The decision of the Upper Tribunal (Lands Chamber in The Appeal of Moore (VO) (2018) UKUT 0324 (LC) was made on the basis of written representations, but will be of interest to practitioners because it returns to the issue of “material change of circumstances” considered in some detail by the Upper Tribunal in its recent decision in respect of Alton Towers (Merlin Entertainments Group Ltd v Cox (VO)) which we have commented on recently in these news pages.

This appeal concerned a car supermarket site in the Hessle Dock area of Hull. The site was severely flooded in 2013, resulting in 800 cars being written off. Following that flooding the Environment Agency re-categorised the site into its highest risk category for flooding and the occupier was unable to obtain insurance against flooding. As a result of this the tenant was able to agree a 25% rent reduction with its landlord to reflect the risk and, in 2015, made a proposal seeking a reduction in its rating assessment on the basis that the flood risk represented a material change of circumstances. The Valuation Officer (VO) initially accepted the proposal as a valid one but, when the matter came to be heard by the Valuation Tribunal for England (VTE), the VO contended that the ratepayer’s proposal was not valid as the matters that it referred to did not represent a material change of circumstances. The VTE considered that the fact that the property was no longer insurable against flooding, and that a rent reduction had been agreed, showed that the value of the property had been affected beyond the immediate flooding. Although there was no flooding at the date of the ratepayer’s proposal in 2015, the VTE was satisfied that the future risk represented a material change and found that the ratepayer’s proposal was a valid one. The VO appealed against this decision. The ratepayer did not respond to the VO’s appeal.

The VO contended that the future risk of flooding was not a material change. Flooding is a periodic occurrence and the risk of it would be reflected in rental values at the relevant valuation date. The ratepayer’s proposal was made in March 2015 at a date when there was no flooding, and more than a year after the last flooding. On the relevant day, the date of the ratepayer’s proposal, there was no disrepair to the property and no physical evidence of flooding.

The Upper Tribunal’s decision refers to its own guidance, given in its decision in respect of Merlin Entertainments, and found that neither the rent reduction, nor the refusal of insurance were either “physical changes”, or matters that were “physically manifest” at the relevant date. There was also no evidence that the Environment Agency’s re-categorisation of the flooding risk was physically manifest at the date of the appeal. As the ratepayer’s proposal had not identified any material change within the meaning of the legislation, the proposal was not valid and the VO’s appeal must be allowed.

The Upper Tribunal’s analysis in this appeal a follows its earlier guidance and is likely to be seen as uncontroversial. The ratepayer had failed to identify any physical change to the property or to its locality at the relevant date. However, we are left wondering how the VO will treat circumstances such as this a future revaluations. The hypothetical basis of valuation for rating requires an assumption that the tenant bears the costs of any insurance for the property; but how can that be recognized in circumstances where insurance is simply not available at any premium?