JOHN TOWNEND (T/A JOHNS RADIO) v TERENCE JOHN GOODALL (Valuation Officer) RA/48/2004

UPPER TRIBUNAL
LANDS CHAMBER
RA/48/2004Case No RA/48/2004
Between
JOHN TOWNEND (T/A JOHNS RADIO)ApplicantTERENCE JOHN GOODALL (Valuation Officer)Respondent
Before
P R Francis FRICS(in person) for AppellantVenue Immigration Appellate Authority, Rushton Avenue, ThornburyDate 3 May 2005Hearing 5 April 2005Property: Millside House, 887 Bradford Road, Batley, West Yorkshire, WF17 8NNCatchwords: RATING – hereditament – originating proposal - classification – whether offices and premises or some other use – valuation – RV reduced to £23,000
[1]This appeal, from a decision of the West Yorkshire Valuation Tribunal (“the VT”) dated 19 July 2004, relates to a former textile mill building known as Millside House, 887 Bradford Road, Batley, West Yorkshire (“the hereditament”), the freehold of which is owned by the appellant. It was heard under the Simplified Procedure (Rule 28, Lands Tribunal Rules 1996). The VT had amended the assessment in the 2000 rating list as offices and premises at rateable value £26,500 effective from 1 April 2003. The parties agreed that the material day for consideration of this appeal was 1 April 2000, the effective date is 1 April 2003 (although this had initially been disputed by the appellant) and the Antecedent Valuation Date is 1 April 1998.[2]The appellant’s principal case is that the hereditament had been incorrectly described as “offices and premises” when, in fact, the building was used for the purposes of manufacturing and workshops at the material date. The value per square metre should therefore be substantially less than the £51.50 assessed by the VT. The respondent contended that not only was the assessment correct, but there was a question in law as to whether the appellant could broaden the scope of his appeal to include reference to the entry description of the premises when no such mention had been made in his originating proposal. Mr Townend’s second ground of appeal related to the fact that the VT had added £1,190 to the assessment to reflect 14 parking spaces when in fact the car park adjacent to the building was not exclusive to the hereditament and was also used on a first come, first served basis by all the occupiers and visitors to the units forming Smithies Mill (to the rear). This was subsequently conceded by the VO, who offered to reduce the assessment by £1,000, but the appellant said he was at a loss to understand why the reduction was not the full £1,190.[3]I made a full inspection of the appeal hereditament, together with an external inspection of a number of the comparables immediately following the hearing. Facts[4]From the agreed statement of facts and from the evidence, I find the following facts. The appeal hereditament comprises an imposing former textile mill building principally of stone construction under slated roofs occupying a sloping site fronting Bradford Road, about 1 mile from Batley town centre, and half a mile from the nearest junction with the M62 motorway. The split-level accommodation has two storeys to the road frontage but three storeys to the rear, with a lower ground floor that, to the front, is partially below road and footpath level. There is a shared yard to the rear, and an adjacent car park that accommodates up to 14 cars.[5]Millside House forms part of a larger complex of principally light industrial and warehouse buildings known as Smithies Mill and nearby properties also include residential dwellings, car showrooms, shops and offices. The hereditament was acquired by the appellant in 1997 and substantially refurbished in 1999 to include new plastering to upper ground and 2 first floors, and tanking to the below-ground walls at lower ground floor levels, the newly provided concrete block inner skin being left unplastered. Suspended ceilings with Category 2 lighting were installed to upper ground and first floors and these incorporate heating and air conditioning cassettes. Perimeter trunking incorporating power and network computer cabling were also included on these floors and the original timber window units were all replaced with new uPVC double glazed units. A new open-tread staircase was installed, leading from the reception area to the first floor, and a secondary internal fire-escape staircase serving all three floors was also provided. Carpeting was laid to the principal rooms at upper ground and first floor, with a hardwood strip floor in the reception area. The overall area was agreed at 580.7 sq m.