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The decision of the Upper Tribunal (Lands Chamber) in Hughes (VO) v Exeter City Council (2020) UKUT 0007 (LC) concerned the rating assessment of the Royal Albert Memorial Museum in Exeter. The museum is housed in a Grade II listed building in Exeter, which was refurbished between 2008 and 2011. The rateable value of the property had been agreed at a figure of £445,000 in 2011, but was re-appealed following the Upper Tribunal decision in respect of York museums; a decision that is detailed elsewhere in these news pages. The Valuation Tribunal for England (VTE) determined an assessment of rateable value £1, following the reasoning set out in the York Museums cases. The Valuation Officer appealed against that decision to the Upper Tribunal.
The parties to the appeal agreed that there was no relevant rental evidence that could be applied directly to value the appeal property. They also agreed the cost of a modern substitute building to be used as a base for valuation using the “contractor’s basis”, valuing by reference to cost. The parties also agreed that if the property was to be valued on a “receipts and expenditure” basis then the correct rateable value was £1, as determined by the VTE. Finally, the parties agreed that the modal category of occupation of the appeal property was “Museum and premises” although they did not agree exactly what form that might take.
The issues for determination by the upper Tribunal were, firstly, what is the appropriate method, or methods, of valuation for rating for the appeal property, and secondly, what is the correct rateable value?
The Tribunal’s decision is an important and detailed one; extending to 71 pages and 280 paragraphs, and incorporating a review of 44 different legal authorities. The Valuation Officer’s valuation was rateable value £690,000, arrived at adopting the contractor’s basis. The ratepayer’s valuation was rateable value £1, arrived at by adopting a receipts and expenditure basis. The Tribunal’s decision incorporates an extensive review of case law and valuation methods valuation methods. The tribunal also reviewed a large number of rental transactions for historic properties. From that review, the Tribunal found “no evidential support in the market for the use of the contractor’s basis of valuation”.
The Tribunal found that the receipts and expenditure basis of valuation produced a nominal value of rateable value £1, but ignored the socio-economic benefits to the ratepayer of occupying the appeal property. The contractor’s basis of valuation produced value before any stage five adjustment (“stand back and look”) in the region of £560,000. But the Tribunal considered that this outcome was “manifestly too high”, and that no weight could be given to the contractor’s basis of valuation. The Tribunal therefore adopted the receipts and expenditure basis of valuation and determined rateable value of £1 with effect from 15 April 2015. But, importantly, the Tribunal noted in its decision that it had not been asked to consider alternative methods of valuation, such as adopting a percentage of receipts, or making assumptions regarding a tenant’s “overbid” above a purely nominal value.
The Upper Tribunal’s decision is a detailed and comprehensively reasoned one, incorporating a very thorough review of legal principles and valuation practice for this class of property. It seems surprising that the Valuation Office is seeking leave to appeal against a decision that is, ultimately, one of valuation, particularly as no appeal was made against the earlier York Museums decision. But we understand that an application has been made for permission to appeal. Appeals from decisions of the Upper Tribunal are made to the Court of Appeal, but on the basis of a point of law only. It will be interesting to see whether permission is granted for an appeal, either by the Upper Tribunal, or an application to the Court of Appeal itself.Whatever the outcome of that application, we cannot help but feel that the Valuation Officer may now be regretting not looking at alternative methods of valuation such as a percentage of receipts, and relying solely upon the contractor’s basis of valuation.
