Planning and Environment Committee v Parish Rate Appeal Board

JurisdictionJersey
CourtRoyal Court
JudgeBirt, Deputy Bailiff:
Judgment Date18 December 2000
Date18 December 2000
ROYAL COURT
Birt, Deputy Bailiff:

Miss S.C. Nicolle, Q.C., Solicitor General, for the Committee;

Miss N. Langlois for the Board.

Cases cited:

(1) Dawkins (Valuation Officer) v. Ash Bros., [1969] 2 A.C. 366; [1969] 2 All E.R. 246; (1969), 113 Sol. Jo. 345; 67 L.G.R. 499, followed.

(2) Jersey New Waterworks Co. Ltd. v. Grouville Rate Assessment Cttee., 1994 JLR 197, followed.

(3) Metropolitan Water Bd. v. Chertsey Union Assessment Cttee., [1916] 1 A.C. 337, considered.

(4) R. v. South Staffs. Waterworks Co. (1885), 16 Q.B.D. 359, considered.

Additional cases cited by counsel:

Fields (née Harvie-Smith), In re, 1998 JLR 359.

Kingston Union Assessment Cttee. v. Metropolitan Water Bd., [1926] A.C. 331.

Port of London Auth. v. Orsett Union Assessment Cttee., [1920] A.C. 273.

Legislation construed:

Parish Rate (Administration) (Jersey) Law 1946, Second Schedule, para. 1, as substituted by the Parish Rate (Administration) (Jersey) Regulations 1991 (R. & O. 8194), reg. 1: The relevant terms of this regulation are set out at page 445, lines 31-42.

Rating and Valuation Act 1925 (15 & 16 Geo. V, c.90), s.22(1)(b): The relevant terms of this paragraph are set out at page 446, lines 1-8.

Texts cited:

Joint Professional Institutions' Rating Forum, Guidance Note to the contractor's method, para. B10 (November 1995).

Rees, Valuation: Principles into Practice, 4th ed., at 374 (1992).

Ryde on Rating, 9th ed., paras. 226-227, at 237-239 (1950).

Parochial Administration—rating—valuation—method of valuation—proper method for assessing building land is rent reasonably expected if let from year to year as open land, taking into account any permitted use capable of immediate implementation—contractor's method of valuation not appropriate

Parochial Administration—rating—valuation—"let from year to year" in Parish Rate (Administration) (Jersey) Law 1946, Second Schedule, para. 1, means lease of indefinite duration but terminable any year upon notice—hypothetical tenant unlikely to pay more than nominal rent on building plot because requires long fixed-term lease for commercial purposes

The Committee sought judicial review of the Board's decisions relating to the rateable value of certain properties.

Three sites intended for building development and under the administration of the Committee were assessed to rates by the Board. In each case, in the absence of any comparable rental figures, the Board applied a variation of the contractor's method to determine the rental value of the sites. This entailed taking an estimate of the value of the land, including any amount attributable to future development potential, and calculating a return by reference to the amount the owner would otherwise have earned had he invested his funds in other assets, which was taken to be 4%.

The Committee sought judicial review of the Board's decision in relation to each of the properties on the basis that it had erred in law in applying the contractor's method. By consent, the Master ordered, pursuant to r.7/8(1) of the Royal Court Rules, that the court determine as a preliminary issue what was the correct method for assessing the rental value of a plot of land intended for development.

The Committee submitted that (a) the varied contractor's method used by the Board was not the correct approach, as it assessed property on the basis of its possible future use; (b) the correct approach was to make an assessment on the basis of its current use, if any, or else at a nominal level, as being the actual rent that a tenant would be willing to pay; and (c) no tenant would be willing to pay rent on building land on a year to year basis (as required by the Parish Rate (Administration) (Jersey) Law 1946) since he would require a long lease to be certain of recouping his investment.

The Board submitted in reply that (a) some variation of the contractor's method had to be used in relation to building plots as no comparable rental figures could be acquired and no other calculation methods were suitable; (b) in applying this method, the estimated value of the land should be taken into account, including any amount attributable to future development potential, and the return should be deemed to be that which the owner would have made had he invested his funds in other assets; and (c) land should only be treated as a building plot for rating purposes once there was a clear intention to develop it, manifested by some visible physical signs and preparation of an application for development permission.

