Amanada Hitchings v Shoosmiths LLP & Anor

For rating purposes, Category B fitting-out works may increase the rateable value of modern Grade A offices above their Category A value. The uplift must be assessed by valuation evidence. Comparable evidence is preferred where it is available, but where reliable comparables are absent, the amortised cost of the fitting-out works may be the best or a significant indication of annual value. Arbitrary, unevidenced allowances must not be used. The actual occupier is included in the rating hypothesis, and the hypothetical letting assumes premises fitted to meet the tenant’s needs.

The Valuation Officer appealed against decisions of the Valuation Tribunal for England concerning two Grade A office properties: premises occupied by Shoosmiths LLP in Manchester and by Mando Group Ltd in Liverpool. The VTE had accepted that Category B fitting-out added value, following Dawn Bunyan (VO) v Acenden Limited, but adopted uplifts of £15 per m² and £10 per m².

The appeals concerned valuation methodology rather than a point of law. The Tribunal had to determine how the Category B uplift should be assessed where bespoke Category B lettings were rare and comparable evidence was limited.

1. Appeals allowed. The Shoosmiths assessment was restored to a rateable value of £640,000. The Mando assessment was increased to £54,000, calculated at £110 per m².
2. The Tribunal was not persuaded to depart from Dawn Bunyan (VO) v Acenden Limited [2023] UKUT 17 (LC). Category B fitting-out works can increase the value of premises above their Category A value. The present appeals concerned only the method of valuing that increase.
3. Under the rating hypothesis, the actual occupier is treated as being in the market. The hypothetical premises are assumed to be fitted out in a way that meets the hypothetical tenant’s requirements. The tenant would pay more for premises already fitted out to those requirements than for premises requiring equivalent expenditure.
4. Comparable market evidence remains the preferred basis of valuation. It is particularly valuable because it reflects the behaviour of real landlords and tenants, but Category B comparables must be treated cautiously because such lettings are uncommon and may involve dated or non-bespoke fitting out.
5. Where useful comparables are unavailable, the amortised cost to the tenant of carrying out the Category B works may be the best, or at least very significant, evidence of the annual value of the property in Category B condition. The amortisation rate should reflect the cost of capital and the shorter of the estimated useful life of the works or the lease term.
6. The VTE’s Manchester uplifts were arbitrary and unsupported by evidence. For Shoosmiths, the 2017 list was closed and the existing assessment was already below the Tribunal’s conclusion as to the Category A value, so the assessment had to be restored without determining a precise Category B value. For Mando, the limited comparable evidence was preferred to the unexplained cost calculations and supported a £30 per m² uplift.
7. The Tribunal declined to decide whether a landlord’s capital contribution should invariably be preferred to the tenant’s actual expenditure. That issue was fact-sensitive and did not affect the outcome.

• Upper Tribunal (Lands Chamber): allowed the Valuation Officer’s appeals against the Valuation Tribunal for England. The Shoosmiths rateable value was restored to £640,000 and the Mando rateable value was fixed at £54,000.