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.