[6]Following completion of the refurbishment, the building was occupied in its entirety by MAPS (Manufacturing and Products Services Ltd), a computer services company which compiled the content of, and distributed compact discs to customers in the IT industry. They were in occupation at the material date at a rental of £38,500 per annum with the landlord remaining responsible for external repairs and insurance. Subsequently, in 2002, MAPS went into liquidation but one of the staff purchased the business from the receiver and continued to trade as ISL. That firm was then acquired by XKO, a nationally based IT company who, until 31 March 2005 continued to occupy part only of the building at a rental of £6,269 per annum, exclusive of VAT. As at the date of the hearing, the hereditament had been vacated. Background to the Appeal[7]The appeal hereditament was formerly part of the wider complex known as Smithies Mill, a former woollen mill, and was entered in the 2000 rating list as “Smithies Mill, 887 Bradford Road, Batley, WF17 8NN Factory and Premises RV £24,000 effective date 1 April 2000”. This entry was split by a Valuation Office Notice of 27 June 2000 and became(1) “Empty Smithies Mill, 887 Bradford Road, Batley, WF 17 8NN Factory and Premises RV £19,000 effective date 1 April 2000” and(2) Millside House, 887 Bradford Road, Batley, WF17 8NN Offices and Premises RV £29,250 effective date 1 April 2000”. The former has subsequently been further sub-divided as parts of the complex were split up and let, and the latter is the subject of this appeal.[8]The appellant’s proposal form was dated 28 February 2004 and date-stamped as received by the Halifax Valuation Office on 12 March 2004. Despite the fact that the description of the hereditament in the proposal form did not match the entry on the valuation list, and Part 13 of the form was not completed, it was accepted by the VO. The appeal was heard by West Yorkshire Valuation Tribunal on 30 June 2004 and its reasoned decision amending the RV to £26,500 with an effective date of 1 April 2003 was issued on 19 July 2004.[9]Although none of the boxes in Section C, Part 13 of the proposal form were completed, the appellant stated in section 14 “The RV for this building is excessive for a building of this age and size – the value increasing by over many 100s of %. As to what it was on purchase in 1997 before splitting up in smaller units – the building with this RV is unable to be let. The RV is not anyway acceptable in proportion to the rent”. In his evidence to the VT Mr Townend said that the hereditament was incorrectly described as offices and premises, that the 3 assessment was too high, and that he was seeking an RV of between £10,500 and £12,000. The VT determined that the hereditament was, indeed, correctly assessed and said “…. the Tribunal formulated the opinion that a hypothetical tenant fresh to the scene would regard the property as providing good quality office accommodation. The Tribunal is satisfied that the property has been correctly described as offices and premises”. In terms of the RV it accepted that the previous assessment had been “a little on the high side” and based its determination on £51.50 per sq m.[10]There are two issues for my determination:(1) The VOs attempts to limit the scope of the appeal and(2) Whether the RV has been correctly assessed. Appellant’s case[11]Mr Townend’s grounds of appeal before this Tribunal were stated as “(1) New classified (sic) as offices from workshops and manufacturing. No change of planning. (2) New classified exclusive car parking for 14 cars ……” He had not prepared a formal statement of case but he reiterated the evidence he had given before the VT. He said in connection with (1) that the use and occupation by MAPS was not as offices (although the accepted that a small part of the building was used for administrative purposes – principally the reception area) but for manufacturing purposes. It was “modern day” manufacturing in that there were desks and computers rather than such items as machines and lathes, but the building was not, and never had been, used for office purposes. An office, in his view, was somewhere that dealt only with written documentation such as a solicitors or insurance. MAPS main business was the production of CDs. The significant factor in MAPS demise was the heavy rate burden, and Mr Townend produced a copy of the letter that he had received from its managing director advising of the liquidation in March 2002 and stating that far from reducing costs in its move to Millside House, they had increased due to the “exorbitant level of rates charged by Kirklees”.[12]Since 2002, Mr Townend said, only part of the building had been used, and the rent that had been paid by XKO reflected that, and the use to which it was put. No formal lease had been prepared. He said that, in planning terms, the building was still being used for the same purposes as it had always been – before he bought it, it had been used for the manufacture of beds and furnishings.