Part 2 - Rental Evidence
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
Executive Summary
Regulation 17(SI 2009/2269) Notices [England], Regulation 48 (SI 2023/350) and Regulation 31 Notices (SI 2005/758) [Wales], using rental evidence at Tribunal, using stamp duty evidence, service of notice, form to use, information required in a Reg 17 (SI 2009/2269) [England] / 48 (SI 2023/350) / 31 (SI 2005/758) 31 [Wales] notice.
Reg 17 (SI 2009/2269) [England] / 48 2023 (SI 2023/350) / 31 (SI 2005/758) 31 [Wales] Hereditaments to be specified in notice, Hereditaments outside the Statutory VO area, rights of other parties - counter-notice under Reg 17(6) (SI 2009/2269) [England] or Reg 48 (6) (SI 2023/350) / Reg 31(4) (SI 2005/758) [Wales] Parties requesting to see rents on other specified hereditaments , viewing hardcopy documents, documents not held in hardcopy, viewing evidence outside the VO area. Documents containing information to be produced, reg 17 (SI 2009/2269) counter notice, verbal requests, misuse of Information, rental evidence at UT.
Relevant Legislation & Practice Statements
(i) Paragraph 5 of Schedule 9 to the Local Government Act 1988 (request of information)
(ii) Commissioners for Revenue and Customs Act 2005
(iii) England - Reg 17, The Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 (SI 2009/2269)
(v) Wales Reg 48, Non-Domestic Rating (Alteration of Lists Appeals) (Wales) Regulations 2023 (SI 2023/350)
(vii) Consolidated Practice statement - Valuation Tribunal Service
(vii) 2C Standard Directions Rating 2023 onwards - Valuation Tribunal Wales
1.1 Introduction
This section covers the use of in proceedings at Valuation Tribunals and the Lands Chamber of the Upper Tribunal which has been derived from Forms of Return (FORs) or other documents and SDLTs.
Formal procedures are provided for in the legislation, but the existence of the covering legislation permits discussion during negotiations of rental evidence derived from FORs and SDLTs.
The VO and other parties may agree the rental evidence prior to the service of the Reg 17 (SI 2009/2269) notice [England] or Reg 48 2023 (SI 2023/350) Reg 31 (2005/758) notice [Wales].
In the case of Upper Tribunal appeals it is expected that the expert witnesses will have prior agreed all facts relating to comparable evidence and thereby by inference the rental evidence to be included.
1.2 Statutory Provisions
Paragraph 5 of Schedule 9 to the Local Government Act 1988 enables a VO to serve a notice on a person who is an owner or occupier of a hereditament requesting him to supply such information as is required by the VO for the purpose of carrying out the VOs statutory functions imposed by the Act.
1.3 Use of Stamp Duty Land Tax Evidence
Section 17 of the Commissioners for Revenue and Customs Act 2005 enables the VO/LO to use SDLT information in relation to Rating and Council Tax matters;
(1) Information acquired by the Revenue and Customs in connection with a function may be used by them in connection with any other function.
(3) In subsection (1) “the Revenue and Customs” means—
(f) the Commissioners of Inland Revenue (or any committee or staff of theirs or anyone acting on their behalf)
1.4 Confidentiality
Sect 18 of the Commissioners for Revenue and Customs Act 2005
(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.
(2) But subsection (1) does not apply to a disclosure—
(a)which—
(i) is made for the purposes of a function of the Revenue and Customs, and
(ii) does not contravene any restriction imposed by the Commissioners,
2.1 Rental Evidence prior to a hearing
2017 List (and later lists) England
The CCA procedures set out the requirements for exchange and discussion of evidence during the Challenge stage as new evidence at Appeal stage will only be permitted in limited circumstances (see section 6 Proposals- 2017 appeals England). Reg 17 (SI 2009/2269) notices should be issued during the Challenge stage.
2010 List (and earlier) England and 2017 List (and earlier) Wales
Appellants or their representatives should be given the opportunity to fully explain their grounds for believing the assessment to be incorrect during the discussion period.
Where professional representatives or ratepayers make an appropriate effort to discuss the proposal before target date then proportionate rental evidence in support of the VO’s view may be disclosed and discussed prior to the service of a Regulation 17 (SI 2009/2269) [England] / Regulation 31 (SI 2005/758) [Wales] notice.
Rental evidence should no longer be disclosed as a matter of course at the start of the discussion period.
Upper Tribunal hearings
Where an appeal is made to the Lands Chamber of the Upper Tribunal it is usual for both parties to the appeal to agree the details of the rental evidence to be spoken to before the hearing (SI 2009/2269).
2.2 Reg 17 Requirements & Notice -England
General
Regulation 17 of The Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 (SI 2009/2269) enables the VO to introduce to the tribunal proceedings information supplied in pursuance of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] and any land transaction supplied via a SDLT provided notice of this has been given to the Appellant. (Reg 17(3)(b) (SI 2009/2269))
Regulation 17(4)(a) (SI 2009/2269) sets out the procedure for so doing and states that 2 weeks notice must be given by the VO of his/her intention to refer to rental evidence at VT.
Rating list – 2017 and 2023 England
Under the CCA process all rental evidence should have been disclosed and exchanged prior to the decision notice being issued and it should be Reg 17 (SI 2009/2269) compliant. i.e. the requirements for Reg 17 (SI 2009/2269) Notice should have been met before the issue of the Decision Notice.
Once an appeal has been submitted to the VTE then the VO has 4 weeks to serve a notice on the Tribunal and Appellant if it is believed that the correct evidence or information provided under Reg 9 (NDR (Alteration of List and Appeals)(England) (Amendment) Regulations 2017 have not been complied with. (See Section 6 Part 8 CCA) This would include any errors or missing data in respect of rental evidence included in the Decision Notice.
Rating Lists before 2017 England
Whilst the statutory requirement is 2 weeks the Valuation Tribunal England [VTE] have directed in its Consolidate Practice statement PS2(b) - that re Regulation 17(3) evidence- that 8 weeks’ notice must be given before a hearing where Reg 17 (SI 2009/2269) rental evidence is to be relied on. Although the statutory requirement is 2 weeks, the VO should follow the VTE guidance of 8 weeks’ notice.
Regulation 17(4) provides that the VO must ensure that:-
(a) not less than 2 weeks prior to the hearing serve notice or every other party to the proceedings specifying the information to be used and the hereditament(s) to which it relates; and
(b) any party on whom such a notice is served and who has given the VO at least 24 hours’ notice of his intention to do so, has been permitted by the VO to inspect and take extracts (not photocopies) from the documents or other media on which the information is held.
The Regulation 17 (SI 2009/2269) notice served must provide in detail the nature of the evidence the VO intends to adduce.
As the parties have the right to inspect any document to which reference is made in the notice it will not be necessary to quote every entry verbatim but details, at least in summary form, of each of the statements of fact on which the VO intends to rely should be given.
2.3 Reg 48 Requirements -Wales
Regulation 48 of the Non-Domestic Rating (Alteration of Lists Appeals) (Wales) Regulations 2023 (SI 2023/350)
enables the VO to introduce to the tribunal proceedings information supplied in pursuance of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] and any land transaction supplied via a SDLT provided notice of this has been given to the Appellant. (Reg 48(4))
Regulation 48(5)(a) sets out the procedure for so doing and states that 3 weeks’ notice must be given by the VO of his/her intention to refer to rental evidence at VT.
2.4 pre 2023 Rating List Reg 31 (SI 2005/758) Requirements - Wales
Regulation 31 of the [Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2005 (SI 2005/758 W63 (https://www.legislation.gov.uk/wsi/2005/758/contents/made) again restricts the use of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] evidence unless proper notice has been given, in Wales this is 3 weeks before the Tribunal hearing date.
Note there is no requirement in Wales to give notice of SDLT information to be used in connection with a rating appeal.
