european valuation standards 2012 - the irrv · 2016-05-09 · valuer june 2012 5 letter to the...
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JUNE 2012 www.irrv.net
ISSN
136
1-13
05
As TEGoVA launches European Valuation Standards 2012, new European interpretations of market and fair value come under Krzysztof Grzesikʼs microscope
INSIDE: RATING DIPLOMA HOLDERS • VALUATION TRIBUNAL UPDATE • CASE LAW • VOA FOCUS
European Valuation Standards 2012
Editor's welcomeIRRV VALUER
Managing Editor John Roberts
Design Jamie Sowler
Publisher IRRV Publications
IRRV
Chief Executive David Magor OBE IRRV (Hons)
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IRRV Valuer is produced by IRRV Publications
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© IRRV 2012. Reproduction in whole or in part
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do not necessarily represent the views of the
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constitute a legal opinion.
June 2012 Edition ISSN 1361-1305
IRRV Council: IRRV President Roger Messenger
BSc (Est Man) FRICS FIRRV MCIArb REV; Senior Vice-
President David Chapman IRRV (Hons); Junior Vice-
President Richard Harbord MPhil CPFA FCCA IRRV
(Hons) FIDP FBIM FRSA; Honorary Treasurer Allan
Traynor FCCA IRRV (Hons); Phil Adlard Tech IRRV
MlnstLM MCMI; Alan Bronte FRICS IRRV (Hons);
Robert Brown BSc FRICS FIRRV; Tracy Crowe CPFA
FIRRV; Carol Cutler IRRV (Hons); Tom Dixon RD BSc
(Est Man) FRICS IRRV (Hons); Ian Ferguson IRRV
(Hons); Geoff Fisher FRICS (Dip Rating) IRRV (Hons)
REV; Richard Guy FRICS (Dip Rating) IRRV (Hons)
MCIArb; Mary Hardman IRRV (Hons) FRICS MCMI;
Gordon Heath BSc IRRV (Hons); Julie Holden IRRV
(Hons) MCMI CMg; Caroline Hopkins IRRV (Hons);
Kerry Macdermott IRRV (Hons); Tony Masella MRICS
MCIOB FIRRV AFA F.Inst.AM; Jim MaCaff erty IRRV
(Hons); Maureen Neave Tech IRRV; Nick Rowe IRRV
(Hons); Peter Scrafton FIRRV FCIArb MRSA (Hons);
Angela Storey Tech IRRV MCMI; Bob Trahern IRRV
(Hons).
Welcome to the summer edition of the Institute’s flagship
offering for IRRV members engaged in property valuation and
its ancillary practices. Each quarter we look to include a key
contribution that picks on an up to the minute theme, and
this issue is no exception. Our June cover story is designed to
follow on from the launch of The European Group of Valuers’
Associations (TEGoVA) European Valuation Standards (EVS
2012) document, released at the organisation’s latest round of
meetings, held in Krakow, Poland, in May. Nearer home, the valuation of public conveniences
may seem an unlikely topic at face value, but Laurence Hatchwell of the Valuation Office
Agency is on hand to offer detailed analysis on the subject. Our compulsory purchase guru,
Stan Edwards, turns his gaze to the Portas Review, as he examines the use of CPO orders in
high street regeneration, and the history of completion notices is tackled by Andrew Warde,
as part of our long-running RICS Rating Diploma Holders’ series.
The right to reply remains an important part of our magazine, and this edition features
yet another important offering which challenges previous comment. Please keep your views
coming, and we will endeavour to print them and prolong the debate.
With other regular features covering the ever-changing planning legislative landscape,
new case law, and not forgetting our intrepid observer ‘Flotsam’ and the forthright
commentary of Tom Dixon, we hope you’ll agree that Valuer remains at the top of its game,
and a must for the profession. Read on … . █
John Roberts IRRV (Hons) is Managing Editor of IRRV magazines.
IRRV Conferences and Courses►► Current Issues on Council Tax & Non Domestic Rate –
Professional Meeting: London – 18 June 2012
►► Welsh Conference: Llandrindod Wells – 21 June 2012
►► Scottish Conference: Crieff – 5 & 6 September 2012
►► Annual Conference: Telford – 3 to 5 October 2012
►► Performance Awards Gala Dinner: Telford – 4 October 2012
►► Autumn Pre-Examination Course: London – 2 to 5 November 2012
►► Scottish Benefits Conference: Crieff – 5 & 6 December 2012
For more information please visit: www.irrv.org.uk or call: 020 7691 8987
For sponsorship and exhibition opportunities please call: 020 7691 8996
Paper fromresponsible sources
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David Magor outlines the plan for expanding the influence of the Institute
Over the next twelve months, the Institute intends to expand its influence in every aspect of the valuation of land and buildings. We will, wherever possible, enter into reciprocal arrangements with kindred institutes all over the world. We will initially seek a memorandum of understanding, which will be followed up with the development of membership opportunities. There will be a mutual exchange of operational facilities, such as web content, magazines and other publications.
This process will start with a membership drive at home, with direct approaches to members of other professional bodies. We will then turn our attention towards Europe, where we will start a campaign linked to the launch of the European Valuation Standards 2012. When this is complete, a country by country approach will be adopted. This will be based on our suite of valuation qualifications and learning opportunities.
The intention is to make the IRRV the focus of activity on valuation throughout the world. Valuation is a core activity of the Institute. We have masses of technical material that will be made available. The Technical Enquiry service will be utilised to give all members a service on technical matters that will be second to none.
The anchor of this activity will be Valuer magazine. We will continue to publish a hard copy version, but there will also be an exciting electronic ‘page turning’ version available for those who want it.
The target is to double the number of valuer members over the next two years – with your help we can achieve this! █
David Magor OBE IRRV (Hons) is Chief Executive of the IRRV.
IRRV on the worldstage
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Editor's welcome 02
Editorial 03
VOA news 04
Letter to the Editor 05
From the trenches 06
RICS Rating Diploma Holders 08
VTS update 11
Business rate matters 12
Valuation technical 14
VOA focus 16
Valuation in Europe 18
Compulsory purchase/regeneration 22
Meanwhile leases 26
Case law update 28
Planning update 29
Fisher's findings 30
Flotsam 31
Contents Editorial
VOA news
IRRV PUBLICATIONSRating Law and Practice(Update Out Now!)
Rating Law and Practice is the authoritative guide to non-domestic rating legislation and its operation.
An essential reference for anyone working in the field, it is designed to make the legislation easier to understand.
The book includes comprehensive footnotes to assist in the cross-referencing and location of the legislation itself. It is kept fully up to date by annual updates.
Rating Law and Practice is supplied in hard copy format together with an electronic PDF version.
www.irrv.net
VOA newsAddendum In the 'Valuer International' article in March Valuer, on page 25, Mohamad Khodr Al-Dah's correct email address is [email protected] – Valuer offers apologies to readers and the author for this error.
Goodbye to Paul Sanderson …
The Valuation Office Agency has said a fond farewell to Paul Sanderson, Head of the National Specialist Unit. Paul joined the VOA in January
1971 as a Cadet Valuer in the Nottingham County South office, and worked in a range of roles, including Valuation Officer in Warwick, Director of Rating and Head of Professional Services. He will continue to be around on the property valuation conference circuit as the President of the International Property Tax Institute.
… and welcome to his successor!
Paul’s successor is David Subacchi, who took up post in March. David has been with the VOA since 1979, and has held a range of roles, including
the Group Valuation Officer for Liverpool, Stoke and the West Midlands. He is a Fellow of the RICS, a law graduate of the University of Liverpool and a former IRRV Branch President in North Wales. Many IRRV members will have heard David speak, either at conferences or IRRV training events.
Rating appeals
Rates are always a concern for businesses across England and Wales, so the VOA will continue to prioritise and maximise the number of rating appeals cleared in 2012/13. We are also trialling revised non-domestic rating processes in some locations. These trials are testing more sophisticated processes for identifying and prioritising cases that can be settled quickly, and methods by which we can concentrate the maximum resource on resolving genuinely contentious matters.We have also been liaising with the Valuation Tribunal Services in England and Wales on ensuring cases, especially ones citing hardship, receive the earliest possible hearing. █
VOA news is compiled by the Valuation Office Agency’s Communications Team
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Letter to the Editor
Dear Editor,
I am writing to comment on the “VTS update” in Valuer for March 2012, by Lee Anderson of the VTS. I think he makes some good points, but feel I must take issue with two things. He says that the VTS’s “primary objective remains to provide a more effective structure to deliver a consistent service which is responsive to the needs of our key stakeholders.” As an aside, I think this is a classic example of the kind of public sector meaningless “newspeak” that has become regrettably ubiquitous since about 1997.
The rating system, let it not be forgotten, is run for the benefit of ratepayers, who have to pay this tax and in return expect/hope that the money thus raised is then spent by the government for their benefit, though this is perhaps a somewhat forlorn hope with government taxation and expenditure nowadays. The VTS is an important part of the rating system – so they exist, ultimately, to serve ratepayers. I suppose you could describe ratepayers as “key stakeholders” in the rating system, but to me they are the only group of people the VTS are there to serve, never mind the convenience of the government, the VTS itself, CLG, the Treasury and billing authorities.
Secondly, Mr Anderson says, “For the avoidance of any doubt, the VTE President, in [one of] his explanatory notes ... has set out his expectation that SoCs should only be prepared for appeals that are actually proceeding to a hearing where efforts to reach agreement through discussion have failed.” He goes on to detail the quite large number of SoCs sent to the VTS, and notes that the vast majority of these “are subsequently settled prior to the hearing date,” going on to say that “clearly, with these appeals, the burden of paperwork is not “imposed” on the parties by either the VTE or VTS.”
Well, I have to say that the above is, to me, a prime example of pious/wishful thinking that ignores the reality of actually settling appeals with the VOA. Pressure of work permitting, I always endeavour to put a substantive case to the VO at or not long after their “start date” and always before their “target date.” Discussions do however take time and the VO are often under just as much pressure of work as those of us in the private sector.
The reality is therefore that in an admittedly small number of cases (at least in my experience), given the strict VT rule of an appeal being almost irredeemably “struck out” by them if a SoC has not reached them by 5pm on the date six weeks before the hearing date, we in the private sector are left with no alternative but to prepare and send in to the VT, before that cut off time and date, “protective” SoCs, so as to keep our clients’ appeal rights alive. Hence why the VTS are receiving a quite large number of SoCs where the appeal does not eventually proceed to the hearing. This burden of paperwork is therefore, it seems to me, very largely of their own making.
So by all means the President of the VTE can have the “expectation” above, but the reality on the ground does quite often completely override that. The further reality, in my view, is that the new appeals system, with its cut off dates and requirements for SoCs six weeks in advance of hearings etc., is far too complicated and unsurprisingly in my view, given the whole direction that government has taken towards the rating system for about the last twenty years, hugely slanted in favour of the VO/government. As Tom Dixon has argued convincingly on many occasions, what was wrong with the old LVT system of cheap, accessible, simple and fair justice for ratepayers? Or put another way “It it ain’t broke, don’t fix it!” Pity the poor unrepresented ratepayer trying to navigate his way through the new VTS/E appeal structure.
A fundamental slimming down of the current VTE/S appeals structure is needed, in order to restore the balance in favour of ratepayers, who, as above, are the sole people for whose supposed benefit the rating system exists.
Yours Sincerely
Michael Blank B Soc Sc, FRICS, IRRV (Hons)Michael Blank and Co., Chartered Surveyors, Manchester
Letter to the Editor
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From the trenches
Tom Dixon has had a dream …
I have a dream that I live in a country – you can call it Utopia if you like – where a democratically elected government acts with fairness and honesty towards all the electorate, not just those who support its political views.
I dream that the elected representatives of the people conduct themselves, without exception, in a non-partisan and positive way, and do not seek to exploit their privileges by opportunism and abusing their financial opportunities.
I dream that those utility companies which provide basic needs to the population such as power, water and transport are taken out of the hands of private organisations which seek to maximise their profits, sometimes unlawfully, against the interest of their customers, and are returned to public ownership.
I dream of a banking system which, as an acknowledged central element of a market based economy with its associated privileges, is operated in the interest of customers rather than seeking to exploit them and mismanage their affairs for short-term individual or corporate gain. Of an industry which does not mislead its clients and try to sell them products which are of no use to them, and end up costing them dearly, but which will return to its fundamental role of providing fairly priced finance, particularly to small and medium businesses which without funding cannot expand and develop to drive the economic growth which is so sadly lacking in the United Kingdom in this 21st century.
I dream of a national health service which is available to all who contribute to it and remains free at the point of delivery, but cannot be exploited by those from overseas who have never contributed to its costs. Of a national health service which is able to provide full and proper medical attention to those in need, and is not handed over to private organisations for exploitation via elected representatives, some of whom have apparently voted in accordance with financial incentives they have received for doing so.
