[2025] UKUT 224 (LC)

Mr Bailey is a Lead Valuer in the Rating Valuation Unit South of the Valuation Office Agency based in the Folkestone Office, and was the VO’s expert witness in Acenden and has worked on the backlog of cases relating to fitting out that were stayed pending the Acenden decision. He set out the VO’s primary case by providing clear and helpful calculations. He started from the headline rent for the Shoosmith’s property and made appropriate and conventional adjustments to derive the present value of the future rent in order, first, to calculate the rental value of the property in a shell state (with neither Category A nor Category B fitting in place), for the property fitted out to Category A condition, and for the Category B condition.

The value of the property in a shell state is seen by taking the rent adjusted for the rental concessions and then subtracting the landlord’s capital contributions. This is the state in which the tenant takes the property, and its value in that state is what the tenant pays less what he receives. Mr Bailey’s figure for the property in this condition was £168 per m².

To calculate the rental value of the property in Category A condition Mr Bailey added back in the capital contributions made for the Category A works and for other named items. This was an approach agreed with the ratepayer at the VTE; at this point in his calculation therefore Mr Bailey had first subtracted these contributions and then added them back again, the net result being that these contributions are ignored. His figure for the property in Category A condition was £216 per m². However, he commented that whilst that figure is derived from “the deal the actual tenant and landlord have agreed”, he pointed out that the tenant still has to do the Category A fitting out work itself; a “DIY” category A property is rather less valuable than a “turn-key” version where the work is already done. But he did not put a figure on that extra value.

Finally, Mr Bailey added back in the remaining contribution of £1,673,172, which we have agreed represented the landlord’s payment for the Category B fitting out works, and arrived at £281 per m^2.; he then adjusted his figures to £208 for Category A and to £271 for Category B by making a 3.5% reduction (being 2.5% to take account of there having been two leases whereas the rating hypothesis requires just one. and a 1% per month adjustment to account for the rent being agreed one month after the AVD). He said that therefore the uplift from Category A was £63 per m². Mr Bailey noted that this was considerably higher than the uplift in the Acenden case, and accounted for that by the fact that the Shoosmith’s property has a more cellular and therefore more expensive layout, being a legal practice rather than the offices of a finance broker. We observe that if the actual cost of the work were used instead the uplift would be lower; the VO’s argument is that the landlord’s contribution should be used, and for the reasons given below we do not have to decide which is correct.