Part 9: Rental evidence: Part 9A: Considering evidence (hierarchy and tone)
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
Executive Summary
considering evidence, selecting evidence, rebus sic stantibus, selecting rents, quality of evidence, new lettings, reviewed rents, admissability of evidence, weight of evidence, (Robinson Brothers (Brewers) Ltd v Houghton & Chester-le-Street Assessment Committee, Garton v Hunter), Heirarchy of evidence (lotus & Delta v Culverwell VO & Leicester City Council, Hodges v Howells), Rents before and after AVD, establishing tone (Specialeves PLc v Felgate VO, Marks Trustees of TN Marks (Dec’d) v Grose VO, Jafton Properties Ltd v Prisk VO, O’Brien v Harwood, Futures London v Stratford VO )
RENTAL EVIDENCE
In considering the rental evidence regard must to be had to the statutory basis for valuation, namely the rent that is considered reasonable to expect for the hereditament as it physically stands at the material day on a yearly tenancy.
The basis of valuation is set out in Paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988 (as amended).
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—
1) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;
2) the second assumption is 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;
3) 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.
This requires an assumption that the hereditament is vacant and available to let on the
above statutory terms. All evidence should be considered in respect of that and weighed accordingly.
1.1 Selection of Evidence
Only relevant evidence should be presented to the VT. In many cases it will suffice to select a proportionate representative sample of rental and or comparable assessments as evidence. However, it should be considered that for 2017 lists, especially in England, as checks and proposals may be made up to 31 March 2017, it will be difficult for the VO to establish that a tone exists unless there is considerable evidence of settlements and Tribunal decisions. Therefore the evidence provided should be sufficient to be able demonstrate the level of values adopted.
It is essential that a full picture be given, so a caseworker should not select only those rents or comparable assessments most favorable to the VO’s case, but also those at variance. To preserve the impartiality and integrity of the VO, the aim is to give the VT a fair and balanced picture of the relevant evidence upon which it may then base a decision.
The VO’s evidence should therefore be unbiased, independent and objective. The VO will have a duty to the Tribunal as Expert Witness to give truthful, impartial and unbiased advice to the Tribunal at the appeal stage (please see RM Section 5, part 8 for CCA 2017 procedures).
When selecting evidence it is worth considering the relative weight that will be attached to rental and comparable evidence. In some cases there may be little direct evidence available and it will be necessary to consider casting the net for evidence across a wider geographical area, age range or other types of property. In the event that evidence is varied, at Tribunal it may come down to the credibility of the expert witness as to the correct level of value that may apply. (see Go Outdoors v Laura Lacey VO (RA 90 2017))
1.2 Evidence and Rebus Sic Stantibus
Any rent passing on the property to be valued and rents and assessments of hereditaments used for a purpose within the same mode or category of occupation as the hereditament being valued will normally form the best evidence.
This does not however mean that rents and assessments of properties used for another mode or category of occupation are irrelevant. (see Reeves VO v Truro College (2007) RA/74/2005)
The Lands Tribunal stated that all relevant evidence was admissible, and that it was for the valuer to judge the weight to be given to evidence of rents or assessments of hereditaments in other uses. The Tribunal made a comparison with valuers adjusting for different physical and locational characteristics, and commented that valuers should adjust for use in a similar way.
In any rating valuation, if the hereditament is let the rent passing will form the starting point for a valuation - Lotus & Delta v Culverwell (VO) 1976 RA 141. The weight given to the actual rent will depend on how closely it conforms to the terms of the rating hypothesis.
Weight should also be given to rents of comparable hereditaments, but again the degree of weight will depend on how closely the terms match those of the hypothetical tenancy.
One of the terms of the hypothetical tenancy is that the hereditament can only be used for a use within the same mode or category of occupation as the actual use.
The Lands Tribunal gives an example, at paragraphs 140-141, of how evidence from hereditaments in a different mode or category of occupation may be used to assist in the valuation of the subject property. The example refers to an office (in premises built as a shop) in a shopping street; if the evidence from other parts of the street is that offices in former shop premises pay the same as shops and restaurants, the conclusion may well be “that the value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the zone A prices that are established for this part of the street frontage”.
The valuer is still valuing as an office, “but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that a tenant would pay to occupy the subject hereditament as an office”.