I dream of a taxation system properly and effectively administered, and based firmly on ability to pay, without the opportunity for those who owe most to take advantage of avoidance measures which may or may not be legal, thus increasing substantially the burden on those less able or indeed unable to afford it.
I dream of a telephone system where I may be able to speak to a real person rather than an irrelevant tape recording, or be bombarded with unpleasant muzak (VOA please note!), and comprising organisations which, when they say that my call is important to them and they are doing their best to assist me, actually mean it.
“I dream of a fair and comprehensible appeal jurisdiction which is designed to assist the ratepayer to a fair hearing, and not embroil him or her in complex legalities enforced by draconian powers to strike out the once only right of challenge.”
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In particular, after forty years experience in all aspects of local property taxation, I dream of reverting to a single piece of legislation – you can call it the General Rate Act if you like – which is simple, straightforward, uncluttered by contradictory regulations, and intended and designed to produce a fair liability for the individual taxpayer. Such a system is possible, as it existed in this country until 1988, when it was negligently destroyed, although not, I still believe, irrevocably.
I dream of a Valuation Office which is free and independent, and not an agency of central government seeking to maximise the individual taxpayer’s contribution, fair or otherwise, to the exchequer – changing to an organisation which reverts to its priority, being to ensure that entries in the Rating and Valuation Lists are correct, fair and reasonable.
I dream that ratepayers wishing to challenge their assessments may be able to do so in a simple and straightforward manner and methodology, as befits any system where the state is expropriating money from the individual, rather than an opaque bureaucracy littered with irrelevant hurdles which the hapless would-be appellant must overcome to even commence a challenge against his or her tax liability, then avoid an ever increasing labyrinth of open ended invalidation procedures, like some demented computer game.
I dream of a Valuation Office which is properly and comprehensively staffed by fully qualified individuals who are competent to determine correct assessments, without being undermined by tiers of supervisors who do not regard themselves as answerable to the taxpayer – and certainly not run by a senior management board who are almost without exception unqualified in any aspect of the valuation service they are constituted to provide.
I dream of a system of challenge which is fair and treats both parties equally, that is not open to cynical manipulation by the executive against the individual, but rather ensures that when an individual challenges his tax liability he is given a full and an unfettered explanation of how that liability was calculated including, as this is a market evidence based method of assessment, the actual evidence from which that calculation was made.
I dream of a fair and comprehensible appeal jurisdiction which is designed to assist the ratepayer to a fair hearing, and not embroil him or her in complex legalities enforced by draconian powers to strike out the once only right of challenge.
I imagine that any taxation system, where it chooses to employ information technology, invests in a failsafe error proof system which does not disadvantage the taxpayer it is supposed to assist, and does not respond to key communications with acknowledgements which are unreadable to the recipient, particularly when the entire right of appeal may be lost if the full procedure is not followed. In short, I dream of an appeal jurisdiction which is available, affordable, and fair – you can call it a Local Valuation Court if you like (just like the one that existed until 1990!)
But it is just a dream, from which my reverie is broken by the ring of the telephone. It’s the valuation officer (whom I have been unable to contact for over a month due to the catastrophic collapse of the VOA telephone network) advising me that our agreement, settled after months of detailed negotiation, of my client’s shop appeal in London’s West End, has been overturned by his ‘team leader’, who is based two hundred miles away, and has never seen the property – oh, and my statement of case, which I had rashly assumed was not needed, is due tomorrow. Unless it is submitted by tomorrow morning, my client’s appeal, which has waited four years to be included in a VO programme for discussion, will be struck out.
This is quickly followed by an email from the Valuation Tribunal for England advising me that my previous statement of case on another property has been rejected by an unknown official for non-compliance. It is too long, or too short, or the paragraphs are inappropriately numbered. No one can tell me the actual reason, but the result is the same - my client’s appeal has been struck out. Oh, Utopia, wherefore art thou? █
Tom Dixon RD BSc (Est Man) FRICS IRRV (Hons) is a past President of the Institute, a member of the IRRV Council, and a consultant with Daniel Watney, Chartered Surveyors. The views expressed are his own.
“In particular, after forty years experience in all aspects of local property taxation, I dream of reverting to a single piece of legislation – you can call it the General Rate Act if you like …”
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RICS Rating Diploma Holders
Completion notices were introduced in Schedule 1, sections 7-9, of the General Rate Act 1967, concerning the “completion of newly erected or altered buildings”. The provisions of these sections were generally re-enacted as Section 46A and Schedule 4A of the Local Government Finance Act 1988, a late insertion made by the Local Government and Housing Act 1989. Notices are served by the billing authorities.
Completion dateThe service of a completion notice sets the date at which a building is deemed to be complete and should be entered into the Rating List. Before the advent of empty rates charging the existence of a hereditament was evident from actual occupation, but in the absence of actual occupation empty rates require a mechanism to establish the date from which an empty property becomes liable to be charged a rate, subject to any other reliefs and exemptions. The completion date in the notice becomes the effective date to be shown in the Rating List by the Valuation Officer. A completion notice cannot be retrospective, but it may specify a completion date up to three months after its date, if ‘the work remaining to be done on a new building in its area is such that the building can reasonably be expected to be completed within three months …’. A billing authority shall serve a completion notice in these circumstances ‘unless the valuation officer otherwise directs in writing.’ The Valuation Officer’s direction in writing prevents the billing authority from notifying a completion date that is different from the effective date of a list alteration being made by the Valuation Officer’s notice. An effective date applied by a Valuation Officer’s notice can be retrospective.
The significance of completion notices has increased since empty property rates charges reduced or ended reliefs for vacant
property after 1st April 2008. Over this period the costs arising from empty rates have been more onerous to property owners as higher levels of property voids have occurred during the recession. Although this has represented an additional burden for property owners, it has proved opportune for government, which would otherwise have experienced a considerable fall in rates revenues as a result of more properties being vacant.
The purpose of completion notices is evidently to establish a certain date for new or refurbished properties to be brought into rating for empty rates charging. Porter (VO) v Trustees of Gladman SIPPS [2011] RA 337 concerned appeals against list entries the Valuation Officer created for 20 new office units for which completion notice(s) had not been served1. At the material day the units were all vacant and despite the works that had been finished, they lacked small power installation, additional air conditioning, tea points, internal partitions and other fitting out. On the evidence in the case, this further work would have taken in the region of six weeks for any of the units. The Lands Chamber dismissed the VO’s appeals, and the President said ‘a building is only a hereditament if it is ready for occupation, and whether it is ready for occupation is to be assessed in the light of the purpose for which it is designed to be occupied. If the building lacks features which will have to be provided before it can be occupied for that purpose and when provided will form part of the occupied hereditament and form the basis of its valuation it does not constitute a hereditament and so does not fall to be shown in the Rating List. There is in consequence no scope for including in the list a building which is nearly, even very nearly, ready for occupation unless the completion notice procedure has been followed.’
Another case where a completion notice had not been served was Credit Suisse Management v Fleming (VO) [2011] RA 279. The
Andrew Warde considers the application of completion notices for rating and council tax, and the consequences of their presence or absence
Completion notices
“The Valuation Officer s̓ direction in writing prevents the billing authority from notifying a completion date that is different from the effective date of a list alteration being made by the Valuation Officer s̓ notice.”
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RICS Rating Diploma Holders
appeal was against two Rating List entries for offices on different parts of one floor of a building in the City of London where works had taken place to create a single hereditament of improved quality. The Valuation Tribunal held that the scope of works justified deletion of the two original hereditaments, since improvement was taking place and not repairs, but that the premises should be re-entered in the Rating List as one hereditament from the completion of the majority of the works because they were capable of occupation from that time, although no completion notice had been served and ‘some works were outstanding’. It does not appear that either the extent or costs necessary for these final works alone were considered in detail during this case.
Appeals against completion noticesWhen a completion notice has been served, the property owner should consider matters promptly. The completion notices I have seen are bland-looking letters, with none of the bold header found on a notice of entry in the Rating List served by valuation officers. These notices have significant consequences, and although there is no official guidance, the presentation ought to draw attention to this. Any appeal has to be made within 28 days of the service of the notice [SI 2009/2268 Reg19], and if the owner subsequently agrees a revised completion date then the original completion notice is deemed to be withdrawn, to be replaced by a revised notice showing the agreed date.
The first question to be asked in a given situation is whether a building has been completed. The LGFA limits application of s46A(2)b to circumstances where ‘the building to which the notice relates is not completed on or before the relevant day …’. If at the relevant day the building has in fact been completed then the
provision of the Act over completion notices ‘does not operate to deem it to be incomplete or not to constitute a hereditament’, a significant issue that needed to be re-stated by the Lands Chamber member in Porter (VO).
Invalid noticesOn a number of occasions challenges have been made over the validity of completion notices, from failure to serve the notice on the correct person or body to failure to serve it in the correct manner. The legislation requires that ‘the authority shall serve a notice … on the owner of the building as soon as reasonably practical’, so the authority has to identify the actual owner if service is to be valid. Until recently it has not been clear what action an aggrieved party could take to challenge a completion notice in these circumstances. In Prudential Assurance Co Ltd v A Valuation Officer [2011] RA 490 the Valuation Tribunal was asked to determine to what extent it had jurisdiction to consider any questions relating to the validity or existence of a completion notice. The panel, comprising the President of the VTE Professor Graham Zellick CBE QC and one of the vice-presidents, decided the VT did have jurisdiction to consider such questions, and proceeded directly to consideration of the arguments. In the instant circumstances it was accepted by the parties that a notice addressed to the developer of a property, who was not the owner (defined as ‘the person entitled to possession of the building’), could not be a valid completion notice within Schedule 4a of the LGFA 1988. However, at the time of service the parties had not realised that the notice was defective, and subsequently an agreement was made between the owner and the billing authority for a revised completion date. The panel decided that this agreement contained all the essential elements of a completion notice, and should therefore be accepted as a de facto completion notice. Because of the unusual facts in the case, this still leaves open the question of whether mistakes in the service or format of a completion notice will invalidate it. As the panel said, ‘we leave open for another day the question when a notice incorporating mistakes may nevertheless be valid.’
Altered buildingsRating agents and Valuation Officers have experienced differences of opinion over consideration of properties undergoing redevelopment, as against those undergoing repair. Extensive works which had once been considered sufficient to delete a hereditament from the Rating List on the ground that the property had become incapable of beneficial occupation are now subject to greater scrutiny. The Valuation Officer has adopted the position that it will not be correct to delete entries for hereditaments undergoing extensive works, and instead the practice is being adopted that a rateable value under appeal is instead reduced to rateable value £0. One effect of this change is that an increase of assessment for a new or altered building from this nominal value to a substantive one will not qualify for any of the mandatory three month void (six months for industrial or storage hereditaments) that is available for a newly created vacant hereditament.
The question has also been raised concerning whether a hereditament assessed at a nominal value during building works should be the subject of a completion notice to establish the completion date on the completion of those works? The General Rate Act was helpful in this respect, since it referred to ‘completion of newly erected or altered buildings’ as noted earlier. However, schedule 4A of the LGFA refers in section 1 to ‘work remaining to be done on a new building…’. S46A (5) and (6) make it clear that schedule 4A would have effect where the new building was produced by the structural alteration of an existing building. The conclusion from this ought to be that completion notices will have their usual
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application, provided a ‘new’ building within the above definition has come into existence. As always with property, there can be wide variations of circumstances, leading to differences of opinion about what constitutes ‘structural alteration’. For example, alterations to plant and machinery may be a major part of creating a different hereditament, but are these changes a structural alteration? In the Credit Suisse case cited above, the Valuation Officer had argued that works necessary to merge two hereditaments into one were in the nature of repair, in particular providing reference to the amendment to statute introduced by the Rating (Valuation) Act 1999. The Valuation Tribunal decision held the ‘removal of partitioning between the two hereditaments changed their character and the two separate hereditaments ceased to exist at that time…’. The decision was that the hereditaments were deleted for the period of the works on the facts, the VT taking into account the cost and extensive scope of the works.
Council taxThe introduction of the council tax in 1993 brought with it a new use for completion notices. The procedure for these is found in Section 17 of the Local Government Finance Act 1992, which effectively imports virtually all rating completion notice procedure into the council tax arena. The case of RGM Properties Ltd v Speight (Listing Officer) [2012] RA 21 is of interest in this area. In dismissing this appeal, the High Court confirmed the listing officer had correctly applied the legislation in entering into the valuation list on 20 July 2009, four flats with effect from 20 March 2008. The flats had been created from a converted office building – none of them had ever been occupied as such and the billing authority had never issued any completion notices. The effective date was the date of a joint inspection of the flats by representatives of the listing officer and billing authority. However, only in July 2009 did the billing authority request that the listing officer assessed the flats for council tax. The appellant contended that the flats were not complete in March 2008, and argued that the listing officer and billing authority had not followed the correct procedure, namely the service of completion notices.
