Assessor For Glasgow V. Schuh Ltd+the Royal Bank Of Scotland+the Body Shop International Plc+bank Of Scotland Plc+j & W Greaves Ltd+sports World International Ltd+phones 4 U Ltd+savers Health & Beauty Plc+optical Express (southern) Ltd+thorntons Plc+lush Retail Ltd+abbey National Plc+barratts Shoes Ltd+superdrug Stores Plc+outdoor Group Ltd+m M Henderson Ltd
| Jurisdiction | Scotland |
| Judge | Lord Clarke,Lord Justice Clerk,Lord Malcolm |
| Neutral Citation | [2012] CSIH 40 |
| Published date | 27 April 2012 |
| Date | 27 April 2012 |
| Docket Number | XA129/11 |
| Court | Court of Session |
| LANDS VALUATION APPEAL COURT, COURT OF SESSION | |
| Lord Justice Clerk Lord Clarke Lord Malcolm | [2012] CSIH 40 XA129/11 OPINION OF THE LORD JUSTICE CLERK in the Appeal by Stated Case by ASSESSOR FOR GLASGOW Appellant; against (1) SCHUH LIMITED; (2) THE ROYAL BANK OF SCOTLAND; (3) THE BODY SHOP INTERNATIONAL PLC; (4) BANK OF SCOTLAND PLC; (5) J & W GREAVES LTD; (6) SPORTS WORLD INTERNATIONAL LTD; (7) PHONES 4 U LTD; (8) SAVERS HEALTH & BEAUTY PLC; (9) OPTICAL EXPRESS (SOUTHERN) LTD; (10) THORNTONS PLC; (11) LUSH RETAIL LTD; (12) ABBEY NATIONAL PLC; (13) BARRATTS SHOES LTD; (14) SUPERDRUG STORES PLC; (15) and (16) OUTDOOR GROUP LTD; (17) M M HENDERSON LTD Respondents: _______ |
Alt: Haddow QC; Brodies
27 April 2012
Introduction
[1] This is an appeal by the assessor against a decision of the Valuation Appeal Committee for Glasgow (the Committee) dated 14 February 2011 by which it allowed the appeals by the respondents (the ratepayers) against the entries in the 2005 Roll for seventeen shops in the pedestrianised section of Sauchiehall Street, Glasgow. The appeals were brought under section 3(4) of the Local Government (Scotland) Act 1975 (the 1975 Act) on the basis of a material change of circumstances.
Zoning
[2] Shops in city centres are valued by the zoning method. This method is based on the principle that the area closest to the frontage (Zone A) is the most valuable part of the shop. When a value per square metre is arrived at for Zone A, the valuer formulaically derives rates for the other zones and from that calculates the value for the shop. In the relevant section of Sauchiehall Street three Zone A rates apply to different blocks of the street. For the purposes of this appeal the important point about the zoning method is that it is based on direct rental evidence (cf Bond and Brown, Rating Valuation: Principles and Practice, 3rd ed (2011), pp 205-207).
The hearing before the Committee
The case for the ratepayers
[3] The ratepayers contended that the rental values of their subjects had fallen significantly during the currency of the 2005 Roll by reason of the economic recession, the effects of changing patterns of retail in Glasgow city centre and the impact of large out-of-town shopping centres, and that these causes together constituted a material change of circumstances within the meaning of section 3(4) of the 1975 Act. They contended that the effective date of the material change should be 1 April 2009.
[4] Mr Harry Reith gave evidence on the decline in rental values in the area. He was experienced in retail rent reviews. He did not speak to valuations of any of the appeal subjects. He described the changes in the market and in Sauchiehall Street retail since September 2008 and spoke of rental transactions that his firm had settled at lower rents than before. He said that the combination of the factors relied on by the ratepayers had severely reduced rental values of shops in Sauchiehall Street. In his view it was probably impossible to allocate the effects of the individual factors into specific proportions.
[5] Mr Brian Rogan, a rating surveyor, referred to twelve comparison transactions in Sauchiehall Street. With one exception, Card Factory, where the parties were agreed that the analysed rent rate was £322 psm, these comparisons ranged from £590 psm to £1267 psm. Of the twelve comparisons, however, six were concluded in the period after June 2010 and therefore fell within the currency of the subsequent Revaluation. Of the six transactions within the period of the 2005 Roll, the assessor's analysis produced different rent rates, but in only one case was the difference significant. On Mr Rogan's figures, the 2010-2011 transactions produced rent rates in the range £776 to £1267 psm. Mr Rogan proposed that the entries should be altered with effect from 1 April 2009 so that where the Zone A rate was £850 psm, it should £600 psm; where it was £1,300 psm, it should be £850 psm; and where it was £1,500 psm, it should be £1,000 psm.
