UNITED SERVICES AND SERVICES RENDERED CLUB (TOOTING AND BALHAM) LTD THE PUTNEY CLUB v DAVID THORNELEY (Valuation Officer) RA/86/1998

UPPER TRIBUNAL
LANDS CHAMBER
RA/86/1998Case No RA/86/1998
Between
UNITED SERVICES AND SERVICES RENDERED CLUB (TOOTING AND BALHAM) LTD THE PUTNEY CLUBApplicantDAVID THORNELEY (Valuation Officer)Respondent
Before
N J Rose FRICSVenue 48/49 Chancery Lane, London WC2A 1JRHearing 14-16 February and 26 March 2001Property: The USSR Club, 268 Balham High Road, London SW17 7AJ, and, The Putney ClubCatchwords: RATING – annual value – valuation – 1995 rating list – two members’ clubs in south-west London – whether rental evidence reliable – whether rating assessments relevant – whether valuation by reference to turnover, subject to minimum figure acceptable to landlord, appropriate – R.V. of clubs reduced from £19,500 to £19,150 and from £38,500 to £29,000.
[1]These two ratepayer appeals, which were consolidated by order of the registrar, are from a decision of the London (South West) Valuation Tribunal (the VT), determining the assessments in the 1995 rating list at the values put forward by the valuation officer. They relate to two clubs, both of which are members of the Working Men’s Club and Institute Union Limited (CIU) and located in greater London, south of the Thames.[2]One appeal relates to the Putney Club, 63 Upper Richmond Road, London, SW15 2RD, in respect of which the VT’s determination was rateable value £38,500. The other concerns the United Services and Services Rendered Club (Tooting and Balham) Limited (the USSR), 268 Balham High Road, London SW17 7AJ. In that case, the rateable value determined by the VT was £19,500.[3]Mr William Hanbury of counsel appeared for the appellant clubs and called Mr Colin Hunter ARICS, an associate director of Bissett Kenning Limited, trading as Bissett Kenning Newiss and based at that firm’s Leeds office. Mr Timothy Mould of counsel appeared for the respondent valuation officer, Mr David John Spencer Thorneley, BSc, ARICS, rating team leader, principal grade in the London south group of the valuation office based at Wimbledon. It was agreed that the material day for consideration of these appeals was 1 April 1995 and that the antecedent valuation date was 1 April 1993.[4]Throughout most of the hearing the valuation officer gave evidence in support of the assessments determined by the VT. The appellants’ case was that the assessment of the Putney Club should be reduced to £16,500 (Annex 1) and that of the USSR to £11,600. There was a slight disagreement between the expert witnesses as to the precise area of the USSR. I was informed on the final day of the hearing that this issue had been compromised. The effect of that agreement was to reduce the valuation officer’s valuation of the USSR to £19,150 (Annex 2). I calculate that it also resulted in the appellants’ valuation being increased to £11,850 (Annex 3). The valuation officer’s valuation of the Putney Club remained unchanged throughout at £38,500 (Annex 4).[5]In company with both expert witnesses I inspected the appeal properties and certain other club premises referred to as comparables on 27 March 2001.[6]From the agreed statement of facts and from the evidence I find the following facts. The Putney Club was originally built towards the end of the 19th century as a detached double fronted brick and tile house. A two-storey brick and flat roofed extension was added to the side in the 1930s and a later extension was added to the rear in the 1960s. There is a single storey brick and tile store at the side. The club is situated on the main distributor road (A205) in a predominantly residential area, approximately 100 metres from the retail area of Upper Richmond Road. It is immediately adjacent to the Royal British Legion Club, which is a similar converted building. The ground floor accommodation comprises an entrance lobby, secretary’s office, lounge, snooker room, kitchen and ladies’ and gentlemen’s toilets. There is a concert room, lounge, committee room, store and ladies’ and gentlemen’s toilets 3 on the first floor; also a basement cellar and an outside store. The agreed area in terms of main space (ITMS) is 668.34m2. There are 11 parking spaces in the front courtyard and 2 spaces to the side. The club includes a steward’s flat on the second floor, separately assessed for council tax.[7]The USSR was originally constructed in the 1920s as a detached three-storey rendered brick and tile house. It was subsequently converted to a club and extended to the rear in the 1970s with a large single storey concert room. The club occupies a corner site at the junction of Balham High Road (A24) and Upper Tooting Park in a predominantly residential area. Balham High Road is a main distributor road.[8]The ground floor accommodation comprises an entrance lobby, bar room, lounge, concert room, kitchen and ladies’ and gentlemen’s toilets. There is a snooker room, committee room and store on the first floor and a cellar and stores in the basement. The agreed area is 359.61m2 ITMS. The former rear garden has been laid out as a car park with access from the side street and provides approximately 20 parking spaces. The club includes a steward’s flat on the second floor, separately assessed for council tax.[9]The valuation officer altered the rateable values of both properties in the 1995 list, because he considered that the original entries were insufficient. There have been no alterations to either property to warrant any change in value. The Putney Club was originally entered in the list at rateable value £25,800. This was increased to £38,500 with effect from the date of alteration, 27 June 1996. Following a request on behalf of the ratepayer the increase was back-dated to 1 April 1995 and the increased assessment was confirmed by the VT. The original rateable value of the USSR was £17,100 with effect from 1 April 1995. The ratepayer lodged an appeal against this assessment and on 16 August 1996 the valuation officer increased the rateable value to £23,150. Before the VT the valuation officer defended a figure of £19,500 – higher than the value appealed against. This increase was confirmed by the VT and took effect on 7 July 1998, the date of the decision.[10]The principal issue in this appeal is the proper method to be adopted when valuing the two appeal properties, neither of which is actually let, in order to estimate their annual value in accordance with the rating hypothesis. The appellants contend for a method which is founded principally upon the clubs’ turnover, taken from their audited accounts. The valuation officer, on the other hand, considers that there is reliable rental evidence in relation to comparable members’ club premises in south London upon which to base an estimate of the rateable value of the appeal properties. He also relies on the assessments of those comparable properties in the rating list. It is agreed that the only rental bids for the appeal properties would come from the current occupiers.