Rating practitioners have welcomed the ruling. Jane Shankland, Business Rates Director with Cooke & Arkwright said, “We are pleased that once again, we have a decision that brings a sense of reality to the valuation of these types of properties, which are mostly non-profit making and rely on significant deficit funding.
“As with Hughes (VO) v York Museum and Gallery Trust, the Tribunal has found that the valuation should be based on the receipts and expenditure basis, which reflects the financial burden resting on the ratepayer, rather than the contractor’s method, which is based on rebuilding costs and produces valuations that are manifestly too high.”
The appeal related to the 2010 rating list, the antecedent valuation date of which was 1 April 2018. Following major works of essential repair and redevelopment between 2008 and 2011, the museum was entered in the 2010 non-domestic rating list at a rateable value of £510,000, effective from December 2011. An appeal revised the entry to £445,000.
In 2017 Exeter Council made a proposal to alter the list on the grounds that the entry was wrong and referred to the decision in May of that year concerning York Museum. An appeal was then made to the VTE who allowed it and ordered that the museum and art gallery should be entered in the list at a rateable value of £1, effective from April 2015.
The VO then lodged an appeal to the Upper Tribunal (Land Chamber) which announced its decision this month, to dismiss the appeal and uphold the VTE’s ruling.
Commenting further on the decision, Jane said, “The important thing here is that the Tribunal noted that ‘The CB (contractor’s method) indicates a figure… of £561,644. The valuer should stand back and look at this result in the context of the large operational deficit faced by the Respondent (council) and the high level of annual subsidy that it must provide to sustain the museum in the face of competing demands for its limited resources’.
“The Tribunal also referred to the abnormally high operating costs of a Grade II historic building and the non-profit motive for operating the museum. It said, ‘In the light of these factors the valuer must then ask whether the tenant’s responsibilities were so great that occupation of RAMM was in fact burdensome and therefore would not command any positive rent. In our judgement the evidence points unequivocally towards such a conclusion’.”
Jane concluded, “The last sentence is a declaration of common sense. It’s the reality principle in action and all museums should be reviewed in light of this decision. However, it’s not that straightforward, as the VOA may appeal the decision to the Court of Appeal. Hopefully though, common sense will prevail and they will accept this decision. Then the large number of outstanding museum rating appeals can be progressed.”