Robert Schroeder v Lucy Dyer (Valuation Officer)

This appeal arises from a decision of the Valuation Tribunal for England (‘VTE’) dated 10 June 2024 to uphold the Valuation Officer’s (‘VO’) decision notice which found that part of the appellant’s Christmas tree farm (‘the Property’) was not exempt from rating.

The 2017 Rating List entry resulted from a Billing Authority report issued to the VO by Maidstone Borough Council. The Appellant challenged the entry of the property into the list on the basis that it should be subject to the agricultural exemption under schedule 5 of the Local Government Finance Act 1988 (‘1988 Act’). The Property was described in the list as ‘Warehouse and Premises’ and assessed at rateable value £18,750.

We inspected the Property on the day before the hearing. We were accompanied by the appellant Mr Schroeder and members of his family as well as workers who assist him with his Christmas tree growing and sales operation. Mrs Heather King and Mr Evgeni Genchev of the VO were also present. We viewed buildings used for the sale of Christmas trees and other related goods, a large car parking area situated to the east, and an area used for caravan storage. We also viewed the Christmas tree growing area in the north west of the site. The Tribunal undertook an additional inspection in December 2024 when the sale of Christmas trees to the public was taking place.

At the hearing Mr Schroeder represented himself and was assisted by Mr Eddie Powell. Ms Isabel McArdle represented the VO and called Mr Evgeni Genchev MRICS to provide expert evidence. We are grateful to them all for their submissions.

The hereditament extends to about 120 acres and includes farm land, areas used for growing Christmas trees, a building of 2,346.1m² and a large gravel car park. Latterly part of the site has been used for caravan storage and a substantial number of shipping containers have been placed around the boundary of the car park. Neither of these elements are included in the assessment under appeal. Mr Schroeder’s father owned the farm before him and began to grow Christmas trees in 1955.

The hereditament is situated on a narrow lane known as Gravelly Bottom Road, about half a mile west of the village of Kingswood. Maidstone is about 5 miles to the northwest and both the M20 motorway and the mainline railway can be accessed at Hollingbourne which is 2.25 miles to the north of the Property. The plan below, which was produced by the VO referencer in 2022 shows the parts of the Property that are included in the assessment. The part of the Property labelled “Ag barn” in the plan below was excluded from valuation as exempt.

The Property is an aggregation of several parts, all constructed around steel portal frames with external box profile cladding. The southern section (shown at the bottom left of the plan) contains a Christmas grotto, a café, play area, and a retail area used for sales of Christmas decorations and paraphernalia. This latter area is also equipped with a mezzanine storage platform. There are two areas used for the display, sale, and netting of trees. These are shown on the right hand side of the plan and are open sided. They are the two largest elements of the property as it now stands and extend to 455.5m² and 894.2m² respectively. Outside of the Christmas period they are left empty or used for storing agricultural equipment. Much of the southern section is mothballed outside the Christmas period but the furniture, fittings and stock are left in place. It is also used as a receiving and storage area for stock that arrives during the course of the year.

Mrs Jenny Schroeder (the wife of Mr Schroeder) appeared as a witness of fact at the hearing and suggested that the preparation necessary for opening for the Christmas sales period only took “a week” but confirmed that Christmas stock was stored in the sales area after it arrived on site about three months before Christmas. Unfortunately, despite being involved in the commercial side of the business for a considerable period she was unable to accurately recall many operational details. The hearing bundle contained screenshots of social media posts by Mr Schroeder’s staff which showed stock arriving in October 