[11]Mr Thorneley considered that, when assessing the rateable value of a property in a particular location, the valuer should look initially to any rental evidence in that location. An analysis of that evidence, adjusted as necessary to conform to the definition of rateable value and to the antecedent valuation date, would provide the primary evidence on which to base the assessment. 4[12]In the course of these proceedings, Mr Thorneley produced two expert reports and Mr Hunter submitted three. Mr Thorneley’s reliance upon particular rents changed to some extent as more information came to light. Before me he relied principally on four comparables, although the weight he placed on each varied. In descending order of importance those properties were The New Malden Club; The National Association of Railway Recreational Sports and Social Clubs (Southern Region) Grove Park Branch (Grove Park); The Raynes Park Social Club and the Grafton Club, New Malden. With the exception of Grove Park, all were within the same locality as the appeal properties, namely south-west London. Mr Thorneley felt that the hypothetical landlord would be aware of the pertaining level of rents within the same locality and would not be prepared to accept a rental bid substantially below that obtained on other properties. Although Grove Park was the most remote comparable, it was common ground that its location did not justify excluding it from consideration.[13]Mr Thorneley analysed his four favoured comparables to show rents between £48 and £57.64 per m2 ITMS at varying dates between 1990 and 1996. He considered that, in deciding whether the available rental evidence was reliable, it was important to consider not the absolute number of comparables, but whether the rental evidence was consistent. In his view the available evidence, considered together, was consistent and provided weighty evidence. It justified his valuations of £45 per m2 for the USSR and £53 per m2 for the Putney Club, with parking taken respectively at £150 and £250 per space. In circumstances where reliable rental evidence was available in the same locality, he could see no justification for looking beyond such evidence.[14]Mr Hunter considered that there was insufficient useful rental evidence available upon which to base the rating valuations of the appeal properties. He explained that, since joining BKN he had assumed responsibility for co-ordinating all appeals on working men’s clubs and other members’ clubs and institutes. BKN advised the CIU on its own properties. The CIU currently had more than 3,000 members, of whom BKN acted for approximately 900. In addition, BKN advised liberal clubs, miners’ welfare clubs, Royal British Legion clubs and a small number of clubs which were not affiliated to any other organisation. His co-ordination role within BKN had led to him being directly involved with the appeals for his firm’s clients and overseeing and guiding other surveyors employed by BKN. He had been directly responsible for taking all his firm’s VT hearings.[15]He had also been involved in regional co-ordination with the former valuation office regions, starting with the northern region. His discussions had led to an agreed approach to analysis and valuation in terms of main space area and to the production of guidance notes to most regions of the valuation office. Actual levels of value were left to individual officers but the guidance notes (excluding London) included a reference to turnover. The amount of weight given to turnover was not agreed.[16]Test cases were taken to a hearing of the West Yorkshire Valuation Tribunal on 28 February 1997 to establish levels of value and the basis from which the price per square metre should be calculated. Thereafter he had liaised with the other regional offices of the valuation office, reaching agreement with central, Wales and eastern regions between July and September 1997. Discussions with London region had started at the same time. This co- 5 ordination had continued. A national guidance note for revaluation 2000 had been prepared in July 1999 by Mr Keith Newbiggin of the valuation office following a meeting with Mr Hunter at Leeds valuation office.[17]It was Mr Hunter’s experience that, when dealing with clubs, the first question in any valuation must always be that of a club’s trade. Evidence of rents was limited and usually tainted. Clubs coming onto the market were normally sold for re-development and not as a going concern. He was aware of a few cases where clubs had been sold for continued club use, but the purchases were usually only viable because of the very low prices paid to receivers for the freehold property including all trade fixtures and fittings.[18]Regional negotiations for the 1995 rating list had all been based on main space valuations using agreed relativities. It was the lack of agreement on unit prices and the means by which those prices should be calculated that had resulted in the VT hearings from February 1997 onwards. In December 1996 a national trawl had been undertaken by the northern region of the valuation office for rental evidence, all local offices being asked to provide details of rents used in the 1995 revaluation. The conclusion of that trawl was that no useful rental evidence existed. At the same time, BKN obtained a schedule of all CIU members, with details of whether the clubs were held freehold or rented. A copy was provided to the valuation office and to other agents participating in the discussions. Approximately 85 per cent of all clubs were freehold. All non-freehold clubs were written to by BKN, requesting details of their lease/tenancy. On the basis of the returns it was determined that approximately one-third were held on ground leases and one-third were owned by and tied to breweries. The remaining clubs, approximately 5 per cent of all CIU members, held a wide variety of leases or tenancies, not all of which were at arms length. It was concluded that no useful rental evidence could be found. It was decided to allow each valuation officer to negotiate levels of value. Test cases were to be taken in the Wakefield area as a result of pressure being exerted by the West Yorkshire valuation tribunal. Negotiations with the London region had commenced in 1997, but had made little progress. The only agreement reached related to the relativities to be adopted when analysing floor areas in terms of main space.