[2024] UKUT 00301 (LC)

The valuation date is 1 April 2017. In his initial report, Mr Alderton said he had placed most weight on comparable evidence that would have been available to the valuer at the valuation date but, in line with RICS Guidance and the decision of the Tribunal (Mr A J Trott FRICS) in Allen v Leicester City Council [2013] UKUT 22 (LC), he had also had regard to transactions in the same calendar year, post valuation date, to help to confirm the state of the market in April 2017.

Mr Nesbit said that he had considered all evidence of transactions in Chester Square within a window either side of the valuation date – 3.5 years pre-date and five years post-date (September 2013 to March 2022). However, his three pieces of ‘principal and key evidence’ were the sales of no.13 (July 2016, nine months before the valuation date), no.2 which he gamely described as being ‘in 2018’ [that is true, just – contracts were exchanged on 21 December 2018, so 20 months after the valuation date], and no.80, in November 2018, 19 months after the valuation date.

The RICS Guidance which Mr Alderton referred to was originally published as a 2013 Guidance Note “Comparable evidence in real estate valuation” (therefore in force at the valuation date) before being updated in 2019 as a Professional Statement, and again in 2023 as a Professional Standard. Despite the changes to the document’s nomenclature, it appears that the guidance remained the same throughout:

“3.3.2

Retrospective and projected valuations

Valuers may sometimes be asked to provide an opinion of value on a specified date in the past when market conditions will probably have been significantly different from those at the date of instruction. This situation can arise, for example, in valuations for taxation purposes or those used as evidence in a court case.

If the valuation is an audit of another valuer’s work, the valuer will need to work with the evidence used in the valuation subject to the audit. In other cases, the valuer should consider the following.

• Comparable evidence should only be used if it would have been available to a valuer on the date of valuation.

• Viewed with the benefit of hindsight, comparable evidence can be much clearer than it would have appeared to a valuer at the date of valuation. The valuer valuing retrospectively needs to place themselves in the position of someone reviewing the available evidence on the valuation date, and then make a judgement on the extent and nature of the evidence that could reasonably be expected to have been available at the time.”

In his second report, Mr Alderton referring to a decision of the First-tier Tax Tribunal, which held that post-valuation date transactions should carry less evidential weight than those transactions before the date. Mr Nesbit’s interpretation of the RICS guidance was that it was aimed at the auditing of another valuer’s report. The intention, he said, was not to limit the scope of post valuation date evidence in other cases. There was no logic, to Mr Nesbit’s mind, as to why evidence in August 2014 which he said was the earliest of the transactions upon which Mr Alderton relied not having the same weight as that in December 2019, equidistant from the valuation date. Mr Nesbit thought that there had been a drafting error in the RICS document, and that the principle applied only to auditing scenarios.

In one of many instances where he made similar allegations, Mr Nesbit thought that Mr Alderton’s choice of comparable selection raised questions of even handedness and consistency and was ‘a deliberate attempt to find a reason not to include post-valuation date evidence’. This theme was developed in Mr Nesbit’s later written evidence, making further accusations, and voicing ‘grave concerns as to whether Mr Alderton’s selection of evidence undermines the entirety of Mr Alderton’s evidence’, and accusing Mr Alderton of seeking out evidence ‘in a vain and somewhat panicked attempt to justify an unjustifiable stance…’.

Mr Nesbit’s intemperate criticisms, upon which I comment later, are to my mind entirely unfounded and are a misreading of Mr Alderton’s evidence, which I have summarised at paragraph 37. Mr Alderton placed most weight on transactions that had occurred before the valuation date but used limited post-valuation date evidence in the months after the valuation date to confirm the state of the market. That seems to me to be sensible in principle.

It is important to distinguish between events and evidence. In Castlefield Property Limited v National Highways Limited [2023] UKUT 217 (LC) the Tribunal (Martin Rodger KC, Deputy President, and Mr M Higgin FRICS) commented [21] that

“As a general rule, without an express contractual or statutory instruction to do so …. it would always be wrong to value land as if with knowledge of matters which were not known, and could not have been known, at the valuation date.”

