following cases are referred to in this decision:
Dennett v Crisp (VO) [2013] UKUT 35 (LC)
DECISION
Introduction
1.
This is an appeal by the ratepayer, Mrs Monica Calver, against a
decision of the Valuation Tribunal for Wales (VTW) dated 17 December 2012
confirming the assessment in the compiled 2010 rating list of a terrace of
three self-catering holiday units (SCHU) known as Castle Cottages, Manorbier
Tenby SA70 7SX at RV £7,400. The ratepayer contended that the VTW had not
taken sufficient account of the appellant’s evidence before it and had
unquestioningly accepted the VO’s evidence and valuation. That valuation,
being assessed as it was on the notional (quasi-receipts) method which, whilst
it was acknowledged to be an easy way for the VO to undertake an assessment,
failed to reflect important differences and produced an unacceptable result
that was full of inconsistencies. The appellant contended, as she had done
before the VTW, for RV £4,500.
2.
The appeal was conducted in accordance with the Tribunal’s simplified
procedure. Mr Lewis Malcolm Carver appeared on behalf of his wife and gave
evidence. Ms Elizabeth Thomas BSc (Hons) MRICS, Valuation Officer, appeared in
person and provided expert evidence under oath. On the day prior to the
hearing I carried out an inspection of Castle Cottages both internally and
externally together with a number of the comparables relied upon by each of the
parties in the company of Mr Calver and Ms Thomas.
3.
The material day and the effective date for the assessment is 1 April
2010 and the antecedent valuation date is 1 April 2008.
4.
In the light of the arguments that had been set out in the claimant’s
statement of case, the VO conducted a full review of the available comparable
evidence in accordance with the recommendations set out in the Valuation Office
Agency’s Practice Note 1: 2010 Holiday Accommodation (Self Catering) whereby
comparisons were made on the basis of Single Bed Spaces (SBS) as defined
therein. This was the basis upon which the original assessment had been made
but she also undertook a full Receipts and Expenditure (R&E) valuation
(formerly known as the profits method) as a check. Ms Thomas’s conclusion was
that the assessment should be amended to RV £5,900. In her reply, therefore,
she sought either dismissal of the appeal or a reduction to said £5,900.
Facts
5.
Ms Thomas had produced a draft statement of facts and issues, but this
was not agreed in its entirety by the appellant. From those parts of that
statement that were clearly not in dispute together with the evidence and my
inspections, I find the following facts. Castle Cottages comprise a terrace
of three traditionally constructed two-storey self contained dwellings located
in the centre of Manorbier, an attractive seaside village approximately seven
miles from Tenby on the south Wales coast. There is a church together with
local shops including a general store and tea rooms within a few steps of the
cottages, and a public house.
6.
The cottages were built by Mr Calver in about 1990 and are finished with
roughcast render under traditional slated roofs. No. 1 comprises living/dining
room and kitchen at ground floor, together with 2 bedrooms and a bathroom at
first floor. Nos 2 & 3 are similar although each has three bedrooms. The
centrally heated properties are set back from the village street, share areas
of communal lawned and terraced gardens to the rear, and each has a single
off-road parking space. Being in the centre of the village, there are no sea
views.
7.
At the material day, Castle Cottages, which are rated as a single
hereditament, provided a total of 14 single bed spaces (SBS) arranged as
follows:
1 Castle Cottages (Bramble Cottage) Sleeps
5
2 Castle Cottages (Primrose Cottage) Sleeps
5
3 Castle Cottages (Clover
Cottage) Sleeps 4
The VTW decision.
8.
It had been argued by the ratepayer that each of the cottages should be
individually assessed as a separate rateable unit, thus triggering small
business rates relief. The VO was of the view that the appeal hereditament had
been correctly entered as a single contiguous rateable unit, that basis being
supported by a large number of settlements and tribunal decisions. The VTW
concluded that, apart from two of the comparables that had been rated
individually and which were being “looked into” by the VO, the weight of
evidence supported the VO’s basis of assessment.
9.
As to the valuation method, the VTW said, at paragraph 36:
“In the absence of any competing or
alternative method of valuation, or submission of details of properties’
receipts and expenditure, the Tribunal accepted the weight of the VO’s ‘bed
space valuation’, i.e. using the quasi-receipts method. In closely analysing
all the comparables (both the appellant’s and the VO’s), the bed space
valuation was the only method for which there was evidence put before the
Tribunal. The appellant did not provide the Tribunal with any alternative
method of valuation.”