However, in the Tribunal’s example it could be argued that the valuer should go straight from the rents or assessments of other offices in the street to the assessment of the subject office.
Whether this is correct will depend on the evidence - if there are a number of offices in former shops, with rents at different levels of Zone A in accordance with changes in retail values in the street, then the conclusion would be that offices pay the same as shops and so the example holds.
If, on the other hand, the answer is that offices pay a consistent level irrespective of the retail Zone A, and that it is just coincidence that in one case the two are the same, then the valuer will apply a level of value drawn from the rents/assessments of offices alone.
It is therefore a matter of what the evidence shows in each case. In some cases this will require a closer investigation of the rental and other evidence than may in practice have been undertaken in the past
1.3 Suitable Rents
Some rents do not lend themselves to the support of a rating valuation. These include:
(a) Rents which do not, or cannot, be made to conform with the rating hypothesis, for example, turnover rents, or rents indexed to the Retail Price Index (RPI)
(b) Connected rents agreed between related persons or companies
(c) Sale and leaseback rents (see John Lewis & Co v Goodwin (VO) (1979) 252 EG 499, 1980 RA 1).
Rents agreed under such arrangements may not reflect open market rental value (OMRV) for various reasons, typically:
(i) Financial arrangement whereby the rent reflects the cost of borrowing rather than open market value (OMV)
(ii) Initial rent is higher than OMV to increase the value of the freehold
(iii) Leaseback essentially a funding operation, with the rent being geared to profitability
Rents which require a great deal of adjustment to make them accord with the statutory definition of Rateable Value.
For example, adjustment may be required to take into account different repairing and insuring liabilities; rent free periods; premiums; stepped rents; improvements; overage; restrictive user clauses or start dates, ie rent set at some time distant from the antecedent valuation date AVD. Generally, the more adjustment that is required the less useful the rental evidence will be.
But it is not a perfect world and it may be that the only available rental evidence will require a lot of adjustment. In such circumstances, the use of such evidence will be unavoidable.
1.4 Quality of Rental Evidence
The quality of rental evidence is dependent upon:
(a) How closely the rented property resembles the hereditament to be valued
(b) How closely the lease terms for the rented property resemble those of the hypothetical tenancy in the definition of rateable value
(c) How close the time the rent was fixed is to the AVD
As a general rule the less a rent has to be adjusted, i.e. the more closely it resembles the rent required by the statutory definition, the more weight it will carry as evidence of likely rateable value.
The reality is that non-domestic property is rarely let on an annual tenancy; responsibility for repairs and insurance is not always as envisaged in the hypothetical tenancy; tenants make alterations and improvements which are not reflected in the rent; landlords grant incentives to secure high headline rents and few rents are likely to have been fixed on the AVD. In rating, a “clean” rent can be rare
1.5 New Lettings
New Lettings are generally regarded as the most reliable category of rental evidence, although the reliability of such rents may be impaired where a lot of adjustment is required.
New lettings provide good evidence because they are freely negotiated between the parties in the open market and hence provide the best indication of open market rental value. However, not all new lettings will be perfect. Aside from adjustment, knowledge of the market and the locality will be help to identify those traders who have paid over the odds to secure a unit, or have paid an artificially low rent.
Anchor tenants tend to fall into the latter category. These comprise the key tenant(s) in a new development and a landlord, with a view to attracting other tenants to the development, will want to ensure that they take a unit to achieve this aim. As a class, anchor tenants tend to be in a strong bargaining position and as a result may be able to agree a low(er) rent.
The fact that a potential occupier of a restaurant, for example, agrees to pay a rent at the same level as a general shop use and in competition with such uses must be evidence of the value of that property/location for restaurant; the rent was agreed in the knowledge that it would be used as a restaurant. This must carry considerable weight and in such circumstances, in most cases, the rent will not require any adjustment for use.
It may be argued that, in the absence of competition from other uses, the restaurant would not have paid as high a rent as it in fact agreed; a comparison might be drawn with imposing a restrictive covenant on use in a lease, and a reduction from the actual rent sought. Unless evidence is provided of rents paid by restaurants, on the assumption of a restaurant use only, being at a lower level than the subject rent, such an argument should be resisted; the actual occupier must have considered the rent paid to reflect the value of that property and location for restaurant use at that time.
