Woolway: where are we now? Alan Colston MRICS Dip. Rating IRRV (Hons) Director National Specialists Unit and Central Valuation Officer Valuation Office Agency IRRV Conference 2015
Goodbye to an old friend! Gilbert (VO) v. Hickinbottom 1956! The case everyone knows! But the Supreme Court in Woolway (VO) v. Mazars had little good to say about it It is plainly an unsatisfactory decision. Lord Gill 2
Tower Bridge House - Mazars 3
Woolway (VO) v. Mazars the facts Tower Bridge House Eight storey new office block 4 occupiers Mazars 2F & 6F Another firm FF, 3F, 4F, 5F and another two occupiers sharing the 7F Mazars sought merger and a discount for fragmentation 4
Upper Tribunal VTE decided on one assessment for Mazars two floors on a functional connection basis. UT rejected VTE reasoning but upheld merger but not an allowance President adopted a common-sense approach following Morris LJ s reasoning in Gilbert Found treating contiguous floors which only intercommunicated through the common parts as one hereditament whilst treating as separate hereditaments non-contiguous floors which also only communicated through the common parts as somewhat unreal. 5
Upper Tribunal 2 Very interested in the insignificant difference in travel time between contiguous and non-contiguous floors due to modern lifts. Considered treating separated floors as separate hereditaments did not properly reflect realities of occupation in a modern office block The proper approach in a case such as this, therefore, in my judgement, is to treat the floors occupied within the building by the same occupier as a single hereditament. 6
Court of Appeal Clearly respected the UT President s expertise and judgement in the context of a modern office block, "contiguity between floors" was of "no practical significance" for the purposes of deciding what was or was not a single hereditament. Pill LJ 7
Problems for the VO How important was the speed of the lift was this a new referencing requirement? What was a modern office block? Was it post 2000, post 1990, post 1970 and what about refurbished blocks? What was a building? Was a 1930s building with 1970s and 2012 extensions a building? Was a terrace of units built at one time a building? Was intercommunication important? What was so special about floors one on top of each other served by a fast lift. What about the situation where a brisk walk out of the front door to a near-by unit was very quick? 8
What was the VO seeking? Pleasing to have the VO s contentions accepted but fundamentally what VOs need is clarity so they can properly assess rateable property. Clarity The Supreme Court decision cannot be said to have failed to give clarity! Closely reasoned, clear and unified. Christopher Lewesley, R&VR September 2015 BUT it does change things not least in having to say goodbye to Gilbert (VO) v Hickinbottom 9
Lord Sumption s Three Principles 1. Primary test geographic visual or cartographic unity not simply contiguous but intercommunicating 2. Functional test may enable two geographical distinct spaces to be treated as one but must be where the use of one is necessary to the effectual enjoyment of the other. 3. Whether necessary depends not on business needs but the objectively ascertainable character of the subjects. 10
Function All five judges agreed with Lord Sumption adding to and expanding on his judgment Broadly, two geographically separate spaces, horizontally or vertically, will not form one hereditament unless they: Intercommunicate, or Satisfy the functional test 11
Not functionally essential Not the phrase used Was Gilbert ever meant to include how a business used its premises rather than the nature of the premises? 'It cannot be right that geographically separate premises should be valued as one hereditament simply because the ratepayer chooses to link his use of one with his use of the other. To modify the geographical test with considerations of functionality, in this sense of the word, is to add to a clear and objective test the uncertainty of a test that is dependent on whatever happens to be the ratepayer's choice of use. : Lord Gill 12
What is effectual enjoyment? Lord Sumption - 'Could commonly be tested by asking whether the two sections could reasonably be let separately?' Lord Gill - 'Properties that are discontiguous but nonetheless geographically linked, may constitute one hereditament if the occupation of one part would be pointless without the occupation of the other.' Lord Neuberger - 'strict necessity is not the test' but if one property 'could not sensibly be occupied or let other than with the other property' then the two parts should be treated as one hereditament. 13
What does this mean in practice? Tower Bridge House 2 nd and 6 th floors return to separate assessment Revision to Rating Manual Gilbert excised! Many old and familiar cases not a guide to future cases VOs need to apply the very strong guidance in Woolway Existing unsettled cases need to be settled/decided on the basis of Woolway Some existing assessments need to be revisited Ratepayers need to consider approaching VOs about correcting entries 14
Examples- Floors in an office One occupier for the whole building one hereditament But if one floor is let Then each floor, if only accessible through the common parts, becomes an hereditament 15
Example-Floors continued One occupier for the whole building one hereditament But if one floor is let Each floor an hereditament But say another occupier moves into three floors and puts a private staircase in 16
Examples- Industrial Probably in many cases of adjoining/contiguous units in one occupation there will actually be connection by virtue of the front yard immediately abutting. The occupier can therefore go from one unit to the other without going through common parts 17
Shops VOs have accepted shops in one occupation that do not interconnect can be one (NB not merely a connected company) This appears no longer correct and each should be separately assessed May, though, be a single yard at rear (NB not shared with others) 18
Where might the functional test apply? 'There are, however, rare cases in which function may also serve to aggregate geographically distinct subjects.' Lord Sumption The golf course 10 holes one side of the road, 8 the other The oil refinery neither side of the road could sensibly be occupied without the other or separately let The church hall case Stamp (VO) v Birmingham Roman Catholic Archdiocesan Trustees. Because of planning the church hall could not be let without the car park 19
Cases which might now be decided differently Gilbert (VO) v. Hickinbottom the workshop could have been let separately Harris Graphics whilst the actual use was functionally essential one part to the other each factory building could be separately let H&B Foods the actual use made by the company of the premises seemed determinative. This is not now the test 20
Significant change After 415 years of Rating and 60 or so years following Gilbert it might have been thought we knew what a hereditament was when we saw one! Clearly not! 21
Next Steps VOA currently reviewing guidance- Rating Manual will be updated end of Oct. VOs will start applying the new guidance to outstanding and new work from Nov. VOs Statutory Duty Offices, shops and other classes 22
Implications Offices most affected. Unit of assessment/rv no indication of size of an occupier- small, medium or large can all occupy small units for property taxation. Likely to see increasing number of hereditaments in Rating Lists over time. Billing Authorities and Ratepayers- additional administration and need effective communication 23
Questions? Alan.d.colston@voa.gsi.gov.uk