[13]As to the terms of occupation by MAPS, Mr Townend said he did not have a copy of the lease. He had initially agreed a rent with them, and had been happy for them to occupy without any formal documentation. However, MAPS solicitors wanted a lease, and eventually drew one up, but he did not have a copy now. He said that it was strange that the VO was holding out for a RV based on offices when all the other units at Smithies Mill upon which he had issued appeals had either been resolved amicably or withdrawn – and none of those had been assessed as offices. The use of Millside House use was, he stressed, no different from the rest of the complex. 4[14]Regarding his second ground of appeal, Mr Townend said he was at a loss to understand why, if the point had been conceded by the VO, the whole amount of the assessment relating to the parking was not being removed. Valuation Officer’s case[15]Mr Terence Goodall BSc (Est Man) Dip Law FRICS is officer in charge of the Halifax office of the Valuation Office Agency and has been with the VO for 15 years. He said that the VO rejects the attempts by the appellant to broaden the scope of the appeal to the issue of the description of the property when that aspect had not been included in the originating proposal. The jurisdiction of the Lands Tribunal had been considered in that regard in Davey (VO) v O’Kelly [1999] RA 245 and Courtney plc v Murphy (VO) [1998] RA 77. He said that in Davey it was held that the appeal was limited by the originating proposal and that the jurisdiction of the local valuation tribunal and the Lands Tribunal was limited to the issues raised by the proposal giving rise to the appeal. Further, the originating proposal was to be construed by reference solely to that document and the Lands Tribunal could not look outside the proposal and could not have regard to extrinsic material.[16]In Courtney, the ratepayers had appealed against the reduced assessment and the effective date. This was the first time that the effective date became an issue, having not been raised before the valuation tribunal. It was held that the Lands Tribunal may make an order which the valuation tribunal could have made but has no power to make an order which the lower tribunal could not have made, and it was not open to the Lands Tribunal to go further than the valuation tribunal and extend the scope of the appeal or disagreement referred to that tribunal which in turn was limited by the proposals. This case, Mr Goodall said, was subject to the same limitations in that the appellant’s proposal had not made any reference to the description of the hereditament. In any event, he said, the mode and category of use was clearly as an office and premises at the material date and the description is therefore correct.[17]He said that from the VO records it was evident that historically the appeal premises had been given over to various uses; the ground floor was used as “offices and showroom”, the first floor was “cutting up and sewing room, stockrooms and messroom” and the lower ground floor was “general stores”. However, under Schedule 6 of the Local Government Finance Act 1988 Mr Goodall said he was required to consider the use and occupation at the material date – 1 April 2000. By that time the building had been fully refurbished and was let to MAPS. The concept of the rule of rebus sic stantibus (actual state), as applied in rating, had been thoroughly tested by the Lands Tribunal in Scottish and Newcastle Retail Ltd and Another v Williams (VO) [2000] 2 EGLR 171 and the decision had been upheld by the Court of Appeal ([2001] 1 EGLR 157). He explained that, when applying the two limbs of the rebus test (physical changes and mode of use) to the appeal hereditament at the material date, it was evident that they complied: As to physical changes, he said the refurbishment to the current (office) layout and specification was complete, and occupation underway. The specification was, and is, to a good modern standard of office accommodation. As to mode of use, the premises were used as offices by the tenants who were computer consultants. Whilst parts of the lower ground floor were used as a store, this was ancillary to the main use. 5[18]Mr Goodall said that the appellant had claimed that planning permission for office use had not been obtained, and as such it was incorrect to describe the hereditament as offices and premises. This, he said, had also been dealt with in Scottish and Newcastle where, at para 72 of the Court of Appeal judgment Robert Walker LJ said:
