Woolway v Mazars

The Supreme Court decided that the primary test for identifying a hereditament for non-domestic rating is geographical unity, with a subsidiary functional test that applies only where the use of one part is objectively necessary to the effectual enjoyment of the other. The court held that separate, self-contained storeys in the same office block, which do not intercommunicate and are only accessible via common parts, are ordinarily separate hereditaments and may be entered separately in the rating list. The judgment applied the statutory definitions of "hereditament" (including section 115(1) of the General Rate Act 1967 and section 64(1) of the Local Government Finance Act 1988 as referenced) and relied on Scottish precedent to reject an approach that allows a ratepayer’s choice of use to determine the bounds of the hereditament.

Background and facts:

• Tower Bridge House is an eight-storey office building. Mazars occupied the non-common parts of the second and sixth floors under separate leases. The occupier applied to merge the two entries in the rating list into a single hereditament, claiming a fragmentation allowance.
• The Valuation Tribunal for England merged the two entries and allowed a 5% fragmentation allowance. The Valuation Officer appealed to the Upper Tribunal (Lands Chamber). The President of the Chamber affirmed the merger but disallowed the fragmentation allowance. The Valuation Officer appealed further to the Supreme Court. Mazars did not appear on that further appeal because the allowance was disallowed and it had no financial interest in the result.

Nature of the application / relief sought: The applicant sought merger of two separate rating list entries (the second and sixth floors) into a single hereditament and an allowance for fragmentation.

Issues framed:

• How should hereditaments be identified for rating where different storeys under common occupation in the same block are non-contiguous?
• What is the relationship between the geographical (cartographic/visual) test and the functional test?
• Whether the particular facts (access only by common parts, absence of intercommunication, capacity to be let separately) justified treating the two floors as a single hereditament.

Court’s reasoning:

• The court reviewed English and Scottish authorities and concluded the geographical test is primary: hereditaments are physical units identifiable on a plan; contiguous or self-contained units will normally be single hereditaments.
• The functional test has a limited role: it can unite geographically separate parts only where the use of one is necessary to the effectual enjoyment of the other, judged objectively (for example where separate parts could not sensibly be let separately).
• The court criticised the inconsistent reasoning in Gilbert v Hickinbottom and held that allowing the ratepayer’s business choices to determine hereditament boundaries would undermine consistency and transparency in valuation for rating.
• Applying these principles, the court held the second and sixth floors were self-contained from each other, lacked intercommunication and were accessible only via common parts; they could reasonably be let separately; therefore they should be entered as separate hereditaments.

Wider comment: The court emphasised the desirability of coherent principles and the importance of not turning hereditament identification into a test dependent on the occupier’s business choices. The decision drew on Scottish authorities as providing clearer guidance.

Appeal allowed. The Supreme Court held that the primary test for identifying a hereditament is geographical unity and that a subsidiary functional test applies only where objective necessity for joint enjoyment is shown. On the facts, the second and sixth storeys, being self-contained and accessible only via common parts with no direct intercommunication, are separate hereditaments and must be entered separately in the rating lists. The orders of the Valuation Tribunal and the Upper Tribunal were set aside.

Valuation Tribunal for England: merged entries for the two floors and allowed a fragmentation allowance. Upper Tribunal (Lands Chamber) (President): affirmed merger but disallowed fragmentation allowance. Court of Appeal: upheld the President's decision ([2013] EWCA Civ 368). Supreme Court: allowed the Valuation Officer’s appeal and declared the two floors to be separate hereditaments ([2015] UKSC 53).