In order that documents containing information may be used as evidence, Regulation 31(3) (SI 2005/758) provides that the VO must ensure that:-
(a) not less than 3 weeks in Wales prior to the hearing serve notice or every other party to the proceedings specifying the information to be used and the hereditament(s) to which it relates; and
(b) any party on whom such a notice is served and who has given the VO at least 24 hours’ notice of his intention to do so, has been permitted by the VO to inspect and take extracts (not photocopies) from the documents or other media on which the information is held.
The Regulation 31 (SI 2005/758) notice served must provide in detail the nature of the evidence the VO intends to adduce.
As the parties have the right to inspect any document to which reference is made in the notice (Reg 31(3)(c)) (SI 2005/758) it will not be necessary to quote every entry verbatim but details, at least in summary form, of each of the statements of fact on which the VO intends to rely should be given.
2.5 Information which may be used as evidence
Information supplied to VO by BAs
By virtue of Regulation 17 (3)(a) (SI 2009/2269) [England] and Regulation 48(4) (SI 2023/350) / Regulation 31(1) (SI 2005/758) [Wales] information supplied in pursuance of Regulation 24 (SI 2009/2268) [England] and Regulation 61 (SI 2023/350) / Regulation 42 (SI2005/758) [Wales], which relates to information to be supplied to VOs by billing authorities, or Para 5 of Schedule 9 to LGFA 1988 is admissible as evidence in valuation proceedings.
Trade information
The regulations do not preclude the use of information supplied in respect of hereditaments valued having regard to their trading potential as was the position under previous legislation.
VOs are reminded that in order to facilitate obtaining information various Codes of Practice have been entered into (e.g. Public Houses). The importance of not disclosing sensitive trade information other than in accordance with the codes cannot be over emphasized, and the Regulation 17 (SI 2009/2269) / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] procedure should only be used in the last resort.
When dealing with appeals in respect of hereditaments valued having regard to their trading potential notice must not be served as a matter of course. Traders regard trading information as sensitive and VOs should respect this and only serve notice when it is essential because negotiations have been exhausted and the VO considers it imperative to produce evidence of rent/trade to support the valuation.
The decision to issue a Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] notice quoting trading information should be made after consultation with the facilitator of the relevant class co-ordination team.
2.6 Documents to be treated as containing information
Information supplied in pursuance of Para 5 of Schedule 9 to the LGFA 1988 can be in the form of:-
(a) FORs designed for the purpose and containing a reference to the Act which was operative at the time the forms were issued.
(b) a reply in writing to the VO together with a copy of the VOs letter, provided the request for information contains a reference to Para 5 of Schedule 9 to the LGFA 1988 (or similar previous enactment if appropriate) together with a statement of the purposes for which the information is requested.
(c) a letter to the VO referring to a FOR recently made and giving additional information in relation to that specific return.
In cases of doubt the VO should submit a report outlining the circumstances and enclosing copy documents to the Litigation & Settlement Review Panel via the Litigation & technical Policy Team together with a copy to the VO
2.7 General Policy - Use of Rental Evidence
The decision to use documents containing information under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] rests with the VO and, unless FORs or other documents are introduced into the proceedings by the VO other parties have no rights under the regulation. No action should be taken which might lead to a suggestion that VOs are taking unfair advantage of this provision.
During a post revaluation period the use of rental evidence will generally be necessary even after some assessments have been subject to Valuation Tribunal decisions. Once levels have been firmly established and accepted by the VT the VO may be able to rely upon comparisons of assessments without having to resubmit rental evidence to the VT in individual cases.
Appeals to the Lands Chamber of the Upper Tribunal are de-novo hearings and it will usually be necessary to introduce rental evidence before the Tribunal, even where reliance was placed on comparisons before the VT for a much longer post revaluation period.
3.1 Formal Documents
Notices served by and on the VO under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] should be treated as formal documents and should be available for inspection by the VT at the hearing.
3.2 Regulation 17 (SI 2009/2269) Notices England
If rental evidence derived from a form of return is to be used, the “parties” must be notified of that intention not less than 2 weeks before the date of hearing, (Reg 17 (3)(4)(a) (SI 2009/2269)).
Under the CCA process, the Reg 17 (SI 2009/2269) Notice should be incorporated into the exchange of evidence during the Challenge period and before the issue of any Decision Notice.
Regulation 17 (SI 2009/2269) also enables the VTE to give directions as to which issues require evidence, the nature of the evidence required and whether the parties are permitted or required to give expert evidence. (Reg 17(1) (SI 2009/2269)).
The VTE may admit evidence or exclude evidence where it was not provided within the time allowed by a direction. (Reg 17(2) (SI 2009/2269)).
It is good practice for the Regulation 17 (SI 2009/2269) Notice to identify:
(i) The document (s) which contain the information
(ii) The hereditament (s) to which the document (s) relate
(iii) The name and address of the person providing the information
(iv) A summary of the lease terms including the rent, dates of rent reviews and the repairing obligations.
3.3 Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) Notices Wales
If rental evidence derived from a form of return is to be used, the “parties” must be notified of that intention not less than 3 weeks before the date of hearing. (Reg 45(5) (SI 2023/350) / Reg 31(3)(a) (SI 2005/758)).
Pre 2023 Rating List - The Regulation 31 (SI 2005/758) Notice requires more information than in the past and should be served as early as possible in the settlement process.
The Regulation 31 Notice (Reg 31(3)(b) (SI 2005/758)) must identify :
(i) The document (s) which contain the information
(ii) The hereditament (s) to which the document (s) relate
(iii) The name and address of the person providing the information
(iv) A summary of the lease terms including the rent, dates of rent reviews and the repairing obligations.
3.4 Service of Notices
England
Reg 22 The Non-Domestic Rating (Alteration of Lists and Appeals)(England) Regulations 2009 SI 2009/2268 applies in relation to any notice authorised or required to be given for the purposes of Reg 17 (SI 2009/2269).
Wales
Reg 59 The Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) 2023 SI 2023/350 W51.
Reg 40 The Non-Domestic Rating (Alteration of Lists and Appeals (Wales) 2005 [SI] 2005/758 W63.
Service
Reg 22 (SI 2009/2268) [England] and Reg 59 (SI 2023/350) / reg 40 (SI 2005/758) [Wales] provides that a notice may be given or served by:
(a)
(i) Delivering it to the person on whom it is to be served
(ii) Delivering it to any authorised agent.
(b) by send it to the person/agent by electronic communication
(c) Leaving it at, or forwarding it by post to:
(i) the usual or last known place of business of that person, or
(ii) in the case of a company, its registered office, or
(iii) the usual or last known place of business or registered office of any authorised agent
(d) delivering it to some person on the premises to which it relates or, if there is no person on the premises to whom it can be so delivered, fixing it to some conspicuous part of the premises.
(e) Additionally, where a hereditament to which the notice relates is a place of business of the person on whom it is to be served, by leaving it at, or forwarding it by post addressed to that person at, that place of business.
Reg 22(4) (SI 2009/2268) [England] / Reg 59(6) (SI2023/350) / Reg 40(4) (SI 2005/758) [Wales] Any notice to be served on a VO may be served by:
(a) Addressing the notice to the valuation officer for the area in question, without further description (i.e. there is no need to use the GVO’s name or personal title) and
(b) Delivering it or sending it to the VO’s Durham postal centre by post or electronic communication.
For the purposes of serving a notice on the VO the online contact Contact VOA - GOV.UK.
Council Tax Manual Section 3 Appendix 3.5 details the procedures concerning service of documents by post. This contains the Interpretation and Practice Direction from the High Court.
Service of a document is to be taken as:
(a) In the case of first class mail, on the second working day after posting, (i.e. posted a minimum of 2 weeks + 3 working days before VT date).
(b) In the case of second-class mail, on the fourth working day after posting. (i.e. posted a minimum of 2 weeks + 5 working days before VT date).
Working days are Monday to Friday, excluding any bank holiday.
3.5 Notice under Regulation 17 (SI 2009/2269) [England]/ Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] - where VO legally represented.
Where the VO is to be legally represented before the VT, any notice under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] will be signed and served by the HMRC Solicitor managing the case.
