UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2015] UKUT 0078 (LC)
UTLC Case Number: RA/26/2014

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – valuation – brewery in industrial building – mode and category of occupation – valuation based upon local industrial values – end allowances – appeal allowed in part – rateable value determined at £52,000

IN THE MATTER OF AN APPEAL FROM A DECISION OF 
THE VALUATION TRIBUNAL FOR ENGLAND

BETWEEN:

	DOUBLE MAXIM BREWERY LTD                              Appellant
	
     and

                                                         JUDITH SMITH                            	Respondent 
(Valuation Officer)

Re: 1 Gadwall Road,
Rainton Bridge South 
Houghton Le Spring
Tyne & Wear
DH4 5NL

Before: P D McCrea FRICS
	
Sitting at: Newcastle SSCS Tribunal, Manor View House, Kings Manor
Newcastle-Upon-Tyne NE1 6PA
on
16 December 2014

Mr Mark Anderson for the appellant
Mr Martin Spencer, Valuation Office Agency for the respondent

© CROWN COPYRIGHT 2015

The following cases are referred to in this decision:
Williams (VO) v Scottish and Newcastle Retail Ltd [2001] EWCA Civ 185
VRCC v French (VO) [2013] UKUT 0627 (LC)
John Townend (Trading as John’s Radio) v Terence John Goodall (VO) [2004] RA 48
Edmondson (VO) v Teesside Textiles Ltd [1985] RA 247 CA
Burvill v Jones (VO) [2013] UKUT 0101 (LC)
Fir Mill Limited v Royton Urban District Council (1960) 7 RRC 171
Lotus & Delta v Culverwell (VO) and Leicester City Council [1976] RA 141

The following further cases were referred to in argument:
Garton v Hunter (VO) [1969] 2 QB 37
Leeds University v City of Leeds and Burge (VO) [1962] RA 177
T Humphries-Jones t/a Cathedral Frames v Welsby (VO) 2000 RA 29
Re: The Appeal of Reeves 2007 RA 168

