Equality of assessment revaluation, tone of the list and ... · rebus sic stantibus ... Is either...

Equality of assessment –

revaluation, tone of the list and

rebus sic stantibus

Patrick Bond BSc FRICS Dip Rating IRRV (Hons)

Head of Commercial, Leisure and Civics

National Specialists Unit

Chief Executive’s Office,

Valuation Office Agency, UK

Equality of Assessment - Dublin 2012

Equality of assessment – outline

Purpose of Rating

Annual Value

Equality - the golden rule

A spanner in the works

Revaluation

Tone of the List

Rebus sic stantibus


Purpose of Rating

Raising money – it’s a tax!

Principles of a good tax Fairness

Cost

Convenience

Certainty

Raising taxes equitably

Basis is a rateable sharing of the burden

So it is not about absolute values but relativity between ratepayers


Poor Relief Act 1601

Our common origin is the 1601 Act

“And also to raise weekly or otherwise (by Taxation of every Inhabitant, Parson, Vicar and other, and of every Occupier of Lands, Houses, Tithes impropriate, Propriations of Tithes, Coal-Mines, or saleable Underwoods in the said Parish, in such competent Sum and Sums of Money as they shall think fit) a convenient Stock of Flax, Hemp, Wool, Thread, Iron, and other necessary Ware and Stuff, to set the Poor on Work “


Annual Value

Why annual value?

The 1601 Act said ‘weekly or otherwise’

‘the obvious basis was the value of the occupation and the obvious measure of that value was its annual value or rental value or rent.’ Amies, Banks & Calvocoressi 1965

In modern world an unusual measure – UK, Ireland, Hong Kong, Malaysia

Most countries use ownership and capital value

And there is also Site Value Rating (Land Value Taxation)

Which is better?


Rental v. Capital Value

Is either approach a best way?

Probably best to choose on the basis of

what type of evidence is most common in

the jurisdiction.

Are most transactions rental or capital

value?

As valuers need evidence for accurate

valuations, then adopt the approach where

there is the most evidence


Rental v. Capital Value

Rentals Capital Value

Annual tax so annual basis

Focuses on occupier – makes tax visible and

spreads the burden wider

Tax liability is on the owner (who ultimately pays

either way)

Paid by the occupier so one assessment per

occupier – clear connection of property to payer

Paid by owner so assessments determined by

patterns of ownership therefore extensive estates

e.g. a shopping mall may have one assessment

only.

Susceptible to short term changes in (annual)

value. More potential for list alterations and

appeals

Longer term view – no problem with small term

MCCs

Taxes current use not potential use Can tax potential use though this depends on

definition. May value ‘highest and best’ use

Some capital values arrived at from rentals –

income capitalisation approach – so why not stay

at rental value?

Some properties are never let

Easier to find occupiers than owners Avoids subtle and rate avoidance arguments

about a property having a capital value but no or

very little rental value


Equality – the Golden Rule?

Equality of assessment is not mentioned in the 1601 Act but it is implied

R v Clerkenwell 1715 - a rate was set aside because it was not equal.

Poor Relief Act 1747 - a ground for appeal was whether the rate was equal

R v Mast 1795 - a rate was quashed because some occupiers who had improved their properties were still assessed on the unimproved value "Whatever be the proportion of rating in a parish, whether to the full value or

otherwise, the rate must be equally made on all persons" Lord Kenyon C J

Perhaps "equality" is better described as "uniformity" or "fairness" but what is meant is "equality of treatment“

Poplar Assessment Committee v Roberts 1922 - House of Lords said "equality of rating is and should be one of the main objects of all rating

systems"

So the important thing seems to be equality. To achieve that all assessments must tie in together Indeed the logic would seem to be that it is more important that they tie

together than individually being correct


A Spanner is thrown!

Ladies Hosiery and Underwear v West Middlesex Assessment Committee 1932 House of Lords

Correctness must not be sacrificed to uniformity

Re-affirmed in K Shoes v. Hardy (VO) 1983

So equality is not the important thing after all! Correctness is the primary test

BUT of course equality of assessment must be a goal of property taxation. That is how you achieve fairness

Correctness before uniformity: because correctness is the only way of ensuring true uniformity


Accurate Lists

In England and Wales valuation officers are charged with preparing and maintaining accurate lists Lists which must be both correct and uniform (uniform because they

are correct)

VOs, therefore, are very interested in ensuring equality of treatment and ‘tone of the list.’

