New ruling on valuation of museums opens door to challenge rating assessments

Decision brings a 'sense of realism in the hypothetical world of rating'

28 June 2017

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The Upper Tribunal (Lands Chamber) has recently published its decision in the case of Hughes (VO) V York Museum and Gallery Trust. The case related to the rating assessments of historic, listed buildings in York occupied and run by York Museum and Gallery Trust (YMT) and its wholly owned subsidiary York Museums and Enterprises Ltd (YME). The buildings were the Castle Museum, Yorkshire Museum - which includes the ruins of St Mary’s Abbey, York Art Gallery and former St Mary’s Church, known as the Heritage Centre.

In broad terms, the rateable value (RV) of a property represents its annual rental value.  In the case of museums and historic properties where no rent is paid the Valuation Officer has sought to rely on the contractor’s method of valuation to value the property.  This method calculates a replacement cost of the historic building and then equates this to an annual rental equivalent through the application of the statutory decapitalisation rate. 

Rating practitioners have contended that the method produces an excessively high level of valuation for historic properties and advocated that a receipts and expenditure basis should be adopted which reflects the profitability of the actual museum.

A number of other complex, legal issues were also addressed in this case, including the issue of whether any trading areas within the museum should be separately assessed for rating purposes.  

The valuation issue debated will be that of most interest. The Tribunal considered in detail the valuations put forward by both parties on the contractors and receipts and expenditure methods.  The Tribunal’s decision sets out clearly that they considered the contractor’s method was not an appropriate method for valuing historic buildings such as museums and visitor attractions. 

The Tribunal’s decision, ruling largely in favour of YMT, was based on a receipts and expenditure approach having regard to the factual information available for each property.  The approach analysed in detail all evidence available, including: the income and expenditure, visitor numbers, repairing obligations, admission charges and prospect of generating a financial surplus for each property.

Rating practitioners have welcomed this decision. It provides clear guidance that the contractor’s method produces valuations which are manifestly too high, particularly in the context of non-profit making museums.  The decision brings a sense of reality to the valuation of these properties; we are optimistic that the principles established in this case may have wider application to the rating valuations of other public sector property classes. 

The rating profession is currently in a state of flux in England following the advent of Check, Challenge, Appeal. This decision, along with the recent and eminently sensible Newbigin V Monk decision on disrepair, provides a note of optimism for rating practitioners and a sense of realism in the hypothetical world of rating.

We will now review museum assessments in light of this decision.  The ruling provides us with not only a further opportunity to appeal the historic 2010 assessments, but also a blue print for tackling 2017 assessments, many of which have seen substantial increases between lists.

If you would like a further discussion on this issue please contact either myself, Andrew West or Huw Jones.

Jane Shankland is very approachable and responsive as well as having sound all round experience of rating law. The Council has benefited greatly from Jane’s support, sound advice and skill and the Council will continue to use her services.

Louise Horner, Blaenau Gwent County Borough Council