DECISION
Introduction
1.	This is an appeal by the ratepayer, Double Maxim Brewery Ltd (“the appellant”), against a decision of the Valuation Tribunal for England (“VTE”) dated 3 April 2014 in which the VTE determined the rateable value of Unit 1 Gadwall Road, Rainton Bridge South, Houghton Le Spring, Tyne & Wear, DH4 5NL (at the date of the VTE hearing known as Unit 1, Rainton Bridge South Business Park) (“the appeal property”) at £54,000 with effect from 1 October 2012.
2.	The appeal was conducted in accordance with the Lands Chamber’s Simplified Procedure.  The appellant was represented by its Director, Mr Mark Anderson, who gave evidence.  The Valuation Officer (“VO”), Mrs Judith Smith BSc (Hons) MRICS, gave expert valuation evidence and was represented by Mr Martin Spencer of the Valuation Office Agency (“VOA”).
3.	A second appeal, relating to flooding, was agreed prior to the hearing.  The parties agreed that a material change of circumstance (“MCC”) on the issue of flooding should be reflected by making an end allowance of 10% with effect from 1 October 2012 to the rateable value that I determine in this appeal.
4.	I inspected the appeal property and externally inspected the relevant comparables on 15 December 2014.
5.	The antecedent valuation date (AVD) is 1 April 2008. The material day in respect of this appeal is 1 April 2010.  
6.	Following the hearing, I asked the parties to provide further information regarding the levels of rent paid by the appellant.  I received this on 5 February 2015.
Facts
7.	In the light of the evidence and my inspection I find the following facts.  The appeal property is situated on Gadwall Road, the main road through the Rainton Bridge South Industrial Estate, Houghton Le Spring, Tyne and Wear.  The Estate is approximately four miles south east of junction 63 of the A1(M), and nine miles south west of Sunderland.  The appeal property is one of only four buildings on the estate. To the north east, on the other side of the B1284, is the larger Rainton Bridge Industrial Estate.  To the east is the Rainton Bridge South Business Park upon which there is a large call centre together with other office buildings. The Rainton Meadows Arena is a leisure facility within a converted commercial building. However the location is semi-rural, with a nature reserve to the south. 
8.	The appeal property is at the entrance to Gadwall Road. Whilst it has frontage to the B1284, it does not have direct access to it. In order to gain access to and from the appeal property it is necessary to enter the business park and approach the appeal property from its southern entrance, which is effectively at the rear of the building.  
9.	The appeal property was constructed by Sunderland City Council (“the council”) in the late 1990s. It is of steel portal frame construction with profile sheet cladding and brick/block elevations under a profile sheet clad pitched roof.  It has an agreed gross internal floor area of 1,481.8m2.  Loading access is in the north-west elevation, and car parking and pedestrian access is to the south east of the building.
10.	The appeal property is fully fitted out as a brewery, having an increased gas supply and a drainage channel installed in the concrete floor.  It has ground and first floor offices, and a visitor’s centre which includes a small bar. A cold room and gantry which served the brewery equipment were installed in October 2010.  It is the only specialist steam brewery in the north east of England.
11.	The appeal property was let by the council to the appellant under a lease dated 26 April 2007, for a term of eight years from 1 April 2007.  The original rent was £61,000 per annum with effect from 1 September 2007 – giving the tenant a five month rent free period.  The permitted user was “the production and distribution of beer and related products”.  The lease was drawn on an internal repairing basis, with the council having an obligation to keep the roof and external walls in tenantable repair, and to paint the exterior. 
12.	A subsequent agreement was entered into on 3 December 2007 between the council and the appellant in which the council gave a grant of £15,000 towards the appellant’s cost in “providing basic services”.  A further agreement was entered into by the council and the appellant under which the rent for the period of 1 June 2009 until 30 November 2009 was reduced to the equivalent of £30,500 per annum.  The amount of the rent reduction was to be repaid by the appellant in equally quarterly instalments from the expiry of the concession period. A £25,000 concession was also granted by the council for the period 1 April 2012 to 31 March 2014, according to an email from Mr Whitaker to the VO dated 9 December 2013.  
13.	The council issued rent demands for the quarters commencing 29 September 2013, 25 December 2013, and 25 March 2014, all at £9,000 per quarter, or the equivalent of £36,000 per annum.  However in an email to the parties dated 4 February 2015, Mr Whitaker said that from 1 April 2014 the rent reverted to £61,000.
The VTE Determination
14.	The appeal property was originally entered into the 2010 rating list at a rateable value of £57,500.  The appellant submitted an appeal against the compiled list assessment and also made a material change of circumstance (“MCC”) proposal – the latter based upon flooding.  At the VTE, the VO submitted that the compiled list assessment should be increased to £60,000, having made some adjustments including the removal of an end allowance for layout.  On 3 April 2014 the VTE determined a rateable value of £60,000 with effect from the date of the decision (the rateable value being higher than the original compiled list assessment), and a 10% deduction in respect of the MCC, which ultimately resulted in an alteration to the rating list to £54,000 with effect from 1 October 2012.
The Statutory Framework
15.	Section 56 of the Local Government Finance Act 1988 (“the Act”) gives effect to Schedule 6 to the Act which sets out the statutory basis on which the rateable value of a non-domestic hereditament is determined.  The statutory assumptions for determining the rent at which the hereditament might reasonably be expected to be let are set out in paragraph 2(1) of Schedule 6, as follows:
“The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non-domestic rating shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on these three assumptions –
(a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;
(b)	the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from the assumption any repairs which a reasonable landlord would consider uneconomic;
(c) the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above.”
16.	The hereditament is to be valued by reference to values pertaining at the AVD. The matters set out in paragraphs 2(7)(a) to (e) of Schedule 6 to the Act are to be taken to be as they were on the material day. Those relevant to this appeal are:
“	(a) matters affecting the physical state or physical enjoyment of the hereditament;
(b)  the mode or category of occupation of the hereditament;”

