The appeals of Lucy Dyer (Valuation Officer) & Anor

For rating purposes, the valuation of office premises must reflect their actual physical state on the material day, including a tenant’s Category B fit-out. The fact that the tenant carried out or paid for the work does not generally exclude its value.

Reliable Category B rental evidence is preferred. Where it is unavailable, a Category B value may be derived from Category A evidence with an appropriate uplift, but fit-out costs and amortisation provide an evidential method rather than an automatic statutory formula. Sublettings are not inherently unreliable and may provide the best evidence where they are physically and commercially comparable.

These were two unopposed appeals by Valuation Officers against decisions of the Valuation Tribunal for England concerning the rating of Category B-fitted office premises.

In the first appeal, the VTE reduced the rateable values of two hereditaments at 85 Uxbridge Road from £111,000 to £99,000 and from £230,000 to £204,000, with effect from 1 April 2017. In the second, it reduced the rateable value of fourth-floor offices at 9 Appold Street from £1,140,000 to £1,010,000, with effect from 28 May 2022.

The central issues were the treatment of Category B fit-out, the evidential value of Category A and Category B rents, the use of fit-out costs, and the weight to be given to sublettings and indexed rental evidence.

1. Both appeals allowed. The rating list entries were restored to £111,000 and £230,000 for the two hereditaments at 85 Uxbridge Road, and amended to £1,110,000 for the fourth floor at 9 Appold Street.
2. Under paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988, rateable value is assessed by reference to the rent reasonably expected for the hereditament as it physically exists. Paragraph 2(6) and (7)(a) require relevant physical matters to be taken as at the material day. The identity of the person who carried out or paid for the fit-out is immaterial. There is no general statutory exclusion of tenant-funded fit-out.
3. Reliable Category B lettings are preferred. Where such evidence is unavailable, Category A evidence may be adjusted to reflect the value of a Category B fit-out. The Tribunal cautioned that a basket of diverse fit-out costs and an amortisation calculation may be unreliable and should not be treated as an automatic or conclusive method.
4. Sublettings are not excluded merely because the evidence concerns a sublease or an accidental landlord. Their reliability depends on physical and commercial comparability. Here, nearby sublettings in similar buildings materially supported the proposed assessment for 9 Appold Street.
5. For 85 Uxbridge Road, the passing rent and other lettings in the same building provided sufficient Category A evidence. Even a modest Category B uplift supported £315 per square metre. For 9 Appold Street, the mixed but materially comparable rental evidence supported £425 per square metre.
6. No orders for costs were made because neither appeal had a participating respondent.

• Upper Tribunal (Lands Chamber): appeals against decisions of the Valuation Tribunal for England allowed. The rateable values were restored or amended as set out in the disposal provisions.
• Valuation Tribunal for England: appeals by the ratepayers allowed, with reductions in the relevant rateable values.