“72. Both sides agreed that use classes and classes of permitted development, as determined from time to time for the purposes of town and country planning law, cannot be determinative as to “mode or category of occupation”
. Mr Holgate [counsel for the appellant] made plain that he accepted this only as a matter of law, and that qualification is sensible, because any system of classification for planning purposes must be expected to reflect economic and social realities. But it may be arguable that B1 Use Class is now so wide that it may span more than one mode or category of occupation for rating purposes. I express no view on that”. The fact that planning consents are not material factors in considering mode or category of use was also established in two other Court of Appeal judgments: O’Brien v Secker (VO) [1996] RA 409 and Regent Lion Properties v Westminster City Council [1990] RA 121 and so, Mr Goodall said, there was no question in his mind that the premises were correctly described in the valuation list.[19]As he had not personally seen the appeal hereditament at or close to the material date, Mr Goodall called David Furniss, a referencer with 25 years experience from the Valuation Office who had inspected and measured the building in June 2000. Mr Furniss confirmed that the upper ground and first floors had been refurbished and fitted out as offices, and that they were being used for those purposes at the time of his inspection with desks, chairs and computers in evidence. The lower ground floor was to a much lower standard, with poor natural lighting especially towards the front and these were classified as storage and canteen which were ancillary to the principal use. The appellant accepted that the condition and use of the hereditament was the same in June 2000 as it was at the material date.[20]Turning to the subject of valuation, Mr Goodall said that an analysis of the passing rent agreed with MAPS, adjusted downwards by 7.5% to reflect the fact that the landlord was responsible for external repairs and insurance gave a rent in terms of RV definition of £35,612 pa. Based upon the main useable area of the premises of 496.25 sq m this analysed down to £71.75 per sq m or £6.67 per sq ft. As to comparables, Mr Goodall referred firstly to Wesley House, Huddersfield Road, Birstall WF17 9AZ. This was a large, stone built circa 1750 former Wesleyan Methodist Chapel that had been converted to four floors of offices and was only about 200 metres from the appeal premises. It is set in its own grounds, has central heating and air-conditioning and has exclusive car parking. The assessment on Unit 1 Wesley House which comprises the ground and first floor offices of 549.4 sq m was agreed with the occupier’s surveyors on the basis of £50 per sq m at an RV of £27,470. The upper second and third floors extending to 549.8 sq m and which are let as suites 1 – 17 but are assessed as floors were agreed with the same surveyors at £41.25 per sq m and £33 per sq m respectively to reflect the standard VO allowance for upper floors that have no lift access.[21]916 Bradford Road was a former police station that had been converted and extended to 152.76 sq m ground and first floor centrally heated offices in about 1995. It is within about 100 metres of the appeal property but has recently been further converted to a guest-house. 6 The assessment as offices was appealed, and eventually agreed with the occupier’s agents at £56 per sq m.[22]Braemar, Snelskins Lane, Cleckheaton BD19 3UE is a stone built period house converted and extended to 2 floors of centrally heated offices totalling 368.54 sq m in 1999. It is located 1.5 miles to the north of the town. Appeal withdrawn, and VO assessment accepted at £50 per sq m. First Floor, 280 Whitechapel Road, Cleckheaton, BD19 6HR is a large and attractive Victorian stone built house in its own grounds with parking, and has been converted and extended to provide 218.50 sq m centrally heated offices. There are a total of 3 assessments ranging from £52.50 to £55 per sq m.[23]On the basis of the comparable evidence, Mr Goodall said he was of the view that the rent achieved to MAPS was “quite full, and perhaps reflected town centre levels”. He doubted whether such a rental level could have been achieved again in what was a slow market in a relatively depressed commercial area. In his opinion the tone of values that was apparent for the area was between £50 and £55 per sq m and as such, this supported the figure that had been applied by the VT. However, bearing in mind the concession for the appellant’s second ground of appeal, the car parking, a reduction of £1,000 from the VT’s figure of £26,500 was appropriate. In answer to the appellant’s query regarding the “extra” £191 that had not been removed from the assessment, Mr Goodall said that, in reality, the VT’s figure had been rounded down by £250, and it could also be seen from his valuation below that there had been a further rounding down of £57. He also said that, as far as the comparables were concerned, the existence of on-site parking had not been reflected in the agreed assessments.