Rating assessments merged

The Upper Tribunal (Lands Chamber) has determined that the rating assessments of two buildings should be merged, despite the two properties being separated by a public highway. Normally, buildings must fall within the same curtilage to form a single assessment for rating purposes. However, in its decision in Johnson (VO) v H & B Foods Limited (2014 UKUT 0458 LC), the Upper Tribunal determined that the assessments of warehouses at 32 and 44-54 Stewarts Road, London SW8, should be merged to form a single hereditament for rating purposes.

The first-tier Tribunal had determined that a single assessment was appropriate and that the correct Rateable Value for the merged hereditament in the 2005 Rating List was Rateable Value £290,000. The Valuation Officer appealed against that decision and contended that the two buildings should be assessed separately because they were separated by a public highway and there was no “essential functional connection” between them. The respondent ratepayer contended that the two properties were operated together and that the ratepayer would be unable to operate its business effectively without using both buildings together.

The Tribunal determined that, whilst the two buildings failed any exclusively geographical test of linkage, there was a functional connection in the use of the two buildings by the ratepayer and, in particular, the buildings had been designed and adapted with a view to their complementary use. On this basis the Tribunal determined that it was correct to treat them as a single hereditament.

In an earlier decision on this same matter, the Tribunal had determined that its hearing of the appeal was a de novo one and valuation issues that had been agreed for the first-tier Tribunal hearing were not to be taken as agreed for the Upper Tribunal hearing. The parties disagreed on three valuation matters: the basic level of value to be applied to the buildings; the discount to that value to be applied to the First Floor production space; and the end allowance for the fragmentation of use between the two buildings. The Upper Tribunal determined a basic rate of £95 per square metre and applied a relativity of 55% to the First Floor space, with an allowance of 15% for fragmentation. The assessment determined for the merged hereditament was Rateable Value £282,500 with effect from 1 April 2005.

The judgment shows clearly that, in any case where properties do not fall within a single curtilage, it will be essential to have clear factual evidence of functional linkage to support a merger. Each case will be viewed on its own facts and there can be no single rule as to what is, or is not, a single hereditament where buildings within separate curtilages are concerned. What appears  to have convinced the Tribunal in this case is that the buildings had been designed and adapted to operate together.