[19]Although the first consideration was a club’s ability to pay - that is, its turnover - the landlord would have a minimum figure below which he would not let the property. This would have regard to the location and quality of the property. He had therefore adopted such an approach in arriving at his valuations. His opinion of the correct approach to valuing clubs had been reinforced by the requirements of lending institutions when requesting capital valuations for security purposes. They required turnover information to be included in the valuation report.[20]His opinion was further supported by the gradual shift in the rating valuation of all leisure properties to a valuation based on gross takings for the 1990 and 1995 rating lists. There were national agreements based on a percentage of turnover for public houses and bingo halls, as well as local or regional agreements for hotels, cinemas, theme parks and historical galleries. In many cases, and especially for public houses, there were open market rents available for analysis. There were also tribunal decisions relating to non-profit making organisations, such as theatres and National Trust properties. In the case of public houses, 6 the national agreements made no reference to whether or not the undertaking was profitable. Each of these classes of property was valued on a percentage of the gross takings.[21]In analysing comparable evidence and in arriving at the valuations of the appeal properties he had firstly had regard to the clubs’ turnover. It included all sources of income, except investment income and interest payable on loans, since these were not relevant to a tenant fresh to the scene. The turnover had then been analysed as a rental equivalent by adopting an appropriate percentage. The unit price had been obtained by dividing the resultant figure by the area ITMS.[22]Mr Hunter had arrived at the appropriate percentage of turnover by reference to the nationally agreed percentages adopted for public houses in England and Wales. The average working men’s club traded on a gross profit ratio of 30 to 35 per cent of bar sales. By contrast public houses traded on a gross profit ranging from 45 to 55 per cent. He had therefore reduced the percentages of turnover adopted for public houses. A typical range for poor quality, provincial public houses would be 7% on the first £100,000, 8% on the next £200,000 and 9¼% on the next £400,000. He had adopted the following range in analysing and valuing clubs: Gross take % £0-25,000 3½ £25,000 - £100,000 3¾ £100,000 - £175,000 4 £175,000 - £250,000 4¼ £250,000 - £325,000 4¾ £325,000 - £400,000 5 £400,000 + 5¼[23]Having analysed a large number of clubs’ accounts and considered trading levels, he had found that a turnover of £250,000 constituted a watershed. He had therefore adopted an increment of ½ per cent at that point, increasing the percentage from 4¼ to 4¾ due to a reduction in relative overheads, especially staffing costs, above that level of turnover. He believed that his opinion was supported by the rental evidence for Grove Park and also for the Openview Sports and Social Club. The resultant price per square metre was then subject to a test of the minimum level of rent likely to be accepted by a landlord. He had had regard to the base rent for Openview in determining this minimum level of value and also to the agreed assessments of clubs outside London.[24]It was also necessary to adjust the valuation to take account of parking and other external facilities such as bowling greens and football pitches. In view of their ancillary nature, he had adopted a maximum value of 10 per cent of the building value for car parking. Whilst parking was at a premium in London, the club’s clientele would normally be expected to arrive either on foot or by public transport. The existence of car parking was therefore not critical to the club’s operation and could not be expected greatly to increase the rental bid of a prospective tenant. 7[25]Mr Hunter had had regard to the level of values which had been agreed in the 1995 rating list for clubs outside London. These ranged from £20 to £35 per m2, reflecting parking and other facilities. He accepted that parking was a special issue in London, but he had seen no evidence to suggest that the general level of value should be higher in London, or that a different approach was appropriate in arriving at either rents or rateable values. He had also borne in mind VT decisions in respect of properties in Oxfordshire, West Yorkshire and Cumbria. These showed a range of values up to £35 per m2. No useful rental evidence had been found to exist outside London. Since regional discussions had taken place, all VT decisions had referred in some way to turnover as being a relevant factor in arriving at the valuation.[26]In the case of the USSR, on the basis of turnover the rental value should be £10,413, or approximately £29 per m2 ITMS. This was in excess of the base rental value, which would be in the range of £22.50 to £27.50 per m2. In fact, Mr Hunter’s valuation of £11,850 was based on £30 per m2, plus 10 per cent for parking. In his opinion, the value of the Putney Club on the basis of turnover should be £8,500, or £13 per m2. He considered, however, that the base rental value was between £20 and £25 per m2. Accordingly, his valuation of £16,500 was equivalent to £22.50 per m2 plus 10 per cent for parking.[27]In the course of hearing I was referred to the following cases: Aberaman Ex- Servicemen’s Club and Institute v Aberdare UDC [1948] 1 QB 332; London County Council v Erith [1893] AC 562; Garton v Hunter [1969] 2 QB 37; National Trust v Spratling [1997] RA 295; Jones v Toby Restaurants [1992] RA 87; Couper v Aylesbury Brewery Co Ltd [1985] 2 EGLR 213; Clement (VO) v Addis Ltd [1988] 1 WLR 301; Double v Southampton Assessment Committee [1922] 2 KB 213; Kingston Union Assessment Committee v Metropolitan Water Board [1926] AC 213; Sheffield and Hallamshire LTC v Elliott (1966) 13 RRC 183; Galgate Cricket Club v Doyle (RA/27/2000, unreported).[28]Both Mr Hanbury and Mr Mould cited Garton v Hunter as providing important authority on the appropriate method of valuation for rating purposes. In the course of his judgment in that case Winn LJ said:
“Where the particular hereditament is let on what is plainly a rack rent or there are similar hereditaments in similar economic sites so let which are truly comparable, that evidence should be classified in respect of cogency as a category of admissible evidence properly described as superior: in some but not all cases that category may be exclusive. Any indirect evidence, albeit relevant, should be placed in a different category: reference to the latter category may or may not be proper, or indeed unnecessary, according to the degree of weight of the former kind of evidence.”
