“In the context of a power station the words mothballing, or preservation apply to those techniques which could be applied to the plant in order to prevent or reduce deterioration when out of service.’. When market economics are not favourable, the option to mothball the plant can be applied, but at this time it may not be known for how long the plant may be required to remain in the preserved state. Basically, there are two categories or options for preservation, namely short-term preservation, and long-term preservation. The techniques used for each option can vary significantly, together with the timescales required to successfully mothball the plant and reinstate the plant back to operational condition. These returns to service timescales can also vary significantly between technologies (Coal, CCGT or OCGT). Basically, the protection of plant from condensation, corrosion, and seizure due to lack of intended use, is primarily a matter of good engineering practice and good housekeeping.”
“Short term preservation can be classed as a period of 3-12 months and typically the boilers/HRSGs are retained full of de-oxygenated water. The access doors on the steam turbine and condensers are removed to allow dehumidifiers to be installed which circulate dry air through the airspaces to prevent corrosion. Station staff are normally retained and are given alternative dates principally relating to plant preservation. The plant being out of service also provides the opportunity to carry out more routine or planned maintenance that would otherwise require[s] an individual unit or station outage. Due to the short term nature of the plant preservation, emphasis is required at all times on the ability for a rapid return to service of the plant, in order to capitalise on changes in market economics. The ability to achieve a successful and rapid return to services relies on the station having a detailed recommissioning plan which includes the cancellation of safety documentation, proof testing of safety systems and running of essential lubrication systems to allow hand turning or machine barring.”
“Long term preservation techniques (>12 months) are far more detailed than short term preservation techniques and require the boilers/HRSGs to be fully drained and dried out. Main generators are to be stored under dehumidified air and large electrical motors are to be kept dry using in built heaters where installed. Small high risk components should be removed and stored under clean dry conditions. Live water systems will require protecting against freezing by applying insulation or trace heating. External surfaces normally covered by insulation where rainwater, condensation or leakage could lead to concealed corrosion occurring. Where advanced information on the long term preservation (>1 year) is available, it is common to reduce the number of site staff down to a minimum level. These staff are then given preservation inspection and maintenance duties. One major disadvantage of this approach is the timescales required to recruit and train new operations staff, when the plant is required to return to service.”
“Power Station & Premises RV£5,340,000 with effect from1 April 2010 .”
“This appeal raises a single issue: what is the mode or category of occupation of a property which, while formerly used as a power station, is at the material day not used for and physically incapable of generating electricity, as a result of long-term mothballing works?”
“(1) The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non domestic rating shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on these three assumptions—. (a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made; (b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic; (c) the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above.” (a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made; (b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic; (c) the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above.”
“(6) Where the rateable value is determined with a view to making an alteration to a list which has been compiled (whether or not it is still in force) the matters mentioned in sub-paragraph (7) below shall be taken to be as they are assumed to be on the material day.”
“(7) The matters are— (a) matters affecting the physical state or physical enjoyment of the hereditament, (b) the mode or category of occupation of the hereditament, (c) the quantity of minerals or other substances in or extracted from the hereditament, (cc)the quantity of refuse or waste material which is brought onto and permanently deposited on the hereditament, (d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and (e) the use or occupation of other premises situated in the locality of the hereditament.” (a) matters affecting the physical state or physical enjoyment of the hereditament, (b) the mode or category of occupation of the hereditament, (c) the quantity of minerals or other substances in or extracted from the hereditament, (cc)the quantity of refuse or waste material which is brought onto and permanently deposited on the hereditament, (d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and (e) the use or occupation of other premises situated in the locality of the hereditament.”
“Just as the tenant is hypothetical, so also is the rent; it is only used as a standard which must be examined without regard to the actual limitation of the rent paid by virtue of covenant as between landlord and tenant, and also, as I regard it, to statutory restrictions that may be imposed upon its receipt. From the earliest time it is the inhabitant who has to be taxed. It is in respect of his occupation that the rate is levied, and the standard in the Act is nothing but a means of finding out what the value of that occupation is for the purposes of assessment. In my opinion, the rent that the tenant might reasonably be expected to pay is the rent which, apart from all conditions affecting or limiting its receipt in the hands of the landlord, would be regarded as a reasonable rent for the tenant who occupied under the conditions which the statute of 1869 imposes.”
