The Assessor For Highland And Western Isles V. Marks And Spencer Plc
| Jurisdiction | Scotland |
| Judge | Lord Justice Clerk,Lord Kingarth,Lord Hodge |
| Neutral Citation | [2009] CSIH 90 |
| Year | 2009 |
| Published date | 04 December 2009 |
| Docket Number | XA82/09 |
| Court | Court of Session |
| Date | 04 December 2009 |
| LANDS VALUATION APPEAL COURT, COURT OF SESSION | |
| Lord Justice Clerk Lord Kingarth Lord Hodge | [2009] CSIH 90 XA82/09 OPINION OF THE LORD JUSTICE CLERK on the STATED CASE in the Appeal by THE ASSESSOR FOR HIGHLAND AND WESTERN ISLES Appellant; against MARKS & SPENCER plc Respondent: _______ |
For the Respondent: Johnston, QC Gerald Eve, Chartered Surveyors, Glasgow
4 December 2009
Introduction
[1] This is an appeal by the assessor against a decision of the Highland and Western Isles Valuation Appeal Committee dated 11 and 12 September 2008. It relates to the respondent's department store in the Eastgate Centre, Inverness. At the 2005 Revaluation the assessor entered the subjects in the Roll at a rateable value of £825,000. The Committee allowed the respondent's appeal against the valuation and substituted the respondent's proposed figure of £680,000.
[2] The appeal subjects are the anchor store for Phase 1 of the Centre. They have a gross internal area of 6,813 sm on two floors, with entrances from the Eastgate, from Academy Street, and from the lower and upper malls.
[3] The respondent is the tenant under a lease dated 12 March 2007 granted by Marks & Spencer Scottish Limited Partnership. It is the general partner in the limited partnership. The lease provides for a stepped rent starting at £730,000 pa and increasing annually by 2.5%.
[4] It is unfortunate that the Committee's rather inadequate findings do not fully set out the background to this transaction, although the Committee alludes to it in its statement of reasons. However, the evidence of the respondent's valuer on the point was not disputed and I see no reason not to take it into account. The rent resulted from a valuation carried out by CB Richard Ellis of the capital and rental values of about 50 of the respondent's properties as at 30 September 2006. This exercise was carried out for the purposes of sale and leaseback transactions on the properties to raise capital for the respondent's staff pension scheme. In each case CB Richard Ellis estimated the rental value of the property and capitalised it. The rental value assessed for the appeal subjects in this exercise was £102.25 psm or £730,000. The valuer was not called as a witness. His identity is not known. There was no evidence before the Committee as to how he arrived at that value, what assumptions he made or what comparative rental evidence he used. It may be significant that in the section of the report headed "valuation assumptions," the expression "rental values" is defined as follows:
"Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes, nor do they necessarily accord with the definition of Market Rent."
[5] Debenhams is the anchor store in Phase 2 of the Centre. It is the only other large department store in Inverness. It has a gross internal area of 9,312.9 sm on three floors, with entrances from the lower and upper malls of Phase 2. In the same Revaluation the assessor's valuation of Debenhams was based on an adjusted rent of £806,466 per annum, equivalent to a rate of £86 psm as at the tone date. Debenhams appealed against the valuation. Its appeal was heard along with the respondent's appeal and was refused.
The parties' valuations
The assessor
[6] The assessor relied on the valuation of Debenhams as his sole comparison. He took the rate per square metre of Debenhams as his starting point and adjusted it for certain factors that in his view justified a higher rate for the appeal subjects. He contended that the appeal subjects had the best city centre location of any store in Scotland. They were the main entrance to the Centre itself and had a substantial footfall. They were superior to Debenhams in terms of location and configuration. To reflect these advantages and to reflect their smaller floorspace, the assessor determined that the appropriate rate for the appeal subjects was £121 psm. He produced a copy of a letter dated 1 September 2008 that he sent to the respondent's agents listing some of the factors that he had taken into account in arriving at this rate. He took the floor area to be 6,807 sm. Applying to that his rate of £121 psm, he valued the subjects at a figure, rounded up, of £825,000.
[7] The assessor rejected the passing rent as a guide to value. He considered that it was not set at a true open market level. He produced an extract from a Marks & Spencer website from 2001 relating to a previous round of sale and leaseback transactions, in which it was said that the initial rent would be around 15% below market value. He submitted that this cast further doubt on the respondent's valuation.
The respondent
[8] The respondent's valuer relied on the initial rent of £730,000 pa. He considered that it should be treated as a reliable indicator of rental value. He cited rental evidence from Marks & Spencer stores elsewhere in Scotland which in his view supported it.
[9] To adjust the rent to 1 April 2003, the tone date for the Revaluation, he discounted it by 10% to reflect four years' rental growth at 2.5% pa. That produced a figure of £657,000, or a rate psm, rounded up, of £100 psm. Using that rate, he valued the subjects at a figure, rounded down, of £680,000.
The Committee's decision
[10] The Committee made the following decisive finding in fact:
"6. The Committee had not been presented with evidence as to how the assessor had taken account of these factors in adjusting the valuation on the Debenhams subjects to the appeal subjects. In response to a question from the Chair, the assessor explained hypothetically how one might make the necessary adjustments. He did not indicate whether or how he or his staff had actually carried out this exercise and he did not explain the provenance of the figures he used to illustrate this hypothetical exercise."
The Committee returned to the point in its statement of reasons. It referred to Drybrough & Co Ltd v Ass for Strathclyde (1982 SLT 426) as having decided that there was an onus on the assessor...
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