[6] Mr Paul McInnes described how Sauchiehall Street and Argyle Street were once the prime shopping areas but had wasted away over the years. He spoke of Buchanan Street's having become a prime fashion retailing location and referred to the emergence of the St Enoch Centre and the Buchanan Galleries. These changes had led to the entry of discount retailers into Sauchiehall Street and to the adverse effect of that on the street's prestige.
[7] Mr McInnes also gave evidence about the RREEF Retail Fund, which was the landlord of several shops in Sauchiehall Street. He said that in January 2008 its interests in Sauchiehall Street were valued at £15,500,000. By June 2008 that valuation had fallen to £14,250,000. By September 2008 it had fallen to £13,000,000. By December 2008 it had fallen to £9,050,000. By January 2009 it had fallen to £8,050,000. The latter figure was based on an estimated rental value, after incentives, that equated to a Zone A rate of £904 psm. At the 2005 Revaluation the Zone A rate for the same properties was £1,500 psm.
[8] The ratepayers' productions included a statement from Mr Ross Allardice, a retail surveyor, on similar lines to the evidence that I have summarised. The statement was read to the Committee without objection. Mr Allardice too was of the opinion that it was not just the economic downturn that had caused the increasing voids and the reduction in rental values.
The case for the assessor
[9] The case for the assessor was presented by his principal surveyor, Mr Christopher Adams. He led evidence from Mr Derek Kidd, one of the assessor's valuers. The case for the assessor was that the alleged fall in rental values since the tone date had not been proved. The assessor relied on several rental transactions which, he argued, showed no significant fall in values.
[10] Mr Kidd gave evidence of lets in that part of the city centre that were concluded at rental levels that were higher than tone. Some new lettings had been at levels below it. Mr Kidd founded on six comparisons that were not on Mr Rogan's list. Five of these produced analysed rent rates in the range £1656 psm to £1998 psm. Of these five, one was a new rent at £1998 psm; one was a lease renewal at £1656; two were rent reviews concluded with nil uplifts at £1657 psm and £1762 psm; and one was a rent review at an increased rent of £1712. The sixth transaction, Arman Traders Ltd, was a new rent agreed for a kiosk at a rate of £2028 psm, which I should think was a less persuasive comparison. On balance Mr Kidd concluded that the evidence did not establish that there had been a material change affecting value.
[11] Mr Adams submitted that the ratepayers were relying on a substantial body of rental evidence that was outwith the period of the 2005 Revaluation, that having been based on a tone date of 1 April 2003. Much of their evidence related to transactions concluded at least four years after the tone date. Much of it would be relevant only to the 2010 Revaluation. The evidence in its totality did not support the ratepayers' case. If a material change had been proved, the proposed effective date of the change was not contested.
The Committee's findings in fact
[12] The Committee has found that there have been major changes in the pattern of retail in Glasgow in the last 30 years. Whereas there were once two separate core shopping areas, in Argyle Street and Sauchiehall Street, Buchanan Street has emerged since the late 1970's as the prime shopping location in the city centre. Although the position of Argyle Street was enhanced when the St Enoch Centre was opened in 1987, retail in Sauchiehall Street has been strengthened by the opening of the Buchanan Galleries at the eastern end of Sauchiehall Street and the northern end of Buchanan Street.
[13] There have also been major changes caused by the opening of large out-of-town centres. The Braehead Centre is six miles to the west of Glasgow city centre. The evidence suggests that it opened in about 1999. When it opened it had 100 shops and 6500 car parking spaces. The Glasgow Fort Centre opened in about 2004. It is four miles to the east of the city centre with 70 shops and 2000 car parking spaces. It is particularly accessible because it is adjacent to the M8 motorway.
[14] The Silverburn Centre opened in 2007. It is about two miles south west of the city centre and is close to the M77 motorway. It is the largest of these centres. It has a floorspace of one million square feet. It has been an outstanding success. It has attracted a wide range of leading retailers.
[15] The Committee has concluded that these out-of-town centres have established a strong customer base. The customers who now use them are to a large extent customers who would previously have shopped in Glasgow city centre. The opening of these centres has therefore caused a loss of business and of customers to city centre shops.
[16] The Committee has also made findings in relation to the United Kingdom economy. It has found that there was a steady growth in the rent levels of retail units in city centre and town centre locations until around 2007. However, by 2008 there was a downturn in the economy. That had had an impact on retail spending. It caused demand for shop premises to dry up as retailers suffered a decline in trading performance. By the end of 2008 at least 35 well-known retailers had disappeared from the high streets of the United Kingdom. As retailers in Sauchiehall Street and elsewhere went out of business, the demand for shop premises, and the level of rents, in Sauchiehall Street inevitably declined.
[17] The Committee has made the following particular findings which, in my view, are crucial to a proper determination of these cases; namely,
"14 A number of factors came together in relation to Sauchiehall Street. There was the economic downturn. There was the collapse of many retail...
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