10 November 2016 
Cheryl Pick, Projects and Engagement Manager
A case has been determined by the Supreme Court (House of Lords) that will potentially impact on the valuations of all properties for rates. This case involved a ratepayer in occupation of two floors (2nd and 6th) within a multi occupied building.
The VOA took the case on the basis that the two floors are not contiguous and therefore should be considered to be in separate occupation. The Courts determined (with the assistance of the former President Lord Gill) that they should be in separate assessed.
The appeal case of Woolway v Mazars concerned Tower Bridge House, an eight-storey office block in St Katherine’s Way, London. Mazars, a firm of chartered accountants, occupied the second and sixth floors of the building under separate leases. These floors were separated by common areas in the building and were entered in the 2005 rating list as separate hereditaments.
In February 2010, Mazars proposed that the VO merge the two entries to form a single hereditament. The VTE agreed that the two entries should be merged. The VO appealed to the Upper Tribunal (Lands Chamber) on the grounds that the properties were two separate hereditaments. The Upper Tribunal confirmed that the premises should be treated as one hereditament. The Court of Appeal dismissed the VO’s appeal.
In the VTE an allowance was given for the disability of having the occupation split between two separate floors, (a fragmentation allowance) but on appeal to the Upper Tribunal (Lands Chamber) the then President, Mr George Bartlett QC, found that the presence of high speed lifts between the floors effectively removed any inconvenience and therefore no fragmentation allowance was appropriate. He also found that the speed of access between the 2nd and 6th floors, together with the fact that the two floors were within the same building and occupied for a common purpose by Mazars, meant that they formed a single hereditament. Probably because the removal of the fragmentation allowance meant Mazars no longer had a financial interest in the outcome of the appeal to the Court of Appeal, the ratepayers did not take part in that appeal or the subsequent appeal to the Supreme Court, but the Court appointed an Advocate of the Court (a barrister to submit opposing arguments to those of the VO) to ensure that the matter was fully tested.
The issue for the Supreme Court to determine was whether the two floors formed one single hereditament or two separate hereditaments. The principal arguments focused on the meaning and application of the tests used in that case; whether the primary test was geographic (that the occupation can all be ringed around on a map without intervening occupations) or a functional test (that the parts were occupied together in the same building and without inconvenience caused by the lack of contiguity).
It has been the practice of VOs to treat contiguous occupations (those that touch each other) as single hereditaments and those that are not contiguous as separate hereditaments unless an ‘essential functional connection’ existed between the parts – that is to say that unless both parts are occupied together they could not properly function according to their character.
The Woolway case concerned whether it was correct to assess together two non-contiguous offices floors in a multi-let building. The Supreme Court determined, unanimously, that it was not correct to do so because the primary test was a geographic one and was whether the occupation can be ringed around on a map or plan without any intervening occupations.
The case did not actually concern adjacent floors, but the judgments of two of the judges (Lords Neuberger and Gill) suggested that such floors should be assessed separately unless they intercommunicated directly (for example by an internal staircase), Lord Sumption clearly regarded intercommunication as important and Lord Toulson agreed with Lords Sumption, Neuberger and Gill. Lord Carnwath said that it was “unobjectionable” that such floors should be assessed together and preferred not to express a firm view. It is clear from the speeches that the court’s view was very much that non-intercommunicating floors should be separately assessed.
So what does this potentially mean?
The Valuation Office have come with a number of scenarios when considering the valuation of properties. In essence as a result of this case the Valuation Office are now reviewing properties to “split” them up where appropriate, creating more entries in the Valuation List and potentially additional income generated for Government.
The Scottish Assessors have considered the application of this North of the border. Principally this has been identified as a 2017 issue, however they have implemented this where it was possible to do so now following an event that allowed them to revisit. This has impacted on the University of Edinburgh at Argyle House where they leased 60,000 sq.ft of office accommodation under one lease but spread over 5 floors in different wings. The Assessors response is to create 9 different assessments.
Indications from the Assessors is that they do not intend to split up the campus assessments into individual assessments at this time as it is deemed that the University are in occupation of the land, roads and buildings.
Where entries have been created in the Valuation Roll for administration purposes, I,e, a Cumulo entry then they will likely have to “split” these into individual entries – this will create an administration headache for Assessors, Finance and Universities going forward at a time when the Government are seeking to reduce the number of appeals that are submitted at each revaluation.