10.
In response to the ratepayer’s arguments relating to competition from
similar businesses, the tribunal concluded that they were not relevant to their
deliberations because under the relevant legislation, a hereditament was to be valued
as it stands, ‘vacant and to let’ – rebus sic stantibus.
11.
In conclusion, the VTW said that having taken all the evidence into
account, the VO’s valuation was in line with the comparables, and did not
appear unreasonable. The assessment was therefore confirmed at RV £7,400 and
the appeal was dismissed.
The appellant’s case
12.
Mr Calver provided a lengthy statement of case, accompanied by a
substantial portfolio of appendices, together with a supplementary statement
responding to the VO’s reply. A significant part of the documentation related
to the early difficulties that had been encountered in trying to extract
information from the original VO (a Mr Davies) to explain and support the basis
of his assessment. Information had been sought particularly in respect of the
background to the comparable assessments made under the SBS (notional or
quasi-receipts) basis, but the VO had refused to release certain documentation
under the provisions of the Data Protection Act. Mr Calver also complained
that he had not been permitted to comment upon the additional information which
had been provided by Mr Davies in response to the appellant’s request at the
VTW hearing - the extent of that additional material having been ratified by
the VTW at the later site inspection. These difficulties, Mr Calver said, had
put the appellant at a considerable disadvantage in preparing for this appeal,
and he said that the only way he had been able to place Castle Cottages in
context was through subjective comparison with other properties in terms of
their size and location.
13.
Mr Calver said that the effect of the 2010 revaluation was to double
rateable values and this was a considerable blow to the industry, so much so
that the WAG brought in transitional relief. He said that the VO at the VTW
appeal had conceded that the introduction of this relief had had the effect of
stemming the flow of appeals. However, because the appeal hereditament was
rated as a single unit, it fell outside the relevant banding, with the result
that the appellant was unable to compete with other holiday cottage complexes
where the individual accommodation units had been rated separately. In such
cases, even though the total RV of other comparable complexes might be more
than Castle Cottages, because they were assessed individually, they became
exempt from business rates. Although Mr Calver acknowledged that the VO’s
revised assessment of RV £5,900 that was before me meant that transitional
relief would now apply, he said that when that relief ended, or thresholds were
revised, Castle Cottages could end up being back in the same position.
14.
It was submitted that the VTW’s reasoning for accepting the VO’s
assessment of Castle Cottages as a single entry was flawed. Just because the
VO had contended for it, and because the ratepayer appellant had not suggested
what the individual RVs should be, was insufficient. It would have been easy,
Mr Calver said, to calculate separate RVs just by dividing the cottages into
three to produce a composite RV of £4,500. Also, the VTW’s suggestion that
because the three properties were all in the same ownership was a reason for
accepting the VO’s submission was unfair. It placed a single business person
without a partner or family at a disadvantage against a family concern which
might have split up ownerships to take advantage of multiple entries even
though it might, in real terms, still be a single business.
15.
One of Mr Calver’s key arguments was that due to his rateable value
being higher per bed space than much of the competition, he could simply not
compete. For instance, Celtic Haven, which is an award winning complex of 25
cottages just down the road at Lydstep and has a wide range of facilities
including leisure centre, pool, tennis courts, bar and restaurant and extensive
grounds with coastal views and a private road to the beach, had RVs per bed
space some 30% less. The 5 bed space units at Celtic Haven were £418 per
single bed space, whereas the equivalent Castle Cottage was £550 (before the
VO’s re-assessment). There also appeared to be an inconsistency between the
number of bed spaces shown on the VO website (122), and those shown in Celtic
Haven’s promotional material (140). Ivy Court Cottages at Llysyfran had an
even larger differential - £380 per bed space – based upon its actual number of
bed spaces (49) against those shown on the VO’s website at 36. Those cottages
also formed part of a larger complex, and had swimming pool and other
facilities. It was hard enough, Mr Calver said, to compete against those businesses
that were able to offer so much more to the holidaymaker without him also
having to pay higher rates per SBS. The inconsistencies indicate, he said, how
unreasonable it was for the VO to simply rely upon the notional method, and of
the VTW to unquestioningly accept the VO’s assessment.