3.6 Persons to whom the Valuation Officer’s Notice is to be given.
Notice by the VO under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (SI 2005/758) [Wales] in respect of an appeal to the VT must be given to every other party to the proceedings.
Reg 17 (4)(a) (SI 2009/2269) [England]and Reg 45(5) (SI 2023/350) / Reg 31(3)(a) (SI 2005/758) [Wales] also carries the requirement to notify “every other party to the proceedings”. The following constitute the potential parties to an appeal whose agreement must be gained prior to an appeal being withdrawn or agreed:
(i) The person who made the proposal
(ii) The occupier at the date when the proposal was made
(iii) The ratepayer at the date of agreement
(iv) Any interested person or relevant authority:
(a) Who at the time the proposal was made would have been able to serve the proposal
(b) Who within 2 months of the proposal having been received by the VO notified the VO in writing that they wished to be a party to the proceedings in respect of the proposal
(v) Any other person who has been a ratepayer in relation to the hereditament since the proposal was made and who has notified the valuation officer in writing before the hearing that he or she wishes to be a party to the appeal
In the majority of cases a Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales] notice will only need to be served on the person who made the proposal.
Additional - For 2010 and earlier appeals (England) and 2017 and earlier appeals Wales:
If there is an intention to use comparable evidence or other information at the VT hearing, caseworkers must adhere to the VOA Charter.
This creates an obligation to provide the other parties with a copy of the written evidence that is going to be used at least 7 days before the hearing. The Charter does however stipulate that this will only be possible where the parties have given the VO the information necessary to conclude negotiations in sufficient time.
Inspection of the documents or on screen data must be in person and arranged at a reasonable time around normal Valuation Office opening times.
The information must be inspected at the relevant statutory VO’s office. An appointment may be made to visit any other of the particular VO’s offices in which the appeal hereditament is situated but cannot be at another VO’s location.
3.7 Forms of Notice
Forms VO 7109, Notice of Information to be used in Evidence and VO 7109A Continuation Sheet have been designed for use by the Valuation Officer in giving notice under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales].
The words “used in evidence” in the forms should be taken as an undertaking by the Valuation Officer to produce at the hearing all the returns specified.
Provision is made in the forms for the Valuation Officer to state the number of hereditaments to which the specified documents relate. In this connection:-
(a) on a document which refers to more than one hereditament (eg a return giving details in respect of separately assessed sub-lettings, or a schedule type of document completed by an owner), each entry is a return in itself and consequently only those hereditaments to which reference is to be made should be counted;
(b) the number of hereditaments should be ascertained in accordance with the rating lists at the date of the notice.
Notices will usually be prepared and printed from DSP.
If at the VT hearing any person to whom notice has been given challenges the validity of the notice the VO should seek an adjournment and refer the matter, together with full details, to the Litigation and Technical Policy Team (TA).
3.8 The hereditaments to be specified
Subject property
When a notice is to be issued under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales] and a document is held for the hereditament which is the subject of the appeal, that hereditament should always be specified in the notice.
Selection of hereditaments
When considering which hereditaments to specify in the notice, the Valuation Officer should not select only those hereditaments which provide rental evidence most favourable to his/her case. The notice should include all relevant rental evidence.
The VO at the hearing will need to explain why greater weight should be given to some rents, and these lead to the VO’s valuation conclusion, and why other evidence although pertinent to the appeal is not as relevant to the valuation.
For consideration and weighting of evidence see Lotus and Delta v Culverwell (VO) & Leicester City Council (1976) 239 EG 287 and Specialeyes v Felgate (VO) RA 387 1992 (pre and post AVD evidence).
Hereditaments outside the Statutory VO area
Special care should be taken with regard to the selection of hereditaments outside the area within which the particular VO is responsible for the rating lists since Regulation 17(6)(a) (SI 2009/2269) [England]/ Regulation 48(7)(a) (SI 2023/350) / Regulation 31(4)(a) (SI 2005/758) [Wales] does not give the ratepayer the right to ask for returns not in the possession of the Valuation Officer. The aim must be therefore always to give the VT or Lands Chamber of the Upper Tribunal a fair picture of the relevant rental evidence.
The introduction by a Valuation Officer of rented hereditaments situated outside the valuation area, should be restricted to essential cases. Such introduction of rental evidence over a wider area may be made, having regard to the class of property concerned in the appeal and the other circumstances of the case (e.g. the situation of the appeal hereditament close to another VO’s boundary or the lack of similar rented properties in the locality).
Photocopies of FOR documents, certified by the VO who has the originals in his/her possession can be utilized for this purpose should the appellant wish to see a hardcopy record. Otherwise, the screen record or a PDF of the scanned document can be shown at any office of the VO responsible for the appealed hereditament.
Alternatively, the party may wish to travel to the office where the FOR is located to see the original if the above options are not acceptable.
Selection of evidence
The aim must be therefore always to give the VT or Lands Chamber of the Upper Tribunal a fair picture of the relevant rental evidence if it is being relied on.
In some cases, it will often suffice to produce a reasonable sample of the available rents, provided the sample is representative of the whole. When it is appropriate to refer only to hereditaments in the same terrace or parade as the hereditament under appeal, the Valuation Officer may decide to produce all the available rents.
For hereditaments of a non-repetitive type, rental evidence from a much wider field may have to be selected.
It will always be a matter for local determination to decide the number of rent returns to be produced. As a general guide a proportional response is required to the evidence provided by the proposer, however in some circumstances it may be necessary to increase this number to present a fair picture of the position. It should, however, be remembered that the other party has the right to refer to an equal number of other hereditaments.
Rental evidence in support of shop valuations in main shopping thoroughfares may have to be confined to each part or section of the street considered to have a separate standard of rental value for rating purposes. Nevertheless, it may be appropriate to include rents of other sections of the street where it is considered that such evidence is relevant to the case under appeal and where it is thought likely to assist the Valuation Tribunal or Lands Chamber of the Upper Tribunal in its determination.
Photocopies of FOR documents, certified by the VO who has the originals in his/her possession can be utilised for this purpose should the appellant wish to see a hardcopy record. Otherwise, the screen record or a PDF of the scanned document can be shown at any office of the VO responsible for the appealed hereditament.
Alternatively, the party may wish to travel to the office where the FOR is located to see the original if the above options are not acceptable.
3.9 Documents to be specified
Although it will usually be sufficient to specify only the latest admissible document relating to a particular hereditament, the Valuation Officer may also specify earlier documents.
Where an earlier document differs materially from the latest one but refers to the same tenancy (or period of tenancy), so that there appears to be a mistake in one of them, then the earlier document must be specified also.
The valuer will need to point out the apparent discrepancy to the VT or Lands Chamber and saying upon which return he/she is relying.
It should be borne in mind that, subject to admissibility, the Valuation Officer is not precluded from relying on a document completed after the compilation of the rating list.
Reference should however be made to the case of Smith v Moore (VO) 1972 RA 269 LVC/220/1970 before reliance is placed on the admissibility or relevance of documents received after the date of a VO alteration or to an IP proposal particularly if they are needed as evidence to confirm a “trend” reflected in the valuation.
Where the case is under National Specialist control, the selection of documents will be made in consultation with the Litigation & Technical Policy Team case manager.
3.10 Rights of other parties - Counter-notice under Reg 17(6) (SI 2009/2269)[England] or Reg 48(6) (SI 2023/350) / Reg 31(4) (SI 2005/758) [Wales]
Parties requesting to see rents on other specified hereditaments.
In addition to the right of inspection and making copies (only) of the documents to be used by the Valuation Officer any person to whom notice is given by the Valuation Officer (under Regulation 17(4) (SI 2009/2269) [England] / Regulation 48(5) (SI 2023/350) / Regulation 31 (3) (SI 2005/758) [Wales]) may give notice to the VO under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31 (4) (SI 2005/758) [Wales] specifying other hereditaments as being hereditaments which are comparable in character or are otherwise relevant to the person’s case, and requiring the Valuation Officer to permit access to information on those hereditament’s that is relevant to the appeal proceedings.