17.	The Valuation for Rating (Plant and Machinery) (England) Regulations 2000 (SI 2000 No 540) (“the regulations”) provides (at Part 2) that for the purpose of determining rateable value:
“(a)  in relation to a hereditament in or on which there is plant or machinery which belongs to any of the classes set out in the Schedule to these Regulations, the prescribed assumptions are that—
(i)	any such plant or machinery is part of the hereditament; and 
(ii)	the value of any other plant and machinery has no effect on the rent to be estimated as required…
(b) in relation to any other hereditament, the prescribed assumption is that the value of any plant and machinery has no effect on the rent to be so estimated.”
18.	The parties agree that in this respect the gantries would fall to be valued, but the specialist brewery equipment would not. 
Case for the appellant
19.	Mr Anderson considered the rateable value of the appeal property by reference to various bases of valuation all of which, he said, pointed to a rental value in the region of £36,000 per annum.  After adjustments he submitted that the rateable value of the appeal property was £27,100.
20.	First, he referred to the rent passing on the subject property.  Although the contractual rent was £61,000 per annum from 1 September 2007, Mr Anderson said that the appellant had, by agreement with the council, paid no rent until April 2008.  From that point, the rent of £61,000 was paid, but significant grants were paid back to the appellant by the council.  A further agreement reduced the rent to £36,000 per annum which Mr Anderson said continued to be the rent passing.  
21.	Mr Anderson submitted that the appeal property was fully fitted out as a brewery, including the installation of gantries, the cold room and an increased gas supply. The removal of these works could not be considered to be minor he said, but would be complex, specialist and costly.  He referred in support of this to Williams (VO) v Scottish and Newcastle [2001] EWCA Civ 185 and VRCC v French (VO) [2013] UKUT 0627 (LC).
22.	Mr Anderson said that the drainage channel in the floor of the building had been installed by the council prior to the lease being completed; a prohibition on alcohol in other council leases had been relaxed; the user clause in the lease was for a brewery; and the appellant had registered for effluent discharge and with HMRC for beer duty.  He said that owing to the increased gas supply required for the brewing equipment, there was no heating in the main space, and that the roof was not insulated.
23.	He considered that the building was configured in a way which was disadvantageous and should be reflected in an adjustment to the rateable value.  In effect, the building was the “wrong way round”, with visitors having to drive around the property to arrive at the visitor’s car park and personnel entrance.
24.	On a receipts and expenditure basis, Mr Anderson submitted that the rateable value was entirely out of sync with other breweries.  He referred to rateable values of other breweries which he said typically equated to between 50p and £1 per barrel produced.  The appeal property’s rateable value in contrast, equated to £20 per barrel and was therefore excessive.  
25.	He explained that in respect of beer duty, a 50% allowance could be claimed for production of up to 3,000 barrels per year.  Once production exceeded that level, full duty was levied on the following year’s revenue.  This was the case even if production in the following year fell below 3,000 barrels which sometimes had disastrous consequences and could render a brewery insolvent.  Mr Anderson said that this type of taxation scheme was unique to the beer industry. 
26.	As evidence of comparable values, Mr Anderson referred to the Moorhouse Brewery which was a large purpose-built establishment.  It was in a valuation scheme adopted by the northwest VOA Group but not by the northeast.  Moorhouse Brewery, which had cost £4.2m to build, had a rateable value of £89,500.  In the light of this, a rateable value of £60,000 for the appeal property, in a converted building, was excessive.
27.	In respect of the other properties in the vicinity, Mr Anderson referred to the assessment of Unit 2 Gadwall Road, based upon £30.23 per m2 for the main space, with air-conditioned ground and first floor offices at £34.10 per m2.  Unit 3, Gadwall Road had been assessed at £33.50 per m2 with ground and first floor offices at £36.85 per m2.  In comparison the appeal property was assessed using a basic rate of £39.00 per m2.
28.	Mr Anderson concluded that, as a converted brewery, the appeal property was not comparable to these units.  He referred to the Rainton Meadows Arena property, which he said was a “similar box”.  As this had been assessed as a sports function centre, a summary valuation was not available on the VOA website, but the property had a rateable value of £22,500 which he considered was comparable to the appeal property.
29.	Mr Anderson submitted that the VO had “moved the goal posts” throughout the process of his appeals.  The original 2010 assessment of the appeal property was at £57,500.  This was based upon a basic rate of £39 per m2, with uplifts of 10% for offices, 20% for the visitor centre and 15.5% for the first floor air conditioned offices.  To this, an end allowance of -3% had been applied for layout.  However at the VTE the valuation contended for by the VO, which was upheld, was higher than the compiled list assessment, including an addition of £188 for rateable plant and the removal of the 3% end allowance.  Mr Anderson submitted that this was a vindictive change of tactic by the VO.
30.	He said that although the cold room and gantry were not installed until October 2010, they had been reflected in the VO’s valuation with effect from 1 April 2010.
31.	On a contractor’s test basis, Mr Anderson had obtained a copy of a valuation which the VOA had carried out and which resulted in a rateable value of £40,000, yet this had not been reflected in the rateable value of the appeal property.
32.	Mr Anderson stressed the unique nature of the appeal property, as the only steam brewery in the north east of England.  It was a specialist brewery and should be assessed as such.  
