Part 2 - Rental Evidence
Source: gov.uk (2025-07-10)

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

Part 2A: Rental evidence Reg 17 (SI 2009/2269) England, Reg 48 (SI 2023/350) and Reg 31 (SI 2005/758) Wales and use in Tribunals

Executive Summary

Regulation 17(SI 2009/2269) Notices [England], Regulation 48 (SI 2023/350) and Regulation 31 Notices (SI 2005/758) [Wales], using rental evidence at Tribunal, using stamp duty evidence, service of notice, form to use, information required in a Reg 17 (SI 2009/2269) [England] / 48 (SI 2023/350) / 31 (SI 2005/758) 31 [Wales] notice.

Reg 17 (SI 2009/2269) [England] / 48 2023 (SI 2023/350) / 31 (SI 2005/758) 31 [Wales] Hereditaments to be specified in notice, Hereditaments outside the Statutory VO area, rights of other parties - counter-notice under Reg 17(6) (SI 2009/2269) [England] or Reg 48 (6) (SI 2023/350) / Reg 31(4) (SI 2005/758) [Wales] Parties requesting to see rents on other specified hereditaments , viewing hardcopy documents, documents not held in hardcopy, viewing evidence outside the VO area. Documents containing information to be produced, reg 17 (SI 2009/2269) counter notice, verbal requests, misuse of Information, rental evidence at UT.

1.0 Rental and Other Evidence (Reg 17 (SI 2009/2269)[England], Reg 48 2023 (SI 2023/350) / Reg 31 (2005/758) [Wales])

Relevant Legislation & Practice Statements

(i) Paragraph 5 of Schedule 9 to the Local Government Act 1988 (request of information)

(ii) Commissioners for Revenue and Customs Act 2005

(iii) England - Reg 17, The Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 (SI 2009/2269)

(iv) The Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) (Amendment) Regulations 2017’ (SI 2017/156) (http://www.legislation.gov.uk/uksi/2017/156/contents/made)

(v) Wales Reg 48, Non-Domestic Rating (Alteration of Lists Appeals) (Wales) Regulations 2023 (SI 2023/350) (https://www.legislation.gov.uk/wsi/2023/350/regulation/48)

(vi) Wales - Reg 31, Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2005 (SI 2005/758 W63) (https://www.legislation.gov.uk/wsi/2005/758/contents/made)

(vii) Consolidated Practice statement - Valuation Tribunal Service (https://www.valuationtribunal.gov.uk/preparing-for-the-hearing/practice-statements/)

(vii) 2C Standard Directions Rating 2023 onwards - Valuation Tribunal Wales (https://www.valuationtribunal.wales/fileadmin/resources/docs/business-rates/02C__Standard_Directions_Rating2023_onwards.pdf)

1.1 Introduction

This section covers the use of in proceedings at Valuation Tribunals and the Lands Chamber of the Upper Tribunal which has been derived from Forms of Return (FORs) or other documents and SDLTs.

Formal procedures are provided for in the legislation, but the existence of the covering legislation permits discussion during negotiations of rental evidence derived from FORs and SDLTs.

The VO and other parties may agree the rental evidence prior to the service of the Reg 17 (SI 2009/2269) notice [England] or Reg 48 2023 (SI 2023/350) Reg 31 (2005/758) notice [Wales].

In the case of Upper Tribunal appeals it is expected that the expert witnesses will have prior agreed all facts relating to comparable evidence and thereby by inference the rental evidence to be included.

1.2 Statutory Provisions

Paragraph 5 of Schedule 9 to the Local Government Act 1988 enables a VO to serve a notice on a person who is an owner or occupier of a hereditament requesting him to supply such information as is required by the VO for the purpose of carrying out the VOs statutory functions imposed by the Act.

1.3 Use of Stamp Duty Land Tax Evidence

Section 17 of the Commissioners for Revenue and Customs Act 2005 enables the VO/LO to use SDLT information in relation to Rating and Council Tax matters;

(1) Information acquired by the Revenue and Customs in connection with a function may be used by them in connection with any other function.

(3) In subsection (1) “the Revenue and Customs” means—

(f) the Commissioners of Inland Revenue (or any committee or staff of theirs or anyone acting on their behalf)

1.4 Confidentiality

Sect 18 of the Commissioners for Revenue and Customs Act 2005

(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.

(2) But subsection (1) does not apply to a disclosure—

(a)which—

(i) is made for the purposes of a function of the Revenue and Customs, and

(ii) does not contravene any restriction imposed by the Commissioners,

2.0 Rental Evidence, Notices and Hearings

2.1 Rental Evidence prior to a hearing

2017 List (and later lists) England

The CCA procedures set out the requirements for exchange and discussion of evidence during the Challenge stage as new evidence at Appeal stage will only be permitted in limited circumstances (see section 6 Proposals- 2017 appeals England). Reg 17 (SI 2009/2269) notices should be issued during the Challenge stage.

2010 List (and earlier) England and 2017 List (and earlier) Wales

Appellants or their representatives should be given the opportunity to fully explain their grounds for believing the assessment to be incorrect during the discussion period.

Where professional representatives or ratepayers make an appropriate effort to discuss the proposal before target date then proportionate rental evidence in support of the VO’s view may be disclosed and discussed prior to the service of a Regulation 17 (SI 2009/2269) [England] / Regulation 31 (SI 2005/758) [Wales] notice.

Rental evidence should no longer be disclosed as a matter of course at the start of the discussion period.

Upper Tribunal hearings

Where an appeal is made to the Lands Chamber of the Upper Tribunal it is usual for both parties to the appeal to agree the details of the rental evidence to be spoken to before the hearing (SI 2009/2269).

2.2 Reg 17 Requirements & Notice -England

General

Regulation 17 of The Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 (SI 2009/2269) enables the VO to introduce to the tribunal proceedings information supplied in pursuance of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] and any land transaction supplied via a SDLT provided notice of this has been given to the Appellant. (Reg 17(3)(b) (SI 2009/2269))

Regulation 17(4)(a) (SI 2009/2269) sets out the procedure for so doing and states that 2 weeks notice must be given by the VO of his/her intention to refer to rental evidence at VT.

Rating list – 2017 and 2023 England

Under the CCA process all rental evidence should have been disclosed and exchanged prior to the decision notice being issued and it should be Reg 17 (SI 2009/2269) compliant. i.e. the requirements for Reg 17 (SI 2009/2269) Notice should have been met before the issue of the Decision Notice.

Once an appeal has been submitted to the VTE then the VO has 4 weeks to serve a notice on the Tribunal and Appellant if it is believed that the correct evidence or information provided under Reg 9 (NDR (Alteration of List and Appeals)(England) (Amendment) Regulations 2017 have not been complied with. (See Section 6 Part 8 CCA) This would include any errors or missing data in respect of rental evidence included in the Decision Notice.

Rating Lists before 2017 England

Whilst the statutory requirement is 2 weeks the Valuation Tribunal England [VTE] have directed in its Consolidate Practice statement PS2(b) - that re Regulation 17(3) evidence- that 8 weeks’ notice must be given before a hearing where Reg 17 (SI 2009/2269) rental evidence is to be relied on. Although the statutory requirement is 2 weeks, the VO should follow the VTE guidance of 8 weeks’ notice.

Regulation 17(4) provides that the VO must ensure that:-

(a) not less than 2 weeks prior to the hearing serve notice or every other party to the proceedings specifying the information to be used and the hereditament(s) to which it relates; and

(b) any party on whom such a notice is served and who has given the VO at least 24 hours’ notice of his intention to do so, has been permitted by the VO to inspect and take extracts (not photocopies) from the documents or other media on which the information is held.

The Regulation 17 (SI 2009/2269) notice served must provide in detail the nature of the evidence the VO intends to adduce.

As the parties have the right to inspect any document to which reference is made in the notice it will not be necessary to quote every entry verbatim but details, at least in summary form, of each of the statements of fact on which the VO intends to rely should be given.

2.3 Reg 48 Requirements -Wales

Regulation 48 of the Non-Domestic Rating (Alteration of Lists Appeals) (Wales) Regulations 2023 (SI 2023/350) (https://www.legislation.gov.uk/wsi/2023/350/regulation/48)

enables the VO to introduce to the tribunal proceedings information supplied in pursuance of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] and any land transaction supplied via a SDLT provided notice of this has been given to the Appellant. (Reg 48(4))

Regulation 48(5)(a) sets out the procedure for so doing and states that 3 weeks’ notice must be given by the VO of his/her intention to refer to rental evidence at VT.

2.4 pre 2023 Rating List Reg 31 (SI 2005/758) Requirements - Wales

Regulation 31 of the [Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2005 (SI 2005/758 W63 (https://www.legislation.gov.uk/wsi/2005/758/contents/made) again restricts the use of paragraph 5 of Schedule 9 to the Local Government Act 1988 [FORs] evidence unless proper notice has been given, in Wales this is 3 weeks before the Tribunal hearing date.

Note there is no requirement in Wales to give notice of SDLT information to be used in connection with a rating appeal.

In order that documents containing information may be used as evidence, Regulation 31(3) (SI 2005/758) provides that the VO must ensure that:-

(a) not less than 3 weeks in Wales prior to the hearing serve notice or every other party to the proceedings specifying the information to be used and the hereditament(s) to which it relates; and

(b) any party on whom such a notice is served and who has given the VO at least 24 hours’ notice of his intention to do so, has been permitted by the VO to inspect and take extracts (not photocopies) from the documents or other media on which the information is held.

The Regulation 31 (SI 2005/758) notice served must provide in detail the nature of the evidence the VO intends to adduce.

As the parties have the right to inspect any document to which reference is made in the notice (Reg 31(3)(c)) (SI 2005/758) it will not be necessary to quote every entry verbatim but details, at least in summary form, of each of the statements of fact on which the VO intends to rely should be given.

2.5 Information which may be used as evidence

Information supplied to VO by BAs

By virtue of Regulation 17 (3)(a) (SI 2009/2269) [England] and Regulation 48(4) (SI 2023/350) / Regulation 31(1) (SI 2005/758) [Wales] information supplied in pursuance of Regulation 24 (SI 2009/2268) [England] and Regulation 61 (SI 2023/350) / Regulation 42 (SI2005/758) [Wales], which relates to information to be supplied to VOs by billing authorities, or Para 5 of Schedule 9 to LGFA 1988 is admissible as evidence in valuation proceedings.

Trade information

The regulations do not preclude the use of information supplied in respect of hereditaments valued having regard to their trading potential as was the position under previous legislation.

VOs are reminded that in order to facilitate obtaining information various Codes of Practice have been entered into (e.g. Public Houses). The importance of not disclosing sensitive trade information other than in accordance with the codes cannot be over emphasized, and the Regulation 17 (SI 2009/2269) / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] procedure should only be used in the last resort.

When dealing with appeals in respect of hereditaments valued having regard to their trading potential notice must not be served as a matter of course. Traders regard trading information as sensitive and VOs should respect this and only serve notice when it is essential because negotiations have been exhausted and the VO considers it imperative to produce evidence of rent/trade to support the valuation.

The decision to issue a Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] notice quoting trading information should be made after consultation with the facilitator of the relevant class co-ordination team.

2.6 Documents to be treated as containing information

Information supplied in pursuance of Para 5 of Schedule 9 to the LGFA 1988 can be in the form of:-

(a) FORs designed for the purpose and containing a reference to the Act which was operative at the time the forms were issued.

(b) a reply in writing to the VO together with a copy of the VOs letter, provided the request for information contains a reference to Para 5 of Schedule 9 to the LGFA 1988 (or similar previous enactment if appropriate) together with a statement of the purposes for which the information is requested.

(c) a letter to the VO referring to a FOR recently made and giving additional information in relation to that specific return.

In cases of doubt the VO should submit a report outlining the circumstances and enclosing copy documents to the Litigation & Settlement Review Panel via the Litigation & technical Policy Team together with a copy to the VO

2.7 General Policy - Use of Rental Evidence

The decision to use documents containing information under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] rests with the VO and, unless FORs or other documents are introduced into the proceedings by the VO other parties have no rights under the regulation. No action should be taken which might lead to a suggestion that VOs are taking unfair advantage of this provision.

During a post revaluation period the use of rental evidence will generally be necessary even after some assessments have been subject to Valuation Tribunal decisions. Once levels have been firmly established and accepted by the VT the VO may be able to rely upon comparisons of assessments without having to resubmit rental evidence to the VT in individual cases.

Appeals to the Lands Chamber of the Upper Tribunal are de-novo hearings and it will usually be necessary to introduce rental evidence before the Tribunal, even where reliance was placed on comparisons before the VT for a much longer post revaluation period.

3.0 Reg 17 (SI 2009/2269) [England] or Reg 48 (SI 2023/350) / Reg 31 (SI 2005/758) [Wales] - in detail

3.1 Formal Documents

Notices served by and on the VO under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] should be treated as formal documents and should be available for inspection by the VT at the hearing.

3.2 Regulation 17 (SI 2009/2269) Notices England

If rental evidence derived from a form of return is to be used, the “parties” must be notified of that intention not less than 2 weeks before the date of hearing, (Reg 17 (3)(4)(a) (SI 2009/2269)).

Under the CCA process, the Reg 17 (SI 2009/2269) Notice should be incorporated into the exchange of evidence during the Challenge period and before the issue of any Decision Notice.

Regulation 17 (SI 2009/2269) also enables the VTE to give directions as to which issues require evidence, the nature of the evidence required and whether the parties are permitted or required to give expert evidence. (Reg 17(1) (SI 2009/2269)).

The VTE may admit evidence or exclude evidence where it was not provided within the time allowed by a direction. (Reg 17(2) (SI 2009/2269)).

It is good practice for the Regulation 17 (SI 2009/2269) Notice to identify:

(i) The document (s) which contain the information

(ii) The hereditament (s) to which the document (s) relate

(iii) The name and address of the person providing the information

(iv) A summary of the lease terms including the rent, dates of rent reviews and the repairing obligations.