The number of other hereditaments requested in the counter notice shall not exceed 4 or if greater, the number specified in the original Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (SI 2005/758) [Wales] notice (Reg 17((7) (SI 2009/2269) [England]), Reg 48(8) (SI 2023/350) / Reg 31(5) (SI 2005/758) [Wales]) NB this is not the same as the number of FORs.
Notice to be given
The person wishing to inspect the documents must give at least 24 hours’ notice and specify which of the documents they wish to inspect. (Reg 17 (4)(b) (SI 2009/2269) [England]) & (Reg 48(5)(b) (SI 2023/350) / Reg 31(3)(c) (SI 2005/758) [Wales])
If the person gives notice under reg 17(6) (SI 2009/2269) [England] or reg 48(6) (SI 2023/350) / reg 31(4) (SI 2005/758) [Wales] that they wish to inspect other comparable documents, they must also give at least 24 hours’ notice.
The 24-hour notice period is statutory but is ‘…not less than 24 hours’ notice…’ and the inspection has to be permitted ‘at any reasonable time’. What is ‘reasonable’ will depend on the circumstances – a request made at 6pm on a Thursday may not be in time to inspect on Friday as the 24 hours would expire after close of business for the Friday and may have to wait until the following Monday. A request to inspect a large number of hardcopy FORs held in different locations may ned a longer period to assemble the documents etc.
Redaction may be appropriate if the FOR contains extraneous material wholly unrelated to the information to be relied on or is personally sensitive.
The person may:-
(a) Inspect the documents or other media in or on which such information is held
(b) Make a copy of information from the documents
There is a statutory prohibition against providing or taking a photograph of the documents, (Reg 17 (4)(b)(ii) (SI 2009/2269) [England]) & (Reg 48(5)(b)(ii) (SI 2023/350) / Reg 31(3)(c) (SI 2005/758) [Wales]).
The recipients also have the right to serve a counter notice at any time prior to the VT hearing allowing them to view, copy and require to be produced at the VT, documents relating to the other hereditaments specified in the counter notice. The hereditaments specified in the counter notice need to be “comparable in character or otherwise relevant to that person’s case”.
The number of hereditaments specified in the counter notice is limited to either 4 or a number equal to the number of hereditaments specified in the VO’s Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/350) [Wales] notice.
It is the number of hereditaments that is restricted and not the number of FORs that may be attached to those properties.
Number of hereditaments and FORs that can be viewed
This right is limited in that the number of hereditaments specified in the notice must not exceed 4 or if greater the number of hereditaments specified in the Valuation Officer’s notice. (Reg 17 (7) (SI 2009/2269) [England]) & (Reg 48(8) (SI 2023/350) / Reg 31(5) (SI 2005/350) [Wales]).
However, the person is entitled to inspect all relevant documents held in relation to those hereditaments so, for example, if the VO notice relates to 1 FOR in respect of each of 4 hereditaments (a total of 4 FORs) and the VO holds 2 FORs in respect of each of the 4 comparable hereditaments in the person’s counter-request (a total of 8 FORs), the person is entitled to inspect all 8 of those documents as well as the 4 in the VO’s notice.
Notice to be in writing
The Valuation Officer should require notice given for the purposes of Regulation 17(6) (SI 2009/2269) [England]/ Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] to be in writing. In cases of ambiguity, the other party should be informed by letter of the action which the Valuation Officer assumes the notice to require.
Hardcopy documents
Where the FOR is held in hardcopy at the location where the inspection is to take place the person may be shown the document and is permitted to make notes from it.
A member of the VO staff must supervise the visitor and remain present at all times that documents are being inspected;
Scanning, photocopying or photographing (e.g. with a camera or mobile phone) documents is not to be permitted; Notes may be made in manuscript or be typed into a laptop or be recorded into a dictaphone etc;
Where the hardcopy is not held at the relevant location, or if the person is content to view the information on-screen, a member of staff may retrieve the relevant information from the database and allow the person to view the screen. Care must be taken to only permit sight of the relevant screens.
Alternatively, printouts from the database may be provided in the same way as for hardcopy original documents. The person is only permitted to take notes from the printouts and must not be permitted to take the printouts away with them.
Viewing evidence outside the VO area
The ratepayer’s right under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) does not extend to inspection or production of returns relating to hereditaments outside the valuation area and which are thus not “in the possession of” the Valuation Officer.
Nevertheless, with respect to hereditaments where a Valuation Officer has included in his own notice properties outside the valuation area, he should afford the ratepayer to whom he has given such a notice a similar right; this right need not be limited to a number of “outside” hereditaments equal to the number of “outside” hereditaments quoted by the Valuation Officer.
Where it is necessary to quote evidence covered by two VOs, it will not be necessary to insist that a visit is made to each VO. A photocopy of the FOR certified by the Valuation Officer to be a true record may be made available for inspection at the other VO’s office or alternatively a scanned record or screen record may be shown to the Appellant.
Alternatively, the Appellant may make an appointment to view the original documentation if they wish to do so at the office where it is held.
Documents not held in hardcopy.
If the required documents are not maintained in hardcopy form then the requirement to produce it is satisfied if a print-out, photographic image or other reproduction of the document which has been obtained from the storage medium used is made available for proceedings and certified by the VO (Reg 17(10) (SI 2009/2269) [England]) & (Reg 48(11) (SI 2023/350) / Reg 31(9) (SI 2005/758) [Wales]).
3.11 Documents containing information to be produced
Counter Notice
The VO must produce, if requested to do so, all the documents containing information in his or her possession which relate to each hereditament specified in a, Reg 17(6) (SI 2009/2269) [England] / Reg 48(6) (SI 2023/350) / Reg 31(4) (2005/758) [Wales], counter-notice.
In practice, ratepayers will usually be interested only in the latest admissible documents, but if the VO is asked to produce documents at a hearing, he or she should have with them all documents which are in their possession in respect of the particular hereditaments.
If the counter-notice is received too close to the hearing for arrangements to be made for the inspection and making of copies if required, the VO should take to the hearing all the documents to which the counter-notice relates and should explain the circumstances to the VT at the commencement of the proceedings.
The VO should not treat any counter-notice received before the date of hearing as too late for these purposes if within reason. Otherwise, the VO’s only course will be to request a postponement of the hearing.
When the VO is informed verbally under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] of the document/returns which are required to be produced at the hearing, the VO should, to avoid any dispute, state in writing the documents which will be produced.
If requested, the VO should produce any earlier document relating to a hereditament specified in the VO’s notice, even where such earlier return has not been specified. Such a request should be treated by the VO as being independent of the ratepayer’s right under Regulation 17(6) (SI 2009/2269) [England / Regulation 45(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales]) to specify other hereditaments.
Regulation 17(6)(a) (SI 2009/2269) [England] / Regulation 48(7) (SI 2023/350) / Regulation 31(4) (a) (SI 2005/758) [Wales] refers to documents “in the possession of the Valuation Officer”. VOs should act reasonably in the interpretation of these words and the phrase is to be considered in relation to:-
‘Hereditaments in the same valuation area as the hereditament which is the subject of an appeal.’
No documents held on requested hereditament
If the VO has no document in his or her possession for a hereditament specified in a counter-notice and which is in the same valuation area as the appeal hereditament, the VO should so inform the other party in writing immediately.
There is no power for the other party to substitute another hereditament for one specified in a counter-notice, either because the information disclosed does not assist the party’s case or there is no document.
VO refusal to produce documents
The VO should not decline to produce for inspection any document held which relates to a hereditament not in the same charging authority area as the appeal hereditament.
Hereditaments in other valuation areas
A VO should refuse to bring into his or her “possession” any form of return concerning a hereditament outside the valuation area, unless such a hereditament has been included in the VO’s own notice. Regulation 17(8) (SI 2009/2269) [England] / Regulation 48(9) (SI 2023/350) / Regulation 31(6) (SI 2005/758) [Wales] however does not permit any person who has served a counter notice to inspect or copy, or require the VO to produce any document, that contains information which does not constitute direct evidence of the rent payable where such information is not reasonably required for the purposes of the relevant proceedings.
