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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Magell Ltd v. Dumfries And Galloway Regional Assessor [2005] ScotCS CSIH_58 (22 July 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSIH_58.html Cite as: [2005] CSIH 58, [2005] ScotCS CSIH_58 |
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Magell Ltd v. Dumfries And Galloway Regional Assessor [2005] ScotCS CSIH_58 (22 July 2005)
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LANDS VALUATION APPEAL COURT, COURT OF SESSION |
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Lord Justice Clerk Lord Nimmo Smith Lord Kingarth
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[2005CSIH58] XA33/05 OPINION OF THE LORD JUSTICE CLERK in STATED CASE in the cause MAGELL LIMITED Appellant; against DUMFRIES AND GALLOWAY REGIONAL ASSESSOR Respondent: (Subjects: Factory at Edingham, Dalbeattie) ______ |
Act: McIver; Morton Fraser
Alt: Stuart; Drummond Miller, WS
22 July 2005
Introduction
[1] This is a 2000 revaluation appeal relating to a complex of industrial buildings owned by the appellant on the Edingham Industrial Estate, near Dalbeattie. The subjects were entered in the roll at a rateable value of £142,000. The valuation date was 1 April 1998. [2] The subjects are a substantial group of buildings occupying a site of about 8.5 acres. The site was developed at least 60 years ago as a munitions factory. It is about 13 miles from Dumfries and about 1 mile north of Dalbeattie. Some of the original buildings remain. The main buildings form a unit about 300 metres long with ancillary storage accommodation. The total floor area is 13,984 square metres. [3] The issue in the appeal concerns the significance of the rent of £75,000 per annum at which the subjects were let in December 1999. The appellant submits that that rent is the best evidence of the rateable value and that it reflects the disadvantages of the isolated location for subjects of this size. The assessor valued the subjects under his revaluation scheme. The scheme is based on survey evidence of rents of factory and warehouse subjects throughout Dumfries and Galloway from which the assessor has derived eight basic rates per square metre related to specific areas within the region. The scheme provides for adjustments and allowances in individual cases for quantum, layout, access, quality of facilities and so on.The decision of 24 September 2003
[4] On 24 September 2003 the Committee refused the appellant's appeal against the entry, subject to the assessor's restriction of the rateable value to £133,000. The Committee accepted the assessor's valuation. It held that the rent passing for the subjects was irrelevant. [5] On 15 July 2004 we allowed an appeal against that decision (Magell Ltd v Ass for Dumfries and Galloway, 2005 SLT 453). We held that the Committee had erred in law in holding the rent to be irrelevant. We also observed that the Committee had failed to make any findings of fact as to the location of the subjects and its disadvantages, or as to the comparisons cited by the assessor; and had failed to explain its interpretation of the assessor's comparison evidence. We therefore recalled the decision of the Committee and remitted the case to it with a direction to have a further hearing and to make a fresh decision.The decision of 17 November 2004
Reasons
[6] On 17 November 2004 the Committee adhered to its previous decision and refused the appeal. These are its reasons:"[One] the Committee gave careful and close consideration to the rent of £75,000 per annum paid for the appeal subjects. However, the members preferred the argument put forward on behalf of the Assessor that although the rent was recent, the level of rent derived from an analysis of the rents of a group of other comparable properties submitted by the Assessor gave a fairer picture of the rent the hypothetical tenant would be likely to offer;
[Two] the Committee did not accept the appellants' inclusion of large end adjustments of 35% for location and 12% for layout to make the otherwise agreed calculation equal the rental figure of £75,000. The Committee accepted that the general rate of £20 per square metre used in the agreed calculation already adequately reflected the location of the appeal subjects. The Committee also accepted that an end allowance of 5% for layout was in line with that applied to other similar subjects quoted;
[Three] in considering the overall analysed factory rates per square metre, the £75,000 rental figure proposed by the appellants showed a rate of £5-36 which is considerably below the level of rent for any similar type of building in Dumfries & Galloway. Even the Assessor's proposed figure of £133,000 showed a rate of £9-51 which is modest compared to the other factory subjects detailed on page 26 of his bound volume of productions."
