Decision Nº RA 37 2013. Upper Tribunal (Lands Chamber), 30-10-2014
| Jurisdiction | UK Non-devolved |
| Judge | Mr Paul Francis FRICS |
| Date | 30 October 2014 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | RA 37 2013 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2014] UKUT 0476 (LC)
UTLC Case Number: RA/37/2013
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
RATING – valuation – offices – treatment of internal staircase installed by tenant – rebus sic stantibus – definition of net internal area – tenant’s improvements - minor works – Appeal dismissed
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF
THE VALUATION TRIBUNAL FOR ENGLAND
BY IAN PHILIP MANNING (VALUATION OFFICER) Appellant
re: Part 3rd, 4th and 5th floors
Park House, 16 Finsbury Circus, London EC2M 7DJ
Before: P R Francis FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on
7 August 2014
Jonathan Davey of counsel, instructed by HMRC Solicitors, for the appellant VO
The following cases are referred to in this decision:
John Laing & Sons Ltd v Kingswood [1949] 1 KB 344
Gilbert v S Higginbottom & Sons [1956] 2 QB 40
Edma (Jewellers Ltd) v Moore (VO) [1975] RA 343
Williams (VO) v Scottish & Newcastle Retail Ltd [2001] EWCA Civ 185
Wilson-Smith v Attrill (VO) [2011] UKUT 287 (LC)
Johnson v H&B Foods Ltd [2013] UKUT 0539 (LC)
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This is an appeal by Ian Philip Manning (the appellant Valuation Officer), from a decision of the Valuation Tribunal for England (VTE) dated 26 June 2013 which allowed an appeal by the ratepayer, Bloomberg LP (Bloomberg) after reducing the assessment in the 2010 non-domestic rating list on “part 3rd floor, 4th and 5th floors, Park House, 16 Finsbury Circus, London EC2M 7DJ” (the hereditament) from £1,700,000 to a rateable value (RV) of £1,440,000. The material and effective dates were 6 June 2011.
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The ratepayer, Bloomberg LP, which was the appellant before the VTE had, by its agent GVA on 18 August 2011, made a proposal to alter the rating list to £1.00 because, for three reasons, the assessment was deemed excessive. The extent of the disability and the effect of the first two reasons (that the assessment did not reflect ongoing construction works to the adjacent property, 12–15 Finsbury Circus, and the Crossrail works being undertaken at Finsbury Circus) were agreed by the VO and this would have had the effect of reducing the assessment to £1,450,000. The third reason, which would, the parties agreed, have reduced the assessment by a further £10,000, related to whether the net internal area (NIA) occupied by a private internal staircase constructed by the ratepayer between the three floors should be removed from the assessment. That was the principal issue considered by the VTE at a hearing on 22 May 2013, and it concluded that, in accordance with the appellant ratepayer’s case, the NIA of the staircase should be excluded. The VTE also considered an argument by the respondent VO that, if the floor area of the staircase was to be excluded, should there instead be an end-adjustment on the basis that the staircase constituted a tenant’s improvement.
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Mr Jonathan Davey of counsel appeared for the appellant. The appellant gave expert valuation evidence as the duly appointed Valuation Officer.
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Although it was accepted by the VO that the amount in issue before me is small, Mr Davey pointed out in his skeleton argument that the issue has “a significance that potentially goes beyond the four corners of the instant facts,” and there was a risk that if the VTE decision was not challenged, it would be “invoked by ratepayers in other cases where the proper treatment of tenants’ alterations is in question.” Presumably recognising that this was effectively a “test case”, Bloomberg confirmed by letters from its agent dated 16 August and 10 September 2013 that due to the potentially significant and disproportionate costs involved it would not be responding to the appeal, and would thus not be taking any part in the proceedings.
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From the evidence, I find the following facts. The appeal hereditament (as defined in the 2010 rating list) comprises part of the third, and the whole of the fourth and fifth floors (apart from communal spaces such as stairwells and lift/service cores) within Park House, 16 Finsbury Circus EC2M 7EB. Park House is an imposing period building, originally constructed in the 1920s and substantially refurbished in the late 2000s to provide grade A office accommodation behind a retained classical stone façade. The building, which is now multi-let, was listed Grade II in 1977. The office floors are served by six 24 person passenger lifts, a goods lift and a fire lift, and each floor has male and female WCs. There is also an original centrally located common staircase with further staircases provided to the north-west core and one on the east side.
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The hereditament is located on the north-eastern quadrant of Finsbury Circus in the City of London between Moorgate and Liverpool Street under and over-ground stations and to the north of London Wall.
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The ratepayer is tenant of the entirety of the third, fourth and fifth floors (apart from the service and access cores) under the terms of three 10 year leases that also include a basement store. All the demised offices were let as Category A which provided principal services, raised floors and suspended ceilings allowing for fitting out to the occupier’s requirements (to Category B). The fourth and fifth floors, together with a small area comprising two meeting rooms on the third floor were, at the material day, fitted out to Category B and occupied. They comprised a “U” shape around the building’s main central ‘core’ containing lifts, services and an atrium/light-well together with WCs. The fourth floor also had a reception area (that being the only public access), kitchen and staff ‘break-out’ area. The demised part of the third floor which remained to be fitted out to category B was unused by the ratepayer, and was not included within the assessment.
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The fitting out works undertaken by Bloomberg before they took occupation (6 June 2011) included the provision, principally for security purposes, of an internal staircase to contain movement within the demised floors, and to prevent staff having to exit the secure floors to the communal core to move between them. It was installed with landlord’s consent, but not pursuant to any obligation, other than to reinstate at the end of the term or upon the exercise of a tenant’s break clause, and was not subject to any resulting adjustment to the passing rent (although it would be taken into consideration at the first rent review). Due to the fact that the doors that formerly gave access on to the communal core (other than those leading into the fourth floor reception area) became fire-escape doors, and from the outside were permanently locked, the new staircase thus became the only internal means of access between the floors. The total floor area occupied by this staircase, over the three floors it serves, was agreed at 55.07 sq m (1.20% of the total office area demised), and it was in place and in use at the material day.
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The overall net internal floor areas of the hereditament, both with and without the staircase, together with the area of the currently unoccupied part of the third floor were also agreed between the parties before the VTE, and the main office rate was agreed at £370 per sq m.
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The two issues considered by the VTE in its decision of 26 June 2013 were (1) whether the floor area occupied by the internal staircase should be included or excluded from the net internal floor area and (2), if it were to be excluded, should it instead be, as argued by the respondent VO, reflected in the valuation as an end-adjustment for tenant “alterations/stairs” of plus 1.20%? This allowance was not justified by any consideration of the value added by the staircase but was a purely arithmetical addition reflecting the fact that the area of the staircase amounted to 1.20% of the total floor area (including the unused part of the third floor). It was noted by the VTE that whichever approach was adopted, the VO’s assessment (at an additional £10,000) was the same. The 1.20% allowance referred to actually produced, on the agreed £370 psm for office space, an increase of £20,376 but the VO did not propose more than a £10,000 addition for the effect of the...
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