Held, determining the preliminary issue as follows:

(1) A varied contractor's method was not the correct one for calculating the rental value of land intended to be used for building purposes. A property had to be assessed on the basis of its current state, and any variation of the contractor's method—which was only a method of last resort when other approaches to valuation were inappropriate—could only properly be used where there was an existing building with an existing use and where comparable rentals were not possible. The respondent's approach was inconsistent with this approach as it took into account the possible future use of the land, which was not permitted by the 1946 Law (page 445, line 29 - page 446, line 12; page 450, line 28 - page 451, line 11).

(2) The correct procedure was that, at January 1st in the material year, the rental value of a building plot was to be assessed on the basis of the rent the land might reasonably be expected to command if it were let from year to year as open land, but taking into account any permitted use capable of immediate implementation. It was the current permitted use which was relevant. Thus, planning permission already granted for the use of a plot for particular commercial purposes should be taken into account, as a prospective tenant would have regard to the income potential of such purposes, even if they were not being pursued by the owner at the time. If no planning permission had been granted, the rental value would have to be assessed by reference to the existing use, e.g. open or derelict land (page 451, lines 12-30).

(3) For the above purposes, the expression "let from year to year" used in the 1946 Law would be taken to mean a lease of indefinite duration but terminable by the landlord at the end of any year upon notice. This emphasized the inappropriateness of trying to use any variation of the contractor's method to assess the rental value of building land. A rental calculated on a "year to year" rental basis would probably be insignificant, because no prospective tenant of a building plot would ever agree to pay a significant rent for an annual lease under which he would be expected to make major capital investment, yet which could be terminated in any year with the loss of that investment. He would require a fixed-term lease of some length to ensure the recovery of his investment in the development. Nevertheless, it was for individual Assessment Committees, with guidance from the Board, to decide how much a hypothetical tenant might reasonably be expected to pay in rent (page 453, line 16 - page 454, line 20; page 454, line 37 - page 455, line 16).

BIRT, DEPUTY BAILIFF: This case raises a question as to the correct method of assessing the rental value for the purposes of the Parish Rate (Administration) (Jersey) Law 1946 ("the 1946 Law") of a plot of land intended for development.

The background On a date which does not appear from the papers, the Chairman of the Supervisory Committee issued a statement to the effect that, in accordance with legal advice provided to the Parish Rate Appeal Board ("the Board") in 1997, building sites would, from 1998 onwards, be assessed using "the contractor's method," with assessors applying a net return of 4%. The legal advice referred to was an opinion by Advocate J.D. Kelleher, dated June 20th, 1997.

In 1998, three sites, owned by the public of the Island and under the administration of the Planning & Environment Committee ("the Committee"), were duly assessed to rates on the basis of the contractor's method. These were fields 91, 91(a) and 92, Belle Vue, St. Brelade ("Belle Vue"), Highbury House, St. Saviour ("Highbury House") and Stranton, St. Saviour ("Stranton"). The rental value attributed to these three properties was £192,000, £5,000 and £4,848 respectively.

The Committee appealed to the Board against these assessments on the grounds that it was wrong in law to use the contractor's method. In decisions dated July 24th, the Board maintained the assessments in respect of Belle Vue and Stranton and increased the rental value of Highbury House to £6,400. In each case, the Board applied the contractor's method by taking the price paid for the relevant property by the Committee and applying a return of 4%. By way of example, the price paid for Belle Vue under the provisions of the Compulsory Purchase of Land (Procedure) (Jersey) Law 1961 was £4.8m. The annual rental value was therefore assessed at 4% of this figure, namely £192,000.

On March 23rd, 1999, the Committee brought a representation seeking judicial review of the decision of the Board in relation to each of these properties on the basis that the Board had erred in law in applying the contractor's method.

On July 20th, 2000, by consent, the Master of the Royal Court ordered, pursuant to r.7/8(1) of the Royal Court Rules, that the court determine as a preliminary issue the following questions of law:

"Whether land used or intended to be used for the construction of buildings or any other structures should be assessed for rate under the provisions of the Parish Rate (Jersey) Law, 1946 [sic] (a) using a variation of the 'contractor's method,' formulated as follows:

'If a plot of land used or intended to be used for the construction of buildings or other structures were not available to rent, then a prospective developer/investor would have to...

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