UT Neutral citation number: [2012] UKUT 165 (LC)
UTLC Case Number: RA/24/2010 

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – hereditament – whether two floors in modern office block to be entered as single hereditament though separated by other floors – held they were – valuation – end allowance – whether allowance to be made to reflect disadvantage of separation – held no evidence to justify this – appeal allowed in part

	IN THE MATTER OF AN APPEAL
FROM A DECISION OF THE VALUATION TRIBUNAL FOR ENGLAND

APPEAL

by

PETER ROBIN WOOLWAY (VALUATION OFFICER)

Re:Tower Bridge House
	Level 2 and Level 6
St Katherine’s Wa
London E1 1AA

	Before: The President

	Sitting at: 43-45 Bedford Square, London WC1B 3AS
	
on 15 May 2012 

Daniel Kolinsky  instructed by HMRC Solicitor for the appellant
The ratepayer did not respond to the appeal 

The following cases are referred to in this decision:

Gilbert (VO) v S Hickinbottom & Sons Ltd [1956] 2 QB 40
Coppin (VO) v East Midlands Airport Joint Committee [1971] RA 449
Ladies Hosiery and Underwear Ltd v West Middlesex Assessment Committee [1932] 2 KB 679
British Railways Board v Hopkins (VO) [1981] RA 328
Baker (VO) v Citibank NA [2007] RA 93
Trunkfield (VO) v Camden London Borough Council [2011] RA 1

The following further cases were referred to in argument:

