In this appeal against a decision of the local Valuation Appeal Committee not to refer the ratepayers’ appeal to the Tribunal, the subjects of appeal are a retail warehouse and the parties are in dispute on one issue which the appellants accept involves a minor element in the valuation but which they say also arises at a number of other retail warehouse subjects. It relates to the valuation of dexion style supported storage floors. The appellants contend that these, being almost always tenants’ additions not included in actual rents, should be valued on a decapitalised cost based approach, whereas the Assessor contends that they are mezzanine floors which should be taken in at the appropriate percentage of the relevant area rate arrived at on the normal comparative basis. The appellants submit that the case raises at least a “general issue likely to be used as a precedent in other cases” and thus qualifies for reference to the Tribunal.
The Tribunal has reached the view on the material before it that that test is not satisfied in the present case and has decided to refuse the appeal.
Regulation 4 of the Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995 provides for either the Assessor or the appellant to seek referral of appeals to the Tribunal. Regulation 5(1) provides inter alia as follows:-
“(1) Where an application under regulation 4(1) has been made, and it appears to the Committee that –
(a) the facts of the case are complex or highly technical;
(b) the evidence to be given by expert opinion is complex or highly technical;
(c) the law applicable to the case is uncertain or difficult to apply;
(d) the case raises a fundamental or general issue likely to be used as a precedent in other cases; or
the Committee shall refer the appeal to the Tribunal for determination … ”
Section 1(3BA) of the Lands Tribunal Act 1949 provides a right of appeal to the Tribunal against a decision not to refer. Such an appeal is ‘open’ in the sense that the Tribunal is not confined to considering whether the committee erred in its decision on the material before it: rather, we have to reach our own decision on the materials placed before us.
The appellants’ appeal relates to subjects at Unit 3, Abbotsinch Retail Park, Washington Road, Paisley. The Assessor entered the subjects in the Valuation Roll at £491,500 net annual/rateable value with effect from 1 April 2005. The appellants contend for a valuation of £450,000. The area of flooring to which the dispute relates is some 440 m2, the present competing rates for this area being around £4 (appellants) and £18-19 (Assessor). The appeal is a revaluation appeal. The appellants duly applied under Regulation 4. They relied on grounds (a), (b), (c) and (d). The Committee refused the appeal, giving the following reasons in relation to ground (d):-
“The evidence here was that the appeal subjects have a supported storage platform as do a number of other properties in retail parks throughout Scotland and the UK and that the outcome of this appeal will have a bearing on the valuation of other retail warehouse subjects. While the Committee accepted that the result of this appeal may well be of use in the approach taken in subsequent cases they did not find that the evidence indicated that the issue was fundamental or one likely to be used as a precedent.”
The appellants appeal only in relation to ground (d).
The appeal was heard at an oral hearing on 30 August 2006. The appellants were represented by Mr MacIver, Advocate, instructed by Messrs Eric Young & Co., Chartered Surveyors. Mr Duffy, Assessor for Renfrewshire Valuation Joint Board, represented the Assessor. The material before us comprised the written Grounds of Appeal and Answers, the reasons for the Committee’s decision refusing the application to it and a copy of a published Scottish Assessor’s Association (“S.A.A.”) Practice Note and subsequent revised edition.
Elaborating on the written grounds, Mr MacIver described the type of flooring involved, a heavyweight ‘meccano’-style structure with a metal grid flooring and handboard. He pointed out that on the Assessor’s approach the value would increase as the value of the retail park increased. About 20 Comet retail park properties had this type of storage, as did a number of other occupiers, so that the issue was likely to be used as a precedent in about 40 other cases throughout Scotland. At the previous revaluation, the issue had been dealt with on a piecemeal basis and so did not emerge as a general issue. For this revaluation, however, the Assessors’ Association had adopted rates for mezzanine floors and all but one Assessor were following these guidelines and valuing dexion storage as mezzanine floors. This type of flooring was not provided by landlords and was generally a form of tenants’ improvement which was not rentalised, although the position at rent review would depend on the terms of the lease. Mr MacIver accepted that this was not a major element in individual valuations, but submitted that the fact that assessors had adopted a co-ordinated approach would make it a general issue. This appeal was one of the first to be listed.