16.
Mr Calver accepted that his only comparative evidence was that gleaned
from websites and advertising material from his competitors in the area and
that his own assessment of RV £4,500 for Castle Cottages was not based upon any
scientific analysis, but was just an amount which, in the light of the
competition, “seemed fair.” He said that the level of rateable values across
the holiday cottage market in the area showed enormous variations which could
not be explained, and certainly had not been adequately explained by the VO,
and he therefore urged the Tribunal to set the RV at the reduced sum sought so
that, in terms of this particular outgoing, he could at least compete on a
level playing field.
Valuation Officer’s case
17.
Ms Thomas is a chartered surveyor who has worked as a rating surveyor
in North Wales for 22 years. She said that, in connection with the 2005 and
2010 revaluations, she was responsible for determining the basis of value for
SCHUs for the North Wales area, and was also a member of the “Class
Co-ordination Team” that issued instructions for the valuation of this class of
property throughout England and Wales. She said that, in addition to her
existing role as non-domestic rating team leader for North Wales, she had
recently taken over the lead role for SCHUs across the whole of Wales.
18.
Having set out the relevant statutory provisions, Ms Thomas explained
that the Form of Return (FOR) VO 6048 (10/11) which was sent to all operators
of SCHUs had been specifically designed to extract the relevant details and had
been amended to obtain fuller information in connection with the 2010
revaluation. She said that the vast majority of SCHUs were owned on a freehold
basis, and consequently it was not possible to establish an appropriate
valuation scheme based solely on rental evidence. For this reason, it was
generally accepted that the most appropriate method of valuation for SCHUs was
the receipts and expenditure basis – this having been considered in the recent
Upper Tribunal (Lands Chamber) decision in Dennett v Crisp (VO) [2013]
UKUT 35 (LC). A copy of the VO’s internal instructions (Practice Note 1) was
included as an appendix to Ms Thomas’s report.
19.
Ms Thomas said, however, that for the 2010 revaluation, it was
acknowledged that the full R & E method could be misleading in respect of
smaller units and complexes because, for instance, of the degree of
commercialisation, the degree of personal use and/or the owner’s individual tax
motives – for instance pension initiatives or the use of Real Estate Investment
Trusts (REITs). Discussions with holiday letting agencies had demonstrated
that the preferred unit of valuation and comparison for this type of property
is the single bed space (SBS) figure which is derived from the R & E
analysis and applied back to all SCHUs.
20.
Thus, it was confirmed that the SBS analysis was the primary comparator
applied to all single SCHUs and smaller complexes (including Castle Cottages)
for the 2010 revaluation. It also ensured that properties of similar type, in
a given area, achieved a consistent level of value. This basis also reflected
the fact that units having fewer bed spaces were, pro rata, more valuable than
those that sleep more. Although it was unusual for the VO to obtain full
accounts in respect of single SCHUs and small complexes, thus creating
difficulties with a full R & E analysis, they had been provided by the
appellant in this case, so Ms Thomas said that she had also undertaken a full R
& E analysis as a check.
21.
Firstly, as to the SBS analysis, Ms Thomas included at her Appendix 16,
a valuation and analysis of tariffs and takings from a number of similar
properties in and around Manorbier. Whilst it was acknowledged that many of
them were single units, there being not many really similar complexes in the
immediate vicinity, she said that this analysis demonstrated the range of SBS
values, and that her assessment of Castle Cottages came towards the bottom end
of the scale. For instance the individual properties at Ty Cariad and Carew
Cottage, both within the village and each having 8 SBS were of generally better
quality in terms of accommodation and fit out, and had better individual
gardens.
22.
She said that Lion House, Tudor Lodge Cottages and Lime Kiln Cottages
were the closest complexes in terms of quality and comprise three, four and
three units respectively. Lion House is an imposing three storey house
converted into three apartments just down the road from Castle Cottages and
adjacent to the village pub. They were previously shown as three individual
entries but had been re-assessed now as a single entity for rating purposes –
at RV £5,200. Despite being flats and having a total of 11 SBS, the income
achieved and number of letting nights was in excess of those at Castle
Cottages. The apartments analysed to £520, £520 and £420 per SBS
respectively.