1.6 Lease Renewals
Sometimes the provisions of the Landlord and Tenant Act 1954 apply when a rent has been set at renewal. So it will first be necessary to determine whether the rent was agreed by negotiation between the parties or was fixed by the courts in accordance with s34 of the 1954 Act when negotiations failed.
The more reliable rent will be the one freely agreed between the parties and where the lease terms, together the extent and treatment of any tenant’s improvements, have been disclosed. Rents fixed by the courts in accordance with s34 may be unreliable in the absence of knowledge about the details of the determination and tenant’s improvements.
Without full knowledge of the renewal agreement or determination, care will need to be taken before attaching great weight to rents fixed on renewal.
Interim rents should be avoided. These are rents set by the courts under the 1954 Act in the “interim” period between a lease ending and a new lease being agreed or determined. Whilst such rents are on a year to year basis (as is the definition of rateable value) they are unreliable because:
(a) They are not market rents, but are fixed by the courts based on the evidence presented
(b) They are the reasonable rent for a tenant to pay, which permits the court to exercise discretion and extend a measure of cushioning to the new rent which tends to favour the tenant
(c) The court is required to have regard to the terms of the old lease and the rent definition contained in s34 of the 1954 Act
The method of determining the interim rent has been altered by the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 when three statutory conditions are satisfied. These are:
(i) The tenant occupies the whole property.
(ii) The relevant notice related to the whole premises
(iii) The landlord did not oppose the grant of a new tenancy
In these circumstances the presumption is that the interim rent will be the same as the rent for the new tenancy, where these conditions are not satisfied or the tenant has declined to take a new lease ordered by the court then the valuation methods currently adopted under the 1954 Act apply. In any event these rents should be avoided as it is a presumption and also the caseworker will not have the full knowledge of the circumstances surrounding the interim rent.
1.7 Review Rents
The weight that can be attached to a rent fixed by review will depend upon:
(i) The contractual agreement between the parties
(ii) The means by which the rent has been determined
Hence it is vital that all lease details are known, especially the rent review clause.
Where the passing rent has been agreed on review, the rent will reflect the terms of the particular lease and especially the terms of the review clause. Often the reviewed rent will assume a wider use than is actually permitted under the user clause of the lease. Similarly, on renewal the rent will be on the basis of the terms of the new lease, including the use assumed for review
Whilst it could be argued that both landlord and tenant are aware of the implications of the use to be assumed upon future rent reviews, the weight which could be given to such an argument will depend heavily on movements in rental values since the start of the lease.
If a restaurateur agrees to a lease with reviews to a value for general shop use it could be argued that, from his perspective, the future value as a restaurant will be at least as great as that for a shop. If in the locality restaurant rents had generally moved in a similar way to shop rents this would give additional weight to such a view.
If however it were shown that shop rents had risen much faster than restaurant rents since the start of the lease this would reduce the weight that should be given to a passing rent on a restaurant agreed on a review clause assuming a general shop use.
There will of course be other factors involved in agreeing to the lease terms, but just because the reviewed rent passing is on the basis of a general shop use it does not mean that the rent necessarily has to be reduced to accord with the rating hypothesis. It may be that values for restaurant use have increased above those for shops.
It will depend on the facts in each case, but when considering a hereditament used for a sui generis use evidence of rents reviewed to a “wide” user should normally be regarded as of lower weight than evidence of new lettings or of reviews where the rent is restricted to that sui generis use.
To serve as good evidence for rating purposes, the review clause should specify that the review be to “open market value” or “rack rental value”, assuming vacant possession and a normal review pattern.
An upward only review clause, for example, may prevent the rent dropping to OMRV and therefore remain at an artificially high level. Care should always be taken when considering the meaning of a review clause, as poorly drafted clauses can lead to unexpected results on review
The most reliable rent on review will be one fixed by agreement at rack/open market rental value, with 3 or 5-year periods between review, where there are no restrictions in the lease and no adjustments are necessary to account for tenant’s improvements.
The weight to be attached to a rent fixed by agreement will be greater than one determined by an independent expert or arbitration. Independent experts are entitled to bring their own knowledge to bear in reaching a determination, whereas arbitrators cannot stray outside the confines of the evidence presented.