“It has long been recognized, as a matter of principle in rating law, that to make actual rentals the basis of rateable value would contravene the fundamental principle of equality, both between the rate contributions from individual ratepayers, and between the totals of rate contributions levied in different contributory rating areas. In effect the result would be to make the amount on which the occupier of property is liable to pay rates dependent in many cases on the contractual relationship between a particular landlord and tenant, whereas it is dependent in all cases on a statutory direction applicable on the same principle to all hereditaments, and intended to insure equality of treatment as between the occupiers of rateable property and the rating authority.”
“12 For many years and long before Parliament enacted Schedule 6 to the 1988 Act, it had been an established principle of rating law that a hereditament is to be valued as it in fact existed at the material day. This principle, which in the past was described by the Latin phrase, rebus sic stantibus (i e as things stand), and is often referred to as “the principle of reality” or “the reality principle”, was stated by Lord Buckmaster in Assessment Committee of the Metropolitan Borough of Poplar v Roberts[1922] 2 AC 93 ,103, thus: “although the tenant is imaginary, the conditions in which his rent is to be determined cannot be imaginary. They are the actual conditions affecting the hereditament at the time when the valuation is made.”
“The hypothetical tenant was assumed to be a tenant from year to year with a reasonable prospect of continuing in occupation; but the hypothetical rent which the tenant could give was estimated with reference to the hereditament in its actual physical condition (rebus sic stantibus), and a continuance of the existing state of things was prima facie to be presumed.” “although the tenant is imaginary, the conditions in which his rent is to be determined cannot be imaginary. They are the actual conditions affecting the hereditament at the time when the valuation is made.” “The hypothetical tenant was assumed to be a tenant from year to year with a reasonable prospect of continuing in occupation; but the hypothetical rent which the tenant could give was estimated with reference to the hereditament in its actual physical condition (rebus sic stantibus), and a continuance of the existing state of things was prima facie to be presumed.”
“13 In Almond v Ash Brothers & Heaton Ltd[1969] 2AC 366 , in which the House of Lords held that the Lands Tribunal had been correct to take account of an existing demolition order in assessing the hypothetical rent, Lord Pearce stated, at p 382: “one must assume a hypothetical letting (which in many cases would never in fact occur) in order to do the best one can to form some estimate of what value should be attributed to a hereditament on the universal standard, namely a letting “from year to year”
“The principle that the property must be valued as it exists at the relevant date is an old one . . . The principle was mainly devised to meet, and it does deal with, an obvious type of case where the character or condition of the property either has undergone a change or is about to do so: thus, a house in course of construction cannot be rated: nor can a building be rated by reference to changes which might be made in it either as to its structure or its use.”
“14 The reality principle continues to be a fundamental principle of rating and is manifested in Schedule 6 to the 1988 Act, in particular in paragraph 2(6)(7). In Scottish & Newcastle Retail Ltd v Williams [2001] LLR 732 the Court of Appeal upheld the decision of the Lands Tribunal that the reality principle meant that it was assumed that a hereditament was in the same physical state as upon the material day, save for minor alterations, and could be occupied only for a purpose within the same mode or category of purpose as that for which it was occupied on the material day. Thus in that case two public houses in a shopping centre had to be valued as public houses and not as retail units.”
“71. It may be useful to note some situations in which the second limb of the rule, understood in this way, does not assist a ratepayer in obtaining a lower valuation. It does not assist a ratepayer who leaves half of his business premises empty, or otherwise runs his business in an half-hearted or inefficient manner; that does not go to the category of the business occupation, but to the way the particular business is run. Nor does it cast any doubt whatsoever on the decision in Robinson Brothers (Brewers)[1937] 2 KB 445 , that a brewer interested in acquiring a tied house should be regarded as in the market for an hypothetical tenancy of a free house; again, that goes not to the category of business for which the premises are occupied, but to the way the business is run.”
“74. Turning to the first limb of the rule, I consider that the Lands Tribunal was clearly right, following Fir Mill, to allow for the possibility of minor alterations in the hereditament on the occasion of its hypothetical letting. The absurdity of any other view appears vividly from the circumstances of these appeals, with numerous very well-known retail chains seeking to establish their identities and brand loyalties by distinctive fascias and fittings installed in uniform, featureless units. The first limb cannot be applied so rigidly as to prevent (for instance) Burger King being considered as a possible bidder in competition with McDonald’s (which occupies a large unit just opposite the City Fayre/City Duck).”
