Assessor’s appeal against decision that vandalised industrial premises had little value refused by Inner House

Assessor’s appeal against decision that vandalised industrial premises had little value refused by Inner House

Two appeals by the Assessor for Lothian against decisions of the valuation committee in respect of damaged land on a Livingston industrial estate have been refused by the Inner House of the Court of Session.

It was argued by the appellants that the committee was wrong to focus on whether a potential tenant would still have a use for the premises. The respondents, Lloyds Banking Group plc and Bank of Scotland plc (collectively Lloyds), and Sky UK Ltd, maintained that the committee had been correct in its determination and that the correct questions had been asked.

The appeal was heard by the Lord Justice Clerk, Lady Dorrian, together with Lord Malcolm and Lord Doherty. Graham Dunlop, advocate, appeared for the appellant, and Burnet KC for the respondents.

Valuable use

In 2017, the appellant made entries in the valuation roll for two neighbouring industrial subjects, Units 1A and 1B, on Baird Road in Livingston. Lloyds and Bank of Scotland were each the proprietors of one of these units. Valuation was settled following appeal at £393,500 for Unit 1A and £276,500 for Unit IB. In March and April 2019, by which time they were unoccupied, both units were broken into and damaged as a result of vandalism and theft.

The units were marketed for sale as an “extensive commercial development site” in May 2019, with the sale particulars envisaging that the purchasers would clear and then redevelop the site. Sky bought the sites for £1.3 million in September 2019 and subsequently had the buildings demolished. With effect from 29 July 2020 the assessor altered the entries in the roll to “Premises under reconstruction” with net annual values of nil, and then later to “Ground” with a net annual value of £91,200.

Appeals were made to the valuation committee seeking to establish the units had nil or nominal value from 1 April 2019 onwards and that the units were an unum quid. The committee allowed the material change of circumstances appeals, holding that the units had a net annual value of £100 from 1 April 2019 and nil from 13 September 2019, but rejected Sky’s unum quid argument. In its findings, the committee determined that no potential tenant was likely to pay a rent to use the premises in the condition in which they were left, even if the walls and roof were still structurally intact.

Counsel for the assessor submitted that what the committee ought to have considered was whether a hypothetical tenant would pay a positive rent over and above the repair costs because of the valuable use which might be enjoyed once the subjects were repaired. Further, the subjects still had the essential characteristics of an office and warehouse and thus the committee should have considered they were capable of beneficial occupation.

Open conclusion

In his opinion, with which the other two judges agreed, Lord Doherty began: “I am satisfied that on a fair reading of the committee’s findings and reasons it asked itself the correct question. It was to be assumed that there would be a hypothetical tenant but it did not necessarily follow that the hypothetical tenant would be prepared to pay a positive rent in addition to assuming the burden of the repairing and other obligations.”

He explained further: “The thrust of the committee’s decision was that the hypothetical tenant would not pay a positive rent for either of the units in addition to meeting his other obligations. In my view that was a conclusion which it was open to the committee to reach on the evidence. Support for it was provided by the evidence of the very extensive damage which had been sustained. I do not think the absence of more detailed evidence about likely remedial costs and about the time it would take to carry out the works precluded the committee from making the decisions which it made.”

On whether the subjects were still capable of beneficial occupation, Lord Doherty said: “The second ground of appeal may be dealt with even more shortly. It proceeds on the basis that Assessor for Tayside Valuation Joint Board v M (2018) is authority for the proposition that any subjects which retain their essential physical characteristics must be capable of beneficial occupation and must therefore have more than a nominal net annual value. That proposition is not well founded. Premises which retain their essential physical characteristics may be likely to be capable of beneficial occupation; but not all premises which are capable of beneficial occupation will have more than a nominal net annual value.”

Addressing whether Sky’s intention to demolish the premises had any effect, he concluded: “I am not convinced that the committee proceeded on the basis that the hypothetical landlord would demolish the units. Sky’s intention to demolish in the near future was something accidental to the lands and heritages. It was not an essential characteristic of them whoever the owner and tenant might be. Reading its decision fairly and as a whole, I consider that the committee merely treated Sky’s intention to demolish as an adminicle of evidence which tended to confirm the very extensive nature of the damage which the units had suffered.”

The appeal was accordingly refused.

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