Newbigin (Valuation Officer) v S J & J Monk (a firm), Court of Appeal - Civil Division, February 13, 2015, [2015] EWCA Civ 78,[2015] WLR(D) 70

Resolution Date:February 13, 2015
Issuing Organization:Civil Division
Actores:Newbigin (Valuation Officer) v S J & J Monk (a firm)
 
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Case No: C3/2014/1549

Neutral Citation Number: [2015] EWCA Civ 78

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)

The Upper Tribunal (Lands Chamber)

RA/62/2012

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 13 February 2015

Before :

LADY JUSTICE ARDEN

LORD JUSTICE DAVIS

and

LORD JUSTICE LEWISON

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Between :

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Sarabjit Singh & Matthew Donmall (instructed by HMRC Solicitors Office) for the Appellant

David Reade QC & Dominic Bayne (instructed by S J & J Monk) for the Respondent

Hearing date : 4 February 2015

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JudgmentLord Justice Lewison:

1. This case concerns a floor in an office building that was undergoing refurbishment on 6 January 2012. It raises a question of interpretation of Schedule 6 paragraph 2 (1) (b) of the Local Government Finance Act 1988. The question is: what physical state is it to be assumed to be in for the purpose of liability for rates? The Upper Tribunal held that it was not capable of beneficial occupation as offices and premises due to its actual physical state; and that in consequence its rateable value should be assessed at the nominal amount of £1. In so holding it disagreed with the conclusion of the Valuation Tribunal. With the permission of the Upper Tribunal the Valuation Officer appeals. For the reasons that follow I would allow the appeal.

2. We are concerned with the first floor of the building known as Avalon House, a modern three-storey office block built in the late 1990s overlooking the riverside at Sunderland Enterprise Park, which lies to the west of the city centre in a former enterprise zone area. There is a car park to the front and side of the building. At the relevant date it was described in the non-domestic rating list as ``Offices and Premises, 1st Floor, Avalon House, St Catherine's Court, Sunderland Enterprise Park, Sunderland SR5 3XJ'' and had a rateable value of £102,000. It has been vacant since 15 March 2006. Messrs Monk are the freehold owners of the building, and they accepted a surrender of a lease of the first floor in December 2009. At the time of the surrender the hereditament consisted of office accommodation with raised floors, suspended ceilings, category 2 lighting and comfort cooling. It also included male, female and disabled access WCs. The whole consisted of a single office suite of 795.73 m2. In March 2010 the freeholders entered into a contract with a construction company for the following works:

i) Removing all internal elements, excluding only the lift and staircase enclosure which give access to the upper floor, but including stripping out the existing cooling system including all internal and external plant, the lighting and power installations, the fire alarm system, the suspended ceiling, all sanitary fittings and drainage connections, the timber joisted and modular raised flooring, and existing masonry walls and metal stud partitions.

ii) Constructing new common parts to the first floor of the building and new communal sanitary accommodation, including new solid partitioning, raised floor, new sanitary fittings, new drainage and plumbing systems, new electric metering, lighting, alarm and heating.

iii) Constructing three proposed new letting areas within the property, including the provision of three self-contained electrical distribution circuits and three self-contained air conditioning and heating systems.

3. It was agreed that on 6 January 2012, which is the material date, the physical state of the hereditament was as follows:

i) The first floor was vacant.

ii) The majority of the ceiling tiles and suspended ceiling grid and light fittings had been removed.

iii) Approximately 50% of the raised floor had been removed.

iv) The comfort cooling system including all internal and external plant had been removed.

v) The sanitary fittings had been removed and the block walls to the WCs demolished.

vi) The electrical wiring had been stripped out.

vii) Plasterboard partitions had been erected and plastered to form the outline for the WCs and a partition had been erected and plastered across the floor at the east side of the building.

viii) First fix electrical installations to the WC area had been completed and alterations made to the drainage.

4. There was a dispute about whether first fix air conditioning installations had been completed by 6 January 2012; but the Upper Tribunal does not appear to have resolved that dispute, on the ground that it did not affect the valuation.

5. The rating of non-domestic hereditaments is governed by the Local Government Finance Act 1988 as amended. Paragraph 2 of Schedule 6 says:

``(1) 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 -

(a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;

(b) 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;

(c) 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.''

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(6) Where the rateable value is determined with a view to making an alteration to a list which has been compiled (whether or not it is still in force) the matters mentioned in sub-paragraph (7) below shall be taken as they are assumed to be on the material day.

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(7) The matters are -

(a) matters affecting the physical state or physical enjoyment of the hereditament,

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(8A) For the purposes of this paragraph the state of repair of a hereditament at any time relevant for the purposes of a list shall be assumed to be the state of repair in which, under sub-paragraph (1) above, it is assumed to be immediately before the assumed tenancy begins.''

6. A ``hereditament'' according to section 64 (1) of the Act, referring to section 115 of the General Rate Act 1967, is ``property which is or may become liable to a rate, being a unit of such property which is or would fall to be, shown as a separate item in the valuation list.''

7. It is a well-known principle of valuation, not confined to rating, that in principle you must value the property as it stands on the valuation date. This is the principle of reality; or as classicists prefer to call it, the principle that property must be valued rebus sic stantibus. This principle can be displaced by contrary instructions in the statute or contract under which the valuation takes...

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