3.3 Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) Notices Wales

If rental evidence derived from a form of return is to be used, the “parties” must be notified of that intention not less than 3 weeks before the date of hearing. (Reg 45(5) (SI 2023/350) / Reg 31(3)(a) (SI 2005/758)).

Pre 2023 Rating List - The Regulation 31 (SI 2005/758) Notice requires more information than in the past and should be served as early as possible in the settlement process.

The Regulation 31 Notice (Reg 31(3)(b) (SI 2005/758)) must identify :

(i) The document (s) which contain the information

(ii) The hereditament (s) to which the document (s) relate

(iii) The name and address of the person providing the information

(iv) A summary of the lease terms including the rent, dates of rent reviews and the repairing obligations.

3.4 Service of Notices

England

Reg 22 The Non-Domestic Rating (Alteration of Lists and Appeals)(England) Regulations 2009 SI 2009/2268 applies in relation to any notice authorised or required to be given for the purposes of Reg 17 (SI 2009/2269).

Wales

Reg 59 The Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) 2023 SI 2023/350 W51.

Reg 40 The Non-Domestic Rating (Alteration of Lists and Appeals (Wales) 2005 [SI] 2005/758 W63.

Service

Reg 22 (SI 2009/2268) [England] and Reg 59 (SI 2023/350) / reg 40 (SI 2005/758) [Wales] provides that a notice may be given or served by:

(a)

(i) Delivering it to the person on whom it is to be served

(ii) Delivering it to any authorised agent.

(b) by send it to the person/agent by electronic communication

(c) Leaving it at, or forwarding it by post to:

(i) the usual or last known place of business of that person, or

(ii) in the case of a company, its registered office, or

(iii) the usual or last known place of business or registered office of any authorised agent

(d) delivering it to some person on the premises to which it relates or, if there is no person on the premises to whom it can be so delivered, fixing it to some conspicuous part of the premises.

(e) Additionally, where a hereditament to which the notice relates is a place of business of the person on whom it is to be served, by leaving it at, or forwarding it by post addressed to that person at, that place of business.

Reg 22(4) (SI 2009/2268) [England] / Reg 59(6) (SI2023/350) / Reg 40(4) (SI 2005/758) [Wales] Any notice to be served on a VO may be served by:

(a) Addressing the notice to the valuation officer for the area in question, without further description (i.e. there is no need to use the GVO’s name or personal title) and

(b) Delivering it or sending it to the VO’s Durham postal centre by post or electronic communication.

For the purposes of serving a notice on the VO the online contact Contact VOA - GOV.UK (https://www.gov.uk/contact-voa).

Council Tax Manual Section 3 Appendix 3.5 details the procedures concerning service of documents by post. This contains the Interpretation and Practice Direction from the High Court.

Service of a document is to be taken as:

(a) In the case of first class mail, on the second working day after posting, (i.e. posted a minimum of 2 weeks + 3 working days before VT date).

(b) In the case of second-class mail, on the fourth working day after posting. (i.e. posted a minimum of 2 weeks + 5 working days before VT date).

Working days are Monday to Friday, excluding any bank holiday.

3.5 Notice under Regulation 17 (SI 2009/2269) [England]/ Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] - where VO legally represented.

Where the VO is to be legally represented before the VT, any notice under Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] will be signed and served by the HMRC Solicitor managing the case.

3.6 Persons to whom the Valuation Officer’s Notice is to be given.

Notice by the VO under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (SI 2005/758) [Wales] in respect of an appeal to the VT must be given to every other party to the proceedings.

Reg 17 (4)(a) (SI 2009/2269) [England]and Reg 45(5) (SI 2023/350) / Reg 31(3)(a) (SI 2005/758) [Wales] also carries the requirement to notify “every other party to the proceedings”. The following constitute the potential parties to an appeal whose agreement must be gained prior to an appeal being withdrawn or agreed:

(i) The person who made the proposal

(ii) The occupier at the date when the proposal was made

(iii) The ratepayer at the date of agreement

(iv) Any interested person or relevant authority:

(a) Who at the time the proposal was made would have been able to serve the proposal

(b) Who within 2 months of the proposal having been received by the VO notified the VO in writing that they wished to be a party to the proceedings in respect of the proposal

(v) Any other person who has been a ratepayer in relation to the hereditament since the proposal was made and who has notified the valuation officer in writing before the hearing that he or she wishes to be a party to the appeal

In the majority of cases a Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales] notice will only need to be served on the person who made the proposal.

Additional - For 2010 and earlier appeals (England) and 2017 and earlier appeals Wales:

If there is an intention to use comparable evidence or other information at the VT hearing, caseworkers must adhere to the VOA Charter.

This creates an obligation to provide the other parties with a copy of the written evidence that is going to be used at least 7 days before the hearing. The Charter does however stipulate that this will only be possible where the parties have given the VO the information necessary to conclude negotiations in sufficient time.

Inspection of the documents or on screen data must be in person and arranged at a reasonable time around normal Valuation Office opening times.

The information must be inspected at the relevant statutory VO’s office. An appointment may be made to visit any other of the particular VO’s offices in which the appeal hereditament is situated but cannot be at another VO’s location.

3.7 Forms of Notice

Forms VO 7109, Notice of Information to be used in Evidence and VO 7109A Continuation Sheet have been designed for use by the Valuation Officer in giving notice under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales].

The words “used in evidence” in the forms should be taken as an undertaking by the Valuation Officer to produce at the hearing all the returns specified.

Provision is made in the forms for the Valuation Officer to state the number of hereditaments to which the specified documents relate. In this connection:-

(a) on a document which refers to more than one hereditament (eg a return giving details in respect of separately assessed sub-lettings, or a schedule type of document completed by an owner), each entry is a return in itself and consequently only those hereditaments to which reference is to be made should be counted;

(b) the number of hereditaments should be ascertained in accordance with the rating lists at the date of the notice.

Notices will usually be prepared and printed from DSP.

If at the VT hearing any person to whom notice has been given challenges the validity of the notice the VO should seek an adjournment and refer the matter, together with full details, to the Litigation and Technical Policy Team (TA).

3.8 The hereditaments to be specified

Subject property

When a notice is to be issued under Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (2005/758) [Wales] and a document is held for the hereditament which is the subject of the appeal, that hereditament should always be specified in the notice.

Selection of hereditaments

When considering which hereditaments to specify in the notice, the Valuation Officer should not select only those hereditaments which provide rental evidence most favourable to his/her case. The notice should include all relevant rental evidence.

The VO at the hearing will need to explain why greater weight should be given to some rents, and these lead to the VO’s valuation conclusion, and why other evidence although pertinent to the appeal is not as relevant to the valuation.

For consideration and weighting of evidence see Lotus and Delta v Culverwell (VO) & Leicester City Council (1976) 239 EG 287 and Specialeyes v Felgate (VO) RA 387 1992 (pre and post AVD evidence).

Hereditaments outside the Statutory VO area

Special care should be taken with regard to the selection of hereditaments outside the area within which the particular VO is responsible for the rating lists since Regulation 17(6)(a) (SI 2009/2269) [England]/ Regulation 48(7)(a) (SI 2023/350) / Regulation 31(4)(a) (SI 2005/758) [Wales] does not give the ratepayer the right to ask for returns not in the possession of the Valuation Officer. The aim must be therefore always to give the VT or Lands Chamber of the Upper Tribunal a fair picture of the relevant rental evidence.

The introduction by a Valuation Officer of rented hereditaments situated outside the valuation area, should be restricted to essential cases. Such introduction of rental evidence over a wider area may be made, having regard to the class of property concerned in the appeal and the other circumstances of the case (e.g. the situation of the appeal hereditament close to another VO’s boundary or the lack of similar rented properties in the locality).

Photocopies of FOR documents, certified by the VO who has the originals in his/her possession can be utilized for this purpose should the appellant wish to see a hardcopy record. Otherwise, the screen record or a PDF of the scanned document can be shown at any office of the VO responsible for the appealed hereditament.

Alternatively, the party may wish to travel to the office where the FOR is located to see the original if the above options are not acceptable.

Selection of evidence

The aim must be therefore always to give the VT or Lands Chamber of the Upper Tribunal a fair picture of the relevant rental evidence if it is being relied on.

In some cases, it will often suffice to produce a reasonable sample of the available rents, provided the sample is representative of the whole. When it is appropriate to refer only to hereditaments in the same terrace or parade as the hereditament under appeal, the Valuation Officer may decide to produce all the available rents.

For hereditaments of a non-repetitive type, rental evidence from a much wider field may have to be selected.

It will always be a matter for local determination to decide the number of rent returns to be produced. As a general guide a proportional response is required to the evidence provided by the proposer, however in some circumstances it may be necessary to increase this number to present a fair picture of the position. It should, however, be remembered that the other party has the right to refer to an equal number of other hereditaments.

Rental evidence in support of shop valuations in main shopping thoroughfares may have to be confined to each part or section of the street considered to have a separate standard of rental value for rating purposes. Nevertheless, it may be appropriate to include rents of other sections of the street where it is considered that such evidence is relevant to the case under appeal and where it is thought likely to assist the Valuation Tribunal or Lands Chamber of the Upper Tribunal in its determination.

Photocopies of FOR documents, certified by the VO who has the originals in his/her possession can be utilised for this purpose should the appellant wish to see a hardcopy record. Otherwise, the screen record or a PDF of the scanned document can be shown at any office of the VO responsible for the appealed hereditament.

Alternatively, the party may wish to travel to the office where the FOR is located to see the original if the above options are not acceptable.

3.9 Documents to be specified

Although it will usually be sufficient to specify only the latest admissible document relating to a particular hereditament, the Valuation Officer may also specify earlier documents.

Where an earlier document differs materially from the latest one but refers to the same tenancy (or period of tenancy), so that there appears to be a mistake in one of them, then the earlier document must be specified also.

The valuer will need to point out the apparent discrepancy to the VT or Lands Chamber and saying upon which return he/she is relying.

It should be borne in mind that, subject to admissibility, the Valuation Officer is not precluded from relying on a document completed after the compilation of the rating list.

Reference should however be made to the case of Smith v Moore (VO) 1972 RA 269 LVC/220/1970 before reliance is placed on the admissibility or relevance of documents received after the date of a VO alteration or to an IP proposal particularly if they are needed as evidence to confirm a “trend” reflected in the valuation.

Where the case is under National Specialist control, the selection of documents will be made in consultation with the Litigation & Technical Policy Team case manager.

3.10 Rights of other parties - Counter-notice under Reg 17(6) (SI 2009/2269)[England] or Reg 48(6) (SI 2023/350) / Reg 31(4) (SI 2005/758) [Wales]

Parties requesting to see rents on other specified hereditaments.

In addition to the right of inspection and making copies (only) of the documents to be used by the Valuation Officer any person to whom notice is given by the Valuation Officer (under Regulation 17(4) (SI 2009/2269) [England] / Regulation 48(5) (SI 2023/350) / Regulation 31 (3) (SI 2005/758) [Wales]) may give notice to the VO under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31 (4) (SI 2005/758) [Wales] specifying other hereditaments as being hereditaments which are comparable in character or are otherwise relevant to the person’s case, and requiring the Valuation Officer to permit access to information on those hereditament’s that is relevant to the appeal proceedings.

The number of other hereditaments requested in the counter notice shall not exceed 4 or if greater, the number specified in the original Reg 17 (SI 2009/2269) [England] / Reg 48 (SI 2023/350) / Reg 31 (SI 2005/758) [Wales] notice (Reg 17((7) (SI 2009/2269) [England]), Reg 48(8) (SI 2023/350) / Reg 31(5) (SI 2005/758) [Wales]) NB this is not the same as the number of FORs.

Notice to be given

The person wishing to inspect the documents must give at least 24 hours’ notice and specify which of the documents they wish to inspect. (Reg 17 (4)(b) (SI 2009/2269) [England]) & (Reg 48(5)(b) (SI 2023/350) / Reg 31(3)(c) (SI 2005/758) [Wales])

If the person gives notice under reg 17(6) (SI 2009/2269) [England] or reg 48(6) (SI 2023/350) / reg 31(4) (SI 2005/758) [Wales] that they wish to inspect other comparable documents, they must also give at least 24 hours’ notice.

The 24-hour notice period is statutory but is ‘…not less than 24 hours’ notice…’ and the inspection has to be permitted ‘at any reasonable time’. What is ‘reasonable’ will depend on the circumstances – a request made at 6pm on a Thursday may not be in time to inspect on Friday as the 24 hours would expire after close of business for the Friday and may have to wait until the following Monday. A request to inspect a large number of hardcopy FORs held in different locations may ned a longer period to assemble the documents etc.

Redaction may be appropriate if the FOR contains extraneous material wholly unrelated to the information to be relied on or is personally sensitive.

The person may:-

(a) Inspect the documents or other media in or on which such information is held

(b) Make a copy of information from the documents

There is a statutory prohibition against providing or taking a photograph of the documents, (Reg 17 (4)(b)(ii) (SI 2009/2269) [England]) & (Reg 48(5)(b)(ii) (SI 2023/350) / Reg 31(3)(c) (SI 2005/758) [Wales]).

The recipients also have the right to serve a counter notice at any time prior to the VT hearing allowing them to view, copy and require to be produced at the VT, documents relating to the other hereditaments specified in the counter notice. The hereditaments specified in the counter notice need to be “comparable in character or otherwise relevant to that person’s case”.

The number of hereditaments specified in the counter notice is limited to either 4 or a number equal to the number of hereditaments specified in the VO’s Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/350) [Wales] notice.

It is the number of hereditaments that is restricted and not the number of FORs that may be attached to those properties.

Number of hereditaments and FORs that can be viewed

This right is limited in that the number of hereditaments specified in the notice must not exceed 4 or if greater the number of hereditaments specified in the Valuation Officer’s notice. (Reg 17 (7) (SI 2009/2269) [England]) & (Reg 48(8) (SI 2023/350) / Reg 31(5) (SI 2005/350) [Wales]).

