Ballcroft Estates Limited v D Virk (Valuation Officer)

For rating purposes, the statutory hypothesis requires a willing tenant, even where the market is weak or saturated. General demand may be assessed from occupation of other properties with similar characteristics. Comparable lettings remain usable despite inducements or non-standard terms, provided appropriate adjustments can be made and the evidence is evaluated cautiously. A rent passing for the whole of a building is of limited assistance where the assessment concerns only part and the lease terms materially depart from the statutory hypothesis. Positive rents, after allowing for concessions and liabilities, may establish sufficient general demand to support a positive rateable value.

Ballcroft Estates Limited appealed against the Valuation Tribunal for England’s decision dated 15 January 2021, which reduced the 2017 list rateable value of the ground floor and basement of a former Marks and Spencer store in Kidderminster from £92,000 to £57,000.

The appeal concerned the effect of weak town-centre demand, the evidential value of leases containing rent-free periods, service-charge arrangements, exclusivity provisions and other inducements, and the extent to which a lease of the whole building could be adjusted to value part of it. The central question was whether the evidence established general demand sufficient to justify a positive rateable value.

1. Appeal allowed. The rateable value of the appeal property was determined at £17,750 with effect from 1 April 2017.

2. The lease of the whole appeal building was of limited assistance. It included the upper floors, which were separately assessed and in poor repair, while the lease terms departed materially from the rating hypothesis. They excluded security of tenure under sections 24–28 of the Landlord and Tenant Act 1954, restricted assignment and subletting, and allowed the landlord to recover possession on short notice. The adjustment exercise also involved unresolved circularity because a rateable value was used to calculate rates liability.

3. The statutory hypothesis nevertheless assumes that a letting takes place. Following the approach explained by Lord Carnwath in Hewitt v Telereal Trillium [2019] UKSC 23, even a saturated market assumes a sufficiently interested willing tenant. In the absence of better evidence, general demand may be assessed by reference to occupation of other properties with similar characteristics.

4. The comparable lettings were imperfect and required substantial adjustments for rent-free periods, rent-review caps, exclusivity clauses, service charges and dilapidations. Their imperfections did not make them unusable. After adjustment, the evidence showed positive rents of approximately £11 to £15 per square metre. That evidence established general demand for large town-centre stores, although the evidence was patchy and required a broad valuation judgment.

5. The most appropriate approach was to value the appeal property at £11 per square metre. The resulting figure was £17,776, rounded to £17,750.

• Valuation Tribunal for England: on 15 January 2021, reduced the compiled list rateable value from £92,000 to £57,000.
• Upper Tribunal (Lands Chamber): allowed the appeal and determined the rateable value at £17,750 with effect from 1 April 2017.