The judge concluded that the building was not yet completed, and said that the billing authority had discretion, and was not obliged to serve a completion notice. He said that it was not a necessary precondition of entry in the list to first serve a completion notice and further, with reference to case law, that a hereditament had been created when it was capable of occupation. The High Court rejected the appellant’s argument that a landlord could not let the flats in their present condition.
In conclusion, it is evident that completion notices are an important mechanism to bring a property into taxation, both for rating and for council tax. However, there may be a need to provide clear comment about the purpose and consequence of these notices, because taxpayers are unfamiliar with rating and council tax requirements, and may fail to appreciate the importance of these notices. █
Footnote:1. This case has been referred to in Insight August 2011 p14 by Simon Tivey:
'Avoiding the bear traps' and in Valuer December 2011 p 29 as a summary
of Patrick Bond’s paper from the Telford ‘Valuer Day’.
Andrew Warde BSc (Hons) IRRV (Hons) FRICS Dip. Rating is Director of Rating at Capita Symonds, and a past Chairman of the RICS Rating Diploma Holders’ Section.
RICS Rating Diploma Holders
Addendum In the 'Rating Diploma Holders' article in March edition of Valuer, on page 10, the author states that the downward limit on transition for large hereditaments in 2011/12 is 6.5%, whereas in the CA Regs 2009 No. 3343 it is 6.7%. Valuer apologies for this error, and thanks Jerry Schurder for his keen eye!
VTS update
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VVTTS S updateStatistics, statistics, statistics … but they do tell a tale, says Lee Anderson
“The administrative focus of the VTS is to provide an efficient and effective platform for the clearance of appeals which cannot be resolved through active negotiation between parties.”
As we move away from the financial year end, it is helpful to reflect on experiences over the year past, and to validate forecasts for the year ahead through trend analysis. Whilst I personally find this exercise informative, I am also mindful that there are two diverse schools of thought when it comes to reliance on statistics to drive forward business planning. “An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts – for support rather than illumination” – Andrew Lang (Literary critic, novelist and poet). I am minded to support the views of George Bernard Shaw on such matters, “It is the mark of a truly intelligent person to be moved by statistics”. Although renowned for his literary prowess, I am drawn to the fact that he was co-founder of the London School of Economics and active in local politics, serving on London County Council. This may be a somewhat tenuous link, but I think it fair to assume that he may also have known a thing or two about government taxation!
In March Valuer, I focused primarily on 2010 Rating List appeals, and commented on stakeholders’ views about the introduction of the disclosure and exchange process. It is helpful to look again at this work in the context of the wider spectrum of appeals under the jurisdiction of the Valuation Tribunal for England (VTE), which fall to be administered by the Valuation Tribunal Service (VTS). In 2011/12, the VTS scheduled 1625 tribunal hearings, of which 1371 ran with meaningful business to be dealt with on the day by panel members. The hearing volumes for 2010/11 were comparable, however the volumes listed to hearings highlighted a marked variance, which is worthy of further analysis.
The VTS listed 118,235 appeals to tribunal hearings in 2011/12, a 22% fall in volumes from 2010/11. The appeal breakdown is consistent across each year as follows – 96.5% NDR and 3.5% council tax (CT) liability and CT valuation. Taken in isolation this may initially trigger an allegation of a reduction in throughput,
suggesting capacity issues within the VT network. This presents only half the story, and for this reason pre-hearing activity and the volume of cases contested at tribunal hearings need to be looked at closely. In 2010/11, the VTS issued 2906 decisions arising from contested cases at tribunal hearing. Despite the reduced volume of cases listed, the figure for the number of decisions issued in 2011-12 stands at 4015, an increase of 38% from the previous year. In NDR terms, the total cases determined by the VTE following representation at the hearing by the parties has increased from 0.8% of listed cases in 2010/11 to 2.2% of listed cases in 2011/12. This coupled with the additional receipt of 22,000 statements of case, for 2010 NDR list appeals, did in fact represent a sizeable increase in administration and judicial activity within the tribunal network.
Active professional representatives will be mindful that with effect from January 2012 the tribunal hearing programme has been developed to provide a renewed focus on listing increased volumes of NDR appeals to strategic regional venues. This has met some criticism, although the basis for this decision is sound and supported by statistical analysis. Although we have seen an increase in NDR cases contested at hearings, it is important to note that attendances are still very much the exception to the norm. As such, the hearing venue is immaterial in the majority of cases. Of the current 2.2% of appeals which are at present determined by the tribunal at a hearing, approximately 50% are dealt with by written submission. Whilst in these cases there may be some implications in terms of “local” office representation from the Valuation Office Agency (VOA), the selected hearing venue has no impact on ratepayers or their representatives given their reliance on written statements rather than attendance. That said, the VTE and VTS are proactive in ensuring local access to justice and continue to determine appeals at local venues for CT appeals. We recognise that there will be circumstances when it is
appropriate, for the benefit of all parties, to hear NDR cases at more local venues, for example with unrepresented ratepayers and those with local representation. In these cases we continue to encourage early contact when it becomes clear that the case will require an attended hearing. If the allocated venue presents a problem, we will work with all parties to ensure a more convenient location within an agreeable timescale.
In comparing CT and NDR statistics, the ratio of cases listed to appeals determined by the tribunal provides a point for further debate. Whilst prepared to accept that this may be akin to comparing apples with pears given volumes and in some cases complexity, there is at least food for thought for the future. Approximately 35% of all current CT appeals listed result in contested cases at hearing. Looking back historically the number of appeals received reduced to around 10% of previous volumes following the introduction of an Appeals Direct (AD) procedure. With the exception of lower volume liability cases, prior to AD approximately 5% of CT cases listed resulted in contested cases at hearing. The administrative focus of the VTS is to provide an efficient and effective platform for the clearance of appeals which cannot be resolved through active negotiation between parties. The tribunal is not directly measured on volumes of cases listed, and cannot be held responsible for the inadequacies of professional engagement in the pre-listing processes. Steps have and will continue to be taken to shake off the tag as a dating agency for professional parties! Whilst it would be naïve to suggest that the CT model can be adopted for NDR, statistical analysis and reduced public sector funding suggest that over listing of appeals cannot continue to be the default position to facilitate routine clearances. █
Lee Anderson BSC (Hons) IRRV (Hons) is Operations Manager with the Valuation Tribunal Service. Email him at [email protected] 11
Change and more change. Thatʼs the name of the game, says Gordon Heath, as he summarises the many issues practitioners need to grapple with in the new fi nancial year and beyond
Business rate matters
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Once again the new rating year brought a number of changes, not the least of which is that some local authorities are taking more interest in business rates than they have in more than 20 years. This is a trend that is likely to continue.
On a more practical level, April 2012 brought another set of business rates deferral schemes in England and Wales. The previous schemes to defer part of the 2009/10 rate increase finished on 31 March 2012, and immediately there are new schemes to defer part of the 2012/13 rate increases. In England, this new scheme is a little less dramatic, because last time the transition scheme was ending, and that resulted in a number of significant changes in liability.
In simple terms, a ratepayer can apply to the local authority to defer 3.2% of their 2012/13 rate bill in England, or 3.36% in Wales. No doubt many ratepayers will be disappointed when they realise that it is just a deferral, not a reduction. When small ratepayers find out how small the deferred amount actually is, disappointment might not be enough to describe their reaction. However, some larger ratepayers might consider it worthwhile overall, except that they will have to accrue for the deferred sums in their accounts anyway.
Once again, local authorities or their software suppliers have to amend their business rates systems at short notice. Some of these systems are quite old, and have been modified so many times to cope with legislative changes that they must be creaking at the seams. No doubt most systems will cope with most circumstances, though. Equally, I have no doubt that some circumstances will give rise to errors. The most likely areas to give rise to problems are the payment allocation and debt recovery systems. This is because payment matching will be necessary to
allocate payments to what is effectively two instalments running in parallel, and default will result in all the deferred amount spread over two years becoming payable immediately. The practical issue for ratepayers is that the earliest their instalments will be reduced is July 2012. That will depend on an application being returned by 9th June 2012, and on the local authority having the software in place. Although applications can be made until 31 March 2013, no deferral will be allowed if either the full 2012/13 rates have been paid, or were due to be paid within 21 days of the application. Also, applications may be refused by the local authority if the ratepayer has lost their right to pay by instalments following a reminder. Any deferred amount will subsequently become payable if the ratepayer ceases to be liable, or loses their right to pay by instalments.
In England, from April 2012 all ratepayers that occupy property below £18,000 RV (£25,500 RV in London), except those receiving another mandatory relief, will be entitled to be billed on the small business multiplier. Empty properties and those in receipt of mandatory charitable or mandatory rural rate relief will continue to be charged on the full multiplier.
In England and in Wales, the temporary increase in Small Business Rate Relief has been extended to 31 March 2013. Eligible ratepayers will receive 100% relief below £6,000 RV, and a tapering relief from 100% at £6,000 RV down to 0% at £12,000 RV. The 100% relief will revert to 50% in England and to the previous levels in Wales from April 2013.
In Scotland, in 2012/13 the small business bonus scheme continues to provide 100% relief to businesses, with a combined RV up to £10,000, 50% up to £12,000 and 25% up to £18,000, with 25%
also available to individual properties up to £18,000 where the combined RV is up to £25,000. This continues to be paid for by a supplement of 0.8p on the multiplier above £35,000 RV. However, in Scotland a public health supplement of an additional 9.3p on top of the multiplier has been introduced for the first time in 2012/13, and applies to retail properties with an RV of £300,000 or more that sell both alcohol for consumption off the premises and tobacco. This will rise to 13p in 2013/14.
In England, the legislation required to remove certain backdated liabilities on ports is now in place. This applies to all eligible business in England only, not just to ports, and amounts to a loss of revenue of £175m. The government has produced a guidance note for local authorities on implementing the cancellation of these backdated liabilities, which runs to nearly
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60 pages. Briefly, the cancellation applies to backdated liabilities of at least 33 months entered in the 2005 list before 31 March 2010 that met the qualifying conditions. Ongoing liabilities from the date that the property was entered into the list remain payable in full.
In England and Wales, the Localism Act 2011 allows billing authorities to fund their own local discounts. From April 2012, billing authorities are able to grant a local business rate discount to any local ratepayer, within the limits of the primary legislation and European rules on state aid. Although central government and the Welsh Assembly will continue to part fund discretionary reliefs in the same circumstances as before, local authorities will have to fully fund any relief given under the new provisions. Considering that all local authorities are facing annual budget cuts, it is difficult to see how these provisions can be used to any extent. However, the one exception is that local authorities in England will be fully funded to use their local discount powers from April 2012 to grant relief to businesses that move into enterprise zones before April 2015. Up to 100% discount may be granted for up to five years, subject to state aid limits. Such discounts may also be awarded from April 2012 to existing businesses in enterprise zones, and to empty properties in enterprise zones.
Other changes are also coming soon. The fees that bailiffs may charge is under review, and large ratepayers who fail to pay might be in for an unpleasant shock if the current proposals go through.
Also, the proposals for local business rates retention will come into effect in April 2013. Although, the power to set the multipliers will not be given to local authorities, they will be keeping much more of the rates collected locally. Unlike the previous incentive scheme, known as “LABGI”, this scheme is more radical. At present, many authorities seem interested in obtaining the benefit of increasing the rate base locally. However, when they wake up to the fact that this time it is a double edged sword, they will realise that a reduction in the local rate base will also be felt locally. Either way, we can expect local authorities to take much more interest in business rates, and in maximising the yield in particular. █
Gordon Heath BSc IRRV (Hons) is an independent revenues consultant. The views expressed here are purely personal. Gordon can be contacted at [email protected]
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Valuation technical
One area of Excel that often seems unused is that of ‘pivot tables’, yet this can be invaluable for data analysis. Some years ago most data would be stored in a database, and any analysis would be undertaken in that package. However, over those years Excel has developed its capabilities into the database area, and coupled with its more traditional spreadsheet functions, it is a highly useful tool to both store and analyse data.
This article examines the use of pivot tables, and for the purpose of this article Excel 2010 has been used. If you are using a different version, then you will need to adapt some of the sequences.
Database formatOnly a certain layout of data is suitable for analysis using pivot tables. The data must be in the format of containing data in columns, with the first row being the field names – or ‘headers’, as sometimes termed. For most purposes, this is not a problem, in that it is often the most common way data will be stored in a spreadsheet database. Typically, this could be a database listing comparable property details:
Date Street Town Area (sq.m) Rent £ Rent Reviews
Etc.