“In our opinion only two assumptions are permitted. The first assumption is that the hereditament is vacant and to let - vacant in the physical sense and in the sense that the existing business has ended and any process machinery has been removed. The second assumption - and here we accept counsel for the respondents‟ second proposition - is that the mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house; a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory. Some alteration to an hereditament may be, and often is, effected on a change of tenancy. Provided it is not so substantial as to change the mode or category of use, the possibility of making a minor alteration of a non-structural character, which the hypothetical tenant may be assumed to have in mind when making his rental bid, is a factor which may properly be taken into account without doing violence to the statute or to the inference we draw from the authorities.”
“152. The conclusions that we have come to can be stated shortly. The rebus sic stantibus rule identifies for the purpose of valuation the hereditament, the physical changes which may be made to it, and the mode or category of occupation. The rule rests on the concept that what has to be determined in rating is the value to the occupier of his occupation of the hereditament, measured by the rent on an assumed yearly tenancy. In carrying out a valuation under the rating hypothesis the following assumptions are to be made about the hereditament: (a) That the hereditament was in the same physical state as on the material day. Alterations which the hypothetical tenant might make to the hereditament may be taken into account if, taken overall, they are minor. All other prospective alterations to the hereditament are to be ignored. (b) That the hereditament could only be occupied for a purpose within the same mode or category of purpose as that for which it was being occupied on the material day. Any prospective change of use outside that mode or category is to be ignored. In determining to what mode or category a particular use belongs it is the principal characteristics of the use and the methods of valuation commonly applied by rating surveyors to which regard must be had; and shops, offices and factories serve as examples. Some uses may not fall within any such broad category, however, and are to be regarded as sui generis. Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. There is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation.”
“73. I do respectfully differ from the Lands Tribunal as to its view (para 152(b) of the decision) that in determining mode or category of occupation regard should be had to “the methods of valuation commonly applied by rating surveyors”
“The second assumption - and here we accept counsel for the respondents‟ second proposition - is that the mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house; a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory. Some alteration to an hereditament may be, and often is, effected on a change of tenancy. Provided it is not so substantial as to change the mode or category of use, the possibility of making a minor alteration of a non-structural character, which the hypothetical tenant may be assumed to have in mind when making his rental bid, is a factor which may properly be taken into account without doing violence to the statute or to the inference we draw from the authorities.”
“205. The mode or category of occupation as defined by the VTE and the respondent council is itself of a specialised nature and it is necessary to be prudent about introducing further subdivisions. There is a risk of ending up with highly specialised, relatively small groupings of property and the grounds upon which the subdivision is advanced may not be sufficiently clear or coherent. The factors put forward by the valuation officer at para 202(i), (iii) and (iv) above may be found in properties belonging to each of the two sub-categories for which he contends. In our judgment it is more realistic and preferable for the purpose of applying the rating hypothesis in this appeal to recognise that there is a broader, single mode or category containing a range of properties rather than culminating that there are narrower categories which are self-contained.”
“50. The differences in the conduct of the business of professional football between leagues are matters of degree. The league makes a difference, but it does not change the fact that the stadium is occupied for the purpose of playing football commercially. The idea of a league as a category is of course selective because it is easy to spot, and clearly labelled. Ms Wigley argued that because there is a limited number of relegations and promotions each season there is no danger of floodgates effect; but the argument for regarding a league as a category would itself require groups of clubs within the league, or even single clubs, to be regarded as different categories because the earning power of, for example, Manchester United is likely to be greater than that of, for example, Bournemouth AFC. On that basis the number of modes or categories is not limited to the four leagues but is unpredictably wide, which goes against the principle that the rating system uses broad categories of use rather than the use of the individual occupier. In Williams the Lands Tribunal [2000] RA 119 said at paragraph 111: “….it is thus the principal characteristics of the actual use that are relevant – those features that reflect the general purpose of the use – rather than the particular occupations of the individual occupier.”
“Keadby was one of the earlier generation CCGT’s built in the UK and is therefore relatively inefficient in comparison with more modern plants. Keadby was one of the lower stations in the “merit order” of gas fired power stations. In other words, it would have been one of the last stations to come online following improved market conditions and the first to be switched off when market conditions worsen.”