That was in a claim for compensation for compulsory purchase, but the general tenet is applicable to other spheres. The learned authors of the Handbook of Rent Review suggest that the principle was equally applicable to the field of rent review, as regards post-valuation date events. It is equally applicable here. Events which might affect market conditions after 1 April 2017 must of course be disregarded, for instance the Prime Minister’s ill-fated decision on 18 April to hold a general election.

But the position as regards post-date transactions is more nuanced, at least those in the months immediately after the valuation date. Returning for the moment to the world of rent review, the Handbook refers to the decision of Staughton J in Segama v Penny Le Roy [1984] 1 EGLR 109 that:

“If rent of comparable premises had been agreed on the day after the relevant date, I cannot see that such an agreement would be of no relevance whatever to what the market rent was at the relevant date itself. If the lapse of time before the agreement for comparable premises becomes greater then, as the arbitrator said, the evidence will become progressively unreliable as evidence of rental values at the relevant date. The same is no doubt true of rents agreed some time before the relevant date; but nobody suggested to me that those should be excluded….”

In Allen, the Tribunal was faced with the sale of the subject property at auction some nine months after the valuation date, in the context of s.5A of the Land Compensation Act 1961, which provided that the valuation for compensation purposes must be made at the relevant valuation date, but that ‘no adjustment is to be made in respect of anything that happens after the valuation date’. The Tribunal was satisfied that it was permissible to take account of the subsequent sale of the actual property being valued. As Mr Alderton quoted, the Tribunal went on, [39]:

From all of the above I take these points. First, events after the valuation date, which would not have been known to either the valuer or (because every valuation begs the question of what a property would have sold for) the hypothetical buyer and seller, should not be taken into account.

Secondly, what can provide retrospective assistance is what comparable properties were selling for around or some months after the valuation date, especially in the case of a transaction on the subject property, or very similar properties in close proximity. In conjunction with pre-date transactions, these can help inform the valuer as to the state of the market in the months around the valuation date. I accept that there may be a tension between those two principles, to the extent that some transactions might have been affected by impermissible events, and in that respect the valuer must be alive to outliers or sudden changes in market levels that might have been affected by post-date events, for instance a general election or a change to interest rates. The valuer must make a judgement as to whether the market, at the valuation date, anticipated a future event, which would be legitimate to take into account. With the passage of time, some market expectations become reality and some do not, and it is necessary to consider with any post-valuation date evidence whether something has changed in the intervening period which undermines the reliability of the evidence as a measure of value of the subject property at the valuation date. As ever, valuation is an art.

Thirdly, for these reasons, as regards post-review transactions there can be no doubt that the further one moves away from the valuation date the less weight should be applied to a transaction, because it becomes ‘progressively unreliable’, as in Segama. I accept, as did Staughton J, that the same might be said for historic transactions, but the difference is that, while historic, they are known to the market at the valuation date, and sensible adjustments can be made on the basis of ‘known knowns’.

How do these conclusions align with the basis of the RICS Professional Standard? In his later evidence Mr Alderton pointed out the difference in the definitions section of the document between ‘must’ and ‘should’. The Standard uses ‘should’, which is not mandatory but is nevertheless best practice, and that ‘it is recognised that there may be acceptable alternatives to best practice that achieve the same or a better outcome.’ That does not seem to me a terribly satisfactory answer. Neither do I accept Mr Nesbit’s assertion that there is a drafting error in the Professional Standard, which survived two changes in status under the auspices of an experienced and eminent committee. But the general approach of the courts, arbitrators, and of the Tribunal, slightly departs from the statement in the Professional Standard in the ways I have mentioned above.

In the end, as Mr Alderton says, both he and Mr Nesbit use post-valuation date evidence; the difference between them is the length of time after the valuation date within which comparables are referred to. As I have said, Mr Alderton was in principle justified in his choice of comparables. As regards Mr Nesbit’s two (very) late 2018 sales, it is puzzling, in the light of other evidence, that he could consider them to be ‘principal and key’ pieces of evidence, particularly when one of the properties, 80 Chester Square, is a significantly larger and prominent corner property, and there are transactions closer to the valuation date.

I have no doubt that those beyond the end of 2017, which include two of Mr Nesbit’s three ‘key’ transactions, should not be afforded any weight. There is sufficient evidence available being the five joint comparables plus Mr Alderton’s further two, to enable a reliable valuation of the appeal property to be undertaken. I have therefore used those seven properties as the comparable evidence.