However, the person is entitled to inspect all relevant documents held in relation to those hereditaments so, for example, if the VO notice relates to 1 FOR in respect of each of 4 hereditaments (a total of 4 FORs) and the VO holds 2 FORs in respect of each of the 4 comparable hereditaments in the person’s counter-request (a total of 8 FORs), the person is entitled to inspect all 8 of those documents as well as the 4 in the VO’s notice.

Notice to be in writing

The Valuation Officer should require notice given for the purposes of Regulation 17(6) (SI 2009/2269) [England]/ Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] to be in writing. In cases of ambiguity, the other party should be informed by letter of the action which the Valuation Officer assumes the notice to require.

Hardcopy documents

Where the FOR is held in hardcopy at the location where the inspection is to take place the person may be shown the document and is permitted to make notes from it.

A member of the VO staff must supervise the visitor and remain present at all times that documents are being inspected;

Scanning, photocopying or photographing (e.g. with a camera or mobile phone) documents is not to be permitted; Notes may be made in manuscript or be typed into a laptop or be recorded into a dictaphone etc;

Where the hardcopy is not held at the relevant location, or if the person is content to view the information on-screen, a member of staff may retrieve the relevant information from the database and allow the person to view the screen. Care must be taken to only permit sight of the relevant screens.

Alternatively, printouts from the database may be provided in the same way as for hardcopy original documents. The person is only permitted to take notes from the printouts and must not be permitted to take the printouts away with them.

Viewing evidence outside the VO area

The ratepayer’s right under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) does not extend to inspection or production of returns relating to hereditaments outside the valuation area and which are thus not “in the possession of” the Valuation Officer.

Nevertheless, with respect to hereditaments where a Valuation Officer has included in his own notice properties outside the valuation area, he should afford the ratepayer to whom he has given such a notice a similar right; this right need not be limited to a number of “outside” hereditaments equal to the number of “outside” hereditaments quoted by the Valuation Officer.

Where it is necessary to quote evidence covered by two VOs, it will not be necessary to insist that a visit is made to each VO. A photocopy of the FOR certified by the Valuation Officer to be a true record may be made available for inspection at the other VO’s office or alternatively a scanned record or screen record may be shown to the Appellant.

Alternatively, the Appellant may make an appointment to view the original documentation if they wish to do so at the office where it is held.

Documents not held in hardcopy.

If the required documents are not maintained in hardcopy form then the requirement to produce it is satisfied if a print-out, photographic image or other reproduction of the document which has been obtained from the storage medium used is made available for proceedings and certified by the VO (Reg 17(10) (SI 2009/2269) [England]) & (Reg 48(11) (SI 2023/350) / Reg 31(9) (SI 2005/758) [Wales]).

3.11 Documents containing information to be produced

Counter Notice

The VO must produce, if requested to do so, all the documents containing information in his or her possession which relate to each hereditament specified in a, Reg 17(6) (SI 2009/2269) [England] / Reg 48(6) (SI 2023/350) / Reg 31(4) (2005/758) [Wales], counter-notice.

In practice, ratepayers will usually be interested only in the latest admissible documents, but if the VO is asked to produce documents at a hearing, he or she should have with them all documents which are in their possession in respect of the particular hereditaments.

If the counter-notice is received too close to the hearing for arrangements to be made for the inspection and making of copies if required, the VO should take to the hearing all the documents to which the counter-notice relates and should explain the circumstances to the VT at the commencement of the proceedings.

The VO should not treat any counter-notice received before the date of hearing as too late for these purposes if within reason. Otherwise, the VO’s only course will be to request a postponement of the hearing.

When the VO is informed verbally under Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] of the document/returns which are required to be produced at the hearing, the VO should, to avoid any dispute, state in writing the documents which will be produced.

If requested, the VO should produce any earlier document relating to a hereditament specified in the VO’s notice, even where such earlier return has not been specified. Such a request should be treated by the VO as being independent of the ratepayer’s right under Regulation 17(6) (SI 2009/2269) [England / Regulation 45(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales]) to specify other hereditaments.

Regulation 17(6)(a) (SI 2009/2269) [England] / Regulation 48(7) (SI 2023/350) / Regulation 31(4) (a) (SI 2005/758) [Wales] refers to documents “in the possession of the Valuation Officer”. VOs should act reasonably in the interpretation of these words and the phrase is to be considered in relation to:-

‘Hereditaments in the same valuation area as the hereditament which is the subject of an appeal.’

No documents held on requested hereditament

If the VO has no document in his or her possession for a hereditament specified in a counter-notice and which is in the same valuation area as the appeal hereditament, the VO should so inform the other party in writing immediately.

There is no power for the other party to substitute another hereditament for one specified in a counter-notice, either because the information disclosed does not assist the party’s case or there is no document.

VO refusal to produce documents

The VO should not decline to produce for inspection any document held which relates to a hereditament not in the same charging authority area as the appeal hereditament.

Hereditaments in other valuation areas

A VO should refuse to bring into his or her “possession” any form of return concerning a hereditament outside the valuation area, unless such a hereditament has been included in the VO’s own notice. Regulation 17(8) (SI 2009/2269) [England] / Regulation 48(9) (SI 2023/350) / Regulation 31(6) (SI 2005/758) [Wales] however does not permit any person who has served a counter notice to inspect or copy, or require the VO to produce any document, that contains information which does not constitute direct evidence of the rent payable where such information is not reasonably required for the purposes of the relevant proceedings.

The inspection, copying or production of receipts information, trading accounts, and costs relating to specialised buildings or plant and machinery is therefore precluded unless the hereditament cited is comparable to the appeal hereditament or the information is otherwise reasonably required.

An example of this may arise in an appeal against the assessment of a shop unit where a similar shop unit, used as a wine bar, is cited as being a hereditament comparable in character to that person’s case.

Different FORs will have been served on the occupier of the shop (VO 6003) and the occupier of the wine bar (either VO 6010/VO 6011). If full details have been provided VO 6010 and VO6011 will show trading information in addition to rental details, and it would not be appropriate for all this information to be inspected, copied or produced at the hearing of the VT.

Whether the other hereditaments specified in the counter notice are comparable in character, or otherwise relevant to the case of the person who has given the notice, is a question of fact for determination by the tribunal or arbitrator, if appointed (see para 1.17).

3.12 Applications under Reg 17(9) (SI 2009/2269) [England]/ Reg 48(9) (SI 2023/350) Reg 31(7) (SI 2005/758) - VO Refusal to issue notice - consequential Action

Where the VO has refused or failed to comply with a Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(9) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] counter-notice, the person who made the notice may make application to the tribunal (or arbitrator if appointed) for the VO to be directed to comply with the notice.

Upon receipt of a copy of such an application, the VO should immediately email Litigation & Settlement Review Panel via the Litigation & Technical Policy Team a full report of the circumstances including reasons for considering that the provisions of Regulation 17(6) (SI 2009/2269) [England / Regulation 48(6) (SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] (see para 12) are not satisfied, together with a scanned copy of the application and of all notices in respect of documents served by and on the VO in the proceedings concerned.

The VO should state in the report whether it is considered that legal representation should be given at the hearing of the application.

If, before the receipt of instructions from the Litigation & Settlement Review Panel LSRP), the VO receives notice of hearing of the application, the Litigation & Technical Policy Team should be advised by telephone or by email marked importance ‘high’.

3.13 Misuse of Information

Where, in the opinion of the VO, an attempt is being made to obtain information for purposes other than the proceedings concerned, the circumstances should be reported to the Litigation & Technical Policy Team. Subject to any special instructions that may be given in consequence of such a report, the VO should give effect to all notices.

3.14 References to Rented Hereditaments not in the same Valuation Area as the Appeal Hereditament

References to hereditaments outside the valuation area should be restricted to essential cases but when a VO wishes to produce rental evidence in respect of hereditaments, and based on documents in the possession of another VO, one of the following alternatives should be adopted:-

(a) a schedule of rents may be agreed with the other parties (see paragraph 6). This method is preferable and should always be attempted;

(b) for the purpose of a Regulation 17(6) (SI 2009/2269) [England] / Regulation 48(6) SI 2023/350) / Regulation 31(4) (SI 2005/758) [Wales] notice certified copies of documents may be obtained from the VO holding the documents. the VO holding the original document should certify each copy at the bottom as follows:-

“certified a true copy (Signature) Valuation Officer ………………… Valuation Area. Date”

When the copy is taken sufficient space on the copy paper should be left for the certificate.

Where it cannot be avoided, the VO who had possession of documents containing information may be called to give additional evidence of comparison as between the rented properties and the appeal hereditament.

Where, however, the evidence required is of a comparatively minor nature, arrangements can be made for one of the VO’s valuers to attend the hearing and give supporting evidence.

Where a VO has specified in a notice documents obtained from another VO, and the ratepayer also has included in a counter-notice hereditaments outside the valuation area, copy documents relating to the latter hereditaments should be obtained from the appropriate VO.

3.15 Imperfect Documents

An unsigned document is not a document to which Regulation 17 (SI 2009/2269) [England]/ Regulation 48 (SI 20213/350) / Regulation 31 (SI 2005/758) [Wales] applies.

Such a document should, therefore, neither be specified in a notice by the VO nor produced for inspection in consequence of a counter-notice.

No attempt should be made to erase any notes in ink that have been added on any document after its receipt in the office.

The VO should be prepared, on request, to explain any such notes to the VT or Lands Chamber of the Upper Tribunal or to the person to whom the document is produced for inspection. It is emphasised that Regulation 17 (SI 2009/2269) [England] / Regulation 48 (SI 2023/350) / Regulation 31 (SI 2005/758) [Wales] applies only to documents as originally made by the person required to make them.

If any document to be specified in the VO’s notice, or relating to a hereditament specified in a counter-notice, contains any comments (e.g. questioning honesty) which are considered undesirable for production to the other parties or to the VT or Lands Chamber of the Upper Tribunal, the VO should seek instructions from the Litigation & Settlement Review Panel. The VO should send a copy of the report via the Litigation & Technical Policy Team.

3.16 Agreement of Facts

It will be an advantage in all proceedings to establish by agreement before the hearing the facts stated in any documents to be used by the VO and the facts concerning the hereditaments to which the documents relate.

Unless, exceptionally, the other party is prepared to agree any analysis that the VO has made, the facts stated in the documents should be produced in schedule form for the purposes of agreement and any analysis dealt with separately.

The VO should offer to agree facts in respect of any documents which the other party requires to be produced at the hearing.

3.17 Rents - Avoidance of Press Publicity

When documents are produced at a VT hearing and the Press is present, the VO should ask the Chairman to request the Press not to publish details of the tenancies of the premises quoted, as such information may prove embarrassing to the occupiers and owners of the properties concerned.

3.18 Publication of the VT decision

The Tribunal decisions are public documents and will be published on the VTE/VTW website unless an application is made by a party to have a decision redacted or anonymized. Requests can also be made to redact information in regard to sensitive or trade information appearing in the decision.

Applications may be made in writing before the hearing, orally at the hearing or exceptionally in writing after the hearing.

All applications must be supported by reasons and it is for the applicant to satisfy the tribunal that an application should be granted.

The following are some of the reasons the tribunal would consider granting an application for:

(a) national security

(b) public safety or public order

(c) personal safety

(d) privacy and family life [CT decisions]

(e) protection of children [CT decisions]

(f) protection of commercially sensitive information eg trade information

3.19 Evidence at Lands Chamber of the Upper Tribunal

See Chapter 8 - Upper Tribunals for full details.

Appeals to the Lands Chamber of the Upper Tribunal should be lodged within 4 weeks of the Valuation Tribunal decision.

The expectation of the Upper Tribunal is that parties will have exchanged all documents, evidence and expert witness reports upon which they intend to rely prior to the hearing date and have a statement of agreed facts as well as having agreed the issues which they require the member to decide upon.

The time limits for the exchange of documents depend upon whether the case is to be dealt with on the standard procedure or the simplified procedure.

Unless the simplified procedure is requested and agreed to by both parties the standard procedure will be followed.

Under both procedures the Appellant and Respondent will usually file and serve a Statement of Case with the appeal and the response notice, however an application for an extension of time to serve the statement of case made be made if necessary and on payment of a fee.

The Statement of Case will include reference to any FOR or SDLT evidence which is to be relied upon.

Simplified Procedure

The Upper Tribunal will fix the hearing date and then not less than one month before the hearing date the parties to the appeal must exchange copies of all the documents they intend to rely upon, this would include full details of any FOR or SDLT information referred to in the statement of case.

Standard Procedure

On acknowledgement of the appeal and confirmation that the standard procedure applies both parties are directed to send to the Tribunal and exchange with each other their expert witness reports and statements of witnesses of fact usually within 2 months of the Registrar confirming the use of the standard procedure.

Part 2B Rental Evidence - hierarchy and tone

1.0 Statutory Basis of Valuation

Regard must be had to the statutory basis for valuation when considering rental evidence. The rent that has to be determined is that which might reasonably be expected for the hereditament as it is at the material day on a yearly tenancy.

The basis of valuation is set out in Paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988 (as amended).

The rateable value of a non-domestic hereditament [none of which consists of domestic property and none of which is exempt from local non-domestic rating] shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year [on these three assumptions—

(a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;

(b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic;

(c) the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above

1.1 Vacant and to Let, Ready for Occupation

This requires an assumption that the hereditament is vacant and available to let on the above statutory terms LCC v Erith (1893 AC 552 House of Lords)

‘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 for them’

R v South Staffordshire Waterwork Co 1985 16 QB 359 and British Home Stores v Brighton BC & Burton (VO) 1958 RVR 665, confirmed that the hypothetical lease is also assumed to have the prospect of continuance.

The statutory assumption requires that the hereditament is taken to be is vacant and available to let ready for occupation on an annual tenancy, with a willing landlord and tenant. This was confirmed in R v South Staffordshire Waterwork Co 1985 16 QB 3 59 and British Home Stores v Brighton BC & Burton (VO) 1958 RVR 665, confirmed that the hypothetical lease is assumed to have the prospect of continuance.