The parties' cases before the Committee
[7] To assess the soundness of this decision, it is necessary to review the main points of the evidence and the submissions that were presented to the Committee. The appellant's surveyor argued that the rental figure of £75,000 should be the rateable value. He said that the rent had been fixed in an open market transaction about 20 months after the revaluation date. During that period the level of industrial rents had not moved. The rent was fixed in the open market at arms' length after the subjects had been marketed by professional agents. The site was 7 miles away from the nearest arterial road, the A75, and was connected to it by the tortuous A745. By virtue of its size, type of main buildings, layout and planning classification, the only suitable use for it now was for large storage or distribution, or for major manufacturing operations. Easy access to main communication routes was a prime requirement of any large storage or distribution operator. [8] None of this evidence was contradicted. The appellant's surveyor said that the difference between the parties' valuations was explained by the assessor's failure to allow for the inappropriate size of the subjects for their location. He considered that in the circumstances the passing rent was conclusive. He was prepared to apply the assessor's method by way of illustrating how the same result could be reached by the use of it. Starting with the assessor's gross valuation of £192,475, he deducted the assessor's quantum allowance of 27%. From the net figure of £140,506, he deducted 12%, rather than the assessor's figure of 5%, for poor layout and difficulty of access for large articulated vehicles. He then made a further deduction of 35% on the view that the basic rate and the quantum allowance failed adequately to allow for the size of the subjects in relation to their location. By this calculation, a valuation could be reached of £74,468 rounded up to £75,000. An end allowance of 35% was unorthodox, but if the assessor's method were to be adopted, that was the only way that could produce a result that corresponded with the primary evidence of the rent. [9] The assessor's valuer said that the assessor's valuation scheme produced a more reliable result. From his survey evidence the assessor had derived a basic rate for the Dalbeattie area of £20 psm. This was 371/2% lower than the basic rate for Dumfries of £32 psm. The difference represented the disadvantageous location of industrial subjects in Dalbeattie. It could be looked on as a location allowance. From the gross value of £192,475, a quantum allowance of 27% and an allowance for poor layout of 5%, led to a rateable value, rounded down, of £133,000. [10] The assessor tendered 15 comparisons where valuations had been either accepted or negotiated. Six had a floor area of between 13,000 sm and 38,000 sm. These were a factory at Lockerbie, creameries at Lockerbie and Stranraer, a factory and an engineering works at Newbie, and a factory at Heathhall, Dumfries. None of these had a passing rent. [11] The other nine comparisons were of less than 10,000 sm. Seven were small factory units from 9,659 sm down to 3,345 sm. Of these, three were in Dumfries, two were in Sanquhar, one was in Kelloholm, and one was in Gretna. Only those in Sanquhar had passing rents, set in October 1993 and May 1998 respectively. The remaining two comparisons were in Dalbeattie. One was a store at Edingham of 1,174 sm, that is to say about 8.4% of the floor area of the appeal subjects. It had a passing rent of £20.01 psm fixed in June 1997. The other was a warehouse at Biggarmill of 1,593 sm, or about 11.4% of the floor area of the appeal subjects. It had a passing rent of £16 psm fixed in September 1999. [12] The assessor also produced a list of 19 factory subjects in Dumfries and Galloway for which he had rental evidence. Five of these were the appeal subjects and the four comparisons in Sanquhar and Dalbeattie. Thirteen were situated in Dumfries and had floor areas of 5,669 sm down to 1,178 sm. The rents of these were struck in the period 1994 to 2003. The remaining site was a unit of only 999 sm at Edingham for which the rent was fixed in 2000. [13] The assessor's witness placed no reliance on the rent passing for the appeal subjects. He knew nothing about the circumstances in which they were let. He could only offer the comment that the rent looked "out of line." It produced a rate per square metre far below those of other industrial subjects in the area
Conclusions
[14] In my opinion, the decision of the Committee should be recalled. The Committee's findings in fact are deficient and its reasons are insupportable. [15] The question for the Committee was to determine the rent at which the subjects might reasonably be expected to be let on the statutory terms at the valuation date (Valuation and Rating (Scotland) Act 1956, s 6(8)). The appellant's case was that the rent struck in 1999 provided the answer. Since the appellant led uncontradicted evidence that that was a bona fide rent and that rental levels in the area had not changed materially between the valuation date and that date, I cannot understand why the Committee has failed to make findings in fact to that effect. [16] The Committee has again failed to make any findings in fact as to the disadvantages of the location for subjects of this size or for the uses to which they lend themselves. It has again failed to make findings in fact on the comparison subjects relied on by the assessor or to explain how it has interpreted the comparison evidence. It has failed to explain what it deduced from the assessor's