[2025] UKUT 224 (LC)

This decision relates to two appeals by the Valuation Officer (“the VO”) against decisions of the Valuation Tribunal for England (“the VTE”) and concerns the rating assessments of Grade A (high quality) offices, in Manchester (“the Shoosmiths Property”) and Liverpool (“the Mando Property”). The issue is the value to be attributed, for rating purposes, to the “Category B” fitting out in each of the buildings.

In Dawn Bunyan (VO) v Acenden Limited [2023] UKUT 17 (LC) the Tribunal (Martin Rodger KC, Deputy Chamber President and Mr Peter D McCrea OBE FRICS FCIArb) described the practical context as follows:

“1.

Modern high quality office buildings are usually offered to the letting market in a “Category A” condition. If the building has been newly constructed or recently refurbished, its owner will typically have installed raised floors and suspended ceilings, basic mechanical and electrical services including lighting and air-conditioning, a fire detection system and basic internal finishes. By marketing the building in this condition, the owner will hope to generate interest from the widest range of potential occupiers. Once a letting has been achieved, the new tenant will be free to fit the building out to meet its own requirements. The tenant’s fitting out work will bring the building into a “Category B” condition and is likely to include the installation of kitchens and tea points, partitioning, the re-routing of air-conditioning and power points to accommodate its preferred layout, and the addition of IT infrastructure.”

In Acenden the Tribunal rejected the proposition that the tenant’s fitting out work would add nothing to the value of the building in comparison to the value derived from the letting in a Category A state; in that particular case the Category B fit-out added £46 per m² to the valuation.

That principle was accepted by the VTE in both the present cases, and it is not in issue before us. As to both properties the VO appeals on the ground that the VTE’s valuation was too low, because the VTE adopted an inappropriate method in assessing the value of the Category B fit-out. Accordingly there is no point of law at issue in the present appeals; they are about valuation methodology and about evidence of value.

At the hearing of the appeal the VO was represented by Ms Jenny Wigley KC and Mr Aaron Walder. Expert evidence was given on the general operation of the office market by Mr Michael Brankin OBE MRICS; on rateable values for offices in Liverpool by Mr Greg Willetts MRICS and in Manchester by Mr Tim Brown MRICS IRRV (Hons), and on valuation by Mr Aidan Bailey MRICS. We are grateful to them all for their assistance. The respondents chose not to participate in the appeals.

Before the hearing we visited both properties accompanied by Mr Bailey of the VO, and by Mr Mark Hayes of CBRE who are rating advisors to the respondents. We also looked at the exteriors of the main comparables in Manchester and Liverpool.

In the paragraphs that follow we first summarise the legal and practical background, discussing how the legal requirements of the rating hypothesis are managed in the context of the market and explaining the decision in Acenden. We then describe the properties and the factual background and explain what was decided in the VTE. We set out the VO’s case on appeal, examine the evidence, and explain our conclusion.