An appeal against the 2010 rating list values for two art galleries and a museum based on an assessment of their socio-economic value has failed in Allen (VO) v Tyne & Wear Archives and Museums [2022] UKUT 206 (LC); [2022] PLSCS 130.
The appeal related to the Laing Art Gallery in Newcastle, the Shipley Art Gallery in Gateshead and the South Shields Museum, all run by the respondent on behalf of the local authority. The Valuation Tribunal for England determined each of the assessments at a nominal level in accordance with the leading authorities on the valuation of museums for non-domestic rating purposes: Hughes (VO) v Exeter City Council [2020] UKUT 7 (LC) and Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 200 (LC).
Schedule 6 of the Local Government Finance Act 1988 provides that the rateable value of a non-domestic hereditament is equal to the rent at which the hereditament might reasonably be expected to be let from year to year on 1 April 2010 with regard to the antecedent valuation date of 1 April 2008, assuming a reasonable state of repair with the tenant paying all usual rates, taxes and expenses.
The best evidence of rental value is comparable rents, but where there is no rental market alternative methods include the receipts and expenditure method, which ascertains a net profit from running the business which is then apportioned between the tenant as a return on capital and profit and the landlord as rent for an annual tenancy. It is this approach which was adopted in the York Museum and Exeter Museum cases, producing a negative figure.
None of the three museums charged for admission and all operated at a deficit. In each case there was only one tenant in the market, the actual occupier, and it was agreed that the receipts and expenditure valuation yielded a nominal return.
The appellant argued that assessing the non-financial benefit to the public of museums and their economic value to the public authorities – the socio-economic value – was measurable and yielded a positive value for all three properties. It adopted various methods, including guidance for museums seeking finance provided by the Arts Council for England and a toolkit provided by the Association of Independent Museums to estimate their economic impact in order to attract grant funding, as well as analysis based on a percentage of gross receipts and the museums’ requirement for storage.
The tribunal rejected the appellant’s valuation evidence. While it accepted that the local authorities were not insolvent at 1 April 2008 and could have paid a rent, that did not mean that the hypothetical tenant would have agreed to do so. There is no methodology available to translate the specific value of a museum to the public into value to its local authority, and no methodology to translate that value into willingness to pay any rent at all, let alone how much, on the part of the local authority. The Valuation Tribunal for England was correct that there was no material on which it could use anything other than the receipts and expenditure method, which generated a nominal rateable value.
Louise Clark is a property law consultant and mediator