Assessments need to tie up and stand together otherwise one (or both!) must be wrong

Rating valuation is therefore not the same as other valuation disciplines because the interests of both the state and the ratepayer are in equality of treatment through correctness The state wants everyone to be fairly treated

Whilst the ratepayer may wish to be under-assessed, he certainly does not wish his neighbours to be!

Uniformity was the reason for the UK Valuation Office taking over valuations for rating in England and Wales in 1950


Revaluation

Need for revaluations

Frequency around the world

Purpose

to restore up to date relativities and

make the values more understandable to ratepayers

Not normally to raise more money but redistribute the burden

Relative movements at revaluation

"Rateable value is based on market rents. These usually vary, sometimes considerably, and it is often difficult to find a general pattern. When preparing a rating list the valuation officer is required to value each property individually and to have regard to the underlying principle of uniformity and equality. Although rents may vary greatly assessments must show a uniform pattern. This has led to assessment by the use of common unit figures for classes of hereditament and location with individual adjustments to reflect the characteristics of each property.“ O'Brien v Harewood (VO) [2003] RA 244


What exactly is correctness?

Kimbells Ltd v Payne (VO) 1954 46 R & IT 255

Shop

Ratepayers conceded £350 achievable but Lands Tribunal determined at £250

What did correctness mean in Ladies Hosiery?

Other assessments can be considered because they are "evidence against the valuation officer in the nature of an admission“ – Tone of the List

Followed these but not some obviously low streets’ assessments

"To relieve unfairness by reducing the assessment to make it uniform with those incorrect assessments would be in conflict with the decision of the Ladies Hosiery"


Tone of the List

Once a rating list comes into force the valuation officer will seek to establish "the tone of the list"

Use of rents - to confirm or establish a level of assessment

Once this general level has been established it will no longer be necessary to prove value by reference to rents, but rather by reference to agreed assessments or assessments determined by tribunals "tone of the list" the level of values established in a rating list

"valuation officer's tone" the levels of value used by a valuation officer in compiling a new list

"settled tone" may be used to refer to the level of values which later becomes settled either by agreement with ratepayers or by acquiescence.


K Shoes v. Hardy (VO)

Three stages leading to the establishment of a tone of the list: 1. "At first, when the list is put on deposit, the

assessments carry little weight: they are opinions of value by the valuation officer, as yet unchallenged and untested by negotiation and determination

2. As time passes more and more assessments are agreed or determined by valuation tribunals or this Tribunal.

3. Finally, a stage is reached when enough assessments have been settled or are unchallenged to establish a pattern of established values, "a tone of the list"


When does tone get settled?

Marks v. Easthaugh (VO) [1993] RA 11 - beach huts

VO said there was a volume of settled assessments = a settled tone

LT said VO's view that there was a volume of established assessments which had acquired weight as evidence of accepted values rested on a very narrow foundation as settlements reached with a single surveyor acting for the local authority. In the LT's view this agreement with the occupiers 'would appear to be essentially acquiescence by lay persons in a settlement reached by two professionals.

J E Clark v Rodgers (VO) [1994] RA 169 - Warehouse

LT found a tone of the list was not established. Only three RVs of close comparables had been agreed, which whilst possibly helpful, did not produce a clear pattern of values reflecting quality of accommodation and did not indicate an established tone.

Specialeyes plc v. Felgate (VO) [1994] RA 338 - shop

Both parties accepted that the date of the hearing was the correct date for ascertaining whether a tone of the list was established.

Waltham Forest LBC v. Andrews (VO) [1996] RA 155 - 13 public car parks

The VO relied on the evidence of agreed assessments on public car parks in other London boroughs. LT did not find a settled "tone of the list" in each of these other areas. Local authorities had in each area instructed a single firm of surveyors to act for them and consequently the agreements and level of assessment had not been tested in negotiation with a number of firms of rating surveyors and in only one case had an appeal been heard by a valuation tribunal


Correctness v. Uniformity

Correctness but with a very careful aim

for equality of assessment – assessments

should be uniform and equal

The goal is a list of values that bear

proper relativity one to another, that can

be checked and compared one to the

other and represent open market rental

value at the valuation date


Rebus Sic Stantibus

How are you actually going to value to

annual value?

Is it actually a valuation at a set date of the

property?

Not actually looking at dates today

Highest and best use or a careful regard to

actual use?

Rebus sic stantibus – current use value really


Origins

R v. Mast (1795) 6 T.R.154

The rate was quashed because some of the occupiers had improved their properties but were still rated as if they had not been improved.