The inspection, copying or production of receipts information, trading accounts, and costs relating to specialised buildings or plant and machinery is therefore precluded unless the hereditament cited is comparable to the appeal hereditament or the information is otherwise reasonably required.
An example of this may arise in an appeal against the assessment of a shop unit where a similar shop unit, used as a wine bar, is cited as being a hereditament comparable in character to that person’s case.
Different FORs will have been served on the occupier of the shop (VO 6003) and the occupier of the wine bar (either VO 6010/VO 6011). If full details have been provided VO 6010 and VO6011 will show trading information in addition to rental details, and it would not be appropriate for all this information to be inspected, copied or produced at the hearing of the VT.
Whether the other hereditaments specified in the counter notice are comparable in character, or otherwise relevant to the case of the person who has given the notice, is a question of fact for determination by the tribunal or arbitrator, if appointed (see para 1.17).
3.12 Applications under Reg 17(9) (SI 2009/2269) [England]/ Reg 48(9) (SI 2023/350) Reg 31(7) (SI 2005/758) - VO Refusal to issue notice - consequential Action
Where the VO has refused or failed to comply with a Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(9) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] counter-notice, the person who made the notice may make application to the tribunal (or arbitrator if appointed) for the VO to be directed to comply with the notice.
Upon receipt of a copy of such an application, the VO should immediately email Litigation & Settlement Review Panel via the Litigation & Technical Policy Team a full report of the circumstances including reasons for considering that the provisions of Regulation 17(6) (SI 2009/2269) [England / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] (see para 12) are not satisfied, together with a scanned copy of the application and of all notices in respect of documents served by and on the VO in the proceedings concerned.
The VO should state in the report whether it is considered that legal representation should be given at the hearing of the application.
If, before the receipt of instructions from the Litigation & Settlement Review Panel LSRP), the VO receives notice of hearing of the application, the Litigation & Technical Policy Team should be advised by telephone or by email marked importance ‘high’.
3.13 Misuse of Information
Where, in the opinion of the VO, an attempt is being made to obtain information for purposes other than the proceedings concerned, the circumstances should be reported to the Litigation & Technical Policy Team. Subject to any special instructions that may be given in consequence of such a report, the VO should give effect to all notices.
3.14 References to Rented Hereditaments not in the same Valuation Area as the Appeal Hereditament
References to hereditaments outside the valuation area should be restricted to essential cases but when a VO wishes to produce rental evidence in respect of hereditaments, and based on documents in the possession of another VO, one of the following alternatives should be adopted:-
(a) a schedule of rents may be agreed with the other parties (see paragraph 6). This method is preferable and should always be attempted;
(b) for the purpose of a Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] notice certified copies of documents may be obtained from the VO holding the documents. the VO holding the original document should certify each copy at the bottom as follows:-
“certified a true copy (Signature) Valuation Officer ………………… Valuation Area. Date”
When the copy is taken sufficient space on the copy paper should be left for the certificate.
Where it cannot be avoided, the VO who had possession of documents containing information may be called to give additional evidence of comparison as between the rented properties and the appeal hereditament.
Where, however, the evidence required is of a comparatively minor nature, arrangements can be made for one of the VO’s valuers to attend the hearing and give supporting evidence.
Where a VO has specified in a notice documents obtained from another VO, and the ratepayer also has included in a counter-notice hereditaments outside the valuation area, copy documents relating to the latter hereditaments should be obtained from the appropriate VO.
3.15 Imperfect Documents
An unsigned document is not a document to which Regulation 17 (SI 2009/2269) [England]/ Regulation 48 (SI 20213/350) / Regulation 31 (SI 2005/758) [Wales] applies.
Such a document should, therefore, neither be specified in a notice by the VO nor produced for inspection in consequence of a counter-notice.
No attempt should be made to erase any notes in ink that have been added on any document after its receipt in the office.
The VO should be prepared, on request, to explain any such notes to the VT or Lands Chamber of the Upper Tribunal or to the person to whom the document is produced for inspection. It is emphasised that Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] applies only to documents as originally made by the person required to make them.
If any document to be specified in the VO’s notice, or relating to a hereditament specified in a counter-notice, contains any comments (e.g. questioning honesty) which are considered undesirable for production to the other parties or to the VT or Lands Chamber of the Upper Tribunal, the VO should seek instructions from the Litigation & Settlement Review Panel. The VO should send a copy of the report via the Litigation & Technical Policy Team.
3.16 Agreement of Facts
It will be an advantage in all proceedings to establish by agreement before the hearing the facts stated in any documents to be used by the VO and the facts concerning the hereditaments to which the documents relate.
Unless, exceptionally, the other party is prepared to agree any analysis that the VO has made, the facts stated in the documents should be produced in schedule form for the purposes of agreement and any analysis dealt with separately.
The VO should offer to agree facts in respect of any documents which the other party requires to be produced at the hearing.
3.17 Rents - Avoidance of Press Publicity
When documents are produced at a VT hearing and the Press is present, the VO should ask the Chairman to request the Press not to publish details of the tenancies of the premises quoted, as such information may prove embarrassing to the occupiers and owners of the properties concerned.
3.18 Publication of the VT decision
The Tribunal decisions are public documents and will be published on the VTE/VTW website unless an application is made by a party to have a decision redacted or anonymized. Requests can also be made to redact information in regard to sensitive or trade information appearing in the decision.
Applications may be made in writing before the hearing, orally at the hearing or exceptionally in writing after the hearing.
All applications must be supported by reasons and it is for the applicant to satisfy the tribunal that an application should be granted.
The following are some of the reasons the tribunal would consider granting an application for:
(a) national security
(b) public safety or public order
(c) personal safety
(d) privacy and family life [CT decisions]
(e) protection of children [CT decisions]
(f) protection of commercially sensitive information eg trade information
3.19 Evidence at Lands Chamber of the Upper Tribunal
See Chapter 8 - Upper Tribunals for full details.
Appeals to the Lands Chamber of the Upper Tribunal should be lodged within 4 weeks of the Valuation Tribunal decision.
The expectation of the Upper Tribunal is that parties will have exchanged all documents, evidence and expert witness reports upon which they intend to rely prior to the hearing date and have a statement of agreed facts as well as having agreed the issues which they require the member to decide upon.
The time limits for the exchange of documents depend upon whether the case is to be dealt with on the standard procedure or the simplified procedure.
Unless the simplified procedure is requested and agreed to by both parties the standard procedure will be followed.
Under both procedures the Appellant and Respondent will usually file and serve a Statement of Case with the appeal and the response notice, however an application for an extension of time to serve the statement of case made be made if necessary and on payment of a fee.
The Statement of Case will include reference to any FOR or SDLT evidence which is to be relied upon.
Simplified Procedure
The Upper Tribunal will fix the hearing date and then not less than one month before the hearing date the parties to the appeal must exchange copies of all the documents they intend to rely upon, this would include full details of any FOR or SDLT information referred to in the statement of case.
Standard Procedure
On acknowledgement of the appeal and confirmation that the standard procedure applies both parties are directed to send to the Tribunal and exchange with each other their expert witness reports and statements of witnesses of fact usually within 2 months of the Registrar confirming the use of the standard procedure.
Executive Summary
Considering evidence, selecting evidence, rebus sic stantibus, selecting rents, quality of evidence, new lettings, reviewed rents, admissability of evidence, weight of evidence, (Robinson Brothers (Brewers) Ltd v Houghton & Chester-le-Street Assessment Committee, Garton v Hunter), Heirarchy of evidence (lotus & Delta v Culverwell VO & Leicester City Council, Hodges v Howells), Rents before and after AVD, establishing tone (Specialeves PLc v Felgate VO, Marks Trustees of TN Marks (Dec’d) v Grose VO, Jafton Properties Ltd v Prisk VO, O’Brien v Harwood, Futures London v Stratford VO).
Rental Evidence
In considering the rental evidence regard must to be had to the statutory basis for valuation, namely the rent that is considered reasonable to expect for the hereditament as it physically stands at the material day on a yearly tenancy.
The basis of valuation is set out in Paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988 (as amended).