… or a residential database:
Date Street Town Type Asking Price
Garage Etc.
It is irrelevant as to the data to be analysed – the important issue is how the data is laid out.
Sometimes data may be laid out as shown in the extract of council tax rates, as below:
1993 1994 1995 1996 1997 1998 1999 2000
City of London
414.00 414.00 432.00 450.00 475.00 513.00 536.00 556.77
Camden 717.66 659.63 687.65 778.72 800.07 879.11 896.71 906.35
Greenwich 783.09 632.16 649.17 763.29 820.92 883.35 883.35 883.35
Hackney 698.54 659.85 778.34 855.13 796.62 789.60 789.60 841.59
Hammersmith & Fulham
423.60 445.39 461.10 509.80 556.66 628.89 695.29 736.68
To use this data in the table, it would have to be rearranged as follows:
Council Year Amount
There are utilities available on the web which can help with the rearrangement of data if your data is stored this way. As usual, the spreadsheet accompanying this article is available for download
from the Institute's website, and has been rearranged as above.The data to be analysed does not have to just come from a spreadsheet, it can come from a database such as Access. The main limitation of Excel is that the number of rows is limited to just over one million, and the memory of the computer. In most cases it is the latter that is the real constraint for users.
Pivot Tables
1.To insert a pivot table, go to the sheet containing the database which you want to analyse. From the tabbed toolbar, choose INSERT and then PIVOT TABLE. You will then be presented with the screen here.
Make sure that in the ‘select a table or range’ box that the data you want to analyse is correctly shown, otherwise you will need to click the selection box at the end and to highlight the range manually. Your next choice is
where you want the pivot table to be placed. In most cases the ‘new worksheet’ option is the best. However, if you are going to analyse a substantial amount of data, then it is worth having a separate file where the analysis is going to be performed, and to link the pivot table to the original data. The advantage is that the pivot table file will be smaller and quicker to open/save than the underlying larger database.
2.You will now be presented with your new worksheet, with a space where the pivot table will be located, as shown here.
Valuation technicalPeter Brown explains the ability to conduct data analysis using Excel's ʻpivot tablesʼ
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3.In practice, you will not use this to develop the pivot table, but rather the ‘Field List’, which will appear on the right hand side of the screen, as shown here. The illustration shows the fields that can be used in the pivot table.
4.The screen shown here is the area where the fields can be dragged to from the report. To access this you must click on the pivot table.
5.This may seem complicated, but a quick pivot table, as below, should help to explain what is happening:
6.In the pivot table shown here, the authorities were the "Row Labels", the years the "Column Labels" and the Band D was the "Values" as shown. The top left box, "Report Filter", is used to allow you to choose or filter the data you want to see. For example, this could be the year, council or county. The top right box, "Column Labels", refers to the columns of data you wish to display/analyse. The bottom left box, "Row Labels", refers to the data you want on the rows. The final box, "Values", refers to the values you wish to be displayed.
7.It may be that you would like to analyse and group the data by county as below:
8.To achieve this we simply need to add ‘county’ to the row values, as shown. If you move the ‘year’ from ‘Column Labels’ to ‘Report Filter’, you will be able to select the year that you want displayed.
There is a limit to the power of pivot tables with such a limited range of data, though hopefully by playing around with the sample data you will be able to understand the basic structure of pivot tables, and how powerful they can be to analyse data in different ways.
In the next article, we shall look at this power in more detail. █
Peter Brown is former Professor of Property Taxation at Liverpool John Moores University and consultant to Legal Owen, Chartered Surveyors, Chester.
“This article examines the use of pivot tables,and for the purpose of this article Excel 2010 has been used. If you are using a different version, then you will need to adapt some of the sequences.”
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Rating textbooks are often a little coy about basic functions, because whereas sewage treatment plants usually get a mention in the index, a hereditament at the other end of the operation, the public convenience, seldom makes an appearance. There should be less justification for this now, since the Upper Tribunal (His Honour Judge David Mole QC) gave a decision in the Appeal of Coll (VO) on 12 January (RA19 2010), in an appeal concerning a public convenience in Steyning, West Sussex, where the Valuation Tribunal’s decision was overturned.
It has never, since Erith v Draper [1952] 45R&ITR, been suggested that public conveniences are incapable of beneficial occupation. But alongside many other hereditaments in the public sector, they produce no income and involve considerable expense. After grappling with these peculiarities and hearing that the Steyning convenience would generate little or no income, but would still
cost £10,000 per annum to maintain, the Valuation Tribunal concluded that no material rent would be paid and accordingly the RV should be a nominal £1.
The VO appealed – and as the ratepayer did not respond, a hearing before the Upper Tribunal was unavoidable.
The Valuation Tribunal had expressly been influenced by the decision of the Lands Tribunal in Hodgkinson (VO) v Strathclyde [1996] RA 129. Hodgkinson does not yield up its true significance easily, and having been present at the hearing in that case, I can say that the
course it took caught both parties by surprise. Although Hodgkinson was not itself appealed, in the Steyning case it was criticised by the VO’s counsel case as having been wrongly decided, and the Upper Tribunal found the reasoning in the decision difficult to follow, as indeed it is. It involved public conveniences, at Burton-On-Trent, which the Tribunal reduced to £1 rateable value, on the basis that they were a financial burden to operate. Since at Steyning the hypothetical landlord also faced considerable overheads the Valuation Tribunal did not resist the temptation to draw an easy parallel with the circumstances in Hodgkinson.
But in fact the circumstances were quite different. At Burton the conveniences were within a shopping centre, and served not only the public using the centre but also the occupiers of retail units, many of which had no lavatories for staff. The occupiers of these units enjoyed express rights to use the conveniences. At Steyning, the hereditament was an ordinary “street” convenience, though actually situated on the edge of a public car park opening off the High Street, and no party had any rights to use it, express or
“It involved public conveniences, at Burton-On-Trent, which the Tribunal reduced to £1 rateable value, on the basis that they were a financial burden to operate.”
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Where thereʼs muck, thereʼs brass! The rating of public conveniences is examined by Laurence Hatchwell
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implied. There may be some doubt as to whether at Burton it was correct to suppose that the hypothetical landlord, as opposed to the actual landlord of the shopping centre, was obliged to make the toilets available to the tenant, but the Member appears to have made this supposition. At Steyning the hypothetical landlord was unencumbered by any such obligation, and therefore cannot be regarded as committed to keeping the toilets operative while the hereditament remains (notionally) vacant and to let. The argument which had weighed heavily with the Valuation Tribunal, that the hypothetical landlord faced an annual outlay of £10,000, had no basis at all. There was no reason to suppose that the landlord would incur expenditure on keeping the conveniences operational.
Another aspect of the Hodgkinson decision which seems to be ill-founded is that the Member in that case supposed that in order for the rent to be more than nominal, more than one competing bidder for the tenancy must be supposed. In this he may have read too much into the fact that the VO suggested that there would be two competing bidders. The Member appears to have reached his decision for £1 on a finding, probably correct, that one of these parties would not have been prepared to bid, leaving only one potential bidder, the landlord of the shopping centre. But many specialised hereditaments are suited to the requirements of just one particular occupier, and would attract no other tenant. Most of these have been brought into existence by considerable expenditure on the part of that occupier, and just as it would give absurd results to exclude such an occupier from consideration as a hypothetical tenant, it would strain credulity to suppose that the landlord, while fully recognising the suitability of the premises for that occupier, would be prepared to let him have them for £1. Similar arguments have from time to time been attempted in the field of statutory valuations, but they have always failed the test of common sense. In Erith v Draper, where the value at issue was little more than nominal, the Member had concluded, “As the council have deemed it worth while to expend money from the rate fund to provide this convenience, it is, I think, obvious that they would be willing to rent it, were it vacant and to let.”
In the Steyning case, the local authorities (parish and district
councils) had spent £75,000 on modernisation of the premises, and in addition the parish council was evidently prepared to spend £10,000pa on their operation. The Member concluded that the council “clearly regards them as a useful facility for the inhabitants of the area ... It seems to me that the Parish Council must think that use of the premises is valuable.” Indeed he went further, agreeing with counsel’s submission “that occupying premises with “high overheads” is likely to be an indication that occupation has value to the occupier rather than the reverse.”
This submission could be taken too far, and it would be unreasonable to deny that a high level of overheads is a negative factor in valuation, but this does not alter the general point – if an occupier willingly embraces a high level of annual outgoings, then it is an indicator that the occupation provides a high level of benefit. The Member referred to Roxburghe Estates v Scottish Borders Council Assessor [2004] RA 15, in which (at page 34) Lord McGhie provides a more precise analysis of the significance of operating expenditure:
“Further and in any event, it can be observed that we heard nothing to justify an assumption that a tenant who was prepared to take a tenancy of subjects which ran at a commercial loss would not pay more than the cost of repairs. If a tenant, for his own purposes would be prepared to occupy subjects at an annual net cost of £80,000, there is no firm basis for saying that he would not occupy at a higher cost if this was necessary to secure the tenancy.”
His Lordship went on to observe that landlords do not habitually treat acceptance of liability for repairs as adequate return from their tenants. The proposition that they might do so “depends on an assumption that the cost of repairs is in the particular circumstances equal to or in excess of, the … benefit of occupation.”
It cannot be correct to embrace that assumption without evidence of what the benefit of occupation actually is. The valuation effect of a high level of operating expenses cannot be gauged without considering the benefits of occupation. In a context where there is no rental evidence and where the premises are not operated for commercial profit, the only measure of that benefit is the input at Stages 1 and 3 of the Contractor’s Basis, namely the capital cost of the hereditament or a modern substitute, and provided that the actual operating expenses are no more than might reasonably be anticipated for newly constructed premises, the rateable value will be that decapitalised cost. Allowance for excess in operating expenses can be accommodated within Stage 2 of the Contractor’s Basis.
If at Steyning the task had been to value newly built premises, it would be possible to conclude that the parish council had embarked upon the project in full acceptance of the consequential operating costs. No allowance would then have been needed. But in actuality the premises dated from the 1950s and had only been internally modernised, and the VO’s expert made an allowance. His valuation was accepted. █
Laurence Hatchwell OBE MA (Oxon) MRICS is Civics Team Specialist, National Specialist Unit, with the Valuation Office Agency.
VOA focus
“Similar arguments have from time to time been attempted in the field of statutory valuations, but they have always failed the test of common sense.”
European Valuation StandardsVA
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“The estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”
The above is the definition of market value universally applied by valuers throughout the world. It derives from International, European and RICS Valuation Standards, and is also enshrined in EU Directive 2006/48/EC, known as the Capital Requirements Directive.
Such a common definition may give comfort to transparency seeking cross border investors, but perhaps they may not realise that its interpretation may differ significantly from country to country. In North America, market value is taken to mean the value assuming the “highest and best use” of a property, and in the United Kingdom valuers go further by reflecting the value of all uses which would be in the minds of willing buyers in the market. On the other hand, in Poland, valuers are split between those who favour the latter Anglo Saxon approach and those who consider that market value is no more than the current use value of a property. Such lack of consistent thought does little to inspire confidence in the valuation profession.
The debate on the definition of market value is about to be enlivened yet again, following the launch this year in Krakow (11th May 2012) of a new 7th edition of European Valuation Standards (EVS 2012) by The European Group of Valuers’ Associations (TEGoVA). EVS 2012 will be
As TEGoVA launches European Valuation Standards 2012, new European interpretations of market and fair value come under Krzysztof Grzesikʼs microscope
European Valuation Standards 2012
European Valuation Standards
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particularly controversial in so far as they reject TEGoVA’s previous thinking, which was in line with that of the International Valuation Standards Council (IVSC), of equating market value to the value of a property in its “highest and best use”.
Highest and best use
EVS 2009 clearly state at 5.4.1 that market value is, “… in principle based on the highest and best use of the property” defined in 5.4.2 as, “the most probable use of the property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued”.
The above definition was taken from IVS 2007 (8th Edition). In the latest IVS 2011, the definition of highest and best use has been somewhat modified, as follows:
“The market value of an asset will reflect its highest and best use. The highest and best use of an asset is the use that maximises
its productivity and that is possible, legally permissible and financially feasible. The highest and best use may be for continuation of an asset’s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid” (page 22, paragraph 33).
Whilst under International Valuation Standards the concept of highest and best use is fundamental to the interpretation of the definition of market value, the Royal Institution of Chartered Surveyors (RICS) in its own internationally recognised standards titled RICS Valuation Standards – Global 2011 (7th Edition) make no reference at all to highest and best use. Indeed RICS seemingly disagrees with the concept, as evidenced by the following passage concerning the exclusion of special value when assessing the market value:
” … where the price offered by prospective buyers generally in the market would reflect an expectation of a change
in the circumstances of the property in the future, this element of ‘hope value’ is reflected in market value. Examples of where the hope of additional value being created or obtained in the future may impact on the market value include: the prospect of development where there is no current permission for that development; and the prospect of synergistic value arising from merger with another property or interests within the same property at a future date”.
