Appeal By Fife Council Assessor Against B & M Retail Limited
| Jurisdiction | Scotland |
| Judge | Lady Dorrian,Lord Woolman,Lord Malcolm |
| Neutral Citation | [2015] CSIH 79 |
| Court | Court of Session |
| Docket Number | XA45/15 |
| Published date | 06 November 2015 |
| Date | 06 November 2015 |
| Year | 2015 |
LANDS VALUATION APPEAL COURT, COURT OF SESSION
[2015] CSIH 79
XA45/15
Lady Dorrian
Lord Malcolm
Lord Woolman
OPINION of LADY DORRIAN
in the appeal
by
FIFE COUNCIL ASSESSOR
Appellant;
against
B & M RETAIL LTD
Respondents:
For the appellant: Stuart QC; Clyde & Co
For the respondents: MacIver; Brodies LLP
6 November 2015
[1] Queensway Industrial Estate is located at Flemington Road, Glenrothes. It is a mixed‑use estate comprising an industrial area and a retail area. B&M Bargain Stores occupies one of the retail units ("the subjects"). It is one of a chain of outlets operated by B&M Retail Limited (“B&M”).
[2] Adjacent to the subjects is an Aldi Supermarket. Nearby there are several other commercial enterprises: ASDA, Gala Bingo, McDonalds, the Filling Station and Morrisons.
[3] Under the terms of its lease, B&M is prohibited from using the subjects as a supermarket. It does, however, allocate about 30 per cent of its floor space to convenience items. Of those, about 20 per cent are food products.
[4] The Assessor entered the subjects in the valuation roll as a new entry with effect from 21 February 2013. He classified the subjects as a supermarket with a NAV/RV of £168,000.
[5] B&M appealed the Assessor’s valuation. It contended that the subjects should have been classified as a retail warehouse with a valuation of £140,000. The Assessor opposed the appeal. He maintained that both the classification and the valuation were correct.
[6] The Fife Valuation Appeal Committee allowed the appeal. On the first issue it held that the subjects should be classified as a retail warehouse. The Assessor does not challenge that decision.
[7] On the second issue, the committee required to consider the appropriate valuation of the subjects. In the case of a retail warehouse, that is made up of three elements: (a) the base rate; (b) the fit out rate; and (c) the external canopy rate. Here the parties agreed the fit out rate at £11 per square metre. They also agreed a reduction factor of 0.15 from the base rate to arrive at the canopy rate.
[8] The dispute between the parties therefore related to the base rate. B&M proposed a base rate of £90 per square metre, while the Assessor contended for £120 per square metre. He also contended that, although he was defending the valuation of £168,000, if the subjects were properly classified as a retail warehouse the correct valuation would have been £197,000.
[9] The assessor’s valuation as a supermarket was based on a direct comparison with the valuation of the adjacent Aldi supermarket, which had a RV/NAV of £137,000, based upon an overall rate of £120 per square metre (£109 unfitted, plus £11 for fit out). On that basis, and comparison evidence in relation to other supermarkets in Fife, the assessor argued for a tone valuation of £168,000.
[10] If the premises were to be valued as a retail warehouse, the assessor argued that the valuation should be based upon an overall rate of £141 per square metre, (£130 unfitted, plus £11 for fit out). This was based on a comparison with retail warehouses in the Saltire Retail Park at Glenrothes, about a five minute drive from the subjects, which were advanced by the assessor as being the most apt comparators. Saltire Retail Park consists of eight purpose built units with a total floor-space of approximately 150,000 square feet. The assessor did not consider that Riverside Retail Park, Leven was an apt comparator as, being about a 10 minute drive from the subjects, it was insufficiently local. There was evidence before the committee that the retail warehouses there (B&M Home Store, Argos and B&Q) were valued at an overall rate of £95 per square metre.
[11] The ratepayers advanced several propositions. First, that as a result of greater demand at tone date for supermarkets, retail warehouses would generally be valued at a lower rate than supermarkets in the same vicinity, so the valuation of the subjects should be based on a figure less than the figure applied to the adjacent Aldi supermarket.
[12] Second, that as a stand‑alone retail warehouse the subjects should be valued at a level lower than such premises within an established retail park, drawing evidence for this proposition from comparison with other stand‑alone units, two of which were outwith the valuation area.
[13] Third, that the most appropriate site comparison before the committee was Riverside Park in Leven. When considering whether sites were “local” it was relevant to consider that retail warehouses were sites which primarily catered for car-borne shoppers, and therefore the Leven site ‑ a mere 10 minute drive away ‑ should be considered local.
[14] The relevance of Riverside Park could be seen further in the effect of reclassification of an adjacent site from a supermarket to a retail warehouse. When that reclassification took place, the valuation changed from £315,000 to £200,000 reflecting a change from £140 per square metre, to one of £95 per square metre, exactly in line with other retail warehouses in the adjacent Riverside Park site.
[15] The committee began by considering more generally the arguments based on the relative value of supermarkets and retail warehouses. On the evidence it found no obvious pattern. In some retail parks supermarkets were valued more highly. In others, the reverse was the case.
[16] To the extent that the ratepayer had relied upon valuations from outwith the valuation area, the committee did not consider these to be relevant. Although there was evidence of “leakage” of convenience expenditure away from the Glenrothes area, this did not extend to areas such as Edinburgh or Glasgow. The committee decided that the valuation should be based on local rental evidence, in which context it rejected the assessor’s contention that Riverside Park should not be considered. In their view, retail warehouses in Fife within a short driving distance of the subjects constituted appropriate comparators.
[17] The committee heard evidence as to the respective advantages or disadvantages of the two retail parks and of the subjects. It was acknowledged by the assessor that the larger area within which the subjects were located consisted of a mixture of retail and industrial uses, but it was contended that, as a result of the adjacent businesses, the sector in which the subjects were directly located had “the look and feel not dissimilar to a retail park”. The assessor relied on elements of the evidence which were said to vouch the relative attractiveness of the site where the subjects were located; the ratepayers relied on elements of evidence indicating the reverse. The committee accepted that evidence to the effect that in general a retail area spread over a number of blocks in a mixed-use industrial‑retail estate was less attractive than a dedicated retail park, particularly when shoppers required to cross roads between units rather than walk across a shared car park.
[18] The committee made the following key finding-in-fact:
“The subjects of appeal are most appropriately compared with the Riverside Retail Park, Leven, which is of mixed use and gives a clear indication of the relative values between supermarkets and retail warehouses in the area.” (emphasis added)
The committee reached the following conclusion:
“Taking all the evidence into consideration it is our decision that the B&M Bargains outlet at Flemington Road should be valued at a lower rate than the adjacent supermarket. Given the choices available to us, we therefore find in favour of the appellant's proposed revaluation of £140,000 NAV/RV from 21 February 2013.”
Grounds of Appeal
[19] The appellant contended that the committee had adopted a valuation based on relative values for a retail warehouse and supermarket in a retail park in Leven, and in so doing had erred in law. The committee erred in determining the value of the subjects by reference to the value of an adjacent supermarket rather than by reference to local retail warehouse values at Saltire Retail Park, and in assuming that any relativity in Leven would apply equally at the site of the appeal subjects. Finally, the committee erred in taking account of the restriction on use as a supermarket, which was not a relevant consideration to the valuation of subjects as a retail...
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