1.8 Admissibility of Evidence and Weight
Robinson Brothers (Brewers) Ltd v Houghton & Chester-le-Street Assessment Committee (1938 2All ER 79) Lord Justice Scott (Court of Appeal) said:
“When the particular hereditament is let at what is plainly a rack rent or where similar hereditaments in similar economic sites are so let, so that they are truly comparable, that evidence is the best evidence and for that reason is alone admissible; indirect evidence is excluded not because it is not logically relevant to the economic enquiry, but because it is not the best evidence.”
However, with the passage of time this view came under increasing criticism and in
Garton v Hunter (VO) (1969 RA 11), Lord Denning stated that:
“We admit all relevant evidence. The goodness or badness of it goes to weight, and not to admissibility.”
1.9 Hierarchy of Evidence
The assessment shown in the Rating List is essentially a matter of valuation opinion having regard to relevant evidence. In Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council LT 1976) a hierarchy of weight to be given to evidence
Lotus & Delta Ltd v Culverwell (VO) & Leicester City Council (1976 RA 141)
The Lands Tribunal set out the following propositions as a properly established procedure for considering evidence in the rating context:
‘(i) Where the hereditament which is the subject of consideration is actually let that rent should be taken as a starting point
(ii) The more closely the circumstances under which the rent is agreed as to time, subject matter and conditions related to the statutory requirements contained in the definition of rateable value the more weight should be attached to it.
(iii) Where rents of similar properties are available they, too, are properly to be looked at through the eye of the Valuer in order to confirm or otherwise the level of value indicated by the actual rent of the subject hereditament
(iv) Assessments of other comparable properties are also relevant. When a rating list is prepared these assessments are to be taken as indicating comparative values as estimated by the valuation officer. In subsequent proceedings on that list therefore they can properly be referred to as giving some indication of that opinion.
In the light of all the evidence an opinion can then be formed of the value of the appeal hereditament, the weight to be attributed to the different types of evidence depending on the one hand the nature of the actual rent and, on the other hand, on the degree of comparability found in other properties.
In those cases where there are no rents available of comparable properties a review of other assessments may be helpful but in such circumstances it would clearly be more difficult to reject the evidence of the actual rent’
The principles laid down in Lotus & Delta case have been followed in the following cases:
There have been a number of cases where the rent in respect of the appeal property itself was rejected as not being a true reflection of market value. The principal cases are Hodges Ltd v Howells (VO) (1993 RA 236) where the LT accepted that the actual rent was less than the rent that might reasonably be expected to be paid in the open market
In Trustees of T N Marks (Dec’d) v Grose (VO) (1995 RA 49) the rent passing on the appeal hereditament was again held to be less than might reasonably have been expected to have been paid in the market at the AVD.
In the appeal of Reed (VO) (2009) RA 90, the LT it was held that a freely negotiated open market letting of the appeal property one year after AVD was at below the market value and the evidence was therefore given little weight in determining the Rateable Value.
See also Futures London Ltd v Stratford (VO) 2006 RA 75 LT. All these cases demonstrate that the rent in respect of the appeal property itself needs to be weighed and can be rejected if it is felt to be irrelevant, or unsatisfactory.
Hodges Ltd v Howells (VO) (1993 RA 236)
Looked at whether the actual rent agreed as from March 1988 (£12,000pa) should be adopted as the RV or, as the VO contended, whether this rent was not the rent which might reasonably be expected in the open market and the RV should be higher and in line with rents on other nearby shops and agreed assessments. The VO supported the assessment of £18,000 RV. The LT adopted the propositions from the Lotus & Delta case that indicates how conflicting rental evidence should be considered. The LT accepted the actual rent was less than the rent that might reasonably be expected to be paid in the open market and, following the evidence, determined £16,375 RV.
1.10 Rents before and after AVD and correct date to consider Tone established
Specialeyes plc v Felgate (VO) (1994 RA 338)
The LT was asked to decide on the weight to be applied to various rental and tone evidence in order to determine the correct Zone A rate to be applied to a shop, and hence its RV.
The LT considered that as the rents of the appeal hereditament, together with the immediately adjoining shops, were agreed between one landlord and one firm of surveyors representing most of the tenants, the weight to be applied to this evidence was reduced (as it was effectively one transaction).