[29]Mr Hunter considered that it would be necessary for the valuer to obtain at least 12 rents in order to provide sufficient evidence to produce a range of values for clubs in London. Such rents would need to relate to all the sizes and types of building involved. Thus, even if Mr Thorneley’s four comparables were reliable – which he did not accept – they would not provide a sufficient basis for valuing the appeal properties. He did agree, however, with the following proposition, contained in the Guidance Note on the Receipt and Expenditure 8 Method of Valuation for Non-Domestic Rating, prepared by the Joint Professional Institutions’ Rating Forum in July 1997, and which largely mirrors Winn LJ’s observations in Garton v Hunter:
“Where open market rental evidence exists for the subject property or similar properties, and that evidence conforms to the statutory definition of rateable value (net annual value in Scotland and Northern Ireland), or can be made to do so without adjustments of such a nature that its reliability is affected, a valuation based upon such evidence will provide the preferred method of valuation.”
[30]I therefore turn firstly to the rental evidence upon which Mr Thorneley’s valuations are based and consider whether, individually and collectively, they constitute evidence which is sufficiently reliable to provide the preferred method of valuation . The New Malden Club, R/0 5 Coombe Road, New Malden[31]Originally built as a cinema, but used as a members’ club since 1923. Situated to the rear of a secondary parade of shops adjoining the local railway station. Access from the street obtained via a narrow passageway between two shops. Accommodation all on ground floor and comprises lounge, bar, snooker room, office and kitchen. Area 251.58m2 ITMS. No car parking. Held on a lease for 10 years from 25 December 1985 on full repairing and insuring terms (FRI) at £10,000 per annum, subject to review after five years to open market value. User restricted to licensed or unlicensed social club. 1990 review agreed at £14,500. Lease renewed on a similar basis for 10 years from 24 June 1996 at £13,500 per annum, with a fixed increased to £14,500 after 5 years. 1995 list RV £13,700 the subject of a VT decision, which was not appealed. The ratepayer had previously been represented by the same surveyor, who had agreed the 1990 list assessment at £13,700.[32]Mr Thorneley analysed the 1990 rent review and the 1996 lease renewal rent as indicating values of £57.64 per m2 and £53.66 per m2 respectively. The 1995 list assessment determined by the VT equalled £54.46 per m2. Mr Hunter attached little weight to this evidence. He deducted 5 per cent from the average rental agreed on lease renewal to reflect the advantages of a fixed increase. He made a further deduction to reflect the tenant’s concern to avoid the substantial costs involved in relocating. He considered that the lease renewal indicated a maximum open market value of £12,500. Even that figure may be unreliable because the parties were aware of the rent being paid for the nearby Grafton Club, which both experts agreed was above market value. In any event, Mr Hunter considered that the rents agreed for this club should be seen as isolated incidents, not forming a pattern of transactions within a general market.[33]Although Mr Hunter suggested that the rent agreed on review in 1990 was in excess of the club’s value at that time, both parties were professionally represented and there is no evidence that the rent of £14,000 was agreed other than in accordance with the definition of market value contained in the lease. As for the lease renewal in 1996, I am satisfied that the agreed rents were not influenced by the amount payable by the Grafton Club; it is clear from 9 the correspondence produced that the New Malden club’s surveyor was aware that the Grafton rent was considered to be excessive. Nevertheless, in a letter to the New Malden club’s secretary in January 1996, the club’s surveyor expressed the view that a rent of £12,500 was the highest that he could recommend on a pure property basis, as opposed to one which reflected other commercial considerations. In my view, this suggests that £12,500 was a full figure and that the market value of the New Malden Club in the first half of 1996 was in the region of £12,000 per annum, or £47.70 per m2 ITMS. I bear in mind that analysis, and also Mr Thorneley’s analysis of the 1990 review at £57.64 per m2. National Association of Railway Recreational and Social Club (Southern Region), R/0 340 Baring Road, Grove Park, London, SE12.[34]Constructed in 1978 of brick with tile and part felted roof. Internally altered to current layout in 1982. Located adjacent to railway line near Grove Park station and at rear of bus terminus and housing. Accommodation all on ground floor comprises entrance lobby, office, club room, kitchen, cellar and toilets. Area 203.60 m2. Nine parking spaces. Held on FRI lease for 20 years from 1 April 1990, with five yearly reviews to open market value. Rent review agreed at £10,500 with effect from 1 April 1995. Landlord (originally British Railways Board) entitled to determine lease at any time on 6 months notice if all or part of property required for the purposes of its undertaking or for demolition, reconstruction or redevelopment. 1990 rateable value agreed at £9,850, the occupier being professionally represented. There has been no appeal against the 1995 assessment of £11,250.[35]It was agreed that only the 1995 rent was relevant, since the negotiations in 1990 had not been at arms length. Mr Thorneley analysed the 1995 rent review at £44.94 per m2 plus car parking at £150 per space. The 1995 rateable value was equivalent to £48.62 per m2 plus £150 per space.