list of rents. [17] Although the Committee has given "careful and close consideration" to the actual rent of the subjects, it has in the result given no weight to it whatever. I fail to see how the Committee could properly proceed in this way. The rent was set in open market conditions in an arms' length transaction. The subjects were professionally marketed. The rent was set about 20 months after the tone date and during that period rental levels had not changed significantly. The rent was fixed on the statutory terms, except as to duration; but it is not suggested that in this case the question of duration is of any materiality. The rent was therefore primary evidence bearing directly on the statutory test. On the other hand, the assessor's comparison evidence included only four actual rents only two of which were in Dalbeattie and all of which were of much smaller subjects. His list of rents had no subjects of comparable size and related to diverse locations, uses, floor areas and transaction dates. It was for the Committee to explain how it interpreted the evidence for the parties in attempting apply the statutory test. Instead, it has merely said that its members "preferred" the argument for the assessor that the level of rent derived from his analysis of the rents of other properties gave a fairer picture of the rent that the hypothetical tenant of the appeal subjects would be likely to offer (cf Reason [One], supra). [18] The Committee has therefore acceded to the startling proposition that if the subjects had been let on the statutory hypotheses on the valuation date, they would have achieved a rent some 77% greater than they actually achieved in the real world 20 months later. That seems to call for an explanation; but the Committee has failed to provide it. [19] The obvious conclusion, in my view, is that however robust the assessor's scheme was in the valuation of small- to medium-sized industrial units, it was unreliable in the valuation of subjects with special features such as these. The importance of this point should have been clear to the Committee from cases such as Simmons Furniture Store Ltd v Ass for Dumfries and Galloway (1989 SLT 4) and Debenhams plc v Ass for Grampian (1992 SLT 309), to which counsel referred it. The Committee seems to have disregarded these decisions. [20] In Reason [One] (supra) the Committee says that the assessor's level of rent was derived from an analysis of the rents of a group of "other comparable properties;" but without specific findings about those properties on matters such as floor area, use, location and transaction date, we cannot know in what way the Committee regarded each as comparable. Likewise, without such findings the Committee had no proper basis for the conclusion in Reason [Two] (supra) that the basic rate of £20 psm "already adequately reflected the location of the appeal subjects." [21] Moreover, it is my impression that the Committee failed to understand that on the issue of location the parties' witnesses were talking about two different things. The assessor's witness contended that industrial buildings in Dalbeattie produced lower rental levels than similar buildings in Dumfries and that that reflected their locational disadvantage. The appellant's witness appears not to have disputed that general proposition, but to have contended that, within the Dalbeattie area, the unusual size of these buildings and their particularly remote location had a depressing effect on the rental value quite apart from the general locational disadvantage of any industrial building in that area. This misunderstanding underlies both Reasons [Two] and [Three].Disposal
[22] I propose that we should allow the appeal and recall the decision complained of. [23] In the light of the re-hearing, counsel for the assessor accepted that if the letting of the subjects was a bona fide open market transaction, we should treat it as having been concluded on the statutory terms and accept the rent as the figure to be entered in the Roll. Since the appellant's evidence about the letting was unchallenged, I think that that is the appropriate course. I propose therefore that we should substitute for the figure appealed against a net annual value and rateable value of £75,000. Magell Ltd v. Dumfries And Galloway Regional Assessor [2005] ScotCS CSIH_58 (22 July 2005)|
LANDS VALUATION APPEAL COURT, COURT OF SESSION |
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Lord Justice Clerk Lord Nimmo Smith Lord Kingarth
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[2005CSIH58] XA33/05 OPINION OF LORD NIMMO SMITH in STATED CASE in the cause MAGELL LIMITED Appellant; against DUMFRIES AND GALLOWAY REGIONAL ASSESSOR Respondent: (Subjects: Factory at Edingham, Dalbeattie) ______ |
Act: McIver; Morton Fraser
Alt: Stuart; Drummond Miller, WS
22 July 2005
[24] I agree with the Opinion of your Lordship in the Chair and have nothing to add. Magell Ltd v. Dumfries And Galloway Regional Assessor [2005] ScotCS CSIH_58 (22 July 2005)|
LANDS VALUATION APPEAL COURT, COURT OF SESSION |
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Lord Justice Clerk Lord Nimmo Smith Lord Kingarth
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[2005CSIH58] XA33/05 OPINION OF LORD KINGARTH in STATED CASE in the cause MAGELL LIMITED Appellant; against DUMFRIES AND GALLOWAY REGIONAL ASSESSOR Respondent: (Subjects: Factory at Edingham, Dalbeattie) ______ |
Act: McIver; Morton Fraser
Alt: Stuart; Drummond Miller, WS
22 July 2005
[25] I agree with your Lordship in the Chair that the appeal should, for the reasons given, be allowed, and that the matter be disposed of as proposed.