The LT examined other rents in the street away from the immediate shop and divided these into 3 categories:-
(i) Rents agreed between 1986 and 1987. The LT found the evidence helpful in showing an upward trend in rental values over the period but otherwise attached little weight to them due to the need to adjust the rents to 1/4/88 levels.*
(ii) Rents close to the AVD. The LT paid particular attention to these as indicating the correct level of value and showing the appeal hereditaments rent to be at the lower end of the band of values to be expected at the AVD.*
(iii) Rents after the AVD. Both parties accepted these rents as admissible but the LT only considered those close to the AVD due to the need, because of the rapid rise in rents in 1988/89, to make large and uncertain adjustments to relate them to AVD levels.
The VO attached significant weight to agreements on value in the street and considered a tone of the list was established. Both parties accepted that the date of the hearing was the correct date for ascertaining whether a tone of the list was established. At this date the LT noted 39 assessments had been agreed, 9 appeals were outstanding and no appeals had been made on 27 shops. The LT regarded the tone as established
1.11 Establishing Tone
Each Rating List stands on its own and reflects the new circumstances appropriate to that list and takes into account the changed physical circumstances at the new compilation date and the changed market conditions at the new Antecedent Valuation Date.
The whole purpose of having a revaluation is to reassess relativities and rebase the valuations to the new dates and it is therefore to be expected that relative values between property types and between locations will change from one list to the next
Marks Trustees of T N Marks (Dec’d) v Grose (VO) (1995 RA 49)
The rent passing on the appeal hereditament had been reviewed to £14,500 on 25 December 1987, with the rateable value in the list being £24,600.
The LT concluded that given the rents on surrounding properties and the amount of adjustment required to the appeal rent, the latter was less than might reasonably have been expected to have been paid at 1 April 1988.
The Tribunal felt that there had been sufficient appeal activity by way of agreements with agents, occupiers and valuation tribunal decisions to establish a tone of the list at £350 zone A. Considerable weight was given to this established tone.
The resultant RV of £24,000 reflected allowance for the irregular shape of the retail area and masking.
Jafton Properties Limited v Prisk (VO) (1997 RA 137)
The appeal hereditament comprised office accommodation in the Smithfield area close to the City of London.
There were two valuation points at issue, the first was the correct RV at the 1 April 1990 and the second was the effect on rateable value of oversupply of office accommodation in the locality.
The LT held that although the rents on the appeal hereditament could be taken into account as the starting point, they were not conclusive, nor were they superior evidence to which the greatest weight should be given in arriving at the appropriate RV. The rents on the appeal hereditament were all for short fixed terms and lacked the reasonable expectation of continuance, an essential part of the rating hypothesis.
The correct time for establishing whether or not the tone of the list had been established was immediately prior to the start of the hearing. It was held that the assessments of comparables established the tone of the list and deserved significant weight given the inadequacies of the rental evidence
O’Brien v Harwood 2003
This Upper Tribunal case considered the weight and relevance of evidence and the establishment of ‘tone’.
“There are three stages leading to the establishment of tone of the list. At first, when a new rating list is put on deposit, entries will carry relatively little weight: they are opinions of value by the valuation officer, as yet unchallenged and untested by negotiation.
Over time assessments will be challenged and agreed or determined by a valuation tribunal or this tribunal or accepted by lack of challenge.
Finally a stage is reached where enough assessments have been agreed or determined or are unchallenged to establish a pattern of values, a tone of the list.
The list is then said to have settled. Rents will be largely subsumed into assessments. At that stage rating surveyors will have little regard to rents and pay considerable attention to assessments. The position regarding tone of the list at any particular time is a question of fact. Where an assessment is challenged before a Tribunal the correct time for deciding whether a tone of the list has been established is immediately before the hearing.”
Futures London v Stratford VO
This case confirmed the approach in O'Brien.
1.12 Rental evidence and mode and category of occupation
In the Scottish and Newcastle case it was stated
“Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. There is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation”.
para 171, following Fir Mill, it was stated
“This part of the rule rests on the principle that the hereditament is to be valued in its actual condition on the material day - as it was rebus sic stantibus. We emphasise that the alterations must be minor…. The correct approach is to look at the totality of the works in the context of the hereditament and then ask the question are those works minor works?”
and at para 173
“The range of potential hypothetical tenants would therefore be restricted to those willing to occupy the properties in their existing condition
In Burvill v Jones (2013) rental evidence from industrial units on the same industrial estate were held to be relevant in the valuation of an MOT test centre even though an MOT test centre was in a different mode or category of occupation. It was stated in that case
“the rental evidence from the other units on the K9 estate is relevant to the valuation of the appeal hereditament as vacant and to let. They immediately adjoin the appeal hereditament, their rents reflect the locational and many of the physical characteristics shared by the subject property and the appeal hereditament could be used other than an MOT test centre by undertaking minor physical works
For the purposes of rating valuation, the hereditament must be valued on the assumption that the premises are vacant and to let in their actual physical state (subject to the usual repair assumptions) and for a use within the same mode or category of occupation as the actual use (now contained in Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988).