The above passage from RICS valuation standards is at odds with the definition of highest and best use which states that the use must be “legally permissible”. RICS goes beyond highest and best use and permits consideration of a use which, whilst at the date of valuation may not be legally permissible, might become so in the future, provided that the market would reflect such expectation.
TEGoVA’s European Valuation Standards Board in drafting EVS 2012 has also now moved away from endorsing the concept of highest and best use in favour of a less restrictive interpretation of the definition of market value, which may now reflect so called “hope value”.
Hope value
EVS 2012 seek to emphasise that the market value of a property reflects the full potential of that property so far as it is recognised by the market place. It may thus take account of the possible uses of the property which, whilst not legally permissible at the date of valuation, may become so in the future. EVS 2012 paragraph 5.4.4 states:
“ ‘Hope value’ (also sometimes called future value) is used to describe an uplift in value which the market is willing to pay in the hope of a higher value use or development opportunity being achievable than is currently permitted under development control, existing infrastructure constraints or other limitations currently in place. It will reflect an appraisal of the probability that the market places on that higher value use or development being achieved, the costs likely to be incurred in doing so, the time scale and any other associated factors in bringing it about. Fundamentally, it will allow for the possibility that the envisaged use may not be achieved. While descriptive of that uplift, it does not exist as a separate value but helps explain the market value of the property which must be judged from the available evidence just as much as any other part of the valuation. Hope value is not a special value as it represents the market place’s reasonable expectations as to the opportunities offered by the property”.
“TEGoVA s̓ European Valuation Standards Board in drafting EVS 2012 has also now moved away from endorsing the concept of highest and best use in favour of a less restrictive interpretation of the definition of market value …”
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“In particular, there is no requirement to expose the property to the open market. There are many situations where it will be used to address the value of a property.”
On highest and best use, EVS 2012 state, at paragraph 5.4.6, as follows:
“The concept of ‘highest and best use’ is met in a number of countries and some valuers in Europe may be asked to value a property on the assumption of its highest and best use, that is the permitted use that offers the highest value based on reasonable expectations. On analysis, that excludes the hope value that the market might place on a property’s potential opportunities that are not currently available. While it is an assessment of the property as it is on the valuation date, it is not an assessment of the best use that the market might at that date reasonably envisage could be possible for it”.
Finally, TEGoVA’s position on interpretation of the definition of market value is made absolutely clear in the following paragraph 5.4.10:
“ … The hypothetical seller will accept no less for his property and the hypothetical buyer will not want to offer more than he would pay for an equivalent property of similar usefulness to him. As each point of the definition of highest and best use (except the requirement for evidence) places some constraint on the definition of market value, the highest and best use assumption will not necessarily be the same as market value, albeit that it might be higher than existing use value. The most obvious common point of difference lies in the exclusion of potential permissions or other future opportunities for which the market might express hope value and in doing so judge the prospects, risks and costs of that future opportunity”.
The publication of EVS 2012 will no doubt provoke much controversy and debate within the valuation profession worldwide. For over 30 years the profession has sought to harmonise its standards and methodologies as evident in a common definition of market value endorsed by all the internationally recognised standard setting bodies (IVSC, TEGoVA and RICS) as well as by the European Union. Unfortunately a common definition has not led to a common interpretation. In this respect it seems that the world is now spilt between the “American” and a newly developing “European school” of valuation.
Whilst valuers in Poland continue to argue about whether market value goes beyond existing use value, the debate in the rest of the world has moved on. Such debate is not only focused on the true interpretation of the definition of market value, but also on the increasingly important concept of “fair value” in connection with which there is also much confusion.
Fair value
It is still not fully appreciated that fair value has two different meanings depending on whether the valuation is for financial reporting purposes (in which case fair value will normally equal market value as interpreted by IVS) or in other cases where there is a need to estimate the price that would be fair in a transaction between two specifically identified parties, where special value or synergistic value may influence the price agreed between them. In such a case fair value would be different to market value.
Whilst up to now there has been one definition of fair value with two possible meanings, IVS 2011 now sets out two separate definitions as follows:
1) “Fair value is the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties”.
2) “Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” (per IFRS Foundation).
Fair value definition 1) above is less specific and exacting in its assumptions than market value. In particular, there is no requirement to expose the property to the open market. There are many situations where it will be used to address the value of a property.
As explained in EVS 2012 at paragraph 4.2.2, “Fair value may generally be used as a basis of valuation for real estate as between specific participants in an actual or potential transaction, rather than assuming the wider marketplace of possible bidders. As such, it may often result in a different value to the market value of a property”.
For this purpose, EVS 2012 provides a somewhat enlarged definition as follows:
“The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants possessing full knowledge of all the relevant facts, making their decision in accordance with their respective objectives”. This definition has regard to general
European Valuation Standards
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market transactions where an opinion of
fair value would not be expected to be the
same as an opinion provided to market
value.
One important consequence of the less specific assumptions of fair value is that it allows recognition of the individual value a property may have to one bidder. This is known as
special value, which is an opinion of
value that incorporates consideration of
characteristics that have a particular value
to a special purchaser, who can optimise
the usefulness of an asset compared to
other market participants.
One particular class of special value is
so called synergistic value, defined by IVSC
as, “an additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values. If the synergies are only available to one specific buyer then it is an example of special value”.
This might often be found where
the acquisition of a property, often a
neighbouring one, unlocks extra value
for the purchaser. It may be relevant to
transactions between landlord and tenant.
Fair Value definition 2) is applicable
to financial reporting. In this respect IVS
considers it to be consistent with its own
interpretation of the definition of market
value, as the commentary in IFRS 13 makes
reference to, “market participants, an orderly transaction, the transaction taking place in the principal or the most advantageous market and to the highest and best use of an asset”.
This new definition was introduced by
the International Accounting Standards
Board (IASB), in its International Financial
Reporting Standard, IFRS 13 concerning
“Fair Value Measurement” in May 2011, and
becomes effective from 1 January 2013.
According to EVS 2012, the fair value of
an asset like real estate takes into account
a market participant’s ability to generate
economic benefits by using the asset in
its highest and best use, i.e. the use of the
asset that is physically possible, legally
permissible and financially feasible. In this
non-financial context, fair value may differ
from a valuation prepared in accordance
with TEGoVA’s interpretation of market
value, which may reflect hope value,
contrary to the IVS interpretation of market
value.
However, in most valuations for financial reporting, fair value will be indistinguishable from market value whether under IVS or EVS, albeit a
company’s auditor may want to exclude
the effect of any development potential
that does not yet have planning
permission. In such cases, the fair value
of a property could differ, perhaps on
occasion substantially, from its market
value. Rather, it will then resemble market
value as assessed on the highest and best
use assumption.
Conclusion
Whilst over the last 30 years the
internationally recognised standard setting
bodies (IVSC, TEGoVA and RICS) have
successfully argued for the acceptance of
market value as the main basis of valuation
with a universally agreed definition,
they have failed to ensure a single
interpretation.
A clear difference has now emerged
between the interpretation of the
definition of market value in North
America and Europe. Valuers in the former
are heavily dependant on highest and
best use analysis, whereas in Europe a less restrictive approach permitting the reflection of hope value is preferred. Unfortunately, the exposed differences
in the interpretation of the definition
of market value do not aid market
transparency at a time when the property
market is becoming more global.
The differences in the interpretation
of market value will in turn impinge on
the assessment of fair value for financial
reporting purposes. Whereas in the case of
property valuation, fair value is taken to be
the same as market value for highest and
best use, under EVS 2012 the fair value of a
property could differ substantially from its
market value.
Also on the question of fair value, it
is important to appreciate that the term
has two different meanings, depending
on whether the valuation is for financial
reporting purposes or where there is a
need to estimate the price that would
be fair in a transaction between two
specifically identified parties, where
special value or synergistic value may
influence the price agreed between
them.
Finally, whilst no doubt the
international standard setting bodies
will seek to iron out their differences
of interpretation, at a time when the
European Union is taking a greater interest
in the regulation and harmonisation of
real estate valuation, the “European”
position on market value must be taken
as that embodied in European Valuation
Standards 2012. █
Krzysztof Grzesik FRICS IRRV (Hons) REV is Managing Director of Polish Properties.
References
• European Valuation Standards 2009
(6th Edition) – TEGoVA
• European Valuation Standards 2012
(7th Edition) – TEGoVA
• International Valuation Standards 2011
– International Valuation Standards
Council
• RICS Valuation Standards – Global 2011
(7th Edition)
This article was originally written for
publication in the journal of the Polish
Real Estate Scientifi c Society (Towarzystwo
Naukowe Nieruchomości) and has
been reproduced with the latter's kind
permission.
Compulsory purchase and regenerationVA
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One of Mary Portas’ 28 recommendations was that ‘local authorities should make more proactive use of Compulsory Purchase Order powers to encourage the redevelopment of key high street retail space’1. In the light of what we know of CPOs can they be used effectively in dealing with these problems?
Mary, Mary au contraire-eHow do the high streets grow? From empty shelves, In empty shellsThrough CPOs all in a row?Stan Edwards
IntroductionMary Portas was asked by the Prime Minister to conduct an independent review into the state of our high streets and town centres. Her statement in terms of using CPO powers to encourage the redevelopment of key high street retail space is accurate, but probably not in the way that she meant. Her other recommendations basically suggest marshalling the resources relative to the ‘high street’ to create a managed, deregulated shopping centre. Such would require, inter alia, additional legislation and adjustment to national policy by making an explicit presumption in favour of town centre development. The cost and validity of such proposals are challengeable (and have to be) in terms of the operation of the retail industry, sustainable development and public interest otherwise the inadequacy of assessment will lead to unintended and unanticipated consequences2. CPOs have to be judged on their individual merits.
DefinitionsIt is important to state key definitions from the outset:
• In Wales the definition of ‘sustainable development’ relates to the enhancement of the economic, social and environmental (ESE) well being3. The new English NPPF4 quotes the UN5 defining it as ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’. The English presumption is in favour of sustainable development focusing on growth. ‘Well-being’ has been removed and replaced by mutually dependant ESE ‘roles’
• Sustainable development aligns with the ‘public interest’, which has been defined by the English government as ‘the considerations affecting the good order and functioning of community and governmental affairs, for the well-being of citizens … common to all members of the community (or a substantial segment of them), and for their benefit”6
• The generic ‘high street’ may be defined as the prime shopping street/s of a town/settlement, market place, comprising shops and commercial interests characterised by the traditional retail and other outlets expected to be found there.
A situational analysisA clear alignment of sustainable development and public interest means that the drivers and influencers of a situational analysis7 are important for providing a context, even if constraints prevent a full analysis now. The largest part of the analysis by far is going to be the economic one, which is considered first.
ECONOMIC WELL-BEING/ROLE
The context of the economics of the retail industry
The success of any retail centre is geared to prime characteristics of retail demand identified by spending power (income and population), the existence of substitutes, and consumer preference, so that people actually choose where they spend their income. Macro economic effects are excluded from this exercise.
Portas in Porter The retail industry in a given geographical area can be described by adapting Porter’s ‘Five Forces Analysis’8 as an illustration of the active components. The Five Forces is a framework for industry analysis and business strategy development utilising five forces that determine the competitive intensity and therefore attractiveness of a market – in our case, urban retail.
The bargaining power of consumers and ‘the cake’
Consumer preference and ability to choose is vital in retail demand. If consumers choose to ignore a town’s brand new retail icon at the centre and leap-frog out of the catchment area, then that is their choice in a capitalist (mixed) free economy. The amount of spendable income in the economy, or catchment area at any given time is finite, and any retail development means an attempt to capture this revenue from somewhere/someone else. There is only so much cake.
Specific capture of spendable income cannot be guaranteed, and it always means winners and losers and resists policy. A shift in population to another area of a town may mean the creation of another centre to provide convenient access to retail, even shifting from an existing out-of-town (OOT) centre to a new one.
Retail led CPOs for High Street regeneration – any Portas in a storm, questions Stan Edwards?
Compulsory purchase and regeneration
Porter’s ‘five forces’ – a retail adaptation (illustrative)
NEW ENTRANTS INTO THE RETAIL
MARKET (both in terms of product and new
competing centres)
BARGAINING POWER OF CONSUMERS
Demand – the key retail driver of which consumer preference
is paramount
THE EXISTANCE OF SUBSTITUTES
Competing retail centres (intra city sites and extra
city – other towns with alternative situs (+ve/-ve)
COMPETITIVE RIVALRY
(at the ‘in town’ market place)
BARGAINING POWER OF SUPPLIERS
(both of products and factors of production)
PORTAS RECOMMENDATIONSKEY FACTORS
Compulsory purchase and regeneration
Competitive rivalry and bargaining power of suppliersThe 28 recommendations of the Portas Report being significantly ‘supply’ orientated seem not to be cognisant of the consumer demand. It is tantamount to saying that the solution is to create protected shopping centres.
