Woolway v Mazars

For non-domestic rating, a hereditament is identified primarily by its geographical and physical unity, not by the business use chosen by its occupier. Separate self-contained premises will normally be separate hereditaments, even if they are occupied by the same person for one business.

Geographically separate premises may exceptionally be aggregated only where their objectively ascertainable relationship makes the use of one necessary to the effectual enjoyment of the other. The ability to let them separately is a useful practical indication. Functional integration arising merely from the ratepayer’s business needs is insufficient.

Accordingly, separate office floors accessible from one another only through common parts are ordinarily separate hereditaments.

Mazars occupied the non-common parts of the second and sixth floors of an office building under separate leases. The floors did not intercommunicate. Access between them required passage through the building’s common parts.

The Valuation Tribunal for England merged the entries in the rating list. The Upper Tribunal upheld the merger, and the Court of Appeal dismissed the Valuation Officer’s appeal: [2013] EWCA Civ 368. The Supreme Court considered whether physically separate floors in common occupation should be entered as one hereditament because of their functional integration in the occupier’s business.

1. Appeal allowed. The orders of the Valuation Tribunal and the Upper Tribunal were set aside. The second and sixth floors occupied by Mazars were to be entered separately in the rating lists.

2. Lord Sumption, with whom Lord Carnwath and Lord Toulson agreed, held that the primary test for identifying a hereditament is geographical. It concerns visual or cartographic unity and the physical character of the property. Adjoining spaces which do not intercommunicate and can be reached only through common parts not exclusively occupied by the ratepayer are strongly indicated to be separate hereditaments.

3. Function has a subordinate role. Geographically distinct spaces may exceptionally form one hereditament only where the use of one is necessary to the effectual enjoyment of the other. Whether they can reasonably be let separately is a useful test. The inquiry is objective and concerns the character of the subjects, rather than the ratepayer’s particular business requirements or chosen use.

4. The relationship between the geographical and functional tests is a question of legal principle, not a discretionary question of fact and degree for the tribunal. The tribunal must make the necessary factual evaluation with professional common sense, but may not give functional business use whatever weight it chooses against geographical separation.

5. The court rejected the reasoning and result of Gilbert v S Hickinbottom and Sons Ltd [1956] 2 QB 40 insofar as it permitted functional integration based on the occupier’s use to outweigh geographical separation. Its correct insight was confined to the exceptional case of objectively necessary interdependence.

6. Lord Gill and Lord Neuberger agreed that the floors were self-contained, separately lettable and physically separated by common parts. Common occupation in the same building did not turn them into one property. Lord Carnwath reserved his position on the treatment of contiguous floors, which was not necessary to decide.

• United Kingdom Supreme Court: allowed the Valuation Officer’s appeal and set aside the orders below: [2015] UKSC 53.

• Court of Appeal: dismissed the Valuation Officer’s appeal and upheld the Upper Tribunal’s merger of the two floors: [2013] EWCA Civ 368.

• Upper Tribunal (Lands Chamber): affirmed the Valuation Tribunal’s decision that the floors should be merged, but disallowed a fragmentation allowance.

• Valuation Tribunal for England: held that the floors should be entered as one hereditament and allowed a fragmentation allowance.