33.	Mr Anderson said that the appeal property should properly be valued by reference to barrelage, at 90p per barrel, which would equate to a rateable value of £4500.  In the alternative should I decide to assess the property on a floor area basis, his valuation was based upon the current rent passing of £36,000pa, which he said equated to £24 per m2.  However, he said, the appeal property was unheated, which he reflected by reducing this rate by 10% to £21.60.  He made a further discount of £19.44 per m2 for the cold store and a 10% addition to the ground and first floor offices, to arrive at a figure of £31,934.  To this he applied a 15% end allowance for “building issues” (principally the access being at the rear of the property) to arrive at a figure of £27,144, say rateable value £27,100 with effect from 1 april 2010.  
Case for the respondent
34.	The VO, Mrs Judith Smith BSc (Hons) MRICS, said that following the settlement of the MCC appeal in respect of flooding, the only issue for determination was whether the VTE erred in confirming the proposed increase to RV £60,000 on the compiled list appeal, thereby confirming her valuation basis; or alternatively as contended by the appellant, either a contractor’s test or profits valuation approach should have been taken.
35.	Mrs Smith explained that her statutory duty as the valuation officer under section 41 of the Act caused her, after inspecting the property, to submit to the VTE that the compiled list assessment should be increased to RV £60,000.  Mrs Smith considered that there was no justification for the 3% end allowance as the unit was rectangular in shape with the typical layout of offices along one side, vehicular access to the rear and pedestrian access to the offices.  She had also made an addition for the rateable plant and machinery and a reduction to the value reflecting the area described as the visitors centre, and an increase to the cold room to reflect better specification.
36.	Mrs Smith explained that, following representations from the appellant, the address of the property with effect from 1 April 2014 has been changed to Maxim Brewery, Unit 1, Gadwall Road, Rainton Bridge South, Houghton Le Spring, DH4 5NL with a description in the rating list of “brewery and premises”.  Mrs Smith said that there was nothing to suggest that the description shown in the rating list had any purpose other than that of identification (John Townend (trading as John’s Radio) v Terence John Goodall (VO) [2004] RA 48).  
37.	Mrs Smith said that the appeal property was an industrial building on an industrial estate, but used as a brewery.  It had a degree of minor alteration but was not so specialised nor altered to the extent that would deter or exclude potential tenants.  In her view, had the unit been placed on the market at the AVD, having had all process plant removed, it would be attractive and would draw potential tenants from a range of users who all could operate from such a typical industrial building.  As there was direct comparable rental evidence, in Mrs Smith’s view the method of valuation most appropriate was that of a rentals approach by reference to this comparable evidence.
38.	In respect of the hypothetical letting for rating purposes, Mrs Smith said that the appeal property must be assumed to be vacant and to let at the valuation date (Edmondson (VO) v Teesside Textiles Ltd [1985] RA 247 CA).  Accordingly, she had assumed that the brewing equipment and system, boiler, chimney vents and steam systems not found in neighbouring properties, fermentation and cooling systems, specialist conditioning room and buffer tanks had all been removed.  In respect of the drain in the floor of the property, and the visitors’ facilities, Mrs Smith considered that these alterations could be removed by way of minor works and therefore did not affect the valuation of the property (Burvill v Jones (VO) [2013] UKUT 0101 (LC)). She did not consider that the upgraded gas and electricity supply would deter a potential tenant or affect its likely rental bid. 
39.	In Mrs Smith’s view it was possible to envisage an incoming tenant to the unit filling in the drainage channel and altering the visitor facilities.  The only plant and machinery included in the rateable value that would be present at the date of the notional letting was the gantry - which would not be costly to have removed. 
40.	In respect of paragraph 2(7)(b) of the Act, an assumption had to be made that the appeal property could only be occupied for a purpose within the same mode or category of occupation as that for which it was being occupied at the material day.
41.	Mrs Smith said that the phrase “mode or category of occupation” meant a use within the same general purpose.  Referring to Fir Mill Limited v Royton Urban District Council (1960) 7 RRC 171, she said that a factory should be valued as a factory, but not as any particular kind of factory.  In determining the mode or category of occupation, she said regard should be had to the principal characteristics of use.  Whilst planning was not determinative, breweries fell within use class B2 (general industrial) of the Town and Country Planning (Use Classes) Order 1987.  Mrs Smith contended that the principal characteristics of use as a brewery - the production and distribution of beer - was a use within the same overall general purposes as industrial users who manufactured or distributed a product.  The requirement to value a factory as a factory but not any particular kind of factory was wide enough to encompass a use as a brewery along with general industrial uses.  Mrs Smith considered that was consistent with the rationale in Fir Mill that the assessment must reflect the value of the hereditament for the purpose for which it was occupied which should not be so narrowly defined as to restrict unrealistically the range of competition that may be assumed.  
42.	In valuing the appeal property Mrs Smith had regard to the guidelines set out by the Tribunal in Lotus & Delta v Culverwell (VO) and Leicester City Council [1976] RA 141 in assessing the weight to be given to evidence in arriving at an assessment.