University of Glasgow v Assessor for Glasgow 1952 SC 504
Rennick (VO) v Weathershields Ltd (1957) 8 RRC 185
Rank Xerox (UK) Ltd v Johnson (VO) [1987] RA 139
Burn Stewart Distllers Plc v Lanarkshire Valuation Joint Board [2001] RA 110
Skerritts of Nottingham Ltd v Secretary of State for the Environment, Transport and the Regions [2001] QB 59
Martin v Hewitt (VO) [2003] RA 275
Winchester City Council v Handcock (VO) [2006] RA 265
Allen (VO) v Mansfield District Council [2008] RA 338
Orange PCS Ltd v Bradford (VO) [2004 RA 61
DECISION
1.	This appeal by the valuation officer, to which the ratepayer does not respond, concerns two floors in a modern city office block which are not next to each other but are in the same occupation.  The VO had entered them in the rating list as separate hereditaments, but the Valuation Tribunal for England determined that they should be entered as a single hereditament and that an end allowance should be given to reflect the disadvantage of their separation within the building.  The VO contends that the decision was in error in both respects.  He says that the two floors are two separate hereditaments and that there is no evidence to justify an end allowance.
2.	Tower Bridge House is a modern 8-storey office building, which was completed in 2005.  Although in Tower Hamlets it is on the opposite side of the road from the Tower of London and thus effectively serves a City of London office function.  In plan form it is in the shape of an extended “U”.  The open space between the three inner sides of the building consists of a glass covered atrium with a central lift shaft housing six high speed lifts that serve six floors of the building.  On the first floor there is a common reception area that provides security for the entire building.  On the ground floor there are restaurants and there are seven floors of offices above.  The solicitors Reynolds Porter Chamberlain have offices on levels 1, 3, 4 and 5, the accountants Mazar LLP on levels 2 and 6, which are the subject of the present appeals, and there are two occupiers of space on level 7.  The floorplate of levels 2 to 6 is about 2,400 sq m net, although there are small differences between levels.  Mazar hold the two floors under separate leases dated 24 June 2007.  Each is for a 15 year term with effect from May 2007.  The rent for level 2 was £1,008,422.50 per annum and the rent for level 6 was £1,053,010 per annum, and there are five yearly reviews.
3.	In the 2005 rating list there were separate entries for the Reynolds Porter Chamberlain offices on level 1, for each of the levels occupied by Mazar and for each of the two occupancies on level 7.  Levels 3, 4 and 5 were entered as a single hereditament.  A rate of £250 per sq m was applied to all levels, but the hereditament consisting of levels 3, 4 and 5 was accorded an end allowance for size of 6.25%.  Level 2 was entered at £600,000 with effect from 24 August 2006 and level 6 at £605,000 with effect from 26 November 2007.  On 10 February 2010 Paul Rabbette Ltd made a proposal on behalf of the ratepayer to merge the two entries with effect from 26 November 2007.  It was this proposal that was the subject of the appeal before the VTE.
4.	The ratepayer’s case before the VTE was that, although the levels occupied by them were separated, there was a functional dependency between them and they therefore ought to be entered as a single hereditament with effect from 26 November 2007 when they had begun to occupy the two floors.  It was contended that there should be an end allowance for fragmentation of 10%.
5.	In dealing with the question whether the two floors should be entered as separate hereditaments or as a single hereditament the Tribunal referred to Gilbert (VO) v S Hickinbottom & Sons Ltd [1956] 2 QB 40, placing reliance in particular on the first and third “general rules” in the judgment of Denning LJ: that where two or more properties within the same curtilage are in the same occupation they are as a general rule a single hereditament; and that where two properties are separated by a public highway, they may form a single hereditament if they are so essential in use the one to the other that they should be regarded as one single hereditament.  In the light of this the tribunal considered that it should address itself to the questions whether the two floors were within the same curtilage and whether there was an essential functional link between them.  In relation to the first question it said:
“33. In seeking to establish whether the premises are two or more properties within the same curtilage and in the same occupation, the Panel considers that the Tower Bridge House development is contained within a single curtilage.  It is the Panel’s view that the ‘curtilage’ contains the two floor levels.  It considers that the structure of the building provides a visible enclosure around the development which included the two levels in question.
34. While the Panel accepts that level 2 and level 6 are linked by the high speed lift it remains satisfied that they are separate floors.  However, in terms of the occupation of both levels which form the appeal entries, the Panel is satisfied that they are in the ‘same occupation’”…
6.	In relation to the second question that the tribunal considered that it should address it said:
“42. In determining the question of an essential functional link, the Panel notes the Valuation Officer’s analysis of the case law and contentions that Mr Rabette had not demonstrated the existence of an essential functional connection between the operations carried on by the appellant on the two floors.  In particular, the Panel notes the Valuation Officer’s opinion that the link was merely one of convenience.