“71. It may be useful to note some situations in which the second limb of the rule, understood in this way, does not assist a ratepayer in obtaining a lower valuation. It does not assist a ratepayer who leaves half of his business premises empty, or otherwise runs his business in an half-hearted or inefficient manner; that does not go to the category of the business occupation, but to the way the particular business is run. Nor does it cast any doubt whatsoever on the decision in Robinson Brothers (Brewers)[1937] 2 KB 445 , that a brewer interested in acquiring a tied house should be regarded as in the market for an hypothetical tenancy of a free house; again, that goes not to the category of business for which the premises are occupied, but to the way the business is run.”
“It seems to us, however, that in the case of a contaminated building which no longer contains identifiable radioactive materials which require to be managed as such, the situation is in principle no different from that of buildings awaiting or in the course of demolition, or for that matter alteration, as in Arbuckle Smith, or construction. It could be said of the appellants in Arbuckle Smith that their possession of the subjects for the purposes of preparing them for the intended business use was of value to them, but their Lordships did not accept that that was such a use as to amount to rateable occupation. The idea that entering the premises for the purpose of inspection, cleaning or ordinary maintenance might, as a matter of degree, amount to occupation was rejected by Lord Reid. No doubt the maintenance regime here is something out of the ordinary, but we do not see any difference in principle. Again, in the present case, there was apparently actually some positive benefit in delaying the work required to make a building safe and then demolish it. However, delaying, even for some commercial reason, the demolition of buildings would not, as it seems to us, change the character of the occupation of the buildings. It seems to us that the buildings which are simply in that situation are not in rateable occupation. The case seems to us in that respect to be similar to the construction site case, Dunbarton Assessor v McKenzie: the contractors were making beneficial use of certain buildings on the site but not of the buildings awaiting or in the course of demolition. One might imagine a chemical works closed down for economic reasons, with some buildings perhaps in the course of demolition and others awaiting demolition but meantime requiring care and maintenance of contaminated structures. A decision perhaps to “mothball” some or all of the buildings for future use would not alter the position.”
“To come to the case before us, the business of a warehouseman need not involve the actual presence on the premises either of the warehouseman himself, or of any representative, or of any movable chattels. If he has the necessary appliances ready for use when the demand for storage comes, he is in a position to do business to which the physical occupation of the premises is indispensable. If he holds himself out to let storage space not involving a demise of the whole warehouse, and, by securing exclusive control over the premises, has put himself in a position forthwith to give the accommodation required, is he to be deemed as not the occupier until some customer has been found to deposit goods for storage? And when he has secured customers, and his warehouse has afterwards again become empty, is he to be deemed as having ceased to occupy? I cannot think that this can be so.”
“It is important to remember, in dealing with questions of liability to pay rates, that occupation, which is the basis of liability, necessarily varies with the nature of the rateable subject-matter. The acts necessary to establish occupancy of a dwelling-house may be very different from those which might be required to establish occupation of a non-habitable hereditament. It is, I think, clear from a comparison of many authorities that the intention of the alleged occupier in respect to the hereditament is a governing factor in determining the question whether rateable occupancy has been established.”
“Thirdly, the question whether the use of one section is necessary to the effectual enjoyment of the other depends not on the business needs of the ratepayer but on the objectively ascertainable character of the subjects. The application of these principles cannot be a mere mechanical exercise. They will commonly call for a factual judgment on the part of the valuer and the exercise of a large measure of professional common sense. But in my opinion they correctly summarise the relevant law. They are also rationally founded on the nature of a tax on individual properties. If the functional test were to be applied in any other than the limited category of cases envisaged in the second and third principles, a subject (or in English terms a hereditament) would fall to be identified not by reference to the physical characteristics of the property, but by reference to the business needs of a particular occupier and the use which, for his own purposes, he chose to make of it.”
“51. We have to agree with the VTE’s pithy summary: football is football. A league is not a mode or category of occupation.”
“10.1 It is agreed that. If the mode or category of occupation has not changed and the hereditament remains a gas fired power station that the buildup of silt within the cooling water culverts and the riverbank adjacent to the cooling water intake pipes is a matter of repair and therefore should be ignored for the purposes of the valuation. The mothballing works undertaken on site would also be disregarded on the basis it comprised minor non-structural works to rateable assets or work to non-rateable assets. and If the mode or category of occupation has changed to that of a power station in long term preservation that the presence of silt preventing an alternative use as an operational power station is an essential feature of the hereditament and the valuation should reflect this as well as the mothballed status of the hereditament.”