[2025] UKUT 163 (LC)

We set out in the following table the rental and tone evidence referred to by the parties at items 1 to 8. We have added as an additional item (9) the Property itself and our analysis of the initial rent payable. In all cases where there is a dispute over the correct analysis, or where none was provided, we have recorded our own figures. We say more about the Tribunal’s treatment of rental concessions later in the decision. We have also included remarks about matters which were relevant to the analysis, and details of the stage of the check, challenge and appeal process that the individual properties reached.

Both parties referred to the guidance of the Tribunal (Mr J H Emlyn Jones FRICS) in Lotus and Delta Limited v Culverwell (VO) and Leicester City Council [1976] RA 141.It is germane at this point to set out the essence of this advice:

In Lamb (VO) v Go Outdoors Ltd[2015] UKUT 366 (LC) the Tribunal (P D McCrea FRICS) commented that

“These propositions provide guidance on the usefulness of different types of evidence but they should not be regarded as rules to be followed slavishly. It will be necessary to have regard to relevant evidence of all types, if available, but always with a clear focus on the statutory valuation hypothesis.”

In his first report Mr Hawkins relied upon two transactions as a basis for his conclusions; the letting on the property itself and the letting of a unit in Swallowdale Lane to Amazon which occurred in October 2013. These are shown as items 2 and 9 in the table above. He was aware of other transactional evidence and had not placed any weight at all on it. He did not explain why he had rejected this evidence until he filed his supplementary, or ‘rebuttal’ as he termed it, report. The rationale for this approach was that the letting of the Property was aligned with the first and second propositions of Lotus and Delta and that the letting to Amazon fulfilled the third in that his analysis confirmed ‘that the level of rent indicated by the rent on the Property was consistent with other market activity around the time’. We will return to these rents when we consider the detail of the rental analyses.

Mr Hawkins also rejected the use of evidence of assessments that had been discussed and agreed between the VO and other occupiers and their advisors. It can be seen from the table of evidence that some of these had been the subject of checks and others both checks and challenges. None, with the exception of the Property had been appealed. Mr Hawkins noted that assessment evidence ‘sat low in the hierarchy set out in Lotus and Delta’ and that the sixth proposition stated that where rents were unavailable a review of assessments may be helpful. As rents were available there was, he said, no need to engage the final proposition.

Mr Steel took a holistic approach, reviewing items 1 to 8 in the table of evidence and arriving at an analysis where appropriate. He questioned why the appellant had entered into a lease for a building nearly a year before taking full occupation and noted the generous rent free provisions. He decided that the VTE had been correct in its approach of not relying on the rent at the Property, electing instead to place greater weight on the basket of comparable evidence. In support of this methodology, he had compared the outcome of the 2019 rent review at the Property with contemporaneous evidence from other properties (Next and Amazon) and found that the rents ‘unclouded by incentives’ were closely aligned. He concluded that the rent agreed at the 2014 letting of the Property could not be attributed to characteristics that were individual to that property.

Mr Steel further noted that the level of assessment on the comparable properties means there would have been significant payment liability, which would have provided an incentive to challenge the assessments if a ratepayer believed them to be excessive. Only three of the properties had been the subject of a challenge and of the remaining five properties, four were the subject of checks. This he said, was evidence of an established tone.

In our view the correct starting point is the rental evidence available to the hypothetical tenant at the AVD. It is perhaps easier to start with the transactions that are not relevant to this exercise. Firstly, we exclude item 7 (Amazon, Boundary Way) which is three times the size of the Property. We also place no weight on item 8 (Vitabiotics, Blossom Way) because the letting occurred nearly four years after the AVD and is therefore too distant from the valuation date to be of any relevance. We also disregard item 5 (Booker, Unit One, The Island) because the rent commenced in July 2018 and the unit has a substantial chiller and cold store. It is therefore materially different to the Property. We place no weight on item 6 (Cormar Carpets, Unit 2 at 1 Boundary Way) as the only available rental information dates from April 2017. Item 3 (Martin Brower, Unit 1 at 1 Boundary Way) relates to a ‘cross-docked’ warehouse which has a particular internal layout and in our view is not comparable to the property. Finally, item 1 (Next at Eastman Way) has a rent that dates from 2011 but also has a large mezzanine floor and neither party is able to confirm whether or not it is included in the rent.