Court of Appeal reduces rateable value on Blackpool office block to £1

14 June 2018

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In a case that offers hope to owners and landlords of unoccupied properties which have passed their economic shelf life, but may still be subject to empty rates bills, a Blackpool office block has had its rateable value reduced from £490,000 to a nominal value of £1. The case had gone to appeal twice, but was finally upheld on the basis that there was no evidence of any demand at all in the relevant market and that the market was saturated.

The case was Hewitt (VO) v Telereal Trillium (2018) and concerned Mexford House, a three storey office building in North Shore, a predominantly residential area of Blackpool.  The property had been occupied by HMRC and DWP in 2008, but vacated thereafter and handed back to the owner in 2009. It was empty on the material day on 1st April 2010.

The property had a 2010 assessment of £490,000RV, which was appealed by the ratepayer and heard by the Valuation Tribunal for England.  The VTE’s decision reduced the assessment to £1RV on the basis that evidence showed there was no demand for the property at the valuation date of 1st April 2008. 

The Valuation Office Agency (VOA) appealed this decision to the Upper Tribunal (Lands Chamber), who determined that the rateable value should be £370,000 RV in line with other comparable properties in the locality which were occupied.

The ratepayer appealed again, contending that it was accepted that there was no demand to occupy the hereditament on the statutory terms and conditions at a positive rent; the Tribunal was wrong to conclude that the rating hypothesis requires the valuer to assume demand that did not in reality exist, and that the correct value was a nominal figure of £1RV.

The VOA maintained its position that the basis of valuation for rating assumes a hypothetical tenant and a demand for the property must be assumed to exist.   The evidence of occupation of comparable properties was evidence of a “general demand” in the locality, it said.

However, the Court of Appeal allowed the ratepayer’s appeal “…in the absence of any actual demand, there is no principle of law which requires such demand to be assumed….. The notional tenant embodies demand in the actual market.  If there is no such demand, because the market is already saturated, the rating hypothesis cannot itself be used to manufacture a non-existent demand from thin air”.

The Court of Appeal then restored the original conclusion of the VTE, which had found the rateable value of Mexford House to be the nominal £1RV.

Jane Shankland, Business Rates Director with Cooke & Arkwright commented:

“This case is good news for owners and landlords of properties which are nearing the end of their economic life, and who maybe facing substantial empty rates liability on the expiry of a tenant’s lease.  Whilst the Court of Appeal made it clear that their decision was based on the specific facts of this case, it does provide hope for owners that a nominal RV may be secured if it can evidenced that there is no demand for the subject property at the relevant date.”

For a further discussion please contact Jane Shankland or Andrew West.

Mansford has expanded its investment portfolio over the last few years. Over this time Andrew West has provided us with a full rating valuation service which has involved giving a view on liabilities prior to acquisitions, as well as conducting negotiations with Valuation Officers on our UK estate. The portfolio includes a wide range of properties from shops, offices and pubs to major leisure schemes. He has been particularly successful in mitigating our liabilities to empty property rate, which has been an issue on acquisition prior to implementing our development and letting strategy. I have no hesitation in recommending Andrew's expertise in rating valuation for all property types. The profile of property within his portfolio and the successes achieved are testament to his position as an extremely accomplished rating practitioner.

Leopold Hall, Partner, Mansford LLP