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
*1) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;
*2) 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;
*3) 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.
This requires an assumption that the hereditament is vacant and available to let on the above statutory terms. All evidence should be considered in respect of that and weighed accordingly.
1.1 Selection of Evidence
Only relevant evidence should be presented to the VT. In many cases it will suffice to select a proportionate representative sample of rental and or comparable assessments as evidence. However, it should be considered that for 2017 lists, especially in England, as checks and proposals may be made up to 31 March 2017, it will be difficult for the VO to establish that a tone exists unless there is considerable evidence of settlements and Tribunal decisions. Therefore the evidence provided should be sufficient to be able demonstrate the level of values adopted.
It is essential that a full picture be given, so a caseworker should not select only those rents or comparable assessments most favorable to the VO’s case, but also those at variance. To preserve the impartiality and integrity of the VO, the aim is to give the VT a fair and balanced picture of the relevant evidence upon which it may then base a decision.
The VO’s evidence should therefore be unbiased, independent and objective. The VO will have a duty to the Tribunal as Expert Witness to give truthful, impartial and unbiased advice to the Tribunal at the appeal stage (please see RM Section 5, part 8 for CCA 2017 procedures).
When selecting evidence it is worth considering the relative weight that will be attached to rental and comparable evidence. In some cases there may be little direct evidence available and it will be necessary to consider casting the net for evidence across a wider geographical area, age range or other types of property. In the event that evidence is varied, at Tribunal it may come down to the credibility of the expert witness as to the correct level of value that may apply. (see Go Outdoors v Laura Lacey VO (RA 90 2017)).
1.2 Evidence and Rebus Sic Stantibus
Any rent passing on the property to be valued and rents and assessments of hereditaments used for a purpose within the same mode or category of occupation as the hereditament being valued will normally form the best evidence.
This does not however mean that rents and assessments of properties used for another mode or category of occupation are irrelevant. (see Reeves VO v Truro College (2007) RA/74/2005).
The Lands Tribunal stated that all relevant evidence was admissible, and that it was for the valuer to judge the weight to be given to evidence of rents or assessments of hereditaments in other uses. The Tribunal made a comparison with valuers adjusting for different physical and locational characteristics, and commented that valuers should adjust for use in a similar way.
In any rating valuation, if the hereditament is let the rent passing will form the starting point for a valuation - Lotus & Delta v Culverwell (VO) 1976 RA 141. The weight given to the actual rent will depend on how closely it conforms to the terms of the rating hypothesis.
Weight should also be given to rents of comparable hereditaments, but again the degree of weight will depend on how closely the terms match those of the hypothetical tenancy.
One of the terms of the hypothetical tenancy is that the hereditament can only be used for a use within the same mode or category of occupation as the actual use.
The Lands Tribunal gives an example, at paragraphs 140-141, of how evidence from hereditaments in a different mode or category of occupation may be used to assist in the valuation of the subject property. The example refers to an office (in premises built as a shop) in a shopping street; if the evidence from other parts of the street is that offices in former shop premises pay the same as shops and restaurants, the conclusion may well be “that the value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the zone A prices that are established for this part of the street frontage”.
The valuer is still valuing as an office, “but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that a tenant would pay to occupy the subject hereditament as an office”.
However, in the Tribunal’s example it could be argued that the valuer should go straight from the rents or assessments of other offices in the street to the assessment of the subject office.
Whether this is correct will depend on the evidence - if there are a number of offices in former shops, with rents at different levels of Zone A in accordance with changes in retail values in the street, then the conclusion would be that offices pay the same as shops and so the example holds.
If, on the other hand, the answer is that offices pay a consistent level irrespective of the retail Zone A, and that it is just coincidence that in one case the two are the same, then the valuer will apply a level of value drawn from the rents/assessments of offices alone.
It is therefore a matter of what the evidence shows in each case. In some cases this will require a closer investigation of the rental and other evidence than may in practice have been undertaken in the past.
1.3 Suitable Rents
Some rents do not lend themselves to the support of a rating valuation. These include:
(a) Rents which do not, or cannot, be made to conform with the rating hypothesis, for example, turnover rents, or rents indexed to the Retail Price Index (RPI)
(b) Connected rents agreed between related persons or companies
(c) Sale and leaseback rents (see John Lewis & Co v Goodwin (VO) (1979) 252 EG 499, 1980 RA 1).
Rents agreed under such arrangements may not reflect open market rental value (OMRV) for various reasons, typically:
(i) Financial arrangement whereby the rent reflects the cost of borrowing rather than open market value (OMV)
(ii) Initial rent is higher than OMV to increase the value of the freehold
(iii) Leaseback essentially a funding operation, with the rent being geared to profitability
Rents which require a great deal of adjustment to make them accord with the statutory definition of Rateable Value.
For example, adjustment may be required to take into account different repairing and insuring liabilities; rent free periods; premiums; stepped rents; improvements; overage; restrictive user clauses or start dates, ie rent set at some time distant from the [antecedent valuation date AVD. Generally, the more adjustment that is required the less useful the rental evidence will be.
But it is not a perfect world and it may be that the only available rental evidence will require a lot of adjustment. In such circumstances, the use of such evidence will be unavoidable.
1.4 Quality of Rental Evidence
The quality of rental evidence is dependent upon:
(a) How closely the rented property resembles the hereditament to be valued
(b) How closely the lease terms for the rented property resemble those of the hypothetical tenancy in the definition of rateable value
(c) How close the time the rent was fixed is to the AVD
As a general rule the less a rent has to be adjusted, i.e. the more closely it resembles the rent required by the statutory definition, the more weight it will carry as evidence of likely rateable value.
The reality is that non-domestic property is rarely let on an annual tenancy; responsibility for repairs and insurance is not always as envisaged in the hypothetical tenancy; tenants make alterations and improvements which are not reflected in the rent; landlords grant incentives to secure high headline rents and few rents are likely to have been fixed on the AVD. In rating, a “clean” rent can be rare.
1.5 New Lettings
New Lettings are generally regarded as the most reliable category of rental evidence, although the reliability of such rents may be impaired where a lot of adjustment is required.
New lettings provide good evidence because they are freely negotiated between the parties in the open market and hence provide the best indication of open market rental value. However, not all new lettings will be perfect. Aside from adjustment, knowledge of the market and the locality will be help to identify those traders who have paid over the odds to secure a unit, or have paid an artificially low rent.
Anchor tenants tend to fall into the latter category. These comprise the key tenant(s) in a new development and a landlord, with a view to attracting other tenants to the development, will want to ensure that they take a unit to achieve this aim. As a class, anchor tenants tend to be in a strong bargaining position and as a result may be able to agree a low(er) rent.
The fact that a potential occupier of a restaurant, for example, agrees to pay a rent at the same level as a general shop use and in competition with such uses must be evidence of the value of that property/location for restaurant; the rent was agreed in the knowledge that it would be used as a restaurant. This must carry considerable weight and in such circumstances, in most cases, the rent will not require any adjustment for use.
It may be argued that, in the absence of competition from other uses, the restaurant would not have paid as high a rent as it in fact agreed; a comparison might be drawn with imposing a restrictive covenant on use in a lease, and a reduction from the actual rent sought. Unless evidence is provided of rents paid by restaurants, on the assumption of a restaurant use only, being at a lower level than the subject rent, such an argument should be resisted; the actual occupier must have considered the rent paid to reflect the value of that property and location for restaurant use at that time.
1.6 Lease Renewals
Sometimes the provisions of the Landlord and Tenant Act 1954 apply when a rent has been set at renewal. So it will first be necessary to determine whether the rent was agreed by negotiation between the parties or was fixed by the courts in accordance with s34 of the 1954 Act when negotiations failed.
The more reliable rent will be the one freely agreed between the parties and where the lease terms, together the extent and treatment of any tenant’s improvements, have been disclosed. Rents fixed by the courts in accordance with s34 may be unreliable in the absence of knowledge about the details of the determination and tenant’s improvements.
Without full knowledge of the renewal agreement or determination, care will need to be taken before attaching great weight to rents fixed on renewal.