[36]Mr Hunter agreed that considerable weight should be given to the rent agreed on review in 1995. He considered that this rent was agreed by reference to the club’s turnover. His analysis indicated that it was equivalent to 4.77 per cent of turnover. In my judgment, the correspondence between the parties’ valuers at the date of the rent review is equivocal as to whether and to what extent turnover was used in order to agree the rent. The tenant’s surveyor suggested that the value should be derived from turnover. The landlord’s surveyor expressed his reservations about that method “on account of the variability of the styles of clubs and the nature of their membership which is unconnected with the buildings which they occupy.” In the absence of any further evidence on the point, I consider it is appropriate to analyse the agreed rent in the manner adopted by Mr Thorneley, subject to an adjustment to reflect the break clause, which was agreed at 5 per cent by the experts in the course of the hearing. I also prefer Mr Thorneley’s approach to the value of car parking, although there is no objective evidence to support the method used by either expert on this matter. My analysis of the agreed rent is therefore as follows:- 10 Agreed rent £10,500 Add for break clause £ 525 £11,025 Less Parking – 9 spaces @ £150 £ 1,350 £ 9,675 Rental = £47.52 per m2 The Raynes Park Social Club, Taunton Avenue, Raynes Park, London SW20 OBH[37]A two storey property with rendered walls under a pitched tile roof. Originally constructed as a sports pavilion in the 1920s or 1930s. Now lies within a public sports ground situated in a residential area, within walking distance of the shops and railway station at Raynes Park. The accommodation comprises a lounge and bar on the ground floor and a bar and lounge on the first floor. Area 167.02 m2 ITMS. Use of shared parking adjoining the playing field. Shared entrance hall, w.c. accommodation and ladies’ changing room. Held on FRI lease for 20 years from 25 March 1992 at £9,500 per annum subject to 5 yearly reviews to open market rental value. Lessee not responsible for major works of repair. There being no entries in either the 1990 or 1995 rating lists, action was taken in September 1999 to bring about new entries of rateable value £6,650 with effect from 1 April 1992 and £7,500 with effect from 1 April 1995. No appeals have been received against these notices.[38]Mr Thorneley analysed the rent payable from March 1992 at £58.87 per m2; the 1990 rateable value at £39.82 and the 1995 assessment at £44.90. Mr Hunter considered that the true analysis of the 1992 rent should be £17.77 per m2. He made the following deductions, none of which had been taken into account in Mr Thorneley’s figure of £58.87 – 5 per cent for major works of repair; 37.5 per cent for right to use adjoining playing fields; 5 per cent for shared parking rights; 20 per cent for right to use shared accommodation and £1,319, representing one half of the 1992/93 rates liability, which was not being charged when the rent was agreed. In evidence, Mr Thorneley agreed with the rates deduction. He also agreed that a deduction was appropriate for major repairs, although his figure was 2.5%. He considered that Mr Hunter’s remaining deductions were not justified.[39]In the light of the evidence and my inspection, my conclusions on the appropriate adjustments are as follows. I prefer Mr Thorneley’s 2.5% allowance for major repairs. I think that the shared right to park cars on the designated area within the park is of some value, although less than if the right were exclusive. I would assess the appropriate value at £450, being six spaces at £75 (one half of £150) each. I make no allowance for the right to use the playing fields. The lease confers no preferential rights and there is no other evidence to suggest that such rights exist. Moreover, in a letter to Mr Thorneley, the club secretary stated that his members did not “enjoy any favour or rights at all” over the adjoining land. Nor do I make any adjustment to reflect the right to use the shared accommodation. I am satisfied that the shared use of an entrance hall outside the demised premises is of no material benefit. Furthermore, the areas of the w.cs within the demise are not included in the agreed areas of the appeal properties. Therefore, the fact that the w.cs at Raynes Park are shared 11 rather than in exclusive occupation is a disadvantage, rather than an advantage. It offsets such value, if any, as may attach to the shared right to the ladies’ changing rooms.[40]My analysis of the March 1992 rent is therefore: Rent £9,500 Less external repairs 2½% £ 238 £9,262 Less parking £ 450 £8,812 Less 50% rates liability 1992/93 £1,319 £7,493 Rent in terms of rateable value - say £7,500 = £44.90 per m2 The Grafton Club, 36 Grafton Road, New Malden[41]A two-storey detached property with rendered walls under a pitched tiled roof. Built in the 1920s and used as a members’ club since the early 1930s. Grafton Road is a turning off New Malden High Street and contains residential and commercial properties. Accommodation comprises lounge, bar, billiard room, committee room and beer store on the ground floor and a first floor residential flat occupied by the steward. No parking. Ground floor area 207.89m2.[42]With the exception of the rear part, held under a separate ground lease, the entire premises are occupied under a FRI lease for a term commencing 11 November 1992 and ending 28 September 2005. The commencing rent was £20,000 per annum, subject to review to open market rent on 29 September 1993 and then every third year. There was no uplift on the 1993 review. It is agreed that the commencing rent was in excess of market value and that in 1992 the club secretary obtained a rental valuation from a local firm of surveyors at £16,000.