23.
Tudor Lodge Cottages was an attractively laid out complex in a rural
position a little way from the village, and comprised a complex of six mainly
terraced cottages behind a pub/restaurant. Four of the units were assessed as
SCHU with a total of 22 SBS and an effective date of 7 May 2011 at RV
£10,500. The 6 SBS cottages were assessed at £470 per SBS and the 4 SBS unit
at £550 per SBS.
24.
Lime Kiln Cottages at Rock Farm, Jamieston, Near Manorbier were slightly
farther away, but still within the parish. They comprised one detached and one
pair of semi-detached single storey cottages converted from stone barns about 2
miles from the sea in a very rural position approached along a narrow lane.
These had a total of 9 SBS assessed at £520, £585 and £445 respectively giving
RV £4,500.
25.
The SBS rates adopted for Castle Cottages were £445 for the 4 bed space
unit and £420 for each of the 5 bed space units.
26.
In response to the appellant’s reference to Celtic Haven, and
particularly the SBS comparison, Ms Thomas said that because it was a very
large complex with well over a hundred SBS, there had been a quantum allowance
of 20%. This took the rate per SBS down from £550 to £440. She said that
whilst businesses such as this could indeed offer more attractions in terms of
facilities, the cost of providing them also had to be taken into account. She
said that, in terms of her analysis and consideration of comparables, she had
been careful to compare, as far as it was possible to do so, like with like.
The rating hypothesis for somewhere like Celtic Haven would also be much more
reliant upon an analysis of its accounts.
27.
As to Mr Calver’s reliance upon information relating to the rating
assessments for the comparable properties as published on the VO website, and
the apparent inaccuracies as to number of SBS, Ms Thomas said that the internet
did not show how the individual bed space totals were analysed. For instance
some of them would be sleeping accommodation in “Croglofts” – loft rooms
accessed by ladder – where allowances had been made, and rooms with bunk beds
where two beds would be taken as one SBS. The internet figure was only the end
RV divided by the number of bed spaces. It would also not take account of any
quantum allowance.
28.
Ms Thomas summarised by saying that her re-analysis on the SBS basis did
show the £7,400 accepted by the VTW to be too high, and that a full R & E
analysis based upon the appellant’s accounts fully supported her re-assessed
figure of RV £5,900. Her SBS based analyses and the full R & E valuation
were included as appendices to her report.
Conclusions
29.
The difficulty I have with the appellant’s case is that Mr Calver has
proffered no calculations, analyses or evidence in support of his argument that
the RV should be reduced to £4,500 other than that it was a figure that “seemed
fair” in all the circumstances. The VTW made it abundantly clear in its
decision (see the extract from paragraph 36 at paragraph 9 above) that it was
relying upon the VO’s bed space valuation on the grounds that there was no
evidence proffered on any other basis.
30.
I am satisfied that that the VTW’s conclusions were correct and soundly
based on the evidence that was then before it, and it cannot therefore be said
that it was wrong. Further, the cottages were constructed as SCHUs, are in the
same ownership and run as a business. They are, therefore, clearly a single
contiguous business unit, and I cannot accept Mr Calver’s arguments for having
them assessed separately.
31.
As to the revised assessment, Ms Thomas undertook a further analysis on
both the SBS method and a full R & E valuation, and concluded that the
resulting figures supported a lower assessment. I found her evidence to be
well reasoned, clear and persuasive and also accept her responses to Mr
Calver’s concerns about the comparison with Celtic Haven and the apparent VO
website anomalies. Particularly taking into account the SBS figures
attributed to Lion House, Tudor Lodge Cottages and Lime Kiln Cottages, I am
satisfied that the revised assessment is fair, and not out of line.
32.
In conclusion therefore, the appeal on the stated grounds is dismissed.
However, based upon the VO’s revised assessment, which, as I have said, I
accept, I direct that the assessment of the self catering holiday units at
Castle Cottages, Manorbier in the 2010 rating list be amended to Rateable Value
£5,900 with effect from 1 April 2010.
33.
This appeal, having been conducted under the Tribunal’s simplified
procedure, and in the absence of any exceptional circumstances, I make no order
as to costs.
DATED
26 September 2013
P
R Francis FRICS