Interim rents should be avoided. These are rents set by the courts under the 1954 Act in the “interim” period between a lease ending and a new lease being agreed or determined. Whilst such rents are on a year to year basis (as is the definition of rateable value) they are unreliable because:
(a) They are not market rents, but are fixed by the courts based on the evidence presented
(b) They are the reasonable rent for a tenant to pay, which permits the court to exercise discretion and extend a measure of cushioning to the new rent which tends to favour the tenant
(c) The court is required to have regard to the terms of the old lease and the rent definition contained in s34 of the 1954 Act
The method of determining the interim rent has been altered by the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 when three statutory conditions are satisfied. These are:
(i) The tenant occupies the whole property.
(ii) The relevant notice related to the whole premises
(iii) The landlord did not oppose the grant of a new tenancy
In these circumstances the presumption is that the interim rent will be the same as the rent for the new tenancy, where these conditions are not satisfied or the tenant has declined to take a new lease ordered by the court then the valuation methods currently adopted under the 1954 Act apply. In any event these rents should be avoided as it is a presumption and also the caseworker will not have the full knowledge of the circumstances surrounding the interim rent.
1.7 Review Rents
The weight that can be attached to a rent fixed by review will depend upon:
(i) The contractual agreement between the parties
(ii) The means by which the rent has been determined
Hence it is vital that all lease details are known, especially the rent review clause.
Where the passing rent has been agreed on review, the rent will reflect the terms of the particular lease and especially the terms of the review clause. Often the reviewed rent will assume a wider use than is actually permitted under the user clause of the lease. Similarly, on renewal the rent will be on the basis of the terms of the new lease, including the use assumed for review.
Whilst it could be argued that both landlord and tenant are aware of the implications of the use to be assumed upon future rent reviews, the weight which could be given to such an argument will depend heavily on movements in rental values since the start of the lease.
If a restaurateur agrees to a lease with reviews to a value for general shop use it could be argued that, from his perspective, the future value as a restaurant will be at least as great as that for a shop. If in the locality restaurant rents had generally moved in a similar way to shop rents this would give additional weight to such a view.
If however it were shown that shop rents had risen much faster than restaurant rents since the start of the lease this would reduce the weight that should be given to a passing rent on a restaurant agreed on a review clause assuming a general shop use.
There will of course be other factors involved in agreeing to the lease terms, but just because the reviewed rent passing is on the basis of a general shop use it does not mean that the rent necessarily has to be reduced to accord with the rating hypothesis. It may be that values for restaurant use have increased above those for shops.
It will depend on the facts in each case, but when considering a hereditament used for a sui generis use evidence of rents reviewed to a “wide” user should normally be regarded as of lower weight than evidence of new lettings or of reviews where the rent is restricted to that sui generis use.
To serve as good evidence for rating purposes, the review clause should specify that the review be to “open market value” or “rack rental value”, assuming vacant possession and a normal review pattern.
An upward only review clause, for example, may prevent the rent dropping to OMRV and therefore remain at an artificially high level. Care should always be taken when considering the meaning of a review clause, as poorly drafted clauses can lead to unexpected results on review.
The most reliable rent on review will be one fixed by agreement at rack/open market rental value, with 3 or 5-year periods between review, where there are no restrictions in the lease and no adjustments are necessary to account for tenant’s improvements.
The weight to be attached to a rent fixed by agreement will be greater than one determined by an independent expert or arbitration. Independent experts are entitled to bring their own knowledge to bear in reaching a determination, whereas arbitrators cannot stray outside the confines of the evidence presented.
1.8 Admissibility of Evidence and Weight
Robinson Brothers (Brewers) Ltd v Houghton & Chester-le-Street Assessment Committee (1938 2All ER 79) Lord Justice Scott (Court of Appeal) said:
“When the particular hereditament is let at what is plainly a rack rent or where similar hereditaments in similar economic sites are so let, so that they are truly comparable, that evidence is the best evidence and for that reason is alone admissible; indirect evidence is excluded not because it is not logically relevant to the economic enquiry, but because it is not the best evidence.”
However, with the passage of time this view came under increasing criticism and in Garton v Hunter (VO)(1969 RA 11), Lord Denning stated that:
“We admit all relevant evidence. The goodness or badness of it goes to weight, and not to admissibility.”
1.9 Hierarchy of Evidence
The assessment shown in the Rating List is essentially a matter of valuation opinion having regard to relevant evidence. In Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council LT 1976) a hierarchy of weight to be given to evidence.
Lotus & Delta Ltd v Culverwell (VO) & Leicester City Council (1976 RA 141)
The Lands Tribunal set out the following propositions as a properly established procedure for considering evidence in the rating context:
‘(i) Where the hereditament which is the subject of consideration is actually let that rent should be taken as a starting point
(ii) The more closely the circumstances under which the rent is agreed as to time, subject matter and conditions related to the statutory requirements contained in the definition of rateable value the more weight should be attached to it.
(iii) Where rents of similar properties are available they, too, are properly to be looked at through the eye of the Valuer in order to confirm or otherwise the level of value indicated by the actual rent of the subject hereditament
(iv) Assessments of other comparable properties are also relevant. When a rating list is prepared these assessments are to be taken as indicating comparative values as estimated by the valuation officer. In subsequent proceedings on that list therefore they can properly be referred to as giving some indication of that opinion.
In the light of all the evidence an opinion can then be formed of the value of the appeal hereditament, the weight to be attributed to the different types of evidence depending on the one hand the nature of the actual rent and, on the other hand, on the degree of comparability found in other properties.
In those cases where there are no rents available of comparable properties a review of other assessments may be helpful but in such circumstances it would clearly be more difficult to reject the evidence of the actual rent’
The principles laid down in Lotus & Delta case have been followed in the following cases:
There have been a number of cases where the rent in respect of the appeal property itself was rejected as not being a true reflection of market value. The principal cases are Hodges Ltd v Howells (VO) (1993 RA 236) where the LT accepted that the actual rent was less than the rent that might reasonably be expected to be paid in the open market
In Trustees of T N Marks (Dec’d) v Grose (VO) (1995 RA 49) the rent passing on the appeal hereditament was again held to be less than might reasonably have been expected to have been paid in the market at the AVD.
In the appeal of Reed (VO) (2009) RA 90, the LT it was held that a freely negotiated open market letting of the appeal property one year after AVD was at below the market value and the evidence was therefore given little weight in determining the Rateable Value.
See also Futures London Ltd v Stratford (VO) 2006 RA 75 LT. All these cases demonstrate that the rent in respect of the appeal property itself needs to be weighed and can be rejected if it is felt to be irrelevant, or unsatisfactory.
Hodges Ltd v Howells (VO)(1993 RA 236)
Looked at whether the actual rent agreed as from March 1988 (£12,000pa) should be adopted as the RV or, as the VO contended, whether this rent was not the rent which might reasonably be expected in the open market and the RV should be higher and in line with rents on other nearby shops and agreed assessments. The VO supported the assessment of £18,000 RV. The LT adopted the propositions from the Lotus & Delta case that indicates how conflicting rental evidence should be considered. The LT accepted the actual rent was less than the rent that might reasonably be expected to be paid in the open market and, following the evidence, determined £16,375 RV.
1.10 Rents before and after AVD and correct date to consider Tone established
Specialeyes plc v Felgate (VO)(1994 RA 338)
The LT was asked to decide on the weight to be applied to various rental and tone evidence in order to determine the correct Zone A rate to be applied to a shop, and hence its RV.
The LT considered that as the rents of the appeal hereditament, together with the immediately adjoining shops, were agreed between one landlord and one firm of surveyors representing most of the tenants, the weight to be applied to this evidence was reduced (as it was effectively one transaction).
The LT examined other rents in the street away from the immediate shop and divided these into 3 categories:-
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(i) Rents agreed between 1986 and 1987. The LT found the evidence helpful in showing an upward trend in rental values over the period but otherwise attached little weight to them due to the need to adjust the rents to 1/4/88 levels.