[43]Mr Thorneley deducted from the valuation figure of £16,000 the sum of £3,000, being his opinion of the value of the residential upper part in 1992. He considered that this calculation suggested that the assessment of £12,650 in the 1995 list, which had not been appealed, and which included the relatively minor accommodation to the rear held on ground lease, was about right. The 1990 assessment of £15,250 had been the subject of an appeal, subsequently withdrawn. Mr Thorneley analysed the 1992 rent of £20,000, minus the value of the flat, at £81.77 per m2; the 1990 assessment at £65.64 and the 1995 assessment at £54.45 per m2. Mr Hunter attached no weight to this evidence, since the 1992 rent was above market value. Moreover, at least one of the landlords was part of a family which had been founder members of the club. In any event, Mr Hunter considered that the value of the flat was £6,240 per annum, based on two students paying £60 per week each. 12[44]In my opinion, the most helpful starting point when considering this property is the valuation of £16,000 prepared by a local surveyor in 1992. I accept Mr Thorneley’s valuation of the flat at £3,000, based at it was upon an internal inspection of the property and experience of valuing composite hereditaments in the area for the 1990 and 1995 rating lists. By contrast, Mr Hunter had not inspected the flat and had had no professional experience of the London domestic rental market at the relevant time.[45]My analysis of the 1992 rental valuation is therefore: Rent £16,000 Less flat £ 3,000 Rent in terms of rateable value = £13,000 = £62.53 per m2[46]These four comparables may be briefly summarised as follows:- Rent per m2 ITMS New Malden December 1990 Review £57.64 June 1996 Renewal £47.70 Grove Park April 1995 Review £47.52 Raynes Park March 1992 Renewal £44.90 Grafton 1992 Valuation £62.53 Having inspected these properties, I consider that the analyses relating to the first three produce a broadly consistent level of value, reflecting the qualities of the respective premises. The figure for the Grafton club is out of line with the others, and it is based on a valuation rather than an agreed rent. It is thus of substantially less weight than the other three and I disregard it. New Malden and Raynes Park are both within the same broad geographical location as the appeal properties. Grove Park is in south-east London rather than south-west, but both experts agree that it is a helpful comparable and that the difference in location is not value significant. I see no reason to question that agreement.[47]I remind myself that I am concerned only with the rental value of the two appeal properties; I am not required to determine a valuation basis for members’ club in the greater London area, still less further afield. In my opinion, the available rental evidence, although limited, is sufficiently reliable to enable me to arrive at an accurate valuation of the appeal properties. It is therefore not necessary for me to consider indirect evidence, such as the rating assessments of clubs in south-west London. Nor is it helpful to have regard to the assessments which have been agreed or determined for the clubs cited by Mr Hunter which are all, to a greater or lesser extent, at some distance from London.[48]Furthermore, I do not consider that the valuation office’s approved guide for the valuation of public houses – based on a percentage of turnover – provides a reliable starting point for valuing the appeal properties. The operators of public houses are in general governed by the profit motive and the turnover of such properties reflects that fact. The occupiers of the two appeal properties, on the other hand, are not profit-making bodies. Mr 13 Hunter suggested that the objective of those managing both public houses and members’ clubs was to sell the maximum amount of beer. No evidence was produced to support that assertion and I am unable to accept it. In my view, those responsible for managing members’ club are likely to be motivated by a desire to provide those facilities which satisfy their members’ particular requirements, subject to the overall need to remain solvent. The rules of the appeal properties state that their object is to provide for their members:
“the means of social intercourse, mutual helpfulness, mental and moral improvement and rational recreation.”
By concentrating primarily on turnover, Mr Hunter has failed to take account of the more general benefits which the appeal properties provide to their members, in accordance with those stated objectives. As Mr Mould pointed out, the value of each of the appeal premises to the club and its members extends beyond that of a surrogate public house. Their rental value should reflect that fact. The comparable rents agreed for New Malden, Grove Park and Raynes Park may be taken to do so and are therefore to be preferred to Mr Hunter’s approach.[49]Balancing the various advantages and disadvantages of the USSR and the comparables, I consider that Mr Thorneley’s valuation of the USSR, based on £45 per m2 and £150 per parking space, is correct. The position is different in the case of the Putney Club, which immediately adjoins a club operated by the Royal British Legion. I accept Mr Hunter’s evidence that the catchment areas of both clubs are similar and that the resultant competition will adversely affect the size of the tenant’s bid for the Putney Club. In my view, the rental value per m2 of the Putney Club is ten per cent less than that of the USSR and the values of the parking spaces are the same in each case. Although Mr Thorneley’s submitted valuation included 12 spaces, the experts subsequently agreed that there were 13 and I adopt that figure. There is, in my opinion, no evidence to support Mr Hunter’s argument for a scale discount to be applied to each added band of 250m2.[50]My valuation of the Putney Club is therefore £29,000, calculated as follows: 668.34m2 @ £40.50 = £27,067 13 car spaces @ £150 = £ 1,950 £29,017 say £29,000[51]The appeal therefore succeeds. I direct that the assessments of the USSR and the Putney Club in the 1995 rating list be altered to rateable value £19,150 and £29,000 respectively.