[24]Mr Goodall’s valuation was: Lower ground floor Store 119.10 sq m £21.25 per sq m £ 2,531 Room 35.00 £42.50 £ 1,488 Canteen 47.30 £42.50 £ 2,010 Ground floor Room 191.90 £51.50 £ 9,883 Kitchen 3.20 £50.00 £ 160 Store 0.80 £50.00 £ 40 First floor Room 174.10 £51.50 £ 8,966 Room 9.30 £51.50 £ 479 Outside Car Park (Reflected) £25,557 Say £25,500 Overall area 580.7 sq m 7 Adjusted ITMS 496.25 sq m Conclusions[25]The first issue is a procedural point - whether, as the VO contends, this Tribunal has jurisdiction to consider and determine the question relating to the description of the appeal hereditament. This attempt by the VO to prevent the appellant arguing the main element of his case is unmeritorious. The reluctance of the Lands Tribunal to accede to technical points of the nature raised by the VO is shown in Galgate Cricket Club v Doyle (VO) [2001] RA 21 where, as will be seen from the extract below, the VO’s arguments were remarkably similar to those raised by Mr Goodall. At para 3 the President, George Bartlett QC, said:
“3. At the outset of the hearing that I held under the Simplified Procedure Mr Doyle took a technical procedural point. Placing reliance on [Courtney] for the proposition that the jurisdiction of the local valuation tribunal on appeal is limited to the issues raised by the proposal giving rise to the appeal, he said that it was not open to the taxpayer to argue the question of rateability as the proposal form did not state this to be a ground of the proposal; and that the Lands Tribunal had no power to order the alteration of the rating list on this ground. This was a surprising argument in view of the fact that before the valuation tribunal he had accepted that the list should be altered so as to reflect the non-rateability of the ground and the pavilion. Moreover, so far from contending that valuation tribunal did not have jurisdiction to consider the question of the rateability of the clubhouse, he had presented his arguments on the question; and the valuation tribunal, for its part, produced a reasoned decision directed entirely to the issue.”
Having dealt with the evidence relating to the proposal and grounds of appeal, the President concluded (at para 6):
“6. …The words quoted are indeed wide enough to encompass the question of rateability, and I can see no reason to limit their scope so as to prevent the ratepayer from advancing a legitimate argument and this Tribunal from ordering the list to be corrected if it finds it to be inaccurate in this respect. Indeed, since it is desirable that inaccuracies in the list should be corrected and since the valuation officer has had sufficient notice of the point, there are strong reasons against adopting such a restrictive approach.”
[26]In the instant case, the valuation tribunal had actually heard argument from the appellant on the question of the description of the hereditament together with statements from the VO (not Mr Goodall, but a Mr Walsh) as to why the premises had been described as they had. They issued a specific determination on that question – that the premises were indeed correctly described in the valuation list, before moving on to deal with the level of assessment. No question was raised by the VO at the lower tribunal in connection with the proposal, and it was only in Mr Goodall’s statement of case to this tribunal that the subject was broached.[27]Mr Goodall’s contention is that the description in the list is determinative of the way the hereditament is to be valued rebus sic stantibus in terms of its use; but there is nothing in the statute or the regulations to this effect. Under the Local Government Finance Act 1988 s 42(4) the rating list must show the rateable value of a hereditament. Under the Non-Domestic 8 Rating (Miscellaneous Provisions) Regulations 1989 reg 2(a) the list must contain a description of the hereditament. There is, however, nothing to suggest that the description shown has any other purpose than that of identification. I can see no reason why it should be determinative of the way the hereditament is to be valued rebus sic stantibus in terms of its use.