43. However, the Panel considers that these views and contentions are based on case law in respect of primarily manufacturing premises, which in the case of Gilbert is now more than 50 years old.  It is the Panel’s view that the criteria for the test of ‘functionally essential’ should not be restricted to manufacturing processes but should also be adapted to reflect the modern era of service industries which also have ‘processes’ in creating service products.  As such, the Panel considers that the Valuation Officer is contending for a degree in the level of necessity which is too high for non-manufacturing premises in the modern era.
44. The Panel considers that the appellant has demonstrated that there is a link between the floors which is essential to the efficiency of the working of Mazars’ overall service-provision business.  While the Panel accepts that it was presented with no evidence that Mazars would cease to operate if it did not occupy the two floors at Tower Bridge House, it considers that the function carried out between the two levels, as described earlier, are sufficiently integrated that they are essential to the effective business as a whole.
45. It is the Panel’s view that, while the actual layout of occupation is, to use the Valuation Officer’s term, ‘convenient’ to Mazarss, the evidence presented by the appellant indicated that the occupation of the accommodation provided by the two floor levels went beyond ‘convenience’ but was essential to the efficient operation and functioning of the business operated by the company.
46. Therefore, the Panel accepts the appellant’s contention that there is a sufficient degree of propinquity and an essential functional link between the two floors.  Thus, the Panel also finds that on the ground the appeal premises are a single hereditament.”
7.	The ratepayer’s valuer, Mr Rabbette, had contended for a basic price per sq m of £225, rather than £250, and an end allowance of 10%.  The tribunal concluded that there was no evidence to support the price of £225.  As far as the end allowance was concerned, it said simply:
“It should only attract a 5% end allowance for the relatively small inconvenience suffered.”
It gave no reasons beyond this, nor did it record any evidence or contentions that sought to justify the allowance.  It did, however, record Mr Rabbette as saying this:
“5. Tower Bridge House was, to some extent, a compromise.  The accommodation was not available on adjoining floors, however, it did have sufficient space for the firm to locate all the work force in one place and the lift service was fast enough to negate the problem of not having adjoining floors.”
8.	At the hearing before me evidence was given by the appellant, Mr Woolway, the valuation officer.  He has been a Fellow of the Royal Institution of Chartered Surveyors since 1988, having become a Professional Associate in 1972.  He said that he had 44 years’ experience of rating valuation, having joined the Valuation Office as a Cadet Valuer in 1967.  He had worked in Central London since 1982 and was currently Litigation Specialist for the Litigation and Technical policy team as part of the National Specialists Unit.  Mr Woolway gave factual evidence about the building and about Mazar and their use of the premises that they occupy.  He described the approach taken by valuation officers to the identification of hereditaments, particularly in relation to modern office buildings; and he gave valuation evidence.
9.	Mr Woolway said that Mazar took the accommodation at Tower Bridge House following the merger of the firm in April 2007 with the London Office of MRI Moores Rowland, becoming the 8th largest accountancy firm in the United Kingdom.  Mazars had said that ideally they would probably have preferred to acquire affordable accommodation elsewhere as a single floor or to occupy floors in Tower Bridge House that adjoined each other, but that was not possible.  Mr Woolway said that the accommodation presumably met Mazar’s cost criteria and suited the needs of the company’s expanded workforce.  Although the accommodation was on two floors separated from each other by intervening floors the lift service was fast enough to negate the problem of separation.  It was not materially different from the logistical challenges faced by Reynolds Porter Chamberlain with their occupation of levels 1, 3, 4 and 5.
10.	The structure and layout of the accommodation was designed, Mr Woolway said, to reflect the fact that all Mazar’s operations in central London were under one roof.  Mazar held themselves out as providing what they described as integrated financial services to their clients, which meant being in a position to offer the complete range of services in one location.  On level 2 there were facilities for meeting clients.  There were rooms for client consultations as well as for staff training and meetings.  There was a staff canteen.  At this level were accommodated the internal accounts department, the insolvency team, the forensic investigation team, a claims department, the HR and IT departments, the print team and the post room.  On level 6 there was accommodation for a large corporate team dealing with banks, insurance companies, internal audit and large corporate clients.  In addition it housed departments dealing with taxation advice and planning, VAT, corporate finance, PFI schemes and other specialist advice and services.