1.2 Other expenses to be assumed

Vassiere v Jackson 1986

In this case an unadopted road was neither the landlord’s nor tenant’s responsibility as it was outside the hereditament. Therefore, its poor state would affect the value of the property and should be reflected.

White Bros v South Stonehen 1915

In this case other expenses were necessary that related to the repair of the sea wall to protect the hereditament, although the sea wall did not form part of the hereditament. It was held that these works could be assumed to be done but the dredging of the canal would not.

1.3 Valuation Principles

A useful summary was set out in Harrods v Baker RA xx-xxxx-xxxx

1) The actual property should be valued rebus (ie as it physically stands at the material day)

2) duty to take all intrinsic qualities and circumstances into account

3) rent derived from the higgling in the market place

4) actual profits made do not form any element except in so far as they afford evidence of what might be reasonably expected to be made from occupation of the premises

5) the statutory hypothesis mechanism to get at value is not to depart from reality any further than necessary

6) actual occupier is to be taken as a prospective bidder

1.4 Devalue as you value

When adjusting and analysing rents, remember you will need to value as you have devalued.

Marks & Spencer Ltd v Collier VO LVC(982 3 1964)

‘The valuation must proceed on the same basis as devaluation’

See also FW Woolworth & Co v Peck (LVC 58 / 65)

1.5 Rent to be ascertained and value to occupier of his occupation

It necessary to look at all the available rental evidence in the locality to establish the correct level of value to apply to the subject property. The closer those rents are to the statutory definition having regard to the terms of their lease and time, and the less adjustment to that rent is required, the greater the use or weight can be attributed to that evidence.

Whilst open market rents are considered to be the best evidence, other rental evidence may still be useful. However, if there is a connection between the parties, ie it is not an arms length transaction it is likely to be less reliable unless it can be demonstrated by comparison with other evidence to be in line with the norm for the market (First Fashions Pension Scheme v List VO 1999 RA 93). E.g., inter-company transaction, pension rents etc

There may well be many cases where the rent passing on the subject property is more extreme than that which would be paid in the market, as evidenced by rents on other properties, but you would need rental evidence to demonstrate this is the case.

Actual rent below market rent

Hodges v Howells (VO) 1993 RA 236 the LT accepted that the actual rent was less than the rent that might reasonably be expected to be paid in the open market

Value to existing occupier

R v School Board for London 1886 17 QBD 738 stated that

‘the true test is the value to the existing occupier and not the rent which any other tenant unfettered as to user and restriction as to charges would give in the market’

All evidence admissible

There are many different types of rental agreement in that can be found in the market place e.g., stepped rent, turnover rents, Company Voluntary Arrangements (CVA) rents, arbitrated rents, pension rents, sale and leasebacks etc and the implication of each of these in the rental basket of evidence are discussed below. See Appendix 1.

What is important is the relationship or connection between the parties and the basis on which the rent is set, which in turn is defined by the terms of the lease agreement, when considering the usefulness of those agreements. The more extreme the rent set is from market norms, the less reliable it is and the less weight that should be afforded to it. It is not necessarily the type of rental agreement that determines its reliability.

All evidence should be considered in respect of the statutory assumptions and weighted accordingly. All evidence is admissible, the goodness or badness of it goes to weight only, not admissibility. This principle was established in Garton v Hunter 1969.

The actual rent on the property is the starting point, but it is not conclusive and other evidence must be considered to test that rent to assist in determining how useful it actually is and the weight to attribute to it.

Rent reasonably expected to be paid for the property

The rent to be paid under the hypothetical tenancy is the rent reasonably expected to be paid for the property and neither party are under any undue pressure to reach agreement. See (R v Paddington (VO) x Peach Property Corporation Ltd 1964 3 ALL ER 200, L&A Black v Burton VO 3 RAC 172).

House of Lords when considering the hypothetical rent stated that the rent to be determined was

‘not the rent reasonable for the hypothetical tenant to pay but the rent reasonable for the premises’

If a rent is to be disregarded it will be necessary to have more compelling rental evidence to displace it. (F W Woolworth & Co Ltd v Moore (VO) [1978] LT RA 186 and Marks and Spencer Leamington Spa v Sanderson (VO) [1992] LT RA 63 and Re the Appeal of Reeds (VO) [2009] RA 90).

Popular Metropolitan Borough Assessment Committee v Roberts (1922 2 AC93)

The actual rent is no criterion unless that happens to be the rent that the imaginary tenant might reasonably be expected to pay.

Ponsford v HSM Aerosols HL ALL ER 837.

What is trying to be established is the rent that is reasonable to be paid for the premises, this is not the same as the rent being reasonable for the tenant to pay.

Willing Parties

R v Paddington (Peachy) 1966 1QBD 360

Both the hypothetical landlord and tenant are assumed to be willing parties and not under any pressure or duress. Some rents, such as CVA agreements, do not fall into this category as they are not freely agreed on the open market but under financial constraints. (see Appendix 1)

LCC v Erith

The hypothetical tenant may be the owner or existing occupier or may be someone fresh to the scene. (Barrett v Gravesend Rent Assessment Committee 1941 2 KB 10) who is unaware of what has gone before,

Morton v Jones (1986 31 RVR 25)

Considered temporary nuisances, the hypothetical tenant fresh to the scene will be unaware of past disturbances and will only consider how it may potentially affect rental value in the future

In all cases the hypothetical landlord and tenant are regarded as being reasonable people

Marks & Spencer v Sanderson VO (1992 RA 63)

‘I accept that one has to postulate that the hypothetical tenant and the hypothetical landlord will be reasonable people, and will behave as reasonable men in the real world behave in the circumstances that have to be postulated’

Finnis v Priest VO (1959 52 R&IT 372

‘But I have to consider not the attitude of the old residents, which is understandable, but that of the hypothetical tenant. He must be considered as a reasonably minded person, arriving fresh to the scene without any prejudice which might derive from experience of conditions which obtained previously.’

Higgling in market

Robinson Brothers (Brewers) Limited v Houghton and Chester le Street Assessment Committee [1937] 2 KB 445 (as endorsed by the House of Lords in [1938] AC 321 at 339) and Hughes (Valuation Officer) v Exeter City Council [2020] UKUT 0007 (LC).

The rent to be ascertained is the figure at which the hypothetical landlord and tenant would, in the opinion of the tribunal, come to terms as a result of bargaining for that hereditament in the light of competition or its absence in both demand and supply as a result of

“the higgling of the market” and

‘all intrinsic advantages and disadvantages considered and weighed’

1.6 Valuation Date

The valuation date, on which the level of values is taken, is known as the Antecedent Valuation Date (AVD).

This is currently set for the 2023 Rating Lists by The Rating Lists (Valuation Date)(England)Order 2020 (SI 2020/823) as being 1 April 2021 in England and The Rating Lists (Valuation Date)(Wales) Order 2020 (SI 2020/1378 (W. 305)) in Wales . For the 2026 list the AVD will be 1 April 2024 as set by the respective legislation is The Rating Lists (Valuation Date)(England)Order 2023 SI 2023 231 and The Rating Lists (Valuation Date)(Wales) Order 2023 SI 2023/1010 (W162)

Rental evidence set closest to the valuation date will constitute the strongest evidence. However, this is subject to the terms of the lease, (including any side agreements and unusual or restrictive terms) and any connections between parties that may have affected the level of rent paid. When looking at the rents or assessments on comparable property, those in the same mode or category of use and close to the subject property will be of greater weight in the evidential basket.

1.7 Rebus and mode or category

It is a long established rating principle that the subject property has to be valued rebus sic stantibus, i.e., physically as it is at the appropriate Material Day. Whilst it is assumed there is an imaginary lease between the hypothetical landlord and hypothetical tenant, the actual property is taken as it is at the valuation date with regard to the physical characteristics where only minor changes could be assumed and the mode or category of use the subject property. See Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988

Fir Mill Ltd v Royton UDC and Jones VO (1960 R&IT 389) stated

para 171, following Fir Mill, it was stated

“This part of the rule rests on the principle that the hereditament is to be valued in its actual condition on the material day - as it was rebus sic stantibus. We emphasise that the alterations must be minor…. The correct approach is to look at the totality of the works in the context of the hereditament and then ask the question are those works minor works?”

and at para 173

“The range of potential hypothetical tenants would therefore be restricted to those willing to occupy the properties in their existing condition

Scottish and Newcastle (retail) Ltd v Williams VO 2000 RA 119 (‘City Duck’),

‘ the mode or category of occupation by the hypothetical tenant must be conceived as being the same mode or category as that of the actual occupier…. As shop as a shop, but not any particular kind of shop.’

Mode or category of use is taken in its broadest sense, a narrow construction has been rejected by the Tribunals. Therefore, rental evidence from hereditaments in the same mode or category of occupation as the subject provide the strongest evidence.

In Williams v Scottish & Newcastle it was held that a restaurant is not in the same mode or category of occupation as a shop and that therefore a restaurant should not be valued as a shop, nor a shop as a restaurant.

Even if premises can be used for a different purpose without the need for significant physical alterations or planning permission, for example a restaurant occupying an identical unit to an adjoining shop where neither physical alterations nor planning permission would be required to change the use from restaurant to shop, the restaurant would therefore be valued as a restaurant even if the value as a restaurant would be lower than the value as a shop.

To apply a shop value to premises occupied as a restaurant would be to value the premises in a different mode or category of occupation than its actual use and which would be in breach of the assumption contained in Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988 that the premises are to be valued in the same mode or category of occupation as the actual use.

If a restaurant would command the same rent as a shop, then it is appropriate to have regard to the evidence of shop values. The valuation would still be on the basis of the value as a restaurant. Refer also to Appeal of Reeves (VO) (2007) RA 168 LT (concerning Truro College).

Scottish v Williams (UT) in reference to Garton v Hunter , para 140 stated all evidence is relevant and it is a question of weight,

“It is important to distinguish between the operation of the rebus sic stantibus rule and the identification of the evidence to which regard may be had in the valuation”

“What the valuer is seeking to assess is the value of the hereditament on the assumption that the matters set out in para 2(7) of sch 6 were as they were on the material day. For this purpose he will have regard to the rent (if any) of the subject hereditament and to the rents and assessments of other hereditaments to the extent that the evidence of these assists him in making his valuation. All relevant evidence is admissible, and the goodness or badness of it only goes to weight. Whether the rents or assessments of hereditaments in other modes and category of use are relevant, is a matter for judgement in the individual case. Often they will be of no assistance, but there are undoubtedly cases where they may contain helpful evidence. Take for example, a shopping street which contains, in addition to shops and A3 users, a few offices in premises built as shops. The subject hereditament, in office use, is in part of the street that contains only shops and restaurants apart from the subject hereditament itself. If the evidence from the other parts of the street is that the rents and assessments of offices are no different from those of shops and A3 users, the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage. It is a matter of evidence and argument and valuation judgement in the particular case whether the rents and assessments of hereditaments in a different mode and category of use are of assistance.

para 141

“In the example given, the valuer is not, of course, valuing the subject hereditament as a shop or restaurant. He is valuing it as an office but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that tenant would pay to occupy the subject hereditament as an office. It is not necessary for him to pretend that the offices are in the same mode and category of use as shops or restaurants”

As per the example, given by the Upper Tribunal in Scottish v Williams, whereby

“the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage”.

Rents from other properties in other uses should not be ignored if evidence shows that the rents paid are commensurate with the mode or category of use the subject property.

Scottish and Newcastle stated

“Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. There is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation”

In Burvill v Jones (2012 UKUT 0101 LC) rental evidence from industrial units on the same industrial estate were held to be relevant in the valuation of an MOT test centre even though an MOT test centre was in a different mode or category of occupation. It was stated in that case

“the rental evidence from the other units on the K9 estate is relevant to the valuation of the appeal hereditament as vacant and to let. They immediately adjoin the appeal hereditament, their rents reflect the locational and many of the physical characteristics shared by the subject property and the appeal hereditament could be used other than an MOT test centre by undertaking minor physical works”

Normally, any rent passing on the subject property to be valued and rents and assessments of comparable hereditaments used within the same mode or category of occupation as the hereditament being valued will form the best evidence

This does not mean that rents and assessments of properties used for another mode or category of occupation are irrelevant and in some cases, it may be appropriate to use them. (see Reeves VO v Truro College (2007) RA/74/2005)

The Appeal of Reeves VO (2007 RA 168) (‘Truro College Case’) .

In that case the rents on colleges were paying similar levels of rent in an office block as office users and therefore it was held that the office rents were useful in establishing the correct basis of value.

‘Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. there is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation’

In Truro College the Lands Tribunal stated that all relevant evidence was admissible, and that it was for the valuer to judge the weight to be given to evidence of rents or assessments of hereditaments in other uses. The Tribunal made a comparison with valuers adjusting for different physical and locational characteristics and commented that valuers should adjust for use in a similar way.

One of the terms of the hypothetical tenancy is that the hereditament can only be occupied for a use within the same mode or category of occupation as the actual use.

The Lands Tribunal, in Scottish & Newcastle (Cityduck) above, gives an example, at paragraphs 140-141, of how evidence from hereditaments in a different mode or category of occupation may be used to assist in the valuation of the subject property.

The example refers to an office (in premises built as a shop) in a shopping street; if the evidence from other parts of the street is that offices in former shop premises pay the same as shops and restaurants and how that evidence should be regarded

The valuer is still valuing as an office, “but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that a tenant would pay to occupy the subject hereditament as an office”.

Whether this is correct will depend on what the evidence shows in each case. In some cases this will require a closer investigation of the rental and other evidence than may in practice have been undertaken in the past.

1.8 Weight and Admissibility

The basic principle is that all evidence should be considered in respect of the statutory assumptions and weighted accordingly. This principle was established in Garton v Hunter 1969 2 QB 37.

‘all evidence is admissible, the goodness or badness of it goes to weight only not to admissibility’

It went on to say that hereditaments let at a rack rent and truly comparable would be classed as superior evidence and indirect evidence would be in a different category.