43.	Mrs Smith had taken the initial headline rent of £61,000 and, allowing three months of the five month rent free period for fitting out, accounted for two months rent free period in her analysis.  She calculated that, on an agreed floor area of 1,481.8m2, or 1,521.4m2 in terms of main space (itms) the rent equated to £37.30 per m2 with effect from 1 April 2007.  
44.	A lease of Unit 2, Gadwall Road was granted with effect from September 2007, at an initial rent of £180,000 per annum, rising over five years to £210,000 per annum. Mrs Smith analysed the stepped rent, using a 7.5% deferral rate, at £47.53 per m2 based on a floor area of 4,352.63m2 itms.  Unit 3 Gadwall Road, which had been let for 15 years from May 2000, had been the subject of a rent review with effect from May 2005 at £133,050 per annum, which equated to £46.22 per m2 based on 2,877 m2 itms.  The tenant has since purchased the freehold interest.  Unit 4, Gadwall Road had been let for 10 years from October 2009 with a 19 month rent free period, which Mrs Smith analysed on a floor area of 6,594 m2 itms at £37.14 per m2, having made a 5% allowance to reflect the internal repairing nature of the lease.
45.	Mrs Smith referred to a rent review of the Chemviron Carbon Limited unit on Mercantile Road – part of the Rainton Bridge Industrial Estate and a short distance from the appeal property.  The unit was let for 30 years with effect from 1 July 1993 on an FRI basis with five yearly rent reviews.  The rent review from July 2008 was set at £110,400 per annum, which on a floor area of 1,929 m2 itms equated to £57.23 per m2.  Further afield, she referred to two lettings at Glover Industrial Estate, Washington; one in July 2006 at £42.77 per m2 and the other in June 2011 at £36.11 per m2.
46.	Mrs Smith then turned to settled assessments of comparable hereditaments, again from the intermediate locality and the Washington area.  In most of these cases, appeals against the 2010 list assessment had been resolved, which she believed supported the tone applied.  Mrs Smith considered that the tone of values on Gadwall Road had been accepted as, other than the subject case, none of the assessments had been appealed. 
47.	On Mercantile Road, Unit 4 had been agreed with agents for the occupier at £35 per m2 for a unit of 899.97 m2 itms, with 4.5m eaves, and a small yard.  The TNT Express building on Mercantile Road had been agreed with agents for the occupier at £32.99 per m2.  This was a building built in 1980 of 2,096 m2 itms with 6 metre eaves. An appeal in respect of Unit A, Mercantile Road, the assessment of which equated to £36 per m2, had been withdrawn. The building had an area of 1,889 m2 ITMS with 6.5 metre eaves, and a small yard area.  Mrs Smith considered the Rainton Bridge Industrial Estate to be an inferior location to Gadwall Road.  At Bentall Business Park, Glover Industrial Estate, Washington, two appeals had been withdrawn by agents where the unit price in each case was £39 per m2. 
48.	Mrs Smith then considered assessments of local breweries in industrial units.
49.	Mordue Brewery has occupied Units D1/D2 Narvik Way, Tyne Tunnel Trading Estate, North Shields since 2005.  It holds a 15 year lease from November 2009 at a rental of £45,000 per annum.  The 2010 rateable value is £35,500, with a basic rate of £31.69 per m2. The unit has a gross internal area of 1,114 m2.  The Jarrow Brewery occupies Unit 54B Aiden Court, Bede Trading Estate, Jarrow on a 10 year internal repairing lease from November 2012 at a rent of £24,700 per annum.  The rateable value is £24,500 with effect from 11 February 2013, on a basic rate of £40.00 per m2. Hadrian Border Brewery occupies Unit 5, The Preserving Works, Shelley Road, Newcastle upon Tyne on a long leasehold basis from 2010.  The rateable value of the property is £13,000, based on £24.65 per m2 with effect from 25 March 2011 and it has a gross internal area of 533.98m2.
50.	Mrs Smith considered that these transactions showed that breweries occupy industrial units on industrial estates, paying open market rents. All of the assessments had been prepared on a “rentals method”, and had been valued in line with the local industrial tone.
51.	Finally, Mrs Smith produced a schedule of 19 other brewery assessments in various parts of the country.  Of these, all but two had been valued on a “rentals method”, having regard to the local industrial tone.  The two exceptions, which were valued using a contractor’s test, were Camerons Brewery, Hartlepool, and Federation Brewery, Gateshead.  Camerons Brewery was constructed from 1900 onwards, with a gross internal area of approximately 22,500 m2 over four floors.  The Federation Brewery was constructed in 1980, with a gross internal area of 19,500 m2, again over four floors, and has a maximum eaves height of 22 m.
52.	Mrs Smith submitted that the VTE were correct in its determination, and submitted that I should find accordingly.
Discussion and Conclusions
53.	In order to determine rateable value, it is necessary to assume a hypothetical tenancy of the hereditament.  Both statute and case law have contributed to what is generally accepted as the hypothetical terms of that tenancy.
54.	First, and in the subject appeal uncontroversial: a tenancy from year to year, on fully repairing and insuring terms; the hereditament is assumed to be in a state of reasonable repair, but excluding any works which a reasonable landlord would consider uneconomic (Part 2 of Schedule 6 to the Act). 
55.	Second, and of more relevance in this case, there is an assumption that the hereditament is vacant and to let.  The business is assumed to have ended, and any process machinery has been removed (Fir Mill and Edmondson). 
56.	The process machinery that is assumed to have been removed is that which is not valued as part of the hereditament (The Valuation for Rating (Plant and Machinery)(England) Regulations 2000).
57.	It is not in dispute in this appeal that the gantries do form part of the hereditament, as does the cooling room (although there is a question of the date of their installation).  However all of the other brewery equipment is assumed for the purpose of the valuation to have been removed.
