Case notes for rating valuation

Garton v Hunter (1969) - the method of valuation

A caravan site, 33.7 acres, with a ‘Martello Tower’ (an ancient defensive structure) and buildings and services ancillary to the 775 mobile caravans parked on the land. Situated at Walton-on-the-Naze, a coastal resort town in north Essex.

The property was subject to the 1960 Caravan Sites Act covering licensing etc. It was leased by the owners to Mr Garton for seven years from 1958 at a rent of £1000 rising to £3000 for the last four years. Mr Garton carried out substantial improvements, but, under a surrender and renewal in July 1962, the rent became £3000 for the first year and £5000 thereafter (7-year lease).

The ratepayer’s proposal dated 1 April 1963 fixed the date of valuation:

Local Valuation Court (pre-VT) assess at RV £8,700 on 6 May 1965.
Ratepayer’s appeal led to LT decision 12 October 1967.
Case remitted following statement of case to Court of Appeal.

At the first LT hearing, the ratepayers argued for a contractor’s test and supported it with the rent paid. The VO argued for a profits test. The LT, following Robinson Bros v Houghton and Chester-le-Street AC, felt bound to allow only the rent paid, which was adjusted for the surrender to £5,700.

The Court of Appeal, however, rejected the restrictive view of the Lands Tribunal, holding that all evidence should have been considered. Although direct evidence of the rent paid was important, indirect evidence should also have been admitted. The fact that such evidence was indirect affected the weight of such evidence, but not its admissibility.

The Tribunal at the re-hearing considered all three approaches to valuation. The rental approach produced £8,040, being the actual rent of £5,000 adjusted for the surrender by the lessee of valuable rights under the former lease. The contractor’s approach produced £8,100. Both these valuations caused considerable arguments on their constituent parts.

The profits test produced by Mr Hunter, the VO, attracted relatively little criticism. The main income was the site rents of the caravans at £30,225; wages and expenses accounted for £11,050; with the balance going to rates, rent, and the tenant’s share. The final result, after some adjustment to the latter, was £8,017 RV.

Of the three valuations, the LT favoured the last, ie the profits test, since it offered the least margin of error in this case. The rent paid was not a rack rent, freely negotiated, but was substantially affected by the tenant’s existing interest including improvements. The property was not of a type suited to the contractor’s test.

This article was created by --University College of Estate Management (UCEM) 17:06, 6 December 2012 (UTC)