Robinson Brothers Brewery V Houghton and Chester Le Street AC 1937

Held that all evidence should be cast into the scales of balance and

‘where a hereditament is let plainly at a rack rent of similar hereditament in similar economic sites are so let as to be truly comparable, that evidence is the best evidence and for that reason alone is admissible’

Painter v Norwich Union 1922

Held that when considering the rent a hypothetical tenant would pay it must depend on the circumstances of the case as to whether the evidence is worth admitting or not and it is a question of degree.

In Arrodell Ltd v Coniston Court (North) Hove Ltd 2007 RVR 39 it determined that the details of evidence before a tribunal should be scrutinized before reaching a conclusion as to weight.

‘each tribunal decision is dependent on the evidence before it and in order to determine how much weight should be attached to a figure adopted in a decision it will be necessary to investigate what evidence the Tribunal had before it.

2.0 HIERARCHY OF EVIDENCE

Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council LT 1976 , (1976 RA 141) sets out How to consider evidence for rating purposes.

The Lands Tribunal set out the following propositions as a properly established procedure for considering evidence in the rating context:

‘(i) Where the hereditament which is the subject of consideration is actually let that rent should be taken as a starting point

(ii) The more closely the circumstances under which the rent is agreed as to time, subject matter and conditions related to the statutory requirements contained in the definition of rateable value the more weight should be attached to it.

(iii) Where rents of similar properties are available they, too, are properly to be looked at through the eye of the Valuer in order to confirm or otherwise the level of value indicated by the actual rent of the subject hereditament

(iv) Assessments of other comparable properties are also relevant. When a rating list is prepared these assessments are to be taken as indicating comparative values as estimated by the valuation officer. In subsequent proceedings on that list therefore they can properly be referred to as giving some indication of that opinion.

(v) In light of all the evidence an opinion can then be formed of the value of the appeal hereditament, the weight to be attributed to the different types of evidence depending on the one hand on the nature of the actual rent and, on the other hand on the degree of comparability found in other properties

(vi) In those cases where there are no rents available of comparable properties a review of other assessments may be helpful but in such circumstances it would clearly be more difficult to reject the evidence of the actual rent.

The principles laid down in Lotus & Delta case were intended to be guidance to provide a useful framework rather than a rigid formulaic approach. ELS International v Prekopp VO 2016 UKUT 0423

3.0 LOTUS STEP 1 – Rent on the subject property

Lotus (i) Where the hereditament which is the subject of consideration is actually let that rent should be taken as a starting point

Actual Rent Passing

The best evidence is the rent passing on the subject property where it is truly let on the open market in an arms length transaction and requires little or no adjustment. (Robinson Bros Brewery v Houghton and Chester Le Street 1937)

Whilst the rent on the subject property is the starting point but it is not necessarily conclusive in itself and must be tested in the light of other evidence as to its usefulness and reliability.

L and A Black Ltd v Burton VO1958 (3 RAC 172, 51 R&IT 307) This case confirmed that the rent on the subject property is good evidence unless rental evidence shows otherwise e.g., in the case of rapidly moving markets where there have been changes in value since that date, the subject rent therefore must be tested against other evidence.

Tivydale Coal Co Ltd v Handstock VO 1966 RA 223 held that where actual rents are available and cannot be impeached these should be the best guide to rateable value.

This principle is qualified by the following:-

R v Skingle 1798

‘The rent under the lease is not conclusive evidence of value’

R v Paddington (VO) v Peach Property Corporation Ltd )1964 3 ALL ER 200, L&A Black v Burton VO 3 RAC 172)

‘The actual rent payable at the date of assessment is not conclusive evidence of value even if terms are on statutory terms’

Popular Metropolitan Borough Assessment Committee v Roberts (1922 2 AC93)

’The actual rent is no criterion unless that happens to be the rent that the imaginary tenant might reasonably be expected to pay.’

Kapoor v Bevington (VO) 1997 RA 439

The ratepayer accepted that rent paid was below the average of rents paid in the arcade, and then argued that the assessment was too high in comparison with the general ratio of rents/assessments and should be reduced to £9,275. VO produced evidence of rents paid and settlements in the arcade to support his valuation on the established tone. LT did not accept the ratepayer’s statistical approach and confirmed VO’s assessment

Trustees of T N Marks (Dec’d) v Grose (VO) (1995 RA 49)

The rent passing on the appeal hereditament was again held to be less than might reasonably have been expected to have been paid in the market at the AVD.

Appeal of Reed (VO) (2009) RA 90

It was held that a freely negotiated open market letting of the appeal property one year after AVD was at below the market value and the evidence was therefore given little weight in determining the Rateable Value.

See also Futures London Ltd v Stratford (VO) 2006 RA 75 LT.

Hodges Ltd v Howells (VO) (1993 RA 236)

The LT accepted that the actual rent was less than the rent that might reasonably be expected to be paid in the open market

The Tribunal looked at whether the actual rent agreed as from March 1988 (£12,000pa) should be adopted as the RV or, as the VO contended, whether this rent was not the rent which might reasonably be expected in the open market and the RV should be higher and in line with rents on other nearby shops and agreed assessments. The VO supported the assessment of £18,000 RV.

The LT adopted the propositions from the Lotus & Delta case that indicates how conflicting rental evidence should be considered. The LT accepted the actual rent was less than the rent that might reasonably be expected to be paid in the open market and, following the evidence, determined £16,375 RV.

All these cases demonstrate that the rent in respect of the appeal property itself needs to be weighed and can be rejected if it is felt to be irrelevant, or unsatisfactory.

4.0 LOTUS STEP 2 Quality Strength and timing of rents

Lotus (ii) The more closely the circumstances under which the rent is agreed as to time, subject matter and conditions related to the statutory requirements contained in the definition of rateable value the more weight should be attached to it.

4.1 Quality of Rental Evidence

The quality of rental evidence is dependent upon:

(a) How closely the rented property resembles the hereditament to be valued

(b) How closely the lease terms for the rented property resemble those of the hypothetical tenancy in the definition of rateable value

(c) How close the time the rent was fixed is to the AVD

As a general rule, the less a rent has to be adjusted, i.e. the more closely it resembles the rent required by the statutory definition, the more weight it will carry as evidence of likely rateable value.

The reality is that non-domestic property is rarely let on an annual tenancy; responsibility for repairs and insurance is not always as envisaged in the hypothetical tenancy; tenants make alterations and improvements which are not reflected in the rent; landlords grant incentives to secure high headline rents and few rents are likely to have been fixed on the AVD. In rating, a “clean” rent can be rare

Rents which require a great deal of adjustment to make them accord with the statutory definition of Rateable Value tend to be more unreliable than those with little adjustment.

An example of this would be where adjustments are required to take into account different repairing and insuring liabilities; rent free periods; premiums; stepped rents; improvements; overage; restrictive user clauses or start dates, i.e., rent set at some time distant from the antecedent valuation date (AVD).

BEA Fastening Systems Ltd v Todd (VO) 1999 Ra 389

In that case the rent involved significate adjustment by way of amortisation of the cost of improvements and was held not to be useful

See RM section 4 Part 1 Rental Adjustment for details regarding specific adjustments in respect of terms under the lease.

4.2 Strength of evidence

For Full details on different types of rental arrangements see Appendix 1

The best evidence is considered to be new lettings and rent reviews, but even these are not without difficulties. There are other types of rental agreements that do not lend themselves to the support of a rating valuation and must be treated with caution when it comes to the weighting of evidence. Rents agreed under such arrangements are unlikely to reflect the full open market rental value (OMRV) for various reasons, These include:

(a) Rents which do not conform to open market rents for example, turnover rents, or rents indexed to the Retail Price Index (RPI), ground rents.

(b) Rents agreed between related or connected persons or companies, eg SIPPS (Pension rents)

(c) Sale and leaseback rents (see John Lewis & Co v Goodwin (VO) (1979) 252 EG 499, 1980 RA 1). Leasebacks are essentially a funding operation, with the rent being geared to profitability rather than being true open market transactions. (John Lewis & Co Ltd v Goodwin VO and Westminster City Council 1979 252 eg 499)

(d) Financial arrangement whereby the rent reflects the cost of borrowing rather than open market value (OMV)

(e) Initial rent is higher than OMV to increase the value of the freehold, stepped rents. Personal concessions given in the rent by the landlord to the tenant

(f) Company Voluntary Arrangement (CVA) agreed rents. In cases of insolvency, it is the financial difficulties within the company that give rise to CVA rents being created and effectively imposed on the landlord, such rents cannot be considered to be arms length transactions in the open market and therefore of much lesser weight than other forms of rental evidence.

(g) Arbitrated rents

(h) L&T 1954 Interim Rents

(i) Auction Rents

If the rent passing on any of the above types of agreement can be demonstrated by evidence to sit within the market norms, then it can be considered to be a useful rent and will carry reasonable weight. However, more often than not, these types of rents tend to be at the extremes of the levels of value set within the market for any particular location and are usually considered outliers. It will all be down to a question of fact and evidence as to their reliability

4.3 Connected Party rents

Rents set between connected parties, or other types of less standard rental agreements may constitute useful evidence if the resulting analysis shows that they have been set in line with prevailing open market rental values and there is other evidence available to substantiate that fact. However, often connected rents are the outliers on the edges of the range of evidence and in that circumstance, they should be treated with caution and much less weight would be attributed to them.

4.4 Rents before and after AVD -weighting

Specialeyes plc v Felgate (VO) (1994 RA 338)

The Lands Tribunal was asked to decide on the weighting of rents set before and after AVD.

The LT considered that as the rents of the appeal hereditament, together with rents on the immediately adjoining shops, were agreed between one landlord and one firm of surveyors representing most of the tenants, the weight to be applied to this evidence was reduced (as it was effectively one transaction).

The LT examined other rents in the street away from the immediate shop and divided these into 3 categories:-

(i) Rents agreed between 1986 and 1987. The LT found the evidence helpful in showing an upward trend in rental values over the period but otherwise attached little weight to them due to the need to adjust the rents to 1/4/88 levels.

(ii) Rents close to the AVD. The LT paid particular attention to these as indicating the correct level of value and showing the appeal hereditaments rent to be at the lower end of the band of values to be expected at the AVD.

(iii) Rents after the AVD. Both parties accepted these rents as admissible, but the LT only considered those close to the AVD due to the need, because of the rapid rise in rents in 1988/89, to make large and uncertain adjustments to relate them to AVD levels.

The VO attached significant weight to agreements on value in the street and considered a tone of the list was established. Both parties accepted that the date of the hearing was the correct date for ascertaining whether a tone of the list was established. At this date the LT noted 39 assessments had been agreed, 9 appeals were outstanding and no appeals had been made on 27 shops. The LT regarded the tone as established.

Rents set after AVD are useful indicators of trend regarding the state and changes in the open market.

4.5 Lease Terms and alignment with statutory definition

The strongest evidence are rents that are arms length transactions between unconnected parties that require little or no adjustment having regard to the terms of the lease to bring them in line with the statutory basis

See RM Section 4 for full details on adjustment of rents, landlord inducements, rent frees, fit out, premiums, stepped rents, improvements, overage, domestic accommodation, insurance and repairs and the order of adjustment. Rating Manual: Section 4 - Valuation methods (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods)

The statutory basis sets out the terms to be assumed in the hypothetical lease. The fact the actual lease being considered has restrictions in it are the result of a contractual arrangement between the landlord and tenant. For rating purposes these contractual restrictions have to be ignored as they are accidental to the hereditament. This point was considered in the following cases:

4.6 Length of lease

Humber v Jones (VO) & Rugby RDS (1960 6 RRC 161 CA)

Considered the question of whether an adjustment should be made for the length of a lease and it was held that it was a question of fact and evidence as to whether the rent took account of anticipated increases in value during the term.

4.7 Service Charges

Bell Property Trust v Hampstead 1939 Service charges are a proper reduction to be made regarding the actual cost of services and repairs to the common parts where an amount has been included in the rent.

4.8 User Covenants and rent restrictions

If the user covenant is very restrictive it may have the effect of lowering the rent passing making it less reliable as it limits the potential market or bids for that particular property such covenants must be ignored in the rating world.

In Poplar Assessment Committee v Roberts 1922 HL, it was held that rent restrictions set under the Rent Restrictions Act should be ignored. It held

‘The Rent Restrictions Act not intended to affect the law of rating. Act is not a restriction on use, but a restriction on the amount compelled to pay. The Object of the system of rating law is to assess occupiers equally in proportion to the value of their occupation.

The tied rent is to be disregarded and must be measured by the rent of a free tenant’

Byrne v Parker (1980 RA 45)

Confirmed that restrictions in the actual lease are irrelevant in respect of the hypothetical lease and should be ignored when establishing what the full open market rental value would be. It stated:

‘But the difficulty in (the appellants) way is, as counsel for the VO has pointed out, that what the Court has to consider in fixing the GV and RV accordingly are what the hypothetical tenant would pay for the premises to be valued supposing that they were vacant and to let.

The matter is dealt with in Ryde…., and it has been held that judicial interpretation….leads to the conclusion that the hereditament at the date of valuation is deemed to be vacant and to let on the statutory terms that restrictive covenants and other private arrangements affecting the hereditament are irrelevant to the ascertainment of its value for rating. The general statutory obligations that would affect any letting of the premises are, of course, relevant, but the particular restrictions imposed upon the ratepayer by the terms of his lease, which compel him to use the launderette and reduce the storage accommodation to nil, are not relevant to the RV of the premises…

There is a decision of the LT,…Fir Mill v Royton…. Which referred to two assumptions…The first is vacant to let…the second involves mode and category of occupation (dwelling as dwelling etc).

There may be some doubt as to the extent of the second of those assumptions, but here there can be no doubt that the letting of these premises as a shop, not necessarily as a launderette but as a shop of some quite different kind, is something which can be and must be considered in assessing the rent which the hypothetical tenant would pay for the vacant hereditament.