[28]The ratepayer’s proposal said that the RV was excessive. The issue that arises on it is whether it should be reduced. His grounds of appeal said that he wanted to raise two points – its valuation as offices rather than as workshops, and the effect of the car parking on value. The VO thus had adequate notice of these points, and indeed he was prepared to make a concession in relation to the car parking. Both points were within the scope of the proposal because they went to the question of whether the RV should be reduced. If the appellant was to be successful on the first point, it would clearly be appropriate that the description in the list should be altered, and this the Tribunal could direct the VO to do under the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1993 reg 44(7). As a matter of law, therefore, there is no justification at all for preventing the ratepayer from advancing the point on use.[29]Nevertheless, in determining what the premises were being used for at the material date, in the light of the physical changes that had been made to them when they were refurbished in 1999, I find the VO’s evidence and that of Mr Furniss persuasive. It was also clear from my inspection that the principal rooms at upper ground and first floor had been extensively refurbished to a reasonable office standard. The suspended ceilings with Category II lighting, skirting trunking, carpeting and air conditioning cassettes all point to office use. Furthermore, and of even more importance in deciding the question of use, was the rental level agreed by the company that was in occupation at 1 April 2000. That was, as described by Mr Goodall, and correctly in my view from consideration of the comparables, a “full” office rent. I do not believe that MAPS would have contemplated paying an office rent if its business was not office based. As Mr Townend pointed out in evidence, there were a number of other manufacturing and workshop premises available in the immediate vicinity at Smithies Mill at rents which were very significantly lower than that which was agreed on Millside House. If MAPS had wanted a pure manufacturing facility with just an ancillary office, they could have taken one of those. It did not appear to me that MAPS had been in the business of physically manufacturing CDs, but were creating the content to be transferred onto blank disks which were subsequently mailed to their clients. In my judgement, such a process could not be considered ‘manufacturing’.[30]As to the question of planning, the effect of 1987 Use Classes Order tends to be that the rental value of B1 premises will be the same whether the use falls within (a), (b) or (c) although this will not always be the case. But, even if evidence of RVs for manufacturing had been adduced and proved lower levels, it is clear from my comments above that I consider the hereditament had been refurbished as offices and was being used for that purpose at the material date.[31]I now turn to the comparables. All of those produced related to conversions to offices from period houses or, in one case, a large former Methodist chapel. They all had central heating and, to varying extents, on site exclusive parking. Whilst Mr Goodall said, in conceding the appellant’s second issue, that none of those premises had separate assessments 9 for their parking provision, it does seem to me that the benefit of such a facility would be reflected in the rent that a prospective tenant would be prepared to pay. The central heating provided in the subject premises was incorporated into the air conditioning cassettes that were only located in the main office areas and, in my view, this will be very much less effective than a traditional, radiator based system.[32]It was clear from the comparable assessments that, at the material date, the general level of RV for good quality offices was £50 - £55 per sq m, but bearing in mind the rather basic facilities within the subject premises, and the lack of exclusive on-site parking, I would expect the assessment here to reflect that. In my judgment a figure of some 10% less is appropriate for the office areas, with the other areas accordingly reduced by the same amount.[33]I therefore direct that the assessment of the appeal premises in the 2000 rating list shall be altered to rateable value £23,000 in accordance with the following valuation: Lower ground floor Store 119.10 sq m £19.13 per sq m £ 2,278 Room 35.00 £38.25 £ 1,339 Canteen 47.30 £38.25 £ 1,809 Ground floor Room 191.90 £46.35 £ 8,895 Kitchen 3.20 £45.00 £ 144 Store 0.80 £45.00 £ 36 First floor Room 174.10 £46.35 £ 8,070 Room 9.30 £46.35 £ 431 Outside Car Park (Reflected) £23,002 Say £23,000[34]The appeal is therefore allowed in part – whilst the hereditament was in my judgment correctly described and the assessment compiled on the right basis, the RV was too high. The appeal was heard under the Simplified Procedure and, there being no exceptional circumstances, I make no award as to costs. DATED 3 May 2005 10 (Signed) P R Francis FRICS 11