[2025] UKUT 224 (LC)

It will be apparent from our presentation of the evidence that we have not found it entirely helpful.

We agree that the Liverpool market in Grade A office accommodation generally takes the form of Category A lettings, and that the available comparables as well as the analysed rent for the Mando Property indicate that its effective Category A rent is £80 per m². Beyond that the waters are very muddy indeed.

The Category B comparables are few and do not inspire confidence. But they are not non-existent. We would have preferred better Category B rental evidence and we understand the VO's reluctance to draw conclusions from it. However, even taking its obvious limitations into account we still prefer to use it as our primary means of valuation rather than rely on the alternative of a Category A rent with the addition of amortised costs, where that calculation is unexplained and appears to yield too high a figure on either the calculation used by Mr Willetts or the figure for fitting out accepted by the VO.

Turning then to the comparables, such as they are, we attach the most weight to the first two of the transactions set out above. As comparables they were both likely to be known about by the hypothetical tenant at the AVD but there are obvious limitations to their usability.

The 3^rd and 4^th floors at 4 St Paul’s Square is a complex letting involving three separate demises and considerable contributions from the landlord. In terms of floor area it is four times the size of the Mando Property but neither Mr Willetts nor Mr Bailey made any adjustment for the additional size. Allowing 5% for the difference in size, for example, would change the analysis to £116.03 per m². At the hearing and in response to a question from the Tribunal MrBailey said that he thought that the adjustment between a scenario where the tenant has to organise the works and the hypothetical tenancy where the landlord has done all the works and the property is complete immediately before the letting, would be in the range of 2.5 to 5%. In other words, the tenant faced with the burden of procuring the fit out would pay more to be relieved of it. Adding 2.5% would take the hypothetical analysis to £118.93 per m². The position adopted by the witnesses is therefore reasonable, if not a little generous.

The value of the second hand fitting out the 13^th floor of 20 Chapel Street provides a baseline above which the new Category B fitting at the Mando Property must sit. It is much nearer in size but beyond that it is of little assistance.

The sublettings at 3^rd and 4^th floor 1 St Paul’s Square were part of a wider transaction involving the acquisition of a business. We simply do not have enough information to enable a proper analysis.

It might be said that the letting at the 7^th floor of 20 Chapel Street with relatively new fitting out provides a degree of corroboration between 3^rd and 4^th floors at 4 St Paul’s Square and the 13^th floor of 20 Chapel Street. The analysis sits just below the level of the new fitting out at the former and is 8.4% higher than the latter. We would have been assisted by Mr Bailey’s analysis of this assignment especially as there was a substantial inducement, equivalent to two years rent, which was said to be the outgoing tenant’s liability under the lease.

More generally, we have next to no detail about the quality of the individual fitting out or the specifications of the buildings involved. The common parts of 5 St Paul’s Square for instance, appeared to us to not have been upgraded since there were originally installed. We have no idea whether this is the case at 1 St Paul’s Square or at 20 Chapel Street. The analyses contain no adjustments for value significant lease terms other than any break clauses and it has been assumed therefore that the comparables are all let on similar terms, which is unlikely to have been the case.

We are therefore left in the position of having to do the best we can with the information to hand.

Our judgement is that the comparables point towards a £30 per m² uplift for the Category B fitting out at the Mando Property, so that the rateable value should be based on £110 per m². That happens to correspond to the figure arrived at by amortising, not the figure used by Mr Willetts in his report in the appeal nor by the figure of £224,000 adopted by counsel but by the amortisation of a contract price, referred to by Mr Willetts before the VTE but not in the appeal and amortised over ten years not five. That corroboration may be coincidental. One further point in favour of the £30 uplift is that it is appropriately less than the Tribunal’s figure in Acenden.