There are a number of problems with this:• most high streets are not in single ownership• urban dynamics and growth over time are ignored. It would
mean reversing negative accessibility and convenience to and at the centre
• provision of free parking is at a sacrificial cost• deliberately encourages congestion• ceteris paribus. Portas appears to apply in practice the
theoretic principle whereby all other things (in the retail hierarchy and distribution) can be held constant. This may be fine for the firm in describing micro economic theory, but all other forms of retail cannot be held constant whilst the centre receives a, perhaps, undeserved and questionable, priority
• part of the argument for the traditional high street is that shopping patterns within it should be retained and conflict will ensue with the Portas orientated regenerators. Local independent traders in centres put profit directly back into the local economy, whereas larger national multiples do not. The deregulation of on-street market trader operations suggested by Portas is in direct conflict with shop keepers who have overheads
• a managed shopping centre/high street focused on retail delivery increasingly demonstrates the Schumpeter9 effect of creative destruction characterised by the destruction of smaller units to create others
• the CPO aspect is considered later.
The existence of substitutesThere will always be substitutes of varying shapes and sizes, including off-centre and OOT shopping, and competition from other towns with their satellites also competing. Realistically the complete package of retail is no longer mono centric, no matter how much politicians and environmental planners would wish it to be. In fact towns should now be considered by the purchasing public as composite, polycentric networks of retail offers.
New entrants into the retail marketThese investors will have done their research and targeted the consumer. They realise, what policy planners fail to accept, that they must bring the market to consumers. Regeneration planning, in promoting unassessed replacement retail in town centres, attempts bringing more consumers to the market. Internet shopping is the classic example of targeting convenience.
ENVIRONMENTAL WELL-BEING/ROLE
Urban retail location or situs
It is said that ‘there are three things that matter in property – location, location, location.’10 The urban economist would disagree in that location is just a position on the globe and say that ‘situs’ is the key. Situs represents those features within a location that provide its critical success or failure factors. Just because a town or city remains in an apparently good, proximate geographical location does not assist in assessing how that town performs in retail terms.
Urban growth and urban change managementPeople readily accept corporate change, but are unable to apply
those features to urban change because they impinge directly on our lives and the time span is of generational proportions. The traditionalist would love to pickle and preserve our old high streets safe in our memories. The younger generation are unable to relate to this – the world has moved on.
The high street’s inability to copeUrban growth happens organically, and the town centres just could not have coped with the size of population, changing modes of transport and shopping patterns – diminishing returns had set in. Some bombed cities like Bristol and Coventry were able to cope for a while, taking the opportunity to reinvent their centres. However, a characteristic of urban growth is the creation of sub-centres (towns become polycentric) servicing the indigenous residential neighbourhoods in close proximity.
Out of town (OOT)Given the constraints which characterise the centres of towns, OOT and out-of-centre (OOC) became an essential part of the lives of millions of people all over the world. The negative situs features of constraints and congestion of centres have been exchanged for the positive situs features of accessibility and convenience found in retail parks and OOT shopping centres. Here, spending on high and low volume/bulk convenience and comparison goods is channelled through them being easily and conveniently accessed. In fact the trade-off is between cost and convenience.
OOT started on a large scale post WWII in that the main planning solutions in the UK were expanded towns and new towns. The beauty of new towns, such as Cwmbran, was that they were built with creating sub-regional shopping centres in mind. They provided accessibility with ample free parking/convenience on a plate. It is no wonder that Cwmbran’s vacancy rate is currently at 5-6% as opposed to the current 11% national average, and that it impacts heavily on the desperate plight of surrounding towns and cities.
SOCIAL/COMMUNITY WELL-BEING/ROLE
Now ‘market to the people’ not ‘people to the market’
Surely the overall public interest concern in society is not the priority to protect the high street, but to make sure that the population is fed, clothed and housed lining up with Maslow’s pyramid of needs11. Whereas traditionally it was a case of ‘people to the market’ it is now ‘market to the people’ – convenience in whatever form that takes, including the internet. This does not sit well with those policies created to recreate town centres with a defunct utility.
Socio/economic heritage The problem of trade diversion ‘in’ city centres associated with regeneration is a deliberately unacknowledged problem. After the Iceland Case12, Newport City Council13 commissioned a retail study and capacity assessment. Their summary of the report, regarding job creation benefits of further retail development described, on a specific point, the circumstances relating to additional retail development where trade diversion from existing retailers and job transfer could occur. This potentially impacted negatively on existing centres, with no new significant retail employment generated, but rather a redistribution of existing jobs around the city.
CommunityIt is significant that with extensive growth (including residential) the desire for convenient retail and local social interaction drives
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the creation of new centres. The town centre itself retains a varied function, including community, recognising also that due to the Localism Act 2011 it will be subject to the ‘duty to cooperate’. The immediate indigenous residential community at town centres actually seek, as a minimum, levels of convenience shopping found in neighbourhoods. They are the ones who have seen the irreversible changes, and eventually have to be satisfied with what can trade at a lower level of activity.
Empirical evidence of decline in South Wales’ traditional shopping centresThe UK government is prepared to provide £100,000 to each of 12 ‘Town Pilots’ suggested by Portas, as a way of experimenting with her recommendations. Too little money and too little time has been allocated for a realistic assessment to be made. The approach in terms of sustainability is to be questioned.
Throughout Wales are many examples of town centres in crisis. It would take a lengthy report to catalogue these, but realistically Newport, Pontypridd, Barry, Ebbw Vale, Bridgend and Llanelli provide examples of critical negative factors from which to ‘pick and mix’:
• departure of original core business of or associated with the town
• long linear high streets lacking parking and focus• in-town growth constrained requiring more convenient and
accessible sub-centres in the form of superstores and retail parks
• competition from larger and more successful centres and their satellites
• immoveable physical constraints• traditional v development conflict• a history of unhelpful, failed, misdirected attempts at retail
led regeneration.Newport CC have even attempted to revive its core by creating a new centre, Friars’s Walk, adjacent to Commercial Street, in the face of all the foregoing accessibility and convenience aspects described earlier. The council with its developer was reported as agreeing to extract major stores from Commercial Street (the main ‘high street’) to locate in Friar’s Walk. The explanation as to how this complements Commercial Street is still awaited.
Planning policy, urban growth and in-town retailIf, as empirical evidence seems to bear out urban economic theory, extensive growth and the creation of sub-centres is a natural characteristic of that growth, then endeavouring to create regeneration in towns with the same uses that have left (retail) are doomed to fail. Existing planning policies are based on a poor explanation of the facts. Actually the in-town/OOT argument is more to do with control of extensive urban growth (negatively described as sprawl) just as much as with the losses of retail at the centre.
Blame is attributed to the OOC or OOT for their impact on the centre, but the centre is the very thing that sowed the seeds of its own demise. The Post Fordist economy and growth meant that the very things that made a town successful – agglomeration (clustering) and associated economies – would be countered by diseconomies of agglomeration. This is identified by the convenience striving shoppers in terms of diseconomies of scale (congestion and constraints to growth). The new situs features of convenient access to retail (economies of scale) soon drew shoppers to locations in convenient proximity. The policy makers preoccupied with the high street still believe that they can influence shoppers’ choice and seem surprised when their attempts fail.
NPPF and retailPlanning policy will find itself challenged when retail policy is geared to ensure the vitality of the town centre. NPPF (part 2) focuses on town centres as the heart of the community, and to pursue policies to support their viability and vitality. Sequential tests encouraging development towards the centre accompanies guidance which encourages competition within the centre. The preoccupation with ‘need’ to deal with over-trading by means of competition sits uneasily when under-trading causes empty shops. Promotion of competition becomes a problem when new trades challenge, also promoted, individuality in the form of traditional independent traders who desire to be protected. The policy to retain, enhance, reintroduce and create new town centre markets ignores consumer demand. Also, promotion of edge of centre with town centre connectivity again ignores consumer accessibility and convenience. The NPPF answer for centres in decline is ‘plan positively for their future to encourage economic activity’! ‘Striving to better, oft we mar what’s well’ – King Lear.
TechnologyTechnological solutions to high streets involve unacceptably high costs, whether it be rationalising the size, accommodation and use of buildings to create a managed Portasian ‘shopping centre’ or transport and parking. Add to this removing the obstructions to access by preventing parking along the arterial shopping roads which would be socio/political suicide.
PoliticalAn issue that lingers high on the agenda of many politicians is a preoccupation with legacy. There is a saying, ‘every Pharaoh has to have his pyramid’. I would add, ‘the rest are in de Nile!’
A lot depends upon the integrity of the individual authority. Some authorities are prepared to sacrifice the high street by plundering them of national retailers to occupy a new ‘regeneration’ project alongside. Other times, it is obvious that some authorities have difficulty in following their own commissioned retail studies. One such study for a city caused the media to proclaim ‘enough convenience stores for the next ten years’. Shortly afterwards a new convenience store was announced contrary to officers’ recommendations. The provision of affordable housing or funding a pet environmental scheme is recognised as an inducement to provide retail ‘trojan horses’. Politicians’ eagerness to expediently fill voids oozes the likelihood of unintended consequences, and demonstrates an inability to acknowledge the generational dimension of urban transition and change.
Public interest and sustainable development We therefore have to consider the improvement of high streets in terms of the wider well being of the population, and where town centres sit in a whole host of priorities of challenging importance. Environmental planners describe the utilities of growth negatively as urban sprawl – such thinking is a legacy from the court of King Canute.
What is the ‘smart’14 approach to the disappearance of retail from the traditional high street?
SPECIFICType of scheme:
• Status quo No CPO required, but not really acceptable in socio /political
terms although gradual change is the way that town centres have traditionally evolved
• Extended reproduction Using CPO, if necessary, to accelerate the natural process by
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marginal changes. Infill schemes• Evolutionary transition LPAs plan for changes over time, using CPOs to rearrange
uses through decanting and consolidating• Radical transformation Complete redevelopment of core retail to create a shopping
centre. You have to be pretty sure of consumer preference and loyalty to attempt this.
MEASURABLEThere should be robust assessments of sustainable development/public interest to deliver change.
ACHIEVABLEA retail led regeneration scheme cannot be guaranteed. Marginal changes are achievable such as High Street Swansea (on the periphery of the city centre) to deliver an affordable housing led mixed-use scheme facilitated by a CPO through a WDA originated partnership.
REALISTICKnowing what we do of consumer behaviour and convenience/accessibility, it is realistic that few will want to return to the town centres no matter how much they have changed.
TIME The lead-in time can be years, and at the end of this period the original parameters may have changed. CPOs in the high street can be made quickly but unless they have a credible basis and foundation they will be fraught with challenge and an ultimate waste of resources.
Legal – CPO … and the high street empowermentSection 226(1)(a) of the Town and Country Planning Act 1990 (as amended)15 has made it easier to promote CPOs for a wide range of mixed use, retail and employment schemes. It could also be used to acquire empty shops if the council thinks that the acquisition will facilitate the development or improvement on or in relation to the land. To qualify for this empowerment, they would only need to think that the development, re-development or improvement is likely to contribute to the achievement of any one or more of the promotion or improvement of the economic/social/environmental (ESE) well-being of their area.
However, whereas the Housing Act specifically operates to acquire empty houses the T&CPA would require wider justification to acquire empty shops.
Guidance – non statutory: whereas the guidance in Circular 06/04 is not statutory. It is there for the use of acquiring authorities in promoting CPOs, those who would object and the Inspectors’ guidance. 1. A compelling case in the public interest Sustainable development (SD) and public interest (PI) issues are a start, but the guidance for CPO schemes provides the requirement of a ‘compelling case in the public interest’. It is not sufficient that they are just in the acquiring authority’s corporate interest, even though it can be demonstrated ultimately for some public good. The socio/economic issues are of high relevance in respect of sustainable development. A full SD/PI assessment has to be made.2. Justify the use of CPO powersThe CPO has to be promoted in such a way as to satisfy human rights criteria. But the exercise of powers of compulsory acquisition, especially in a “private to private” acquisition, amounts to a serious invasion of the current owner’s proprietary rights.16 It is the overriding concern of the courts to protect the rights and
interests of the individual. Of all the types and uses of CPOs, those that are retail led have the most potential for severe collateral socio/economic impact. They set out to remove the competitive advantage of numerous retail interests and replace them with others ‘in the public interest.’ 3. There must be no impediments to the implementation of the CPOThe blocking impediment may be the lack of planning/market evidence. Does acquiring an empty shop(s) mean that a new replacement(s) will do better? Does interfering with the rights of current occupiers assist in resurrecting a dead or dying centre akin to putting a new patch on an old garment?4. There must be a reasonable prospect the scheme will proceed
The challenge …The challenge is for a rational strategic approach to consolidate and reinforce stability in centres, rather than trying to second-guess the market. Chasing growth in an artificial environment does not provide for sustainable town centres. If such promoters can reverse the characteristics of growth, redevelop traditional centres out of all recognition, and then convince the public that it is what they want, then high streets stand a chance. █
Footnotes:1. The Portas Review – an independent review into the future of our High Streets
– Mary Portas, December 2011. http://www.maryportas.com/news/2011/12/12/the-
portas-review/.
