Rating assessment of large office complex in York

The judgment of the Upper Tribunal (Lands Chamber) in City of York Council v Sykes (VO) (2017) UKUT 0230 (LC) concerned the Council Offices in York, a headquarters building of more than 118,000 square feet in the city centre. The offices were part modern and part fully refurbished on a site of more than two acres. They were developed by the City Council and occupied following completion of the development in 2013. At that time they were assessed at rateable value £1,810,000 from 25 March 2013 and rateable value £1,790,000 from 12 April 2013 – when part of the space became separately assessed following transfer to the Citizen’s Advice Bureau.

The City Council appealed against these assessments and those appeals were heard by the Valuation Tribunal for England, which determined reduced assessments of rateable value £1,350,000 from 25 March 2013 and rateable value £1,340,000 from 12 April 2013. Both the City Council and the Valuation Officer (by way of a cross appeal) appealed against the decision of the Valuation Tribunal for England (VTE) and those appeals were heard together, with the City Council as Appellant, by the Upper Tribunal (Lands Chamber) which has now issued it decision.

The Appellant Council argued that the VTE was wrong to refuse to make allowance in the valuation for the size of the property, the lack of car parking at the site, and the additional repairing costs that were likely to apply because part of the building was Grade II listed. The Appellant contended that the assessments should be reduced to rateable value £1,073,000 and rateable value £1,060,000 respectively.

The Respondent Valuation Officer argued that the VTE had been wrong to determine different values for the old and new parts of the building and that there was no justification for any of the additional end allowances sought by the Appellant.  The Respondent contended that the assessments should be increased to rateable value £1,700,000 and rateable value £1,680,000 respectively.

The first question considered by the Tribunal was whether there should be different values applied to the old and new parts of the building, as suggested by the Appellant, or a single level of value across both parts, as suggested by the Respondent. Noting that the two parts of the building were so inextricably linked to each other and woven together that they could never be marketed or occupied separately, the Tribunal determined that it was therefore more appropriate to apply a single value to both the new and refurbished parts of the building. This particularly so because the standard of the refurbishment of the older parts was equal to the standard in the new parts “and, in some respects, possibly better”.

The Tribunal then considered the whether it was appropriate to make an end adjustment to reflect the overall size of the property. The evidence referred to by the Appellant to support such an allowance was derived from agreed assessments of offices in Leeds and Sheffield but these were different locations, with many larger offices in those cities. The evidence from York showed that there were two other office properties in the city that were larger than the appeal property and neither of these had been agreed with an allowance for size. On this evidence the Tribunal preferred the Respondent’s approach, which was to make no allowance for size.

There are only 14 car parking spaces at the appeal property and the Appellant sought an allowance of 10% to reflect this. The Respondent contended that no such allowance had been agreed in respect of other properties in York, and that it was not appropriate to make such an allowance in this case. The Tribunal determined that no allowance should be made for this factor, noting that the evidence from other offices in the city showed that “low levels of parking are not such a disadvantage as to require an allowance”. Another important reason was that the decision to provide only a very small number of car parking spaces at the appeal property had been a conscious one and reflected a change in planning policies and a general move away from encouraging private vehicles in city centres.

On the question of allowance for the extra repairing costs that were likely to arise because part of the building was Grade II listed, the Tribunal found that there was no conclusive evidence to show that repair costs of the appeal property would be higher, or that rents of other listed building were reduced to reflect this factor. The Tribunal considered that, in the absence of any evidence to support such a discount, it was not appropriate to make any adjustment for this factor, noting also that the building is at the start of its refurbishment cycle.

The final matter considered by the Tribunal was the question of an end allowance for the layout of the building and for differences in floor levels resulting from its hybrid nature. The Appellant contended that the VTE had been correct to determine an end allowance for this of 10%. The Respondent contended that no allowance should be made as these were factors that affected only small parts of the building. The Tribunal noted that there was significant evidence to show that such allowances were agreed but in many cases the amount of the allowance for this factor was unclear. The Tribunal was therefore left with no alternative but to “take a view” on the issue and determined an allowance of 7.5% across the whole building.

The parties agreed valuations incorporating the Tribunal’s findings and determination. The resulting figures, of rateable value £1,550,000 from 25 March 2013 and rateable value £1,530,000 from 12 April 2013 were the figures determined by the Upper Tribunal (Lands Chamber).

The Tribunal’s judgment serves to remind valuers that the approach to valuation needs to be informed by detailed inspection – the Tribunal was clearly influenced on the issue of whether the old and new parts should be valued at different rates by what it had seen on its inspection of the property. The decision also reminds valuers that end allowances of the types considered here need to be supported by evidence, and that evidence from the locality of the appeal property will normally be preferred. Finally, where valuers are seeking to apply end allowances for more than one factor the Tribunal’s decision stresses the need to “stand back and look” at the net figure after the application of all allowances to make sure that it bears sensible comparison with other local evidence.