That being so, the restriction on the user of it imposed by the ratepayer’s lease is irrelevant, and though he may feel aggrieved, and one sympathises with him, it does mean that he is, on the one hand, limited to the use that the premises can be put to under his lease, and, on the other hand, has to pay a much higher sum for rates than other premises which are not so restricted, but the law does not help the Court to reach any other result; indeed it compels me to say, as I read the decision of the LT and understand the law, that there was no error of law on the part of the LT ‘

4.9 Prohibitions on occupation

Where there is a statutory prohibition on occupation then this may affect the rental value of the property as being an intrinsic matter that will affect all possible occupiers of the property.

Dawkins v Ash Brothers refers

However, contractual restrictions do not apply.

Hare & Tortoise case 503014461112/058/101

‘ The Panel would expect that action to prohibit occupation with its serious legal and other consequences would be taken by or on behalf of the Crown or by a public authority or body, not a contractor. There was no suggestion that any other law applied before or after the works to the property to prohibit occupation….

The primary purpose of Health and Safety legislation seems to be the protection of employees and others by means of access, safety clothing etc. and prima facie does not seem to prohibit the occupation of a property in the manner asserted. If it did reference to the primary legislation or regulations would no doubt have been made by Mr Harris…

The Panel accepts that Health and Safety legislation applies but does not accept that the prohibition referred to in this Regulation allows such legislation to override established rating law and precedent’

4.10 Rent Free periods, fit outs and financial inducements

These have to be considered as to their impact on the rent passing and converted to annual amounts as appropriate. The period over which they are amortised will depend on the existence of a break clause.

See Morrison EF (GP)ltd v Assessor for Central Scot LTS VA 2001/16 held based on the facts of that case

‘a) Rent free periods and monetary inducements should be taken separately, with the result that in a lease where there was a rent-free period shorter than the conventional minimum period at which rent free periods were considered significant (three months) as well as a monetary inducement, the rent free period should not be aggregated with the monetary inducement and thus should not be brought into account.

b) the capital amounts of inducements considered relevant should be converted to annual equivalents of the periods before the breaks. and not on the full periods of the leases, since

i) it was correct in principle to consider in each case what truly was the period over which the inducement had effect

ii) there was no reason to doubt the reality of the tenant break options which may induce new rent negotiations even if the tenant remained

iii) this was consistent with the practice in England and in accordance with .. the RICS Red Book, Guidance Note 4

iv) fitting out costs should be assessed on the basis of the appellants’ professional estimates of typical fitting out costs since the relevant items of actual costs returned by the tenants.. were unreliable, and since in this particular case the appellants had (by considering the life spans of the various types of work) provided a more accurate estimate of the value, that value should be adopted, but without any discount

4.11 Rent includes items that are part of a separate assessment

It may be necessary to adjust the rent if the lease includes other property not part of the hereditament included in the non-domestic assessment. Eg living accommodation, car parking

Merchant investors Assurance Ltd v Sercombe 1983 20 ED 742 stated:

‘It is quite correct to say that some adjustment falls to be made because the rent includes three car parking spaces which are the subject to separate assessments and do not form part of the appeal hereditament.’

4.12 Tenant’s Improvements / order of adjustments

Whether these are taken into account will depend on the terms of the actual lease and if they were conditional under the terms or were separate to the grant of the lease. It will only be expenditure on rateable items that should be considered.

Merchant Investors Assurance Ltd v Sercombe VO 1983 265 ED 990, this case involved improvements and reverse premiums

Edma (Jewellers) LTd v Moore VO LT 1975 RA 343

Considered the amortisation of Tenant’s improvements re installation of a mezzanine floor.

Dorothy Perkins Retail Ltd v Casey VO RA 148 1992

Considered how improvements relating to the addition of P&M should be treated and the amortisation rates to use.

FW Woolworth & Co v Peck LVC 58/65 – order of adjustments

This case considered the treatment of improvements to a property and stated that adjustments for insurance must be made last in the process.

4.13 Landlord intention to demolish

The intentions of the landlord are factors that are irrelevant as it is accidental to the hereditament not incidental like a CPO or other statutory restriction.

Dawkins(VO) v Ash Brothers and Heaton Ltd 1969 HL

4.14 Planning

Rozel Motor company Ltd v Clark (VO) 1980 LT re the effect of an area action plan

‘Planning matters are an essential characteristic’

Old School and Old School v Coll VO 1994 LT

The parties agreed that planning conditions were part of mode or category of occupation and the Tribunal agreed it would on the facts in this case have an effect on value.

O’Brien v Secker (VO 1995/RA/13

Ad rights had no planning consent for use and the ratepayer tried to argue that it was unlawful to use for that purpose and therefore there was no hereditament. The Tribunal disagreed.

4.15 Building contracts

Houndslow v Rank Audio Visual & Bryant (1970 RA 535)

‘the existence of the building contract was personal to the parties concerned and was therefore comparable with the intentions of the actual owner which as Lord Pearce said..

‘are immaterial as being accidental to the hereditament’

4.16 Keep Open clauses

Eyston v Muncy VO 1978 LT

There was a lease with clause to keep a county mansion open to the public one day a week. It was held to be a personal agreement between the parties and therefore should be disregarded. It was unlike a restrictive covenant which ran with the land and would be binding on anyone looking to take the property.

Co-Operative Insurance Society Ltd v Argyll Stores (Holding) Ltd 1977 3 ALL ER 297.

A leading Landlord and Tenant case on keep open clauses, the House of Lords held that a keep open clause was not specifically enforceable, other than in exceptional circumstances, since it was settled practice of the Court not to make an order requiring a party to carry on a business. Therefore if this clause exists no adjustment should be made in the rent paid for this restriction

4.17 Personal agreements or lease restrictions e.g., use

A lease is an agreement between the landlord and tenant. The statutory assumption assumes the subject property is vacant and to let and a hypothetical lease will be granted. Therefore any restrictions in the actual lease will not be binding on the hypothetical tenant and so any such restrictions in the actual lease on the property have to be ignored for rating purpose.

Where a lease includes restrictive terms, consideration will need to be given as to whether the level of the rent has been supressed as a result which may affect its usefulness within the evidence basket.

4.19 Rent Restrictions

Similarly in Poplar Assessment Committee v Roberts 1922 HL, it was held that rent restrictions set under the Rent Restrictions Act should be ignored. It held

The Rent Restrictions Act not intended to affect the law of rating. Act is not a restriction on use, but a restriction on the amount compelled to pay. The Object of the system of rating law is to assess occupiers equally in proportion to the value of their occupation. The tied rent is to be disregarded and must be measured by the rent of a free tenant.

In Byrne v Parker (1980 RA 45) It was held that user restrictions in a lease should be disregarded

“The matter is dealt with in Ryde…., and it has been held that judicial interpretation… leads to the conclusion that the hereditament at the date of valuation is deemed to be vacant and to let on the statutory terms that restrictive covenants and other private arrangements affecting the hereditament are irrelevant to the ascertainment of its value for rating. The general statutory obligations that would affect any letting of the premises are, of course, relevant, but the particular restrictions imposed upon the ratepayer by the terms of his lease, which compel him to use the launderette and reduce the storage accommodation to nil, are not relevant to the RV of the premises.”

There is a decision of the LT,…Fir Mill v Royton…. Which referred to two assumptions…The first is vacant to let…the second involves mode and category of occupation (dwelling as dwelling etc).

“There may be some doubt as to the extent of the second of those assumptions, but here there can be no doubt that the letting of these premises as a shop, not necessarily as a launderette but as a shop of some quite different kind, is something which can be and must be considered in assessing the rent which the hypothetical tenant would pay for the vacant hereditament.

That being so, the restriction on the user of it imposed by the ratepayer’s lease is irrelevant, and though he may feel aggrieved, and one sympathises with him, it does mean that he is, on the one hand, limited to the use that the premises can be put to under his lease, and, on the other hand, has to pay a much higher sum for rates than other premises which are not so restricted, but the law does not help the Court to reach any other result”

In Houndslow v Rank Audio Visual & Bryant (1970 RA535) said

‘the existence of the building contract which was personal to the parties concerned and was therefore comparable with the intentions of the actual owner which as lord Pearce said.. Are immaterial as being accidental to the hereditament’

Matters that are accidental to the hereditament should be disregarded whilst those that are intrinsic have to be taken into account.

5.0 LOTUS and Delta STEP 3 – Rents on other properties

Lotus (iii) Where rents of similar properties are available they, too, are properly to be looked at through the eye of the Valuer in order to confirm or otherwise the level of value indicated by the actual rent of the subject hereditament

5.1 Williams v Scottish and Newcastle 2001 ‘ fairness generally requires comparable properties to be valued by the same yardstick’.

Having considered the rent on the subject property and considered the terms in detail, that rent has to be tested against other evidence such as rents on other similar properties in the locality as to its reliability and strength. Similarly, the merits or otherwise of rents on the comparable properties also have to be considered using the same parameters.

Whilst greater regard is had to comparables in the same mode or category of occupation, as discussed at 1.4 above, rents on other properties may be considered following the principles in the Appeals of Reeves (Truro College Case)

Normally comparable evidence will be taken from the immediate locality in which the subject property sits. As this would form the strongest evidence. Whilst the case considers comparable assessment evidence, the same principle would apply to rental evidence as well.

For more information on ‘Locality’ see RM Section 2 Valuation Principles Part 7 (13) Rating Manual Section 2 - Valuation principles (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods).

Banks v Speight & Snowball (2005)p240

Gave authority to the principle that it is permissible to look outside the locality to find good evidence that can be relied on .

‘Generally, the concept of tone of the list is applied by reference to assessments of comparable properties in the same locality and in the same rating list. Where, however, the hereditaments under consideration are in a special class, and particularly where rental evidence is absent or lacking, then agreed assessments over a wider geographical area may be considered (Shrewsbury Schools v Shrewsbury Borough Council & Plumpton (VO) (1960) 7 RRC 313 at 322 (public schools); Imperial College of Science & Technology v Ebdon (VO) and Westminster City Council [1984] RA 213 at 234 (universities)). No objection has been raised in these appeals to consideration of assessments of opencast coal sites covering a very wide area.’

It is important to ensure when analysing comparable rents that they are devalued and valued on the same basis as the subject hereditament to ensure consistency of approach and to be able to make a direct comparison .

Those rents on properties situated closest to the subject property in terms of geographical location and character will provide the stronger evidence than those properties situated some distance away.

Additionally those rents set closest to AVD with minimal adjustment are the most reliable and will carry the greater weight as the strongest evidence.

5.2 Selection of Comparable Rental Evidence – practical considerations

Only relevant evidence should be considered at Challenge and ultimately presented on appeal to the VT. In many cases it will suffice to select a proportionate representative sample of rental and/or comparable assessments as evidence. However, it should be considered that for any new list, especially in England, it will be difficult for the VO to establish that a tone exists unless there is considerable evidence of settlements and Tribunal decisions. Therefore, the evidence provided should be sufficient to be able demonstrate that the level of values adopted are reasonable.

A balanced view of the evidence is essential, and rents should not be cherry picked, so that the impartiality and integrity of the VO is preserved. The aim is to give the VT a fair and balanced view of the evidence upon which it may then base a decision. This is quite different from the approach of ‘defending’ the assessment at all costs.

The VO’s evidence should be unbiased, independent and objective. At any VT hearing, the VO will have a duty as the Expert Witness to the Tribunal to give truthful, impartial and unbiased advice (please see RM Section 7 regarding Tribunal hearings).

When selecting evidence, consider the relative weight that will be attached to rental and comparable evidence. In some cases there may be little direct evidence available and it will be necessary to look for evidence across a wider geographical area, age range or other types of property. In Banks v Speight & Snowball (2005 RA 61) the Tribunal confirmed that where rental evidence is absent or lacking, especially with more specialised classes of property, then assessments over a wider geographical area may be considered.

In the event that evidence is variable and/or thin, at Tribunal it may come down to the credibility of the expert witness as to the correct level of value that may apply. (see Go Outdoors v Laura Lacey VO (RA 90 2017)). It is essential that you check your evidence and that the adjustment and analysis of that evidence is correct.

6.0 LOTUS Step 4 - Establishing Tone/Assessment Evidence

(v) Assessments of other comparable properties are also relevant. When a rating list is prepared these assessments are to be taken as indicating comparative values as estimated by the valuation officer. In subsequent proceedings on that list therefore they can properly be referred to as giving some indication of that opinion.

6.1 Comparable assessment may be considered in the basket of evidence but the weight that is attributed to it will vary depending on how long the list has been in existence and the number of checks, challenges and appeals that have been made to determine those assessments.

Case Law, see below, has identified 3 stages applicable to the establishment of tone

1) Initial phase

A new list is deposited which contains assessments which are opinions of value of the VO as they are uncontested and unagreed.

2) Interim Phase

Over time there will be checks, challenges and appeals against assessments to determine the correct levels of values for those properties

3) Final Phase – tone set

Finally either there will be a sufficient number of settlements against the list to demonstrate that a tone has been established or the effluxion of time, e.g., the list closes, means that the settlements or acceptance of the list entries are such that a tone is established.

In the third phase, the strongest evidence will be the appeal decisions of the Tribunals, Court of Appeal or Supreme Court. Challenges, which may be agreements, well founded cases, withdrawals or cases where a Regulation 13 Decision Notice has been issued (the latter accepted and not appealed) will be good evidence, whilst Checks which have not proceeded to challenge/appeal are indicative of acceptance of the assessment but will carry slightly lesser weight than the challenges, but will still be of merit in the basket of evidence.

When considering Check evidence, regard should be had as to background as this may influence the level of weight that would attach to them. E.g., if they are the result of a Group Challenge Review or prior agreement on a particular sector or class of property

O’Brien v Harwood 2003 RA 22/ 2022

This Upper Tribunal case considered the weight and relevance of evidence and the establishment of ‘tone’.

“There are three stages leading to the establishment of tone of the list. At first, when a new rating list is put on deposit, entries will carry relatively little weight: they are opinions of value by the valuation officer, as yet unchallenged and untested by negotiation.

Over time assessments will be challenged and agreed or determined by a valuation tribunal or this tribunal or accepted by lack of challenge.