2. Merton, Robert K. Sociological Ambivalence and Other Essays. New York: Free Press,
1976. Article 1936 “The Unanticipated Consequences of Purposive Social Action,”.
3. One Wales: One Planet Consultation on a new Sustainable Development Scheme for
Wales November 2008.
4. NPPF National Planning Policy Framework Department for Communities and Local
Government March 2012.
5. Resolution 42/187 of the United Nations General Assembly.
6. Office of the Information Commissioner (QLD) Information Sheet – Public Interest
Balancing Tests in the Freedom of Information Act Issue Date: 5 February 2003.
7. Political, economic, social, technology, environmental, legal, community. Rerranged
for sustainable development as economic social/community, environmental drivers
and political, technical legal influencers.
8. Michael E. Porter. "The Five Competitive Forces that Shape Strategy", 1979 Harvard
Business Review.
9. Schumpeter, Joseph A. [1942] Capitalism, Socialism and Democracy, London:
Routledge.
10. Lord Samuel or real estate classified ad in the Chicago Tribune: ‘Attention salesmen,
sales managers: location, location, location, close to Rogers Park. 1926.
11. Abraham H Maslow. A Theory of Human Motivation (1943).
12. R (on the application of ) Iceland Foods Ltd Claimant v Newport City Council.
Defendant Neutral Citation Number: [2010] EWHC 2502 (Admin) Case No:
CO/2654/2010 in the High Court of Justice Queens’ Bench Division Administrative
Court in Cardiff.
13. Retail Study and Capacity Assessment carried out for the City Council and urban
regeneration company Newport Unlimited by Colliers International (formerly
Colliers CRE) 2010.
14. Specific, Measurable, Achievable, Realistic, Timebound.
15. Town and Country Planning Act 1990 by Section 99 of the planning and Compulsory
purchase Act 2004.
16. Lord Walker – R (on the application of Sainsbury's Supermarkets Ltd) (Appellant) v
Wolverhampton City Council and another (Respondents) [2010] UKSC 20 – Para 84.
Stan Edwards, a Chartered Surveyor, is a Director of Evocati Consultancy specialising in CPO process and is also visiting lecturer in retail planning and development at Cardiff University. He was formerly Vice-Chairman of the Compulsory Purchase Association. He worked on town centre retail and project managing CPOs over 40 years in Cwmbran, Land Authority for Wales and the WDA. Contact him on [email protected]
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Meanwhile leases
Meanwhile leases
Barely a week goes by without a reference in the national press to our failing town centres. Record number of vacancies resulting in part from the closure of chains that have been household names for decades are set to increase dramatically, as 25 year leases signed in the boom years of the late 1980s finally come to an end.
The government commissioned Mary Portas to tell them what the property industry already knew – many town centres have too much retail space, much of it poorly located and badly configured.As we head back into recession, it is clear that we need some creative thinking to underpin the recovery of our high streets.After all, it’s not just jobs that are at stake, our pensions also rely on growth in rents and values. Although the government response to Portas has been noticeable by its absence, most industry commentators seem to be leaning in the direction of improvements in the flexibility of use and ease of occupation.
Let’s face it – there’s virtually no money to be had from local or central government, so landlords are going to have to take it on the chin and go back to basics. In many instances, having a multiple retailer as a tenant will be a thing of the past. The options are a change of use or a wholly different type of occupation. The byword is no longer rental maximisation, but cost reduction.
For many, change of use is not on the cards – neither the local authority nor the lender will approve it. Thus the two new phrases in the landlord lexicon are the ‘meanwhile lease’ and the ‘pop-up shop’.
So what exactly is a meanwhile lease?
A meanwhile lease is a temporary lease of a vacant business property for non-commercial use, typically granted on the following terms:
• for a term of six months or less (must be for a minimum term of six weeks to take advantage of the extended period of rates relief)
• no liability on the tenant to pay rent, service charge or buildings insurance
• tenant is responsible for utilities and business rates (if the property is used for charitable purposes, mandatory relief in relation to business rates will apply)
• tenant is prohibited from using the property for commercial or profit-making activities
• basic or limited repair and reinstatement covenant; and
• landlord has a right to terminate the lease on short notice if terms are agreed with a commercial tenant to lease the premises.
What are the benefits of meanwhile leases?
For landlords: in addition to avoiding or reducing empty rates liabilities for properties, meanwhile leases reduce the security risk of properties being left vacant. For tenants: voluntary organisations or charities may be able to use properties they would not normally be able to afford.
Points for landlords to consider
Fit-out: Given the basic repair obligations, landlords will want to ensure any fit-out works are kept to a minimum. Charities are unlikely to require an extensive fit-out, but the property will need to be in a state of repair that is ready for immediate use and occupation. Form of lease: The form of lease will be relatively short and drafted on fairly neutral terms. Negotiations should be kept to a minimum, and parties need to take a commercial view and consider what is really necessary in the documentation. This type of arrangement will not be a viable
Mark Higgin and Stephen Law explore the concept of meanwhile leases and pop-ups, the latest initiatives to combat empty high street shops
©iS
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o.co
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Mark Higgin Stephen Law
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Meanwhile leases
option for either party if the legal costs outweigh the financial benefits. Protecting image of high street/shopping centre: Charity shops may not be desirable in all locations and could, in the mind of the landlord, have a detrimental impact on the image of the property. Landlords need to carefully consider the nature of the tenant and the proposed use of the property. Security of tenure: Ideally, a meanwhile lease should be for a term of no more than six months. If the parties wish to extend the arrangement, it should be for a further period of less than six months, or the further meanwhile lease should be excluded from the Landlord and Tenant Act 1954 (the Act). If a tenant is in occupation for twelve months or more, it could acquire rights under the Act. Landlords need to actively police the termination of meanwhile leases and to consider the security of tenure implications on any renewal. It may be sensible to consider routinely excluding all short term leases, to avoid any risk that a tenant may inadvertently acquire rights under the Act.
The philosophy behind the meanwhile lease is based on the notion that empty properties are detrimental to economic and social value, and waste resources that should not be left unused. An interim use, which may not be retail in nature, benefits the town centre as a whole, throughincreased footfall and adds vibrancy by
creating diversity in occupation. The meanwhile lease was a key component of the government’s 'Looking after our town centres' document, initiated by the last government in April 2009. It included a revival plan to ameliorate the effects of empty shops. It was also part of the Strategy for Seaside Success, a key consideration as some of the centres with the highest vacancy levels are failing coastal resort towns. The concept of pop-up shops first surfaced in the United States in the early 2000s, taking their name from their propensity to ‘pop up’ unannounced, quickly establish a following, and then just as quickly disappear or change in to a different concept.
What are the implications for rating practitioners?
Short term occupations – there is an obvious benefit for landlords. So long as the occupation is a number of six weeks, once the shop is vacated a further void period of three months will arise. In other words, one letting, with the tenant paying the rates while in occupation given 18 weeks respite from empty rates. Furthermore, there should be no issues around what constitutes occupation – the stumbling block for many rate avoidance schemes.Occupation of part – many shops have significant areas of unused ancillary accommodation, usually in basements
or on upper floors. Most, if not all of this space, may be superfluous to the pop-up tenant. Under current VOA guidance there is no point in stripping it out with a view to getting it deleted from the assessment. Experience shows that the most likely outcome is a lengthy argument followed by a day in the Valuation Tribunal. A more productive route is to use S44a of the Local Government Finance Act 1988 to seek an apportionment between the occupied and vacant parts. This process can be slow, and might not produce a result whilst the tenant is in occupation. It is also discretionary on the part of the billing authority. This is an issue with the potential to discourage many short term lettings and the reform of Section 44a should be a matter for debate. One possible solution might involve the use of a value threshold under which relief is mandatory. The VOA will need to address the question of the value of ancillary accommodation in time for the next revaluation if smaller occupiers are not to be penalised.General levels of value and the effect of transition – high vacancy levels, pop-ups and meanwhile leases are a symptom of a greater malaise. The level of demand from high street staples has collapsed, and this is evident in the rents being agreed. In some locations, and I include the south east in this analysis, retail rents have halved between 2008 and the current time. They will not be not recovering in time for the antecedent valuation date for the next revaluation. As a result of high inflation, many centres are still beset by downwards transition from the previous revaluation. All of this means that current levels of liability are based on values which bear no resemblance to the current market.
If the government is serious about the longer term success of town centres, they will need to break the cycle of minute demand reductions in liabilities. We are stuck with transitional arrangements, as they are a statutory requirement, but if pop-ups are not to be slapped down and meanwhile tenants are to become the next generation of tenants, downwards transition must be extinguished much more quickly. The government has it in its power to do something about this issue – the professional bodies have a duty to their members to make it happen. █
Mark Higgin is a Partner with Montagu Evans LLP, London – contact him on 020 7493 4002. Stephen Law is a Partner with Penningtons Solicitors LLP, London – contact him on 020 7457 3000.
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Peter Brown is back to report on some more recent compensation cases
Case law update
Case law update
Kingsley v Highways Agency
Hearing to determine a preliminary issue in respect of a s.17 certificate. Following the service of a blight notice in respect of an agricultural unit the claimant obtained a s.17 certificate.
The acquiring authority were unhappy with the certificate, but had not appealed against it. They had previously applied to the Tribunal for permission to apply for a new certificate, but this had been refused. They now sought determination of a disagreement between the parties in respect of one aspect of the certificate, namely criteria contained in the Local Plan policies.
“The starting point, in my judgment, is this. The certificate must be construed in relation to the terms of the statutory provisions. Under section 17(4), unless the authority consider that planning permission would only have been granted for development for which the land is to be acquired (see section 17(4)(b)), they must issue a certificate stating that planning permission for development of one or more classes specified in the certificate would have been granted, but would not have been granted for any other development (see section 17(4)(a)). If they consider that planning permission would only have been granted subject to conditions, the certificate must specify those conditions (section 17(5)); and, if they consider that planning permission would only have been granted at a future time, the certificate must specify that future time (ibid).
In form the certificate that was issued accorded with section 17 in this respect: it was expressed so as to state the classes of development for which planning permission would have been granted; to specify the conditions to which any such grant of permission would have been subject; and to state that permission would not have been granted for development other than that specified. The difficulty arises, however, because, whilst following a form that accorded with section 17, the certificate contained a qualification in relation to affordable housing and agricultural workers dwellings: “subject to satisfying the criteria in policies H7, DC22 and DC23 of the Macclesfield Local Plan 1997.”
But the certificate must be construed in the light of the statutory provisions that give rise to it … here the certificate did not say expressly that permission might or might not have been granted for these classes of development, but this was necessarily implicit in what it did say.
Accordingly on a proper construction of the certificate, in my judgment, it does not state that planning permission would have been granted for those classes of development in the unqualified way that section 17 requires.”
The Tribunal therefore concluded that the s.17 certificate did not include residential uses.
The Tribunal also comments that the issues raised in this case would be unlikely to occur again as the Localism Act 2011 substitutes new provisions and provides that each party can appeal against a certificate to the Tribunal.
Kaufman v Gateshead Borough Council
Compulsory acquisition of an area of 1635 sq.m of unused and undeveloped land. The land had no direct access to a highway, and such access could only be gained through another site.
The issues to be determined by the Tribunal included the value of the land for residential development and secondly the value of the land as a ransom strip for access to other land.
The Tribunal considered in detail the Pointe Gourde principle, and how it applied in this case. The Tribunal also found that the most likely purchaser of the land would be an adjoining owner and determined a value of £650,000 plus costs.
Newall v Lancaster City Council
Compulsory acquisition of a former mill, comprising a series of different buildings and occupied by a number of different occupiers.
An earlier hearing determined that for the purposes of s.16 Land Compensation Act 1961, planning permission could not be assumed for the conversion of the building for the provision of 150 flat units. It also determined there was a 40% chance of planning permission being granted within five years. It was finally determined that the approval of reserved matters under an outline planning permission for the provision of 150 flat units could not be reasonably expected.
