By Stuart Hicks, Director
For those involved in the more arcane areas of rating valuation, another interesting decision has been determined by the Upper Tribunal (Lands Chamber).
In Semlogistics Milford Haven Ltd v Webb (VO)  UKUT 19 (LC) the appeal concerned the rateable value of a bulk liquid storage at Waterston, Milford Haven, Pembrokeshire. The property extends to about 260 acres and formerly comprised part of the Gulf Oil refinery. The property was designed and constructed for use as a refinery. It was not designed for use as a bulk liquid storage depot and it has had to be adapted for its current use.
Both parties agreed that the appropriate approach to assessing the rateable value was to adopt the contractor’s basis of valuation. The Tribunal agreed this to be the correct basis. It reminded us that the contractors’ basis is merely a recognised valuation method by which to answer the statutory question in finding the rateable value i.e. what is the rent at which it is estimated the property might reasonably be expected to let from year to year on the statutory assumptions.
As in Belfast International Airport v Commissioner of Valuation VR/9/16 (a decision of the Lands Tribunal Northern Ireland) the UT(LC) has confirmed the use of the “modern equivalent” as a useful tool for the valuer because the capital value of the hereditament will not exceed the age depreciated cost of a modern equivalent, which provides the same functionality as the actual property but which costs less to construct.
The Tribunal was critical of the Valuation Office Agency’s expert and said that it is important not to allow the mechanics of the contractor’s basis to obscure the crucial question being “what is the rent contemplated under paragraph 2(1) on the statutory assumptions” bearing in mind “it remains necessary to take into consideration every intrinsic quality and every intrinsic circumstance which tends to push the rental value either up or down”.
The Tribunal confirmed “that it has been established in various cases that, as a matter of principle, a reduction can properly be made (when adopting the contractor’s basis) to reflect underutilisation of the hereditament”. And further that “a stage 5 allowance … should be made in recognition of the additional costs to the hypothetical tenant of maintenance of the actual hereditament (as compared with the modern equivalent)”.
This decision confirmed the principles of the contractors’ basis and rebukes the attempt to circumvent those principles.