58.	Therefore the appeal property should be assumed to be vacant and to let, with some gantries in the main space, a cooling room, and with a (not particularly large) drainage channel in the floor of both the main space and the cooling room.  The visitor centre, ground and first floor offices are all to be assumed to be as they are in reality.
59.	Some further assumptions are required to be made. Matters affecting the physical state or physical enjoyment of the hereditament, and the mode or category of occupation of the hereditament, are to be assumed to be as they were on the material day (Part 2(6),(7)(a) and (7)(b) of Schedule 6 to the Act).
60.	The making of minor alterations of a non-structural nature may be contemplated, provided that they are of a nature which would be undertaken by a hypothetical occupier wishing to occupy the hereditament for the same mode or category of user.  The test is whether the works in question are, as a whole, minor (Williams (VO) v Scottish and Newcastle Retail at paragraphs 52 and 74).
61.	Before dealing with these assumptions it is convenient to make some general comments about the comparable evidence and the method of valuation.  On balance, I am satisfied that the appeal property should be valued having regard to the local industrial rental and settlement evidence, and not by way of a contractor’s basis or receipts and expenditure basis. Rental evidence should always be preferred, if sufficient is available.
62.	In my judgement the VO’s schedule of brewery evidence across the country, the vast majority of which was valued by reference to local rents, was compelling.  The two breweries that were valued by reference to a contractor’s basis were specialised brewery buildings, in at least one case seemingly purpose built, and of a scale and nature which meant it would be very difficult to envisage them being used for anything else.  That is not the case in respect of the appeal property, in my view.
63.	A receipts and expenditure basis would be more difficult to apply because the appeal property is assumed to be vacant and to let and business is assumed to have ended. In my judgement the likely hypothetical tenant would not, on balance, make his or her rental bid by reference to a price per barrel, or having regard to beer duty or similar matters, would make a rental bid having regard to the levels of rent, and available properties, in the locality.
64.	That is precisely what the appellant did at the time it took occupation.
65.	Having made these findings, the mode or category of occupation becomes less critical in this particular case.  On either an industrial basis or as a brewery, the property would be valued having regard to local industrial values.  In fact, on the evidence, in my judgement the mode or category of occupation is as a brewery and not as an industrial unit.  I am not persuaded by the VO’s contention that a brewery falls within Class B2 of the Use Classes Order – planning is not in itself determinative of mode or category of occupation.
66.	In respect of the physical characteristics of the appeal property, I do not agree with the appellant’s contention that the building should be assumed to be unheated.  Mr Anderson accepted in answer to a question from me that there were warm air blowers in the main space.  The fact that they were unused was owing to the appellant’s gas requirements, but the property is assumed to be vacant, and I am satisfied that the hypothetical would require heating and that it would not be too great a trial to reactivate the heaters which are assumed to be in repair.   There is also no evidence in support of the appellant’s contention that the building was not insulated.  From my inspection, I found the property to be of standard industrial design and I am satisfied that, on balance, the steel sheet clad roof does have insulation within the sheets.  
67.	In respect of the Moorhouse Brewery, which Mr Anderson relies upon, I do not consider that an analysis of the assessment assists him.  It has been valued having regard to industrial values local to the property.  The upper floor production areas have been discounted from the main space rate, which is a conventional method.  Ground and first floor offices, which are described as being of superior quality and specification, have been valued by adding 20% to the main space rate. Again, this is conventional, and similar to the way in which the appeal property has been assessed.  
68.	I now consider the available evidence, and in doing so I have had regard to the Tribunal’s guidance in Lotus & Delta.   
69.	First, the rental evidence on the appeal property itself.  The evidence on this topic was not wholly clear.  It is not in dispute that the contractual rent under the lease dated 26 April 2007 was £61,000, which was to take effect from September of that year, after a five month rent-free period.  It is a fact that the appellant freely entered into that lease.    
70.	It seems that the headline rent was reduced in various ways, some being grants to the appellant, some being rent holidays, and some being rent concessions that were required to be repaid over time.  A complete picture is not available from the evidence.  The rental concessions granted to the appellant may have been personal to them, and in my judgement largely related to the appellant’s ability to afford the headline rent.  Rateable value is not usually concerned with one particular occupier’s ability to pay rent.  This would only be the case when the market for a hereditament was very restricted, and I am not persuaded that, vacant and to let, that is the case for the appeal property.  I therefore place no weight upon the rental level of £36,000 per annum.  However the concessions are sufficient for me to have some doubt about the reliability of the headline rent as evidence of value. It must therefore be considered in the light of other available rental evidence.