[52]What I have said so far concludes my determination of the substantive issues in this case. It will take effect as a decision when the question of costs is decided and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and Order 61 rule 1(1) of the Civil Procedure Rules will come into 14 operation. The parties are invited to make submissions as to the costs of these appeals and a letter accompanying this decision sets out the procedure for submissions in writing. Dated: 26 April 2001 (Signed): N J Rose ADDENDUM ON COSTS[53]I have received submissions on costs from both parties.[54]The respondent’s solicitor objected to the references to certain documents that were made in the appellants’ submission. Having considered the matter, the President agreed that those documents were privileged and should not be referred to. Accordingly, he directed that the relevant references should be excised from the appellants’ submissions, which should be re-served with the passages deleted. I did not read the original submission which was objected to, but I have read the copy which was amended in accordance with the President’s direction.[55]The appellants seek all of their costs. They suggest that they were obliged to come to the Tribunal to appeal against excessive assessments and they were successful in both cases. Virtually everything about the respondent’s case changed except his bottom line in both cases. It was purely fortuitous that the assessment determined in relation to the USSR Club was so close to the VT’s decision.[56]The appellants also allege that there were considerable delays in agreeing facts and that these were the fault of the respondent, who was extremely tardy in producing details to support the rents on which he was seeking to rely.[57]The respondent submits that the two appeals were in practice worked as a single case, although the fact of there being two separate appeals did lead to a limited increase in the overall cost of the appeals. It would have been impractical and unrealistic for his solicitor to have attempted to keep detailed records of which items of costs related to which appeal, since the vast majority of items were incurred once, but related equally to both appeals. Accordingly, the equitable way to apportion the costs incurred on each side is to divide the overall costs by two, and attribute one-half to each club’s appeal.[58]In respect of the USSR Club, the respondent submits that he should have his costs of the appeal. The compromise reached in respect of the floor area of the upstairs room should not be taken into account and, that apart, the appellant gained nothing by pursuing the appeal. 15[59]Even if the reduction in rateable value of £350 should be taken into account, the respondent says that he should have his costs because in substance and in fact his opposition to the appeal has succeeded. The Tribunal upheld his arguments as to valuation methodology and his contention that his comparables provided cogent market evidence. It rejected the appellants’ allegedly comparable settlements and its decision represented a reduction of less than 5% of the reduction sought by the appellants.[60]If, contrary to these submissions, the Tribunal considers that the reduction in rateable value ought to be taken into account, the respondent submits that it should also take account of his Calderbank offer dated 20 July 1999. This gave the appellant the option of settling at RV £18,500 and was expressed to remain open until 13 August 1999. The appellant failed to beat this offer and has gained nothing in consequence of the additional costs which have been incurred. On this basis, the respondent submits that the correct order, if the Tribunal is not minded to order that the appellants pay the whole of the respondent’s costs, is that the appellant should pay the whole of the respondent’s costs incurred since 13 August 1999 and that there should be no order as to the costs incurred prior to that date.[61]As for the Putney Club, the respondent suggests that the appellant enjoyed only a very limited amount of success, since its suggested valuation approach, its approach to the various comparables and its suggestion that the range of values in London should be no greater than the range of values outside London were all rejected by the Tribunal and the determined rateable value of £29,000 was much greater than the appellants’ suggestion of £16,500. The respondent refers to two Calderbank offers, one made by each side, neither of which was effective, although the determined rateable value was closer to the respondent’s figure in absolute and percentage terms. Accordingly, the respondent submits that the correct order in respect of the Putney Club is that each party should bear its own costs.[62]In deciding the issue of costs I consider firstly the Putney Club appeal. In my view, the relevant circumstances may be summarised shortly. The VT determined that the rateable value should be £38,500. The appellants contested this decision and, as a result, the assessment has been reduced to £29,000. The appeal has therefore succeeded and, although the respondent made a Calderbank offer, it was appreciably higher than the figure I have determined. In my judgment, the fact that the evidence of the appellants’ expert witness was not accepted in its entirety is not sufficient to justify a departure from the general rule that costs should follow the event. Accordingly, the appellants should have their costs of the appeal, so far as they relate to the Putney Club.