The planning history of the site was complex and the majority of the buildings were used for B1/B8 uses. The planning assumptions had a major impact on the valuation of the property, and the claimant had made certain assumptions as to changes to the use of the building which would not be a material change of use.
The claimant sought to reflect in the valuation the 40% hope value of obtaining permission for the residential development after five years. The Tribunal considered that the market would not be prepared to pay any additional sum over a commercial investment valuation for the development potential, on the grounds that there was only a limited increase in value on that basis.
The Tribunal found for a valuation of £1,771,000. In addition, the Tribunal awarded just over £230,000 in disturbance, made up of management time, legal costs and other fees, as well as statutory costs/payments. █
Peter Brown is former Professor of Property Taxation at Liverpool John Moores University and consultant to Legal Owen, Chartered Surveyors, Chester.
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The National Planning Policy Framework is out, declares
Tony Prior, and it brings change with it
Following lengthy consultation, vigorous lobbying and detailed Parliamentary scrutiny, the long awaited National Planning Policy Framework (NPPF) came into effect on 27th March. At just over 50 pages, it is quite a different animal from the 1,300 pages of detailed guidance and policy contained in 44 separate documents which it replaces.
It retains the original presumption in favour of sustainable development, which is to be seen as a golden thread running through both the plan-making and decision-taking processes.
Proposals that accord with the local Development Plan will have to be implemented without delay, and where the Plan is silent or out of date, permission will be encouraged to be granted unless to do so would significantly run contrary to the policies in the NPPF. In practice, this will require local planning authorities to positively seek opportunities to meet the development needs of their area.
The emphasis throughout the NPPF stresses the coalition’s commitment to localism. Responsibility is firmly placed on the local planning authority to ensure local involvement in plan making.
In my earlier articles on proposed changes to planning guidelines, I touched on the uncertainty as to the meaning of sustainable development, and the widely expressed concerns that a presumption in favour of development would have an
adverse effect on the countryside and environment. Among the assurances given the Minister on the 27th March was confirmation that the NPPF now provides greater clarification as to the meaning of sustainable development. Social and environmental objectives as well as economic aims must also be reflected, so as to achieve a balanced approach. The document recognises the intrinsic value and beauty of the countryside (whether specifically designated or not) and confirms that relevant policies – such as those protecting the green belt, sites of special scientific interest, national parks and other areas – cannot be overridden by the presumption of growth alone.
The revised NPPF and government reassurance was initially greeted with general approval, winning the support of developers and a cautious welcome from environmental groups. But, although still widely supported, doubts are beginning to be raised.
Among the first reservations is the thought of many planning professionals that the future of social and affordable housing provision has been left with greater uncertainty. The emphasis on localism means a move away from centralised target setting, but when combined with the emphasis on viability within the NPPF, it may be more challenging for councils to secure as much social and affordable housing as part of new developments.
There also appears to be the need for greater clarity on national infrastructure. Achieving housing and commercial development requires national transport, energy and water supply strategies to work in harmony. Whilst there are transitional arrangements for planning authorities,
they have just a year to adjust current plans to fit the new policies and ensure that they are in "complete conformity" with the NPPF. It is not going to be easy to produce a local plan against the tight timetable with this lack of direction.
Concern is also being expressed that, while reducing 1,000 pages of guidance to 50 is laudable, there is significant room for different interpretations. The ambiguity resolved in previous documents by practice, case law and experience has been largely lost, and further guidance will be necessary either by way of supporting documents (hopefully not 950 pages) or case law, both of which will come at a cost.
Simply shortening guidance does not make planning and its ramifications easier for communities or non-specialists to understand. So where will the additional guidance come from? Is there a risk that local planning authorities will produce their own detailed guidance, which may differ from one council to another? And if so, will this lead to a set of national guidance to save them all the trouble and achieve consistency?
The procedural requirements of the NPPF need time to settle down, and this year will be a challenging time for planners, developers, environmentalists and local activists. Given collaboration it can work, but all will have to come to terms with the shift in decision making that comes with localism. The key test for the NPPF is whether it delivers truly sustainable places and lifestyles, as well as opportunities for new jobs and businesses, or whether it fails to satisfy anyone completely. █
Tony Prior is the IRRV’s valuation consultant.
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Fisher's findingsVA
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General practice
The RICS/IRRV Red Book 8th edition became effective on 31 March 2012, and includes the International Valuation Standards of the IVSC.
The European Valuation Standards 2012 ‘Blue Book’ was launched in Krakow on 11th May at the TEGoVA Spring Conference. It includes a comprehensive overview of EU property law, together with Guidance Notes and a Code of Ethics. The TEGoVA general assembly followed on 12th May 2012. www.tegova.org
Some 24 Enterprise Zones have been introduced across England and Wales, including one of the largest at the Royal Docks, East London, close to the Olympics. See the map of Local Enterprise Partnerships and Enterprise Zones athttp://www.communities.gov.uk/documents/localgovernment/pdf/1968608.pdf. Enterprise Zones have business rate discounts, but are subject to State Aid De Minimus Regulation. It does not cover Enhanced Capital Allowances in Enterprise Zones – these will be managed under a separate process. The State Aid rules regulate public sector intervention, with the aim of ensuring fair competition and the proper functioning of the single market.
The Compulsory Purchase Association Chairman Keith Murray will be chairing their Annual Conference on 11 July at Savoy Place, WC2 – see http://www.compulsorypurchaseassociation.org/events/1009%20-%20members.pdf
The Section 232 Localism Act 2011 revision of the Land Compensation Act 1961 Planning Assumptions was made effective for new CPOs from 6 April 2012.
Stratford E15 becomes a Mayoral Development Corporation, which takes over from the Olympic Park Legacy Company for maximising East London legacy, with additional powers including planning from October 2012 from ODA and London Thames Gateway Development Corporation. The TGDC and the London Development Agency have been merged into the Greater London Authority.
Community Infrastructure Levy (CIL) – the Greater London CIL has been introduced to help pay for Crossrail, and London Boroughs are introducing their own CILs and reviewing their Section 106 approaches. The Mayor of London CIL is £50/£35/£20 per square metre for new build space, corresponding to whether the
London Borough is in Zone 1, 2 or 3.The VOA Statutory Valuation Team
now has its own web page covering the following valuation services:
• IMRC on national taxation in England Wales and Scotland
• determination valuations for Right to Buy (RTB) in England and Wales
• local authorities and Registered Social Landlords in Scotland on Right to Buy applications
• CIL – to act as the appointed person in accordance with Regulation 112 of the Community Infrastructure Levy Regulations 2010
• Jobcentre Plus, Pension Service and local authorities, in England, Scotland and Wales, to support the delivery of DWP benefits
• information on property transactions – working with HMRC on areas such as tax avoidance, evasion and criminal attack
• advice to ministers, government departments and public sector SVT clients on policy issues, and assistance with complaints, parliamentary questions and press enquiries.
http://www.voa.gov.uk/corporate/SVT/SVTstructureAndStaff.html
Rating
The latest Valuation In Practice (VIP24) can be found on the Valuation Tribunal website. It usefully summarises the first five BRILs (Business Rates Information Letters) issued in 2012 by CLG, and now offers an email alert advising you when a new Practice Statement or important decision has been published. It also notes VT rating decisions on the effective date of bringing into rating of a long stay car park, MCC effect of new retail centre opening, and the valuation methods for various museums (percentage of estimated receipts rejected – contractors test preferred), together with council tax decisions, including effective date and MCC issues. http://www.valuationtribunal.gov.uk/vip_newsletter.aspx
RSA President Graham Ryall handed over his chain of office to the new President at the Rating Surveyors Association (RSA) members’ dinner (and AGM) on 21 March 2012. The RSA House of Lords reception will be on 22 June 2012. www.ratingsurveyorsassociation.org.uk
BRIL 6/2012 on the CLG web site gives details of the rates deferment scheme 2012/13, and includes a useful summary of the latest rating measures. http://www.communities.gov.uk/documents/localgovernment/pdf/2125839.pdf
Enterprise Zones and business rate discounts – State Aid Guidance – A guidance note on State Aid De Minimis Regulation* and discretionary business rate discounts is on the CLG website. http://www.communities.gov.uk/documents/localgovernment/pdf/2109522.pdf
Recent Upper Tribunal (Lands Chamber) decisions:
Abattoir – lairage held rateable, and abattoir separate mode of user to local industrial tone – RA 6 2010 March 2012 Airport business centre – held different category of user to offices – rent followed. Mouland VO – RA/15/2009 November 2011 Riverside gardens with summer house – held rateable, as remote from occupiers’ dwelling, and not domestic. RA 28 2010 October 2011. █
*(EU Commission Regulation EC/1998/2006)
Fisher’s Findings are prepared by Geoff Fisher, an IRRV Past President and professional consultant at Strettons chartered surveyors. Contact him on [email protected]
Fisher’s findings
Flotsam“There is far more to discuss, here, than space will permit – but, before signing off, let me just mention the matter of tribunal fees, which are also reviewed from time to time.”
This time, my warning is about a flanking manoeuvre, which is likely to cost money to you and yours.
Those of you who read the professional websites may have noticed the recent joint paper to the Senior President of Tribunals, Lord Justice (Sir Robert) Carnwath, following the publication of a report to him, last December, by the Costs Review Group (CRG), entitled “Costs in Tribunals”, which is said to be designed to promote access to justice in the world of tribunals, following the Jackson Report on costs in civil proceedings, published two years previously.
There has been (as yet) no public consultation, but although this may take place, the report accepts (at para.5) that, as far as costs in taxation proceedings are concerned, the views expressed to them:
“… do no more than express again the various views previously expressed in the context of the Tax Appeals Modernisation Programme where radically different, and irreconcilable, views had been expressed.”
Some people, you see, adhere to the quaint, old-fashioned view, that if the citizen wishes to object to the level of a tax imposed upon him, and has to take his complaint against the actions of state officials to a tribunal run by the state, then he should not have to pay a fee for the privilege, other than to a professional adviser, should he choose to employ one. This seems to have been a long-established principle – and it is also one which CRG does not seek to disturb in connection with the Valuation Tribunal for Wales, because the poor, benighted Welsh have decided that they want to retain a valuation tribunal of local people (with
training) hearing local cases, locally, and providing a service free at the point of delivery. Quite how this squares with the Localism Act I hope someone will write to the editor and tell us!
The Treasury, you see, takes a contrary view and insists that users should pay for everything – which could be quite profitable if the policy wonks at HMRC and CLG decide to increase all tax and rating assessments by, say 50%, and then either collect from those who do not object, or charge costs and fees to those who have the temerity to challenge their bills. Good wheeze, that!
For, as we know, English Valuation Tribunals, in pursuit of the “one size fits all” principle of the Localism Act, are headed for amalgamation with the Courts and Tribunals Service, as a First Tier Tribunal, alongside the Residential Property Tribunal Service, which already has a (very limited) power to make orders for costs. Bear in mind, though, what the CRG say (at their para.23):
“… the position as regards costs is governed by section 29 of the (Tribunals Courts and Enforcement Act 2007) and the relevant Tribunal Procedure Rules. Section 29 gives the Tribunals the widest of powers. Section 29(1) provides that the costs of and incidental to all proceedings … are at the discretion of the tribunal in which the proceedings take place. And section 29(2) provides that the relevant tribunal has full power to determine by whom and to what extent the costs are to be paid. An express power is conferred by section 29(4) to make wasted costs orders. We say more about the interrelation between section 29(1) and section 29(4), in particular
whether the power under section 29(4) can be qualified by the Rules, later in this Report.”
Note, also, what CRG say about costs in tax cases at their paragraphs 52 to 56. Could this be the intended route for costs in English Valuation Tribunals? Would any burden be limited to sanction unreasonable conduct? Professor Zellick advocates a maximum order of £250 – RPT can go up to £5,000 – CRG proposes an unlimited power.
There is far more to discuss, here, than space will permit – but, before signing off, let me just mention the matter of tribunal fees, which are also reviewed from time to time. Readers should be aware that there has recently been a consultation on increases in fees for use of the High Court and the Court of Appeal, in some cases by a factor of six. Responses raising cries of denial of access to justice will probably fall on deaf Treasury ears (after all, the County Courts are running at an operating profit, aren’t they, so why not everything else?). Why mention this here? Because, historically, every time court fees have been increased, tribunal fees have followed, rapidly … purely to keep them in line, of course!
This little piece cannot cover the potentially ameliorating proposals for the Upper Tribunal, but perhaps the council taxpayer and the small ratepayer will find enough to persuade them, finally, to abandon hope and pay what the VOA computer tells them to – without protest. █
Flotsam
THE COST OF GOING TO A TRIBUNAL (or “Make sure the hand in your pocket is your own”)
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