71.	The rental evidence provides a mixed picture. The most comparable evidence, in my view, would be the other three transactions on Gadwall Road. However these show Unit 3 and Unit 2 at £46.22 per m2 (May 05) and £47.53 per m2 (Sep 07), but Unit 4 at £37.14 per m2 (Oct 09).  It is conceivable that the market contracted post 2008 but no evidence was submitted by either party to that effect.  Mrs Smith thought that Gadwall Road was superior to the Rainton Bridge Industrial Estate, and yet the only rental transaction on that estate – the Chemviron letting – showed £57.23 per m2 in July 08, albeit for a small unit.
72.	Mrs Smith considered Gadwall Road to be a comparable location to Washington, but again there the evidence is patchy, at £42.77 (April 06) and £36.11 per m2 (June 11).  In my judgement, the units at Washington are in a marginally better location, with superior access to the main road network.
73.	I now consider the settlement evidence.  Again, I turn first to Gadwall Road.  The assessments of units 2, 3 and 4 were not appealed.  They analyse at £31.00, £33.50, and £29.00 per m2 respectively.  The subject assessment, by contrast, is based on £39.00 per m2.  On the face of it, in comparison with its neighbours, that seems high.  Mrs Smith told me that the disparity was because of the small size of the appeal property, and that there would be more demand for it, but there was nothing in the evidence in support of that contention.
74.	The Chemviron unit is assessed at £36.00 per m2, and the two units at Washington at £39.00 and £32.45 per m2.  Mrs Smith’s other settlement evidence was in the range of “£32.99” to £39.00 per m2, with the latter being on two withdrawn appeals on Bentnall Business Park at Washington, which I have indicated is in a marginally better location in my view.
75.	I have considered the matter by analysing the evidence for properties where there is both rental and assessment evidence.  Including the appeal property these are as follows:
Unit	Rent per m2	RV rate per m2	
Appeal Property	£37.30	£39.00	
Unit 2 Gadwall Road	£47.53	£31.00	
Unit 3 Gadwall Road	£46.22	£33.50	
Unit 4 Gadwall Road	£37.14	£29.00	
Chemviron, Mercantile Way	£57.23	£36.00	
Cannon Transport, Glover IE, Washington	£42.77	£39.00	
Units 3A/3B, Glover IE, Washington	£36.11	£32.45	
76.	Even a cursory glance at the table suggests that the assessment of the appeal property might be too high.  It is the only property where the rateable value rate exceeds the rental rate per m2.  The others are lower by quite a margin.  As indicated above, the headline rent of £61,000 per annum, upon which £39.00 is based, may not be wholly reliable.  However in my judgement it is, if anything, too high rather than too low.  Any reduction in the rent would exacerbate the discrepancy in comparison with the above comparables.
77.	I do not derive any assistance from the Rainton Bridge Arena, as its method of valuation is not comparable. I am satisfied that the best comparables are the other three units on Gadwall Road, which are of very similar age and inherent specification.  Where then, should the appeal assessment sit in relation to its neighbours?  Mrs Smith was unable to shed any light upon a quantum scale, but there seems to me to be a correlation between size and rate on the assessments of the other three Gadwall Road units.  
Unit	Gia (m2)	Rate per m2	
4	6,503	£29.00	
2	4,367	£31.00	
3	2,814	£33.50	
78.	Based on the above, in my judgement the appropriate basic rate for the appeal property should be £35.00 per m2.  
79.	In terms of the parties’ competing floor area breakdowns, I prefer that of the VO.  It is consistent with the devaluation of the comparable assessments, and to depart from it would not be to value as you devalue.  I also accept Mrs Smith’s additions for better specification and air-conditioning.
80.	There is, however, a discrepancy in respect of the gantry and the cold store.  Mrs Smith accepted in the hearing that these were not installed until October 2010.  I can only deal with the appeals before me – those of the assessment at 1 April 2010, and the MCC at 1 October 2012.  It therefore follows that the valuation as at 1 April 2010 should not reflect the gantry and cold store, but the agreed reduction of 10% as at 1 October 2012 should be from a valuation that does reflect them.  
81.	Finally, I deal with the issue of an end allowance.  Having inspected the appeal property, I am satisfied that an end allowance for the configuration of the building within the site is appropriate.  I make no criticism of Mrs Smith for removing the end allowance, but I think she was wrong to do so.  I therefore reinstate the original end allowance of 3%, which was loosely described in the compiled list assessment as being for “layout”.
82.	Accordingly, in respect of the substantive appeal, with effect from 1 April 2010, my valuation is RV £52,000.  In respect of the MCC appeal with effect from 1 October 2012, following the parties agreed 10% deduction, but reflecting the cold store and gantry, my valuation is RV £48,500.  Both valuations are outlined in the Appendix to this Decision.
83.	The VTE’s decision was to increase the assessment from the existing compiled list figure, and therefore took effect from the date of its decision.  That is not now the case, as the assessment is being reduced from £57,500 to £52,000, which takes effect from 1 April 2010.
Disposal
84.	I therefore direct that the appeal property shall be entered into the non-domestic rating list with a description of “brewery and premises” at a rateable value of £52,000 with effect from 1 April 2010, and at a rateable value of £48,500 with effect from 1 October 2012.
Costs
85.	At the conclusion of the hearing, Mr Spencer submitted that should the Valuation Officer succeed in resisting the application, the applicant should be responsible for at least a proportion of the VO’s costs. The appeal has succeeded in part, and therefore I make no order for costs. I would add, however, that had the appeal been unsuccessful, there was nothing in the applicant’s conduct of the case which I found to be unreasonable behaviour that would cause me to depart from the general no costs rule in simplified procedure cases.  
86.	Equally, in my view there is nothing in the applicant’s assertion that Mrs Smith contending for a higher rateable value at the VTE than the compiled list assessment was vindictive.  She should not be criticised for complying with her statutory responsibility.

