Part 10 - Appendix 1: Case law regarding the application of MEES and the Rating hypothesis
Source: gov.uk (2025-09-30)

The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.

1 In this section, a property being ‘sub-standard’ means the EPC is below the minimum energy efficiency standard, currently E and falls under s27 (2015/962)

2 The issue considered here is whether the prohibition against letting the property under the Energy Regulations impacts or overrides the statutory assumptions (schedule 6(2)(1) LFGA 88) that the principle that the property is vacant and available to let under the Rating Hypothesis.

CVG have taken legal advice from Counsel on this issue and a summary of that advice is set out below:

3 London County Council v Erith and West Ham (1893) AC 562/588,

Lord Herschell LC said:-

“The tenant described by the statute has always been spoken of by the Court as “the hypothetical tenant”. Whether the premises are in the occupation of the owner or not, the question to be answered is: supposing they were vacant and to let, what rent might reasonably be expected to be obtained from them?”

4 The Energy legislation effectively imposes a prohibition upon the letting of premises that are sub-standard (Reg 22(1). i.e. the premises cannot be let whilst the statutory prohibition applies to them. (Reg 27 SI 2015/962)

5 However for Rating purposes, schedule 6, 2(1) LGFA 88, sets out the prescribed statutory valuation hypothesis that has to be applied, namely that the property is vacant and available to let. In other words, the statutory basis requires the valuer to ignore the fact that the actual letting is prohibited by virtue of s27 (SI 2015/962) due to failure to meet the energy efficiency standards.

6 In cases where the property being considered for rating purposes is s27 substandard, then the statutory assumptions, under Schedule 6, compel the valuer to depart from reality to be able to determine the rent at which the property might reasonably be expected to let.

7 Robinson Bros (Brewers) Ltd v Houghton & Chester-le-Street Assessment Committee [1937] 2 KB 445, 474, the Court said –

“Whilst the tenant is hypothetical and the landlord who is to let to the tenant is necessarily also hypothetical, the hereditament is actual - namely, the hereditament described in the valuation list with all its actualities. Two consequences follow. All the intrinsic advantages and disadvantages must be considered and weighed. It is just that particular hereditament which is supposed to be in the market with all its attractions for would-be tenants, to whatever kind of human emotion or interest or sense of duty they may appeal - economic, social, aesthetic, political (for example, in order to perform a statutory duty) - and also with all its imperfections and drawbacks which may deter or reduce competition for it …………………… the totality of opposing forces of demand and supply must be assessed and weighed in order to hit off the point at which the two opposing negotiators are to be deemed likely to strike their bargain.”

8 This passage emphasises that it is the actual property which is required to be assumed to be let on the open market. The existence of a statutory prohibition on letting cannot override the rating statutory assumptions and therefore must be disregarded.

9 R v East Sussex Valuation Tribunal, ex parte Silverstone (1996) CO/3488/94

This was a Council Tax case on judicial review. The appellant challenged whether he could adduce evidence to rebut the statutory assumptions which applied to the assessment of values under the regulations. These various statutory assumptions included to reasonable repair and values as at 1 April 1991. It was stated in the decision

“I have no doubt that on this main issue the tribunal were correct. The assumptions prescribed under the Act expressly make them mandatory. An assumption is by definition a hypothesis which may be adopted whether or not it is, in fact true. The making of assumptions is a familiar concept in valuation law. For example, in the Land Compensation Act 1961 there are certain prescribed ‘assumptions’ as to planning permission and they are applied whether or not the particular planning permission has been given. The whole purpose of such assumptions would be lost if it were open to individual owners, or indeed individual authorities to rebut the assumptions by reference to evidence of individual cases. The statutory provisions are quite clear on this point”

This case shows that the prescribed assumptions under the Rating hypothesis regarding the property being available and able to be let are mandatory regardless of whether in reality the property is prevented from being let.

10 It is clear from the above that the Rating hypothesis and statutory assumptions prevail over the prohibition against letting that may apply to substandard properties. In other words, when considering the property for rating purposes the principle is that the property still has to be assumed to be vacant and to let on the open market even if in reality it is prohibited from being let.

Other Cases

11 Popular Union Assessment Committee v Roberts (1922) 2 AC 93 HL

This was a public house premises to which the level of rent was restricted by the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 and the question arose of whether this restriction was to be disregarded when considering the level of rent to be paid. It was held

“The aim of rating is to arrive at the value of the occupation to the occupier: rent actually paid or payable is only a means of achieving that aim. The Rent Restrictions Act affects rent, but does not, and was never intended to, affect value…. The rent mentioned in the definition of gross value in s. 4 of that Act is mere machinery for ascertaining value; which is unaffected even where no rent at all can ever actually be paid…

The object of the whole system of rating law, built up partly by legislation, partly by judicial decision, is to assess occupiers of rateable property equally in proportion to the value of their occupation…

The hypothesis of rent is merely the appointed means of arriving at annual value and must never be so used as to defeat the purpose for which it is made. Accordingly the hypothetical rent need not be, and seldom is, a rent which any one actually pays; and in many cases it is a rent which no one possibly could pay. It is annual value stated in terms of an annual payment for the right to occupy the property valued. Anything therefore which does not affect the use to which the property can be put or the income to be derived from the occupation of it is to be disregarded in fixing the hypothetical rent It is for this reason that it has been held to be immaterial whether the property could be let at all, whether any particular person could legally or in fact be tenant of it, whether it is illegal to charge any rent for it; although a these things have obviously the most material bearing on the question what rent can be obtained for it in fact. On the same principle it is immaterial whether the rent which an occupier can be obliged to pay is limited by law for such a limitation can affect neither the use to which the property can be put nor the income to be derived from the occupation of it….

What the ratepayer is, under both the Act of 1836 and that of 1869, rated in respect of is decided by many cases in this House to be the beneficial occupation of a hereditament. And if he is in enjoyment of this species of occupation, he must be rated, even though he should not be a tenant of the hereditament ‘ and though no person could be made the tenant of it, and though no rent is or could be received in respect of it.”

Lord Parmoor goes on to state

” It has long been recognised that actual rents based on the contractual relationship between tenant and landlord are not the test of the value of a property for rating purposes. I do not think that there is any difference in this respect between a contractual or a statutory rental. In either case the same objections apply, and in either case the rateable value must be assessed in accordance with statutory directions.”

It was held that statutory restrictions in relation to rent did not apply to the Rating hypothesis and should be disregarded.

12 There have been many other cases considering statutory and restrictive covenant impositions

Dawkins (VO) v Ash Brothers & Heaton Ltd (1969) 2 All ER 246 at 252

This case involved a CPO for a road widening scheme and the anticipation that the property would be demolished could be taken into account as it was reasonable to anticipate the event. The House of Lords held that the impending demolition should be taken into account in applying the statutory hypothesis as the demolition order would apply to anyone who occupied it.

at 33

” a statutory order, such as a demolition order, is imposed and enforced by a superior body and has a pre-determined outcome…..the nature of a restrictive covenant is more akin to a private arrangement between the parties rather than essential to the hereditament”

Williams VO v Scottish and Newcastle Retail Ltd and Another (2001) EWCA Civ 185

“it is common ground between the parties that the statutory hypothesis, as explained in case law, takes account of statutory restrictions on the use of a hereditament but not of restrictions imposed by the covenants in a lease or restrictive covenants affection a freehold property”

All the above cases refer to the effects of statutory limitations on the ‘use’ or type of occupation to which the premises are put, as distinct from the ability to ‘ let the premises’ under the rating hypothesis which must be ignored to give lawful effect to the statute.