Paul Geoffrey Clifton v Liverpool City Council  UKUT 74 (LC)
27th March 2017
The Upper Tribunal considered the correct approach in ascertaining the “appropriate day” for calculating the rateable value of a house as part of an enfranchisement claim under the Leasehold Reform Act 1967 following the conversion of a building from two flats into one house.
The case concerned determination of the ‘appropriate day for assessing ratable value under the Leasehold Reform Act 1967.
Under the 1967 the ‘appropriate day is defined as ‘…the 23 March 1965 or such later day as by virtue of s. 25(3) of the Rent Act 1977 would be appropriate day for the purposes of that Act in relation to a dwelling house consisting of the house in question if the reference in para (a) of that provision to a ratable value were to ratable value other than nil. The appropriate day will be 23 March1965 unless the house in question fails to fulfil one of the following three conditions:
- It is a hereditament for which a ratable value other than nil was shown in the rating valuation list in force on 23 March 1965; or
- It forms part of such a hereditament; or
- It consists of or forms part of two or more such hereditaments.
The house in question had consisted of two flats until 1985. In both 1962 and 1973 the flats appeared to have been valued individually, and had a combined ratable value of more than £200.
The First Tier Tribunal had to determine whether the ‘appropriate day was 23 March 1965, in which case the appropriate basis of valuation under the 1967 would be under section 9(1A), or some later day after the conversion, when the house appeared in the valuation list for the first time as single dwelling, in which case the basis of valuation would be the more favourable s. 9 (1).
At first instance, the Tribunal held that the house existed as two or more hereditaments on 23 March 1965, making that date the ‘appropriate day. Applying section 25(1) of the Rent Act 1977, the values of the two flats fell to be aggregated producing a ratable value of above £200 on the appropriate day. Therefore, Section 1A of the 1967 Act applied and the valuation fell to be conducted under section 9(1A).
Decision on appeal
The appellant argued that he Tribunal had erred in its approach. The house, in its present form, had not existed in 1965, and therefore the ‘appropriate day should have been the date that the house (as opposed to the two flats of which it formerly consisted) first appeared in the valuation list.
The appellant based this argument upon the decision of Judge Clive Taylor QC in the Stafford County Court in Griffiths v Birmingham City District Council  CLYB 2172, in which it was held that, where there had been a change of identity in the ratable hereditament, the appropriate day would be the first day on which the modified hereditament appeared in the valuation list. It was held that for the principal to apply, the change must be “substantial”; mere improvement would not be sufficient. Whether the change was substantial in any given case would be a question of fact and degree for the judge. In Griffiths, two uninhabitable cottages had been covered into “one house of character”. HHJ Clive Taylor QC considered that there had been a change of identity / substantial change.
Unfortunately, Mr Cliftons appeal did not clear the required factual hurdle, as he was not able to show on the evidence before the Upper Tribunal that the house had ever appeared in the valuation list in its modified form. The appeal failed on that basis, but, in light of the dearth of authority on the point, HHJ Hodge took went on to consider what the appropriate day would have been had the house subsequently appeared in the valuation list as a single hereditament.
After a review of the authorities and the relevant statutory provisions, HHJ Hodge reiterated the test applied by HHJ Clive Taylor QC. He observed that Parliament had clearly
“considered that a house and premises might comprise, or might have comprised, more than one rateable hereditament, or might form, or might have formed, part only of a rateable hereditament; and that an alteration in rateable value which did not operate retrospectively as at the appropriate date should have no effect.”
In conclusion, he remarked that:
“[S]ome change more radical than the mere fact of improvement or structural alteration must have taken place before it can arguably be said that a house and premises have shed their identity and become a new rateable hereditament so as to displace what would otherwise be the appropriate day.”
If he had been called upon to make such a determination in the instant case, the Judge would have found that the consolidation of two single units of residential accommodation into one single house would have been insufficient to constitute a change in identity so as to bring the appropriate day forward in time.
The Judges decision in the case appears uncontroversial. As Mr Clifton could not show that the house had appeared in the rating list in its altered form the claim could not succeed.
HHJ Hodge noted that neither party in the appeal sought to challenge the analysis at paragraph 3-23 of Hague based on the decision in Griffiths v Birmingham City DC. But he noted that the Deputy President in the course of giving permission had noted that there was “remarkably little authority on the proper application of the complex statutory provisions to determine the ‘appropriate day for the purposes of the 1967 Act“. Given the paucity of authority in this area he decided to explore the question. Obviously his comments are purely obiter dicta.
He noted that Griffiths v Birmingham City DC was decided prior to the decision of the House of Lords in Dixon v Allgood. He quoted liberally from the speech of Lord Templeman in that case and stated that:
“Although the point was not directly in issue in Dixon v Allgood, Lord Templeman would not appear to have contemplated that a substantial change between premises in a former state and in their subsequent state would be enough to constitute a change in the identity of the rateable hereditament sufficient to displace an earlier “appropriate day”.”
He clearly thought that, although the decision in Dixon v Allgood was directed towards a different point, it might be grounds upon which to doubt Griffiths.
He then reminded himself that he did not have to decide the matter so he limited himself to summarising the points that a judge would have to bear in mind should the question arise. He concluded by saying:
“All of this leads me to conclude that some change more radical than the mere fact of improvement or structural alteration must have taken place before it can arguably be said that a house and premises have shed their identity and become a new rateable hereditament so as to displace what would otherwise be the appropriate day. I would reject any argument that structural alterations of an insubstantial or non-structural, and still less of a trifling, character are sufficient merely because there has been a functional change in the use of the house and premises.”
That is very similar to the change of identity test in Griffiths. Judgments such as this which “explore” the law but reach no conclusions are not terribly helpful to practitioners as they mainly serve to sow doubt where previously there was a consensus. Also, because the judge does not make explicit findings, it is sometimes difficult to appreciate some of the nuances in what they are saying, particularly where, as here, the matter was not argued by counsel and there is no record of the arguments for and against the proposition in question.
A change in function or use of the hereditament may come to be treated as a crucial factor. One may compare Griffiths, where two thereto uninhabitable properties were turned into a habitable (and desirable) dwelling house, with the facts of the instant case, where the building was a habitable dwelling house both before and after the changes.
Finally, it would be remiss of any commentator not to remark upon the fact that the parties to the 1985 lease of the subject property had eschewed the reservation the habitual peppercorn as the nominal annual rent in favour of ‘one red rose. Whether the listing officers of the Upper Tribunal were aware of this when they listed the case for hearing on Valentines Day will never be known.