Arma Hotels Ltd v Dawn Bunyan (Valuation Officer)

In valuing a small independent hotel for rating purposes, the fair maintainable trade method may be used where reliable rental evidence and a settled tone of the rating list are absent. Unchallenged assessments do not establish a tone where they remain the valuation officer’s untested opinions, particularly under the 2017 check, challenge and appeal regime.

Fair maintainable trade must reflect what a reasonably efficient operator would expect to achieve at the antecedent valuation date. The selected percentage must reflect the hotel’s construction, layout, size and ancillary facilities.

Arma Hotels Ltd appealed against the Valuation Tribunal for England’s decision dated 14 February 2022, which confirmed the Hotel’s rateable value in the 2017 rating list at £31,000. The central dispute was whether valuation should use comparable rental evidence and an alleged tone of the list, or the shortened receipts and expenditure method based on fair maintainable trade.

The Tribunal considered the available rental evidence, whether list assessments had been sufficiently tested, the appropriate fair maintainable trade at 1 April 2015, and whether a material change of circumstances deduction was justified.

1. Appeal allowed. The rateable value of the Hotel was determined at £16,250.
2. The Tribunal applied paragraphs 2(1) and 2(7) of Schedule 6 to the Local Government Finance Act 1988.
3. Applying Futures (London) Ltd v Stratford (VO) [2006] RA 75, the Tribunal held that no reliable tone had emerged. The assessments were largely the result of a later review of the valuation officer’s initial opinions and remained insufficiently tested by agreement, determination or an absence of challenge in circumstances where challenge would have been expected.
4. There was no helpful rental evidence. The appropriate method was therefore shortened receipts and expenditure based on fair maintainable trade. Fair maintainable trade had to reflect what a reasonably efficient operator at 1 April 2015 would expect to achieve. The fire-insurance year was an unreliable starting point.
5. No material change of circumstances deduction was justified. The evidence did not establish that the relevant change in competing hotel rooms affected the hypothetical tenant’s bid.
6. Fair maintainable trade was assessed at £155,000. Applying the relevant scale, 10.5 per cent was selected, producing a rateable value of £16,250.
7. The Tribunal also relied on Stock Auto Breakers Ltd v Chris Sykes (VO) [2020] UKUT 52 (LC) concerning the reduced time pressure on ratepayers to check and challenge assessments under the 2017 regime.

• Upper Tribunal (Lands Chamber): appeal allowed and rateable value reduced from £31,000 to £16,250.
• Valuation Tribunal for England: decision dated 14 February 2022 dismissed the appeal and confirmed the rateable value at £31,000.