The meaning of ‘same mode or category of occupation’ was considered in *Fir Mill v Royston UDC and Jones (1960) 7 RRC 171 where it was held that “a shop [must be valued as] *a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory . . .” and so on.
The decision in Fir Mill was reviewed in Williams v Scottish & Newcastle Retail Ltd and Allied Domecq Retailing Ltd. (2001) where it was held that a restaurant is not in the same mode or category of occupation as a shop and that therefore a restaurant should not be valued as a shop, nor a shop as a restaurant.
Even if premises can be used for a different purpose without the need for significant physical alterations or planning permission, for example a restaurant occupying an identical unit to an adjoining shop where neither physical alterations nor planning permission would be required to change the use from restaurant to shop, the restaurant would therefore be valued as a restaurant even if the value as a restaurant would be lower than the value as a shop.
To apply a shop value to premises occupied as a restaurant would be to value the premises in a different mode or category of occupation than its actual use and which would be in breach of the assumption contained in Schedule 6 paragraph 2(7) of the Local Government Finance Act 1988 that the premises are to be valued in the same mode or category of occupation as the actual use.
If however, a restaurant would command the same rent as a shop then it is appropriate to have regard to the evidence of shop values. The valuation would still be on the basis of the value as a restaurant. In re the appeal of Reeves (VO) (2007) RA 168 LT (concerning Truro College), the tribunal held that premises occupied as a college should be valued in its actual mode or category of occupation which in that case was held to be educational, but that if it could be shown that its value as an educational establishment was the same as that for office use, then office rents were admissible as evidence of value for educational use.
The premises were still being valued in their actual mode or category of occupation as educational but since educational use was shown to have the same value as for office use, office rents were therefore admissible as evidence to establish the value for educational use.
In the Scottish and Newcastle case it was stated
All evidence is relevant and it is a question of weight, as stated in Scottish v Williams (UT) in reference to Garton v Hunter , para 140
“It is important to distinguish between the operation of the rebus sic stantibus rule and the identification of the evidence to which regard may be had in the valuation”
“What the valuer is seeking to assess is the value of the hereditament on the assumption that the matters set out in para 2(7) of sch 6 were as they were on the material day. For this purpose he will have regard to the rent(if any) of the subject hereditament and to the rents and assessments of other hereditaments to the extent that the evidence of these assists him in making his valuation. All relevant evidence is admissible, and the goodness or badness of it only goes to weight….. ~Whether the rents or assessments of hereditaments in other modes and category of use are relevant, is a matter for judgement in the individual case. Often they will be of no assistance, but there are undoubtedly cases where they may contain helpful evidence. Take for example, a shopping street which contains, in addition to shops and A3 users, a few offices in premises built as shops. The subject hereditament, in office use, is in part of the street that contains only shops and restaurants apart from the subject hereditament itself. If the evidence from the other parts of the street is that the rents and assessments of offices are no different from those of shops and A3 users, the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage. It is a matter of evidence and argument and valuation judgement in the particular case whether the rents and assessments of hereditaments in a different mode and category of use are of assistance.
para 141
In the example given, the valuer is not, of course, valuing the subject hereditament as a shop or restaurant. He is valuing it as an office but by reference to rents and assessments of shops and restaurants, because he finds that from those rents and assessments can be derived the rent that tenant would pay to occupy the subject hereditament as an office. It is not necessary for him to pretend that the offices are in the same mode and category of use as shops or restaurants
As per the example, given by the Upper Tribunal in Scottish v Williams, whereby
“the valuer may well conclude that the best evidence of value of the subject premises as offices is to be found in the rents and assessments of the adjacent shops and restaurants and he will make his valuation on the basis of the Zone A prices that are established for this part of the street frontage”.