11.	Mr Woolway said that it was clearly convenient for Mazar to locate all their activities in a single building and there was no doubt a flow of personnel between the two levels.  But that convenience was not the same as finding that it was necessary for the parts to be located close to each other.  Such proximity was not vital.  He considered that if the floors were further apart or even in different buildings they would still be able to carry on the accountancy business providing a bespoke service to clients. 
12.	The approach taken by valuation officers in determining whether premises should be shown as a single hereditament or as two or more hereditaments was to exercise judgement on the facts of the case and to reach results that were practical and reasonable.  The great majority of merger proposals on properties of common types such as shops, offices and industrial properties involved a degree of physical proximity between the units, and it was necessary to take account not only of the degree of physical proximity but also the functional connection.
13.	Mr Woolway said that, although in Denning LJ’s general rules in Gilbert v Hickinbottom reference was made to cases where two or more properties were within the same curtilage, the concept of curtilage, as derived from conveyancing law, did not seem to be particularly relevant when dealing with office buildings subject to sub interests in the form of leases.  Individual office floors were always capable of being let singly or in multiples of floor occupations.  While the subject building formed a single geographical unit, the structure and layout facilitated the occupation of individual floors, multiple floors and parts of a single floor.  His experience was that even when multiple floors were occupied together the landlord required individual leases, although negotiations for the leasing of a number of floors would be directed towards agreeing an overall price which would then be divided up for the purpose of the individual floor leases.  He said that he assumed that Mazar had said that they wanted 4,500 sq m and that negotiations had taken place on that basis.
14.	If he was wrong to say that the two floors should be assessed as separate hereditaments, Mr Woolway said, he did not think that there was any justification for applying an end adjustment for fragmentation.  It appeared to be contrary to the market evidence of the actual leases.  There were no perceived or operational difficulties for the actual or hypothetical occupier.  There was little practical difficulty in moving from floor to floor, whether or not the floors were adjoining.  The rents of the two floors let to Mazar were very specific, but the negotiations would not have proceeded in isolation, and the total rent could be presumed to reflect all the benefits and disadvantages to the extent to which they might or might not be valuation significant.  There was, however, no evidence that the rent paid was reduced to reflect the separation of the floors.
15.	Mr Kolinsky submitted that applying the general rules in Gilbert v Hickinbottom, although floors 2 and 6 were in the same occupation, they were not contiguous, they could not be ringed, and they were not functionally essential one to the other so as to overcome their separateness.  By contrast floors 3, 4 and 5 were contiguous and could be ringed.  It was not relevant, he said, to look at the negotiations that might take place in the real world, since what mattered were the physical facts.  While he would not suggest that the fact that there were separate leases for each floor should be ignored, their only relevance was in showing that each floor was capable of being separately let.  Moreover it was not to be assumed that the hypothetical landlord of each floor was the same, and in relation to this Mr Kolinsky referred to Coppin (VO) v East Midlands Airport Joint Committee [1971] RA 449.  That case concerned the valuation of an airport, which consisted of the principal airport hereditament and let-out parts (hangars, workshops, offices, car parks and so forth), which were agreed to be separate hereditaments.  Only the principal airport hereditament was in issue.  The Court of Appeal held that it was not to be assumed for the purpose of valuation that the hypothetical landlord of this hereditament was also the landlord of the let-out parts.
16.	Under section 42 of the Local Government Finance Act 1988 a local non-domestic rating list must show each hereditament in the billing authority’s area that is a relevant non-domestic hereditament.  It must be entered at a value equal to the rent at which it might reasonably be expected to let from year to year (see paragraph 2(1) of Schedule 6).  Under section 64(1) a hereditament is anything which, by virtue of section 115(1) of the General Rate Act 1967 would have been a hereditament for the purposes of that Act; and “hereditament” was defined in section 115(1) as “property which is or may become liable to a rate, being a unit of property which is, or would fall to be, shown as a separate item in the valuation list.”