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(ii) Rents close to the AVD. The LT paid particular attention to these as indicating the correct level of value and showing the appeal hereditaments rent to be at the lower end of the band of values to be expected at the AVD.
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(iii) Rents after the AVD. Both parties accepted these rents as admissible but the LT only considered those close to the AVD due to the need, because of the rapid rise in rents in 1988/89, to make large and uncertain adjustments to relate them to AVD levels.
The VO attached significant weight to agreements on value in the street and considered a tone of the list was established. Both parties accepted that the date of the hearing was the correct date for ascertaining whether a tone of the list was established. At this date the LT noted 39 assessments had been agreed, 9 appeals were outstanding and no appeals had been made on 27 shops. The LT regarded the tone as established.
1.11 Establishing Tone
Each Rating List stands on its own and reflects the new circumstances appropriate to that list and takes into account the changed physical circumstances at the new compilation date and the changed market conditions at the new Antecedent Valuation Date.
The whole purpose of having a revaluation is to reassess relativities and rebase the valuations to the new dates and it is therefore to be expected that relative values between property types and between locations will change from one list to the next Marks Trustees of T N Marks (Dec’d) v Grose (VO)(1995 RA 49).
The rent passing on the appeal hereditament had been reviewed to £14,500 on 25 December 1987, with the rateable value in the list being £24,600.
The LT concluded that given the rents on surrounding properties and the amount of adjustment required to the appeal rent, the latter was less than might reasonably have been expected to have been paid at 1 April 1988.
The Tribunal felt that there had been sufficient appeal activity by way of agreements with agents, occupiers and valuation tribunal decisions to establish a tone of the list at £350 zone A. Considerable weight was given to this established tone.
The resultant RV of £24,000 reflected allowance for the irregular shape of the retail area and masking.
Jafton Properties Limited v Prisk (VO)(1997 RA 137)
The appeal hereditament comprised office accommodation in the Smithfield area close to the City of London.
There were two valuation points at issue, the first was the correct RV at the 1 April 1990 and the second was the effect on rateable value of oversupply of office accommodation in the locality.
The LT held that although the rents on the appeal hereditament could be taken into account as the starting point, they were not conclusive, nor were they superior evidence to which the greatest weight should be given in arriving at the appropriate RV. The rents on the appeal hereditament were all for short fixed terms and lacked the reasonable expectation of continuance, an essential part of the rating hypothesis.
The correct time for establishing whether or not the tone of the list had been established was immediately prior to the start of the hearing. It was held that the assessments of comparables established the tone of the list and deserved significant weight given the inadequacies of the rental evidence.
O’Brien v Harwood 2003
This Upper Tribunal case considered the weight and relevance of evidence and the establishment of ‘tone’.
- “There are three stages leading to the establishment of tone of the list. At first, when a new rating list is put on deposit, entries will carry relatively little weight: they are opinions of value by the valuation officer, as yet unchallenged and untested by negotiation.
Over time assessments will be challenged and agreed or determined by a valuation tribunal or this tribunal or accepted by lack of challenge.
Finally a stage is reached where enough assessments have been agreed or determined or are unchallenged to establish a pattern of values, a tone of the list.
The list is then said to have settled. Rents will be largely subsumed into assessments. At that stage rating surveyors will have little regard to rents and pay considerable attention to assessments. The position regarding tone of the list at any particular time is a question of fact. Where an assessment is challenged before a Tribunal the correct time for deciding whether a tone of the list has been established is immediately before the hearing.”
Futures London v Stratford VO
This case confirmed the approach in O’Brien.
1.12 Rental evidence and mode and category of occupation
In the Scottish and Newcastle case it was stated “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”.
para 171, following Fir Mill, it was stated
“This part of the rule rests on the principle that the hereditament is to be valued in its actual condition on the material day - as it was rebus sic stantibus. We emphasise that the alterations must be minor…. The correct approach is to look at the totality of the works in the context of the hereditament and then ask the question are those works minor works?”
and at para 173
“The range of potential hypothetical tenants would therefore be restricted to those willing to occupy the properties in their existing condition”
In Burvill v Jones (2013) rental evidence from industrial units on the same industrial estate were held to be relevant in the valuation of an MOT test centre even though an MOT test centre was in a different mode or category of occupation. It was stated in that case.
“the rental evidence from the other units on the K9 estate is relevant to the valuation of the appeal hereditament as vacant and to let. They immediately adjoin the appeal hereditament, their rents reflect the locational and many of the physical characteristics shared by the subject property and the appeal hereditament could be used other than an MOT test centre by undertaking minor physical works”.
For the purposes of rating valuation, the hereditament must be valued on the assumption that the premises are vacant and to let in their actual physical state (subject to the usual repair assumptions) and for a use within the same mode or category of occupation as the actual use (now contained in Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988).
The meaning of ‘same mode or category of occupation’ was considered in Fir Mill v Royston UDC and Jones (1960) 7 RRC 171 where it was held that “a shop [must be valued as] a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory . . .” and so on.
The decision in Fir Mill was reviewed in Williams v Scottish & Newcastle Retail Ltd and Allied Domecq Retailing Ltd. (2001) where it was held that a restaurant is not in the same mode or category of occupation as a shop and that therefore a restaurant should not be valued as a shop, nor a shop as a restaurant.
Even if premises can be used for a different purpose without the need for significant physical alterations or planning permission, for example a restaurant occupying an identical unit to an adjoining shop where neither physical alterations nor planning permission would be required to change the use from restaurant to shop, the restaurant would therefore be valued as a restaurant even if the value as a restaurant would be lower than the value as a shop.
To apply a shop value to premises occupied as a restaurant would be to value the premises in a different mode or category of occupation than its actual use and which would be in breach of the assumption contained in Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988 that the premises are to be valued in the same mode or category of occupation as the actual use.
If however, a restaurant would command the same rent as a shop then it is appropriate to have regard to the evidence of shop values. The valuation would still be on the basis of the value as a restaurant. In re the appeal of Reeves (VO) (2007) RA 168 LT (concerning Truro College), the tribunal held that premises occupied as a college should be valued in its actual mode or category of occupation which in that case was held to be educational, but that if it could be shown that its value as an educational establishment was the same as that for office use, then office rents were admissible as evidence of value for educational use.
The premises were still being valued in their actual mode or category of occupation as educational but since educational use was shown to have the same value as for office use, office rents were therefore admissible as evidence to establish the value for educational use.
In the Scottish and Newcastle case it was stated:
All evidence is relevant and it is a question of weight, as stated in Scottish v Williams (UT) in reference to Garton v Hunter , para 140
“It is important to distinguish between the operation of the rebus sic stantibus rule and the identification of the evidence to which regard may be had in the valuation”
“What the valuer is seeking to assess is the value of the hereditament on the assumption that the matters set out in para 2(7) of sch 6 were as they were on the material day. For this purpose he will have regard to the rent(if any) of the subject hereditament and to the rents and assessments of other hereditaments to the extent that the evidence of these assists him in making his valuation. All relevant evidence is admissible, and the goodness or badness of it only goes to weight….. ~Whether the rents or assessments of hereditaments in other modes and category of use are relevant, is a matter for judgement in the individual case. Often they will be of no assistance, but there are undoubtedly cases where they may contain helpful evidence. Take for example, a shopping street which contains, in addition to shops and A3 users, a few offices in premises built as shops. The subject hereditament, in office use, is in part of the street that contains only shops and restaurants apart from the subject hereditament itself. If the evidence from the other parts of the street is that the rents and assessments of offices are no different from those of shops and A3 users, the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage. It is a matter of evidence and argument and valuation judgement in the particular case whether the rents and assessments of hereditaments in a different mode and category of use are of assistance.
para 141
In the example given, the valuer is not, of course, valuing the subject hereditament as a shop or restaurant. He is valuing it as an office but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that tenant would pay to occupy the subject hereditament as an office. It is not necessary for him to pretend that the offices are in the same mode and category of use as shops or restaurants.
As per the example, given by the Upper Tribunal in Scottish v Williams, whereby
“the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage”.