Telereal Trillium v Hewitt (Valuation Officer)

Under the rating hypothesis, the assumed letting is hypothetical but the market is real. The hypothetical tenant embodies the actual demand for the hereditament at the relevant time. Where no real-world tenant would pay a positive rent, the law does not permit demand to be invented merely because comparable premises are occupied. The requirement of a concluded letting can be satisfied by assuming a nominal rent. Comparable occupied properties and statutory assumptions about their occupation cannot create demand in a saturated market. Independent valuation prevails over uniformity where uniformity would produce an incorrect assessment. A nominal rateable value is not confined to premises incapable of beneficial use or cases involving exceptionally onerous tenancy obligations.

Telereal Trillium appealed against the Upper Tribunal (Lands Chamber), which had allowed the valuation officer’s appeal concerning Mexford House, a vacant office building in Blackpool. The Valuation Tribunal for England had reduced its rateable value to £1 with effect from 1 April 2010.

The parties agreed that, at the antecedent valuation date of 1 April 2008, nobody in the real world would have occupied Mexford House and paid a positive price. The Upper Tribunal nevertheless assessed the property by reference to demand for comparable occupied offices and determined a substantially higher value. The central issue was whether the rating hypothesis required the valuer to assume demand which did not exist in the real market.

1. Disposition. Lord Justice Henderson delivered the judgment, with the Senior President of Tribunals and Lord Justice Davis agreeing. The appeal was allowed and the Valuation Tribunal for England’s rateable value of £1 was restored.
2. Real-market valuation. The statutory rating hypothesis assumes a yearly letting, but the market in which that letting is posited remains real. The valuation is derived from actual supply and demand and from the probabilities of what reasonable parties would have done. This approach was supported by [1937] KB 445, [1994] STC 360, [1998] RA 391 and (1960) 31 DRA 788.
3. On the agreed facts, there was no actual demand for Mexford House at a positive rent. No rule required the valuer to manufacture such demand. The notional letting could be concluded at a nominal rent. The reality principle prevented the rating hypothesis from being extended beyond what the statute required.
4. The occupation of comparable offices did not alter the result. The relevant public-sector demand was already absorbed elsewhere. Under paragraphs 2(5) and 2(7) of Schedule 6 to the Local Government Finance Act 1988, the comparable properties had to be treated as occupied and used as they were on the material date. The principle of independent assessment meant that uniformity could not justify an inaccurate higher value, applying [1932] 2 KB 679.
5. The Upper Tribunal had wrongly treated the reasoning in [1893] AC 562 and [1998] RA 391 as limiting nominal values to intrinsically sterile premises or cases where tenancy responsibilities made occupation commercially burdensome. Those categories were not exhaustive.
6. The Court also confirmed, following [2013] UKUT 539 (LC), that an appeal from the Valuation Tribunal for England to the Upper Tribunal proceeds by way of a fresh hearing under regulation 42(5) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009. Tribunals should nevertheless exercise caution before agreeing a procedure that forecloses fact-finding or investigation, since they owe duties to the general body of ratepayers as well as to the parties.

• Court of Appeal (Civil Division) — [2018] EWCA Civ 26: allowed Telereal Trillium’s appeal and restored the rateable value of £1.
• Upper Tribunal (Lands Chamber) — [2016] UKUT 258 (LC): allowed the valuation officer’s appeal and proceeded on the parties’ agreed factual basis, treating the property as having a substantially higher rateable value.
• Valuation Tribunal for England — reduced Mexford House’s assessment to a nominal rateable value of £1.