[63]As for the USSR Club, the VT’s figure was £19,500 and this has now been reduced to £19,150. The appeal has therefore succeeded, albeit to a very limited extent and I consider that that success should be reflected in the costs order. Nevertheless, the appellant would have done better if it had accepted the Calderbank offer dated 20 July 1999. This factor is of far more significance than the fact that details of the respondent’s valuation changed, or that there were delays in reaching agreement on facts. In my view, the appellant should have its costs of the appeal until 13 August 1999, the date when the Calderbank offer lapsed. Thereafter, the appellant should bear the respondent’s costs so far as they relate to the USSR. 16[64]As has been pointed out, however, the fact that the two appeals were consolidated at a relatively early stage gives rise to potential difficulties in attributing the costs to one or other of the clubs. In view of that, and in view of the fact that both appeals were apparently maintained by the Working Men’s Club and Institute Union Ltd, I consider it appropriate to make a single award of costs, on a basis which broadly reflects my view as to the appropriate award for each club. Accordingly, I order that the respondent shall pay the appellants their costs of the two consolidated appeals until 13 August 1999. There will be no order for costs incurred thereafter. Such costs are to be agreed or, in default of agreement, assessed on the standard basis by the registrar of the Lands Tribunal in accordance with the Civil Procedure Rules. Dated: 2 September 2001 (Signed): N J Rose 17 Annex 1 The Putney Club, 63 Upper Richmond Road, London, SW15 2RD Mr Hunter’s Valuation Area in terms of main space Agreed area 668.34 m2 @ £22.50 £15,038 Plus parking @ 10% £ 1,504 £16,542 say £16,500 Reasoning:[1]This property is an adapted detached double fronted house facing on to the A205 which forms a main distributor road feeding into the A3.[2]The property has been refurbished and extended over a period of approximately 40 years and provides reasonable, but awkwardly shaped club accommodation on the ground floor.[3]The club is in a relatively poor catchment area with direct competition from the neighbouring Royal British Legion Club.[4]Trading is very poor. The club committee appear competent and so the trading is in my opinion a reflection of a fair maintainable trade.[5]On the basis of the turnover, see below, the rental value should in my opinion be £13/m2.[6]The base rental value of the property should in my opinion be in the range of £20-25/m2 by comparison with the base rental at Openview Sports and Social Club, of £16.05/sqm.[7]I have therefore adopted a base rental of £22.50/m2, plus parking. Valuation by Reference to Turnover Year Bar Sales AWP Subscriptions Other Total 1990 £176,533 £21,688 £4,801 £17,742 £220,764 1991 £200,641 £17,539 £5,559 £19,783 £243,522 1992 £184,281 £17,911 £5,120 £18,061 £225,373 1993 £180,130 £15,345 £3,751 £15,783 £215,009 1994 £202,664 £22,614 £4,712 £15,866 £245,856 1995 £198,423 £24,128 £4,804 £15,048 £242,403 1996 £173,500 £31,461 £4,285 £15,420 £224,666 Estimated FMT and AVD adj. for refurbishment £200,000 Estimated Rental 4.25% £ 8,500 Rental/ITMS £ 13/m2 18 Annex 2 United Services and Services Rendered Club (Tooting & Balham) Ltd 268 Balham High Road, Balham, London, SW17 7AJ Mr Thorneley’s Valuation FLOOR DESCRIPTION Overall m2 % of main space Area itms Rate £/m2 RV GROUND Lounge 87.91 100 87.91 Store 3.25 50 1.63 Lounge Extensions 191.35 100 191.35 Rear Kitchen 12.49 66 8.24 FIRST Snooker Room 59.20 62.5 37.00 Committee Room 4.16 50 12.08 Private Room 7.80 50 3.90 BASEMENT 70.00 25 17.50 359.61 at £45= 16,182 OUTSIDE Car Park Say 20 Spaces £150.00 3000 19,182 Say RV £19,150 19 Annex 3 United Services and Services Rendered Club (Tooting & Balham) Ltd 268 Balham High Road, London, SW17 7AD Mr Hunter’s Valuation (amended by Lands Tribunal to reflect agreed areas) Area in terms of main space FLOOR DESCRIPTION NIA RELATIVITY AREA ITMS Ground Lounge 87.91 100% 87.91 Store 3.25 50% 1.63 Lounge/Function Room 191.35 100% 191.35 Kitchen/Dressing Room 12.49 66% 8.24 First Snooker Room (disused) 59.20 62.5% 37.0 Committee Room 24.16 50% 12.08 Private Room 7.80 50% 3.90 Basement Cellar & stores 70 25% 17.50 Total 359.61 sqm ITMS 359.61 @ £30.00/m2 £10,788 Plus parking @ 10% £ 1,079 £11,867 Say £11,850 Reasoning[1]This club is a converted detached property on the corner of Balham High Road and Upper Tooting Road.[2]The club has been extended, adapted and refurbished. The internal layout of the ground floor is well suited to use as a club. The original first floor concert room has been superseded by the ground floor extension.[3]The club is in a good catchment area with large numbers of high density terraced housing in the immediate vicinity.[4]Trading is at a reasonable level, but in common with many clubs is showing a slow decline, despite increasing prices. In my opinion the trading of the club represents a fair maintainable trade. On the basis of the turnover, see below, the rental value should in my opinion be £29/m2.[5]The base rental value of the property should be in the range of £22.50/m2 - £27.50/m2 by comparison to Openview Sports & Social Club. Annex 3 (continued) 20[6]I have adopted a value of £30.00/m2 primarily with regard to turnover at the antecedent valuation date. Valuation by Reference to Turnover Year Bar Sales AWP Subscriptions Other Total 1990 £247,147 £2,275 £1,943 £1.553 £252,918 1991 1992 £246,972 £13,520 £1,898 £1,910 £264,300 1993 £239,458 £12,599 £2,013 £1,599 £255,669 1994 £239,641 £15,286 £1,835 £1,570 £258,332 1995 £223,760 £17,215 £3,016 £1,277 £245,268 1996 £228,252 £15,625 £2,729 £1,285 £247,891 Estimated FMT and AVD adj. for refurbishment £245,000 Estimated Rental 4.25% £ 10,413 Rental/ITMS £ 29/sq.m 21 Annex 4 The Putney Club 63 Upper Richmond Road London, SW15 2RD Mr Thorneley’s Valuation FLOOR DESCRIPTION Overall m2 % of main space Area itms Rate £/m2 RV GROUND Lounge/Bar 189.58 100 189.58 Reception (net) 8.1 100 8.10 Snooker Room 161 100 161.00 Office 23.62 66 15.59 Kitchen 9.72 66 6.42 Store 3.53 50 1.77 FIRST Hall/Stage 231.68 75 173.76 Lounge/Bar 55.9 75 41.93 Office 20.15 50 10.08 Committee Room 32.45 50 16.23 Kitchen 9.51 50 4.76 BASEMENT Stores 97.8 25 24.45 OUTSIDE Stores 58.8 25 14.70 668.34 £53 35421.99 12 Car Spaces £250 3000.00 38421.99 Say RV £38,500 22