17.	The hereditament is a unit of occupation (see Ryde on Rating paragraph B[113] “Introduction to the Concept of the ‘Hereditament’”).  What constitutes a separate hereditament is a question of fact and degree.  Rating is intended to achieve the payment of rates on a basis that fairly reflects the value of the ratepayer’s occupation (or such value as the property would have if it was occupied) and the relative worth of all rateable property (see, for example, Ladies Hosiery and Underwear Ltd v West Middlesex Assessment Committee [1932] 2 KB 679, per Scrutton LJ at 688).  The identification of the hereditament, as the unit of assessment, is part of the process by which this objective is achieved, and the aim must be to identify what on the facts can fairly be said to constitute the physical unit that the ratepayer occupies.  While I fully accept Mr Kolinsky’s submission that the identification of the hereditament must precede the task of valuation and that valuation can play no part in making the identification, it is right to bear in mind that a failure to identify what on the facts can fairly be said to constitute the physical unit that the ratepayer occupies may result in a rateable value or rateable values that does or do not properly reflect the value of the occupier’s occupation and such value relative to the property of other ratepayers.
18.	Gilbert v Hickinbottom is the leading case on the identification of the hereditament.  It establishes that in determining as a matter of fact whether premises in one occupation constitute separate hereditaments or a single hereditament regard may be had to both the physical and the functional relationship between the parts under consideration.  It should not, however, be treated as establishing an incontrovertible formula for the identification of the hereditament.  It is important to have in mind the words of Morris LJ ([1956] 2 QB 40 at 52) where, having noted the contention advanced by the appellant VO, that if premises in the same occupation were structurally and geographically separate and capable of being separately let they must be held to be separate hereditaments, he said:
“I do not feel able to accept this approach.  I do not think that it is appropriate to lay down propositions of the above nature as being inevitably or invariably applicable.  If, as I think, the decision as to whether premises form one hereditament is a question of fact, then I think that it is undesirable to prescribe some formula in words or to seek to define certain considerations as being relevant and to stipulate that others must be excluded.  Parliament has not laid down a definition of a hereditament and difficulties might result if a rigid judicial definition were formulated.  In the great majority of cases there will be no difficulty, after assessing all the considerations which apply according to the weight they command, in deciding whether premises comprise a hereditament.  In the borderline cases where difficulty arises it is better to employ a common-sense assessment of the features of the case than to seek to have recourse to some standard formula.”
19.	Gilbert v Hickinbottom itself was concerned with industrial premises, a bakery and a depot for the repair and maintenance of delivery vans, that were situated on opposite sides of a street, and the judgments, although cast in general terms, reflect the factual elements of the sort of case then under consideration.  Thus Denning LJ’s references to the curtilage (at 48-49) and Parker LJ’s reference to “a single geographical unit” (at 54) are directed towards buildings and other land, whether separate from each other or contiguous, as they are upon the ground.  Those references do not usefully translate to the occupation of floors within a modern office block.  Nor should Denning LJ’s functional test (at 49-50), “so essentially one whole – by which I mean so essential in use the one to another –that they should be regarded as one single hereditament,” be treated as the test in the case of separate floors in an office building.  As expressed, that related to the situation that “may happen when a nobleman’s park, or a farm (when agricultural land was rated), or a golf course is bisected by a public road.” 
20.	I agree with Mr Woolway, and with the submissions made by Mr Kolinsky on the point, that in identifying hereditaments within a modern office building the concept of the curtilage has no useful part to play, and is far removed from what Denning LJ had in mind when formulating his general rules in Gilbert v Hickinbottom.  The VTE, having concluded that the two floors were within the same curtilage, then explored whether there was an “essential functional link” between them.  In so doing it was clearly misapplying Denning LJ’s general rules, where the question of the essential functional link only arose in the case of premises that were not within the same curtilage but were separated by a highway, and I do not think that an essential connection should be treated as a criterion in the present case.  I agree in any event with the VO that a detailed inquiry into the functional relationship between parts of a building in the same occupation is of no assistance in the present case and is positively undesirable.  It seems to me inappropriate to explore the degree of functional interaction between two floors in common occupation.  Any such process would tend to be detailed and time-consuming (as it was in the present case) and always liable to reassessment as the occupier made changes in the way that the space was utilised.  The fact that the floors of office premises are in the same occupation for the purposes of the occupying firm is by itself, in my judgment, a significant pointer.