Finally a stage is reached where enough assessments have been agreed or determined or are unchallenged to establish a pattern of values, a tone of the list.

The list is then said to have settled. Rents will be largely subsumed into assessments. At that stage rating surveyors will have little regard to rents and pay considerable attention to assessments. The position regarding tone of the list at any particular time is a question of fact. Where an assessment is challenged before a Tribunal the correct time for deciding whether a tone of the list has been established is immediately before the hearing.”

Specialeyes v Felgate VO 1994 RA 338

Sets out that the correct date for considering whether a tone has been established is immediately before the Tribunal hearing.

Marks Trustees of TN Marks v Grose 95 RA 49 LT

There was sufficient appeal activity in the locality to demonstrate a tone had been established.

The rent passing on the appeal hereditament had been reviewed to £14,500 on 25 December 1987, with the rateable value in the list being £24,600.

The LT concluded that given the rents on surrounding properties and the amount of adjustment required to the appeal property’s rent, the latter was less than might reasonably have been expected to have been paid at 1 April 1988.

The Tribunal felt that there had been sufficient appeal activity by way of agreements with agents, occupiers and valuation tribunal decisions to establish a tone of the list at £350 zone A. Considerable weight was given to this established tone.

The resultant RV of £24,000 reflected allowance for the irregular shape of the retail area and masking.

Futures London v Stafford VO RA 47 2005

This case confirmed the approach in O’Brien

K Shoes V Hardy 1983

Stated that when considering the evidence it was important that properties should be valued at the same date (now the AVD) and that fairness and uniformity should not over-ride correctness of the list.

6.2 Changes between lists

Each Rating List stands on its own and reflects the new circumstances appropriate to that list and takes into account the changed physical circumstances at the new compilation date and the changed market conditions at the new Antecedent Valuation Date.

The whole purpose of having a revaluation is to reassess relativities and rebase the valuations to the new dates and it is therefore to be expected that relative values between property types and between locations will change from one list to the next.

6.3 Rents subsumed into Tone

Jafton Properties Limited v Prisk (VO) (1997 RA 137)

The appeal hereditament comprised office accommodation in the Smithfield area close to the City of London.

There were two valuation points at issue, the first was the correct RV at the 1 April 1990 and the second was the effect on rateable value of oversupply of office accommodation in the locality.

The LT held that although the rents on the appeal hereditament could be taken into account as the starting point, they were not conclusive, nor were they superior evidence to which the greatest weight should be given in arriving at the appropriate RV. The rents on the appeal hereditament were all for short fixed terms and lacked the reasonable expectation of continuance, an essential part of the rating hypothesis.

The correct time for establishing whether or not the tone of the list had been established was immediately prior to the start of the hearing. It was held that the assessments of comparables established the tone of the list and deserved significant weight given the inadequacies of the rental evidence

It also found that at the point a tone is established, the rents are subsumed into that tone and it is no longer necessary to consider rental evidence and that assessment evidence can stand on its own.

Stock Autobreakers Ltd v Chris Sykes VO RA 12 2019

This case disagreed that there was a settled tone.

‘There is no time pressure on a ratepayer to check and challenge an assessment and the importance of making early proposals under previous lists, and thus the earlier establishment of a tone, no longer exists.’

This was the first case under the new 2017 CCA procedures.in which it examined whether a tone could be set and found that an early establishment of tone is difficult to achieve under CCA. However, it is not impossible depending on the classes of property and the number of cases litigated against those assessments.

APPENDIX 1 – DIFFERENT RENTAL ARRANGEMENTS

Regardless of the type of tenancy agreement, the main concern is whether the agreement can be treated as reliable market evidence. Where any agreement lies within the market norms, then that rent can be considered to be useful evidence. The closer to AVD and the statutory definitions the greater the weight should be attached to it. Rents sitting outside market norms have to be treated with caution and lesser weight applied regardless of whether they are open market standard lease agreements or one of the other types of more unusual leases mentioned below. If the level of analysed rent under the occupational agreement can be supported by other independent rental evidence then it can be considered to be stronger evidence accordingly. If it is unsubstantiated then it will be inferior and should be treated accordingly. A full understanding of the lease arrangements is essential in determining the weight that should apply to that evidence so that any decision is based on the correct facts.

1 New Lettings

New Lettings are generally regarded as the most reliable category of rental evidence provided they are arms length and sit within reasonable market norms. The reliability of such rents may be impaired where a lot of adjustment is required. Back in the early 2000s the trend was typically to grant 25 year leases on 5 year rent reviews on an FRI basis. In more recent years much shorter leases of 5 to 10 years have become the norm, with varying rental arrangements e.g., stepped rent, turnover rents, top up rents, concessionary rents etc and incentives have become increasingly significant in the market in the negotiation of rents e.g., rent frees, premiums, capital contributions etc

New lettings normally provide good evidence because they are freely negotiated between the parties in the open market and hence provide the best indication of open market rental value. However, not all new lettings will be perfect. Aside from adjustment, knowledge of the market and the locality will be helpful to identify those traders who have paid over the odds to secure a unit, or have paid an artificially low rent. Understanding the bargaining powers of the parties is significant in fully understanding the rental deal. It is therefore important that research is undertaken regarding any side agreements or heads of term to fully understand all the incentives that may have been agreed when adjusting and analysing a rent.

Anchor tenant rents need to be considered carefully as the landlord has other motives when setting their rent. Anchor Tenants are usually key tenant(s) in a new development and are a dominating influence in attracting other tenants to the development, landlords will want to ensure that they secure good anchor tenants. As a class, anchor tenants tend to be in a strong bargaining position and as a result may be able to agree a low(er) rent. This was certainly true of rents in the early 2000’s, however, the market has significantly changed post covid and what were once anchor or key tenants have often disappeared from the market place. Understanding the rental agreement is therefore very important.

For example, the fact that a potential occupier of a restaurant, agrees to pay a rent at the same level as general shop uses in the area, must be evidence of the value of that property/location for restaurant; the rent was agreed in the knowledge that it would be used as a restaurant. This must carry considerable weight and in such circumstances, in most cases the rent will not require any adjustment for use as a restaurant as opposed to a shop.

It may be argued that, in the absence of competition from other uses, the restaurant would not have paid as high a rent as it in fact agreed; a comparison might be drawn with imposing a restrictive covenant on use in a lease, and a reduction from the actual rent sought. Unless evidence is provided of rents paid by restaurants, on the assumption of a restaurant use only, being at a lower level than the subject rent, such an argument should be resisted; the actual occupier must have considered the rent paid to reflect the value of that property and location for restaurant use at that time.

2 Review Rents

The weight that can be attached to a rent fixed by review will depend upon:

(i) The contractual agreement between the parties

(ii) The means by which the rent has been determined

Hence it is vital that all lease details are known, especially the rent review clause.

Where the passing rent has been agreed on review, the rent will reflect the terms of the particular lease and especially the terms of the review clause. Often the reviewed rent will assume a wider use than is actually permitted under the user clause of the lease. Similarly, on renewal the rent will be on the basis of the terms of the new lease, including the use assumed for review

Whilst it could be argued that both landlord and tenant are aware of the implications of the use to be assumed upon future rent reviews, the weight which could be given to such an argument will depend heavily on movements in rental values since the start of the lease.

If a restaurateur agrees to a lease with reviews to a value for general shop use it could be argued that, from his perspective, the future value as a restaurant will be at least as great as that for a shop. If in the locality restaurant rents had generally moved in a similar way to shop rents this would give additional weight to such a view.

If, however, it were shown that shop rents had risen much faster than restaurant rents since the start of the lease this would reduce the weight that should be given to a passing rent on a restaurant agreed on a review clause assuming a general shop use.

There may be other factors involved in agreeing to the lease terms, but just because the reviewed rent passing is on the basis of a general shop use it does not mean that the rent necessarily has to be reduced to accord with the rating hypothesis. It may be that values for restaurant use have increased above those for shops.

It will depend on the facts in each case, but when considering a hereditament used for a sui generis use (ie in a class of their own), evidence of rents reviewed to a “wide” user should normally be regarded as of lower weight than evidence of new lettings or of reviews where the rent is restricted to that sui generis use.

To serve as good evidence for rating purposes, the review clause should specify that the review be to “open market value” or “rack rental value”, assuming vacant possession and a normal review pattern.

An upward only review clause, for example, may prevent the rent dropping to OMRV and therefore remain at an artificially high level. Care should always be taken when considering the meaning of a review clause, as poorly drafted clauses can lead to unexpected results on review

The most reliable rent on review will be one fixed by agreement at rack/open market rental value, with 3 or 5-year periods between review, where there are no restrictions in the lease and no adjustments are necessary to account for tenant’s improvements.

The weight to be attached to a rent fixed by agreement will be greater than one determined by an independent expert or arbitration. Independent experts are entitled to bring their own knowledge to bear in reaching a determination, whereas arbitrators cannot stray outside the confines of the evidence presented

3 Lease Renewals

There is a subtle distinction between where a lease has ended and a new lease has been granted whereby the rent has been freely agreed between the parties without restraint, and leases subject to the strict provisions of lease renewal under the Landlord and Tenant Act 1954, where the lease and rent may have been fixed by the courts.

If the lease has been renewed, then the provisions of the LTA 1954 may apply and it will be necessary to find out whether the rent was agreed by negotiation between the parties, or fixed by the courts in accordance with section 34 of the Act in default of agreement. A rent fixed by the court may be unreliable if, for example, only one side has put forward a figure for consideration. It is unlikely to be a true open market rent in this scenario.

It will therefore be necessary to first determine whether the rent was agreed by negotiation freely between the parties or whether application was made for a formal lease renewal fixed by the courts in accordance with the 1954 Act. In the period between the ending of the original lease and the granting of a new lease where negotiations fail an Interim rent will be imposed by the courts.

The more reliable rent will be the one freely agreed between the parties and where the lease terms, together the extent and treatment of any tenant’s improvements, have been disclosed. Rents fixed by the courts in accordance with s34 may be unreliable in the absence of knowledge about the details of the determination and tenant’s improvements.

Without full knowledge of the renewal agreement or determination, care will need to be taken before attaching great weight to rents fixed on renewal.

Interim rents should be avoided. These are rents set by the courts under the 1954 Act in the “interim” period between a lease ending and a new lease being agreed or determined. Whilst such rents are on a year to year basis (as is the definition of rateable value) they are unreliable because:

(a) They are not market rents, but are fixed by the courts based on the evidence presented (Arrowdell Ltd v Coniston Court (North) Hove ltd 2007 RVR 39 stated that

‘each tribunal decision is dependent on the evidence before it and thus in order to determine how much weight should be attached to the figure adopted in the decision it would be necessary to investigate what evidence the Tribunal had before it)

(b) They are the reasonable rent for a tenant to pay, which permits the court to exercise discretion and extend a measure of cushioning to the new rent which tends to favour the tenant

(c) The court is required to have regard to the terms of the old lease and the rent definition contained in s34 of the 1954 Act

The method of determining the interim rent has been altered by the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 when three statutory conditions are satisfied. These are:

(i) The tenant occupies the whole property.

(ii) The relevant notice related to the whole premises

(iii) The landlord did not oppose the grant of a new tenancy

In these circumstances the presumption is that the interim rent will be the same as the rent for the new tenancy, where these conditions are not satisfied or the tenant has declined to take a new lease ordered by the court then the valuation methods currently adopted under the 1954 Act apply. In any event these rents should be avoided as it is a presumption and also the caseworker will not have the full knowledge of the circumstances surrounding the interim rent.

Surrender and Renewals

Care should be taken when determining what weight should be given to rents resulting from surrender and renewal, because getting ‘behind’ the deal and understanding the thinking of the parties is often extremely difficult. In Allen (VO) v Freemans Plc [2009] UKUT 240 (LC), a ‘surrender and renewal’ rent on the subject property that had been relied upon by the VT was on appeal given little weight by the UT, and virtually no weight once the strength of comparable evidence was taken into consideration.

4 Sale and leasebacks

A sale and leaseback is an arrangement whereby a freeholder, or in some instances a leaseholder, sells their interest in a property for an agreed sum and takes a lease back on the whole or part of the property from the purchaser

It is often argued that the rents resulting from sale and leaseback transactions are unreliable because they are the product of a financial arrangement and reflect the cost of borrowing rather than an open market rental value. In the case of some initial rents this may be true. It is also not uncommon for the initial rent to be higher than the open market rental value in order to increase the value of the freehold interest sold. Purchasers of the property are likely to be wary of an inflated rent depending on the covenant of the new lessee. Leaseback rents may therefore be intended to be at market rental values. Whether or not this is so will vary from case to case

See

John Lewis and Co Ltd v Goodwin (VO) and Westminster CC 1988 LT RA 1 the Lands Tribunal, in the absence of any direct evidence of department store rents, considered in detail a leaseback rent on Debenhams in Oxford Street. The member held

“the Debenhams leaseback rent… cannot be accepted as dependable evidence of market rental value. Market rental value is by common consent geared primarily to profitability whereas a leaseback transaction is essentially a funding operation in the context of which the initial rent is geared not so much to profitability as to the relative strengths of the property market at the time the transaction is arranged”.

It is essential that VOs carefully consider any sale and leaseback transaction and, if possible, obtain a copy of the lease (together with any side letters and deeds of variation as appropriate) in order to establish the true nature of the arrangement and the weight, if any, to be attached to the rent.

5 Company Voluntary Arrangement (CVA) agreed rents

When a company becomes insolvent it can enter into the administration process either voluntarily by the directors or one of the creditors may force them into insolvency by going through the courts.

When a company becomes insolvent, it can enter into an Individual Voluntary Arrangement (IVA) or if goes into formal administration, a Company Voluntary Arrangement (CVA).

The voluntary route enables the company to keep trading and its directors remain in office with responsibility for that trading. It a company goes into formal administration the company is run by the administrators and they stand in the company shoes. (much like an executor on a will for the deceased).