"Every inhabitant ought to be rated according to the present value of his estate, whether it continue of the same value as when he purchased it, or whether the estate be rendered more valuable by the improvements which he has made upon it." Lord Kenyon C. J.

R v Everist (1847) 16 L.J.M.C 87

A brickfield with the occupier seeking to have it rated as agric. la

"Now, neither of the appellant's modes are correct...They were in effect to rate land occupied in one mode, as if it were occupied in another; the modes producing different rates of profit, and commanding different amounts of rent, than which nothing can be more unreasonable." Lord Denman


Rebus Sic Stantibus

Fundamental principle taking the thing as it is – as things stand

Two limbs only minor physical changes can be envisaged

the mode or category of occupation cannot be altered

Rateable value is, therefore, a current use value disregarding any possible additional value which might exist due to the potential to enlarge or significantly modify the property or change the mode or category of use.


Mode or category of use

Fir Mill Ltd v. Royton UDC & Jones (VO) 1960 LT

the LT held that a cotton mill must be valued as a factory rejecting the ratepayer's contention that it should be valued merely as a cotton mill & the VO’s contention that it should be valued without limitation on user.

'The mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house; a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory'.

Williams (VO) v. Scottish and Newcastle and Allied Domecq 2001

Court of Appeal confirmed correctness of this statement


Midland Bank v. Lanham (VO) 1978 RA 1

'.... all alternative uses to which the

hereditament in its existing state could be

put in the real world, and which would be

in the minds of competing bidders in the

market, are to be taken as being within

the same mode or category, where the

existence of such competition can be

established by evidence'. REJECTED

in Williams v. Scottish and Newcastle


Physical changes

Any value attributable to the prospect of making substantial physical changes is to be ignored.

The hereditament is valued as it is.

The prospect of erecting an extension to a building or making new entrances are the sorts of change which cannot be envisaged when valuing for rating purposes.

Fir Mill Ltd v. Royton UDC & Jones (VO) 1960

'Some alteration to a hereditament may be, and often is, effected on a change of tenancy. Provided it is not so substantial as to change the mode or category of use, the possibility of making a minor alteration of a non-structural character, which the hypothetical tenant may be assumed to have in mind when making his rental bid, is a factor which may properly be taken into account without doing violence to the statute or to the inference we draw from the authorities'.


Minor physical changes

For many years valuers have taken the words

"non-structural character" to mean any

structural alteration even if minor had to be

disregarded. In Williams v. Scottish and

Newcastle the Court of Appeal preferred simply

to look at whether the proposed alterations

were "minor" rather than making a difficult

distinction between minor structural and non-

structural works.


New Ross Tanning Co. Ltd v. Commissioner

of Valuation (1961) IR Jur Rep 13

Premises specially constructed as a tannery. Sloping floors and special walls open to admit air to aid drying

Clear that without costly alteration the premises were only suitable as a tannery

Vacant and no rental offers (but an offer to purchase was refused)

Held – Sale value does not necessarily include letting

value

Premises currently unlettable and have no rental value


What about planning?

"While it is perfectly true that the Town & Country Planning (Use Clauses) Order under the Town Planning Acts is a modern innovation compared with the age of rating law, it has stood of course now for many years as a generalisation. We think it is a useful guide- but we put it no higher – in deciding what other uses can be taken into account.’ LTE v Croydon LB & Phillips (VO) [1974]

"the existence of planning restrictions and the necessity of obtaining planning permission for certain changes of use are all factors which affect the minds of potential tenants in the real world, and to that extent they must have an influence on value. But the interpretation of these factors remains a matter of evidence and of expert valuation evidence.“ Midland Bank v Lanham (VO) [1978]

Both parties agreed in the Milton Keynes case that planning use cannot be determinative of mode or category of occupation


Disrepair

An exception to Rebus

Definition of RV in England & Wales requires the assumption that ‘immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic’

This assumption overrides rebus


Equality of assessment – outline

Purpose of Rating

Annual Value

Equality - the golden rule

A spanner in the works

Revaluation

Tone of the List

Rebus sic stantibus

Fairly to raise money

A measure of relative worth

Uniform & equal

Uniformity through

correctness To maintain

fairness Uniformity again

A uniform standard


QUESTIONS?

Equality of assessment revaluation, tone of the list and ... · rebus sic stantibus ... Is either...

Documents

Transcript of Equality of assessment revaluation, tone of the list and ... · rebus sic stantibus ... Is either...