21.	In the context of floors within a modern office block, although I accept that contiguity or the lack of it is a material consideration, I attach (as I shall say) more importance to the practical realities of the physical relationship between the floors.  The functional relationship is also, in my view material, and I bear in mind Parker LJ’s consideration (5) (at 54): “Whether the occupier finds it necessary or convenient to use the premises as a whole for one purpose, or whether he uses different parts of the premises for different purposes.”  I can, however, see no justification for requiring that the functional connection between the parts should be such that each is essential to the other.
22.	The practice of VOs, according to Mr Woolway, is to enter individual floors as separate hereditaments because that is the way in which they are normally let (entering contiguous floors in the same occupation as a single hereditament being an exception to this practice).  It is clear that he had regard to the way in which the floors are normally let not just for the purpose of establishing that they were capable of being separately let, but as a material consideration in identifying the hereditament.  I accept that it may be a material consideration for this purpose.  But it is also right, in my judgment, to have regard in the same context to the fact, referred to by Mr Woolway, that where two or more floors in the same building are let to the same occupier this is normally done on the basis of negotiations carried out on an overall basis.  These considerations, however, although material, ought in my view to carry less weight than the facts relating to the physical nature of the premises and the purpose of the ratepayer’s occupation.
23.	An approach that treats as a single hereditament adjoining floors which communicate only through the common parts while insisting that floors that are separated even by a single floor must be treated as separate hereditaments seems to me to be somewhat unreal.  Take floors 3, 4 and 5 in the present building.  Personnel move between floors by using the lifts.  Floors 3 and 4 on the one hand and 4 and 5 on the other are only a floor’s travel on the lift apart.  It is two floors between 3 and 5, but the extra time in the lift must be insignificantly small.  (As I have already noted, Mr Rabbette for Mazar told the VTE that the lift service was fast enough to negate the problem of not having adjoining floors, and he was speaking about floors 2 and 6.)  Since communication between floors is only through the common parts of the building contiguity between floors has no practical significance.  Supposing the occupation was not floors 3, 4 and 5 but floors 3, 5 and 7 or 3, 5 and 6.  The difference in travel time in the lift would be insignificant, but the VO would, on the basis of what he says is common-sense, treat the first as a single hereditament, the second as three hereditaments and the third as two hereditaments.  This would be of no account if in each case the total rateable value was three times the value of an individual floor.  But in the case of floors 3, 4 and 5 an end allowance for size has been agreed, yet if the ratepayer occupied instead floors 3, 5 and 7 or floors 3, 5 and 6 he would not get the benefit of an end allowance even though the total amount of rent he would be paying for the three floors could be expected to be the same.  The approach adopted by VOs thus risks producing values that do not fairly reflect the value of the ratepayer’s occupation and the relative worth of the different occupancies within the building.
24.	I should make clear that I do not regard matters of valuation themselves as relevant to the identification of the hereditament.  What has to be borne in mind, however, is that unless the hereditament is identified in a way that reasonably and fairly represents the occupier’s unit of occupation unfairness may result when the valuation stage is reached.
25.	Mr Kolinsky relied on Coppin v East Midlands Airport for his contention that it was not to be assumed that the hypothetical landlord of each floor was the same.  The context of that case was quite different (the valuation of the let out parts in a contractor’s basis valuation), and is of no assistance.  The VO in the present case took the view that floors 3, 4 and 5 constituted a single hereditament despite the fact that they were the subject of separate leases and were evidently capable of having different landlords, and I do not see that any different assumption has to be made where the floors are not contiguous.  Many hereditaments are capable both of being let in parts and of being owned in parts.
26.	Although I was told that the practice of VOs is to enter only adjoining floors as a single hereditament, it is to be noted that in British Railways Board v Hopkins (VO) [1981] RA 328 an entry had been made comprising “Lower Ground, Ground, Part First (West Wing) and Fifth-Tenth Floors” of a recently completed office building, reflecting the extent of the ratepayer’s occupation.  The rest of the building was unoccupied.  The dispute in that case concerned the treatment in the valuation list of the unoccupied parts of the building.  The VO had entered these as six separate hereditaments.  The ratepayers contended that the whole of the building was a single hereditament and should be entered as such.  The Member (J H Emlyn Jones FRICS) rejected this submission.  He said (at 341):
“The unoccupied part of the building being capable of occupation cannot in my judgment be said to be part of a hereditament of the occupied part since it cannot be said that it was occupied for the same purpose as the rest nor was it occupied at all.”
The said later (at 344):