							Dated 20 March 2015

							
							P D McCrea FRICS

Appendix
Valuation as at 1 April 2010
Floor	Description	Area (sqm)	£/sqm	Value (£)	
					
Ground 	Production Area	996.38	 £   35.00 	£34,873.30	
Ground 	Production Area	86.5	 £   35.00 	£3,027.50	
Ground 	Office	156.7	 £   38.50 	£6,032.95	
First	Office	85.6	 £   38.50 	£3,295.60	
Ground 	Office	42.8	 £   38.50 	£1,647.80	
First	Office	113.9	 £   42.35 	£4,823.67	
					
				£53,700.82	
					
End Allowance of 3% for layout				-£1,611.02	
					
				£52,089.79	
					
		(say)	RV	£52,000	

Valuation as at 1 October 2012
Floor	Description	Area (sqm)	£/sqm	Value (£)	
					
Ground 	Production Area	996.38	 £   35.00 	£34,873.30	
Ground 	Cold Store	86.5	 £   38.50 	£3,330.25	
Ground 	Office	156.7	 £   42.35 	£6,636.25	
First	Office	85.6	 £   42.35 	£3,625.16	
Ground 	Office	42.8	 £   42.35 	£1,812.58	
First	Office	113.9	 £   46.59 	£5,306.03	
					
Plant and Machinery				£188.00	
					
				£55,771.57	
					
End Allowance of 3% for layout				-£1,673.15	
					
				£54,098.42	
					
Less 10% for flooding				-£5,409.84	
					
				£48,688.58	
					
		(say)	RV	£48,500