This enables the company to manage its debts and provide protection from legal action like winding-up petitions. This in turn enables them to re-structure their costs and debts whilst continuing to trade instead of going into liquidation. The process requires 75% of creditors (which includes the landlord) to agree to the creation of a legal moratorium for a period of between 1-5 years. The CVA binds the landlord into the moratorium.

The agreement enables the tenant to exit existing property leases and stop paying rent without immediate costs, it means the landlord cannot take recovery action and the existing lease is surrendered or terminated. A new agreement is entered into, often at a much lower rent and the landlord who is bound by the voluntary arrangements for future obligations under the lease. (Doorbar v Alltime Securites Ltd 1995 BBC 1149).

In this situation, the landlord cannot be considered to be willing, or the parties acting in a free open market environment, when setting the rent as its level is influenced by the debts and financial position of the tenant and other creditors.

By entering such an arrangement it gives the company time, either to turn things round, find a new owner or be wound up.

The CVA rent is a product of the financial difficulties within the company. Often the rent paid under these agreements are often heavily discounted to enable the company to pay off its debts over a fixed period of time. The agreements are constrained by the financial debts of the company, so cannot be considered to be freely negotiated arms length transactions in the open market.

6 Arbitrator Rents versus independent expert rents

Arbitrator Rents

These rents are based on the opinion of the arbiter formed on the information presented to him, these may not be the full evidence available in the open market. See Arrowdell Ltd v Coniston Court (North) Hove Ltd 2007 RVR 39 and Old Street Retail Trustees Hersey 1 Ltd v GV Healthcare Ltd and also Vines Ltd v de Mauny 2010 and Fosse Park RA20-26 2011.

Arbitrated rents should be attributed very little weight unless they accord with market norms.

There is no way of realistically assessing the basis on which the award was made as it is a determination which is judicial rather than expert. It can be distinguished from awards set by an Independent Expert. Arbiter rents are only based on the information provided by the parties and represents the opinion of the arbiter based on indirect evidence, they are unlikely to be true open market rents. Various Courts have held they cannot be used to prove facts of actual rental value. However, in rating, all evidence is admissible. There could be cases where the arbiter award may be useful but each case should be assessed on its merits.

Old Street Retail Trustees Hersey 1 Ltd v GV Healthcare Ltd (202) GO2CL960 para 18 and 21-26

This was a County Court Case involving Landlord and Tenant Act 1954 and a s34 rent on a lease renewal. It was a large shop that had been compared to food stores. The arbiter evidence was rejected in favour of actual market lettings.

Hollington v F Hewthorn & co Ltd (1943) KB 587

This was a rent review case which stated that hearsay evidence was inadmissible. An arbiter determination was based on evidence from others and was therefore unreliable.

Land Securities plc v Westminster City Council [1992] 44 EG 153.(not a rating case)

This case decided that the judgment, verdict or award of another tribunal is not admissible evidence to prove a fact in issue, or relevant to an issue, in other proceedings between other parties.

Hoffmann J explained why.

‘an arbitration award is an arbitrator’s opinion after hearing the evidence before him…The letting is hypothetical, not real. It is therefore not direct evidence of what was happening in the market. It is the arbitrator’s opinion of what would have happened.’

‘Such decisions could be “evidence” of their own findings only on the assumption that those findings were correct. But testing that assumption would involve a collateral inquiry that would be of no relevance to the later set of proceedings, and would, in any event, take one back to evaluating the truly admissible evidence used in the earlier proceedings.;

GPS (Great Britain) Ltd v Bird (VO) [2013] UKUT 527(LC)

This is an MCC case where an allowance of 10% was granted at Fosse Park for the MCC at Highcross. In this case 2 arbiter rents were referred to on M&S and GAP which indicated some changes to rental levels. However the Tribunal rejected this evidence as not admissible.

However, for rating purposes, arbiter rents are admissible under Garton v Hunter as all evidence should be considered, but the weighting of such evidence would be weak unless the quality of evidence on which that decision was based were known in detail or the award sat within market norms and could be substantiated by other evidence.

Rents set by Independent Expert

The weight to be attached to a rent fixed by agreement will be greater than if the parties resorted to a third party, such as an independent expert or to arbitration.

Independent Experts, in making their awards, independent experts are entitled to bring their own knowledge of values to bear, whereas arbitrators cannot stray outside the confines of the evidence presented. This is an important distinction when considering the weighting of rental evidence and would mean more weight would be attributed to an expert set rent as opposed to an arbiter rent.

Vines v Andrew De Mauny 2008 RA 3.

Considered rents set by an Independent Expert. This was a car showroom where rents on retail warehouses were evidence. 1 was an arbitrated rent. The Tribunal held that the rental evidence showed the RV on the subject property was not excessive.

7 Turnover Rents

These are rents determined by the actually turnover achieved by the tenant which is dependent on the type of business being run in the property and relates to the ability to pay regarding turnover and profit margins. As a result, the amounts paid are extremely variable and unpredictable. Such agreements have both advantages and disadvantages for both the landlord and tenant, however they are greatly affected by trading policies of the business rather than the fluctuation of rental values in the open market.

See

Morrison EF (GP) Limited v Assessor for Central Scotland [2003] LTS/VA/2001/16, 21, 25, 38, 39 & 47; [2004] RA 76

Allen (VO) v Freemans Plc [2009] UKUT 240 (LC)

8 Minimum Guaranteed rent with Top Up / Percentage leases

A percentage lease is a lease agreement where the tenant pays a base rent along with an additional rent based on a percentage of their gross sales made when conducting business on the property. This means the rent the tenant pays is tied to the success of their business.

The tenant is usually required to provide regular sales reports to the landlord, which are used to calculate the additional rent based on the agreed percentage. Many percentage leases include a “breakpoint,” which is a predetermined sale threshold. If the tenant is below a certain sale threshold, they only pay the base rent. Once the sales exceed the breakpoint, the additional percentage of rent becomes payable.

Select Service Partner v Ricketts CHG100339899 by VTE (12/1/22)

ApAppealNumber=CHG10033989906 (https://assets.publishing.service.gov.uk/media/686fc8a181dd8f70f5de3e15/CHG100339899_Decision.pdf)

Top up rents were heard before the president of the VTE. The case involved various kiosks in stations in London that had top up rents. It was common practice to have a minimum guaranteed rent (MGR) and a top up when a specified trade limit was exceeded. The Tribunal considered if it was appropriate to consider the supplementary top- up when establishing the level of rent that was paid for each unit. The units had been rented following a tender. The member found on reading the lease agreement, that the level of supplementary top up was personal to the specific occupier and there was nothing to show the hypothetical tenant would pay the same top up. In this particular case it was held that a hypothetical tenant fresh to the scene would place an open market value bid for the MGR to secure the unit and reduce the likelihood of a top up in the future. Comparable assessment evidence showed that other similar units had been assessed at the MGR level without the top up. So in this particular case the top ups were ignored.

Top up rents were considered in the following subsequent cases at VTE

Select Service Partner Ltd v A Ricketts VO – VTE – CHG100910105, 100929630, 100929564, 101068479) (5/12/24)

Cafes and shops at a station let out on minimum guaranteed Rents (MGR) with supplementary top up rents on leases that had been subject to tender. The VO argued

‘the rents on the retail units were based on an open market tendering process and that the MGR’s were therefore indicative of the open market value. The turnover top-ups were specific to the occupying tenant and represented ‘excessive performance’. Any hypothetical tenant ‘fresh to the scene’ could not know what their expected turnover would be and would have to make a bid at market level to secure the tenancy..’

The appellant argued,

‘no tenant would agree to pay a MGR which equated to the full open market value in the knowledge he would also be expect to pay a profits-based top up amount. He stated that the calculations for the top up element were written into the leases and therefore formed part of the rental agreement and not due to over trading’

On all the 4 appeal properties an amount in excess of the MGR had been paid for many years

The VTE held,

‘In reaching a decision, the panel took the view that the top-up element would be taken into account in any rental bid made by a prospective tenant. With the exception of the 2015/2016 rent paid on WHSmith at Peterborough station, the amount paid for all four properties around the AVD was in excess of the MGR, which suggested to the panel that the actual rent passing on the appeal properties was more analogous to the statutory definition of ratable value than the MGR alone’

In conclusion, where a top up rent is paid then this addition should be included in the analysis of the rent if it were the market norm and the hypothetical tenant would have to pay that amount.to occupy the property

9 Tender Rents

In the past tender rents were treated with caution. In recent times tendering has become more common, and large companies tendering for accommodation in a good location are unlikely to make ill-considered bids. It is possible, however, that a small retailer might make a reckless bid when tendering for a unit in a suburban parade of shops which is subject to a strict user-limitation. (W A Rawlinson & Co Ltd v Pritchard (VO) [1959] LT 52 R & IT 182.

10 Pension Fund Rents (SIPPS – Self-Invested Pension Plan)

Rents set under pension funds are required by law to be open market value by virtue of S207, Earnings and Pension Fund Act 2003 and Part 4 Fonance Act 2004, whereby a sponsoring employer or member of the scheme could rent a property owned by the pension scheme, but the Act requires a commercial rent to be paid. Failure to do so would lead to an unauthorised payment tax charge on an amount equivalent to the shortfall.

Pension fund rents will be considered useful if they are in line with the general market evidence.

Snowhill v Bunyan CHG100752119 (VTE)

In this decision it was held that whilst the rental agreement was a connected party rent involving a pension fund, the panel found

‘that the rent was comparatively high for such an arrangement and as such could be reasonably relied on.’

Dick Lovett (Specialist Cars) Ltd v Virk VO CHG100321484 (VTE)

Determined that as pension fund rent had been based on the RICS Red Book Valuation as it was required under the Pension Acts to be valued on full open market value was a useful rent and could be considered but had to be treated with caution.

‘As outlined in Lotus and Delta v Culverwell, the starting point is the consideration of the actual rent, but the circumstances as to time, subject matter and conditions relating to the statutory requirements need to be taken into account when deciding the weight to attach to it. Usually little or no weight would be attached to a connected party rent, however, according to the forms of return, the subject rent had been agreed at open market value. Consequently I decided that the evidence of the subject rent should not be disregarded, given that it was the only piece of rental evidence available for consideration, however, it should be treated with some caution.

In the absence of any other rental evidence, I turned to the comparable assessments cited by the parties’

The merit of pension rents was also considered by the VTW appeals on offices at Units 1,2,4 and 5 Ocean House, Hunter Street Cardiff (68159482367/192N05/16 for the same reasons quoted in Dick Lovett. In those cases, the VTW had regard to the pension rents as good evidence.

11 Auction Rents

In 2023/4 the Government introduced the concept of Auction Rents. These are rents that are established under High Street Rental Auctions give the Billing Authority (“BA”) powers to grant to businesses and community groups the ‘right to rent’ long neglected town centre commercial properties. HSRA allow councils to market properties for a 5 week period and put them up for auction that have been empty or more than 365 days in a 24 month period, for a one-to-five year lease. These powers came into force from 2 December 2024.

See

High streets to be revitalised with new legal powers - GOV.UK (https://www.gov.uk/government/news/high-streets-to-be-revitalised-with-new-legal-powers)

High Street Rental Auctions: Non-statutory guidance - GOV.UK (https://www.gov.uk/government/publications/high-street-rental-auctions-non-statutory-guidance/high-street-rental-auctions-non-statutory-guidance)

If the premises have been vacant for a year then the BA can issue an ‘initial letting notice’. Then for 10 weeks the Landlord cannot let the property without the BA consent. If the property is still vacant after 8 weeks (of the 10 week period) the BA can serve a ‘final letting notice’. There is then further 14 week period during which the Landlord cannot let or carry out works to the property without the BA consent. The landlord can appeal the notices on specified grounds e.g., for redevelopment or wants to occupy himself. During the final 14 week period the BA can carry out a rental auction. The BA must send the landlord a copy of the draft lease and agreement for lease. The Landlord can make representations about the terms, but the BA is not under any obligation to accept any proposed changes.

At the start of the auction process the BA commissions a survey of the property and if the minimum standard is not met re repair and condition the Landlord can be compelled to carry out works at his own cost before the lease is granted. (The minimum standard is defined in the Act and includes no significant water ingress, all fire safety requirements are in place and mains water, gas, electric are connected. Penalties are payable to the tenant by the landlord if the works are not finished within 3 months. The property is marketed for 5 weeks and bids must be submitted by week 10. There is no minimum rental figure in the regulations, but at week 10 the landlord has 2 working days to decide which bid to accept. The landlord has no right to ask for financial information or references from the bidder. If the landlord fails to choose a bidder, the BA may choose to accept a bid, but it must choose the highest bid. If the landlord refuses to grant the lease the BA has powers to enter into the lease agreement on the landlord’s behalf.

The BA decides the length of the lease and the agreement sits outside of the L&T 1954 Act. There is a fixed 4 week rent free period. The tenant’s repairing obligations are limited by reference to a schedule of condition. Assignment of the lease is possible with the landlord’s consent as is alteration to the premises by the tenant.

There is no minimum rent under this scheme, no scope for the landlord to reject a bid from an undesirable tenant and the landlord may be forced to carry out costly repair work for a one year term.

With an auction rent there is a strong element of compulsion regarding the landlord’s position and may not be a willing participant. The landlord has to accept such a lease and has limited options regarding the rent set and the actual tenant. These types of agreements are unlikely to provide good evidence of rental value and their weighting would be anticipated to be relatively low within the basket of rental evidence. However, it is very early days of the scheme and whilst a number of BAs have signed up to the scheme the application of the scheme is currently unknown

12 Franchise rents

In franchise setups, lease arrangements for commercial property can be structured in several ways, with either the franchisor leasing the property and subletting it to the franchisee, or the franchisee directly leasing the property. The franchise agreement will outline these arrangements, including the responsibility for finding premises and the terms of the lease or sublease

Often the leases contain clauses known as a Deed of Option, which gives the landlord the ability to take over the premises in the event that the franchisee decides to leave.

Due to the connections between the parties, rents set under these types of leases are often very unreliable and should carry little weight unless there is market evidence to demonstrate they are in line with the norm.