Mr MacIver reviewed some of the cases concerning ground (d). He accepted that a “distinct issue with an appreciable bearing on valuation practice” must be identified. It did not require to be an issue of law, and could arise where the assessor used some new valuation method or refinement. This was not simply the application of well-established general principles.
For the Assessor, Mr Duffy explained that the S.A.A. guidance had initially been put out for consultation among ratepayers’ agents and thereafter re-issued with slight amendment. The only issue on which there had not been agreement was the approach to mezzanine floors and in particular dexion style floors. Mr Duffy said that although Renfrewshire was the first such case, it was not a test case. It could not, he said, be contended that every item in S.A.A. Practice Notes, of which there were now 92, became a general issue when challenged. There were two different approaches but no distinct issue. The appeal subjects had the largest proportion of dexion floors in Renfrewshire retail warehouses but it still only accounted for less than 2% of the value. The position had been accepted by many agents where there were concrete non-sales mezzanine structures, sometimes added by the tenants. This was merely a disagreement on the application of well-established principles, in subjects where the method of valuation was agreed and there was merely disagreement on the extent of application of zoning. Valuation practice in relation to ancillary floors was flexible. It was a question of fact for the Committee.
In a brief reply, Mr MacIver argued that the fact that it was accepted that this was an issue which had not been agreed between Assessors and ratepayers’ agents went a long way to establishing it as a general issue. Assessors were generally intent on following the guidance, unlike in previous revaluations. There was no rental evidence for this type of material.
This dispute is really one of valuation opinion, in the absence of rental evidence, as to the basis on which the parties to the hypothetical tenancy would reflect this type of storage floor in the rent. This seems to us to be the type of dispute which can arise day in day out, and even if it involves choosing between two different valuation methods, rather than simply striking a rate, cannot be categorized as fundamental. In fairness to the appellants, they have not sought so to categorise it.
The appellants point to the number of cases in which the dispute appears essentially the same, and we are inclined to accept that the particular circumstances at particular locations are unlikely to play much part. The decision in this case is likely to provide guidance in other cases. That clearly takes the appellants some way towards satisfying ground (d). In our view, however, this is not necessarily sufficient to establish a “general issue likely to be used as a precedent in other cases”. It must be a matter of degree whether the “general” part of the test is satisfied. There must be many situations involving some new material, form of construction, physical circumstances, or whatever, which is claimed to call for some different valuation treatment and which occurs in a number of subjects so that an early decision is likely to be relied upon in other cases. The references which the Tribunal has made in other cases to “an appreciable bearing on valuation practice” are helpful here. In the present case, there is no suggestion, as we understand it, that this issue arises in all or most retail warehouse valuations, although it clearly does in a number of others. At the subjects of appeal, where the issue has the greatest impact of all the retail warehouses in its valuation area, the difference between the parties appears to be at most £6,600, or around 1.5%, of the valuation.
We accept that an issue may be one of fact or valuation practice but still qualify under this ground.
Another factor which we accept points towards an issue being “general” is the fact of disputed inclusion in a national guidance statement. However, we agree with Mr Duffy that that also cannot be sufficient in itself – the S.A.A. might choose to give guidance on all sorts of issues, not only fundamental or general ones. More significantly, it seems to us that although there is disagreement between Assessors and ratepayers’ agents on this issue, the dispute is not over the terms of the guidance, but rather as to whether the guidance applies to this particular form of provision of storage: is it properly valued as a mezzanine floor or should it (although admittedly rateable) be treated in the same way as tenants’ fitting out? This seems to us to involve the application of well-established principles to a particular, rather than a general, situation, albeit one which arises in a number of other cases.
Weighing these considerations up on the material before us in this case, and accepting that the appellants’ arguments clearly go some way towards succeeding, we feel that the appellants have not satisfied us that this case satisfies the test. Our impression was that the issue arises in only a minority of cases. Moreover, in cases where the issue does arise, it can only be described as a peripheral element in the valuation. It does not seem to us to play a significant part in the valuation of any subjects. It is not an issue which can be truly regarded as a ‘general issue likely to be used as a precedent in other cases’. Rather, it appears to us to be a relatively minor issue of valuation judgment in one particular situation, albeit that situation does arise in a number of other cases.
We accordingly refuse this appeal.