“I have come to the conclusion that it was open to the valuation officer in the light of the circumstances existing at the date of the proposals to make proposals in respect of the separate parts.  By virtue of section 69(2) [of the 1967 Act] a valuation officer may at any time make a proposal for the alteration of the valuation list and clearly he must exercise his judgment in so doing.  In the instant case I think it would also have been open to him to make a single proposal in respect of the whole of the unoccupied parts and subsequently to carve portions out of that hereditament to accord with the lettings which subsequently occurred.  In the same way it would have been open to the valuation officer to make two proposals in respect of the occupied part, that is to say one in respect of the lower ground, ground, and part first floor and another in respect of the fifth to tenth floors inclusive.  The fact that he chose one way rather than the other does not seem to me to lead inevitably to the conclusion that on one approach effect is to be given to a proposal but on the other no effect on the grounds that the proposal is invalid.  It seems to me that there are many instances where two parts of a single hereditament may appear as two separate entries in the valuation list even though they could also and more appropriately be described as one.  
27.	The context in which the question of the identity of the hereditament arose was different from that of the present case, and it should not be thought, in the light of what the Member there said, that the VO’s role in determining how to enter property in the list or how to deal with a proposal relating to the identity of the hereditament is other than to ensure that the list is correct.  For this purpose he must determine, in the case of occupied property, what reasonably and fairly represents the occupier’s unit of occupation; and a tribunal, hearing an appeal, must do the same.  Where property is unoccupied, on the other hand, and could realistically become the subject either of a single occupancy or a number of occupancies, it may be impossible to say that there is only one correct way of entering it in the list.  
28.	It is also to be noted that in Baker (VO) v Citibank NA [2007] RA 93 the VO entered as a single hereditament parts of two intercommunicating office blocks at Canary Wharf, the whole of number 33 Canada Water and parts of the 42 floor building number 25 (basement, part ground floor, and floors 3-14, 17-18 and 20) on the basis that that was the physical extent of the area occupied.  In Trunkfield (VO) v Camden London Borough Council [2011] RA 1, by contrast, I held that two office buildings (one wholly, and the other partly, occupied by the ratepayer) that touched at one point but did not intercommunicate internally were separate hereditaments.
29.	I have referred above to the features of this case which are common to most modern office blocks – the fact that these are floors within a single building; the fact that communication between floors, whether next to each other or not, is through the common parts of the building; the lack of any significant practical difference, from the occupier’s point of view, between floors that are next to each other and those that are separated; and the fact that, although each floor is normally the subject of a separate lease, where two or more floors in the same building are let to the same occupier this is normally done through negotiations carried out on an overall basis, albeit that there is a separate lease for each floor.  To treat as a single hereditament floors next to each other that are in the same occupation but as separate hereditaments floors in the same occupation that do not adjoin each other does not, in my view, properly reflect the realities of occupation in a modern office block.  The proper approach in a case such as this, therefore, in my judgment, is to treat the floors occupied within the building by the same occupier as a single hereditament.  Since the occupier will be occupying the floors as offices for the purposes of his business, it is not in my view necessary to investigate the functional interrelationship between the floors at any particular time.  In the present case, therefore, floors 2 and 6 are properly to be entered as a single hereditament, as the VTE determined; and the VO’s appeal on this point fails.
30.	I would add that the adoption of the approach that I have concluded to be appropriate does not require that all existing entries in current lists of separate floors in the same occupation need to be changed.  Only if a proposal for merger were to be made would it be necessary to make an alteration.
31.	The second question that arises is whether the VTE was correct in making an end allowance of 5% “for the relatively small inconvenience suffered” as a result of the floors being separated.  The justification for and end allowance of this kind ought generally to be sought in the rental evidence, but it does not appear that there was any rental evidence before the tribunal to justify the reduction.  Mr Woolway says that there is no evidence that the rents payable under the leases were reduced to reflect the separation between the floors, and I see no reason to reject what he says.  In any event the decision records the ratepayer’s surveyor as having said that the lift service was fast enough to negate the problem of not having adjoining floors, so that on this basis no case for an end allowance had been made.
32.	The appeal is accordingly allowed in part.  The rateable value of the hereditament (Levels 2 and 6, Tower Bridge House, St Katherine’s Way, London E1W 1AA) must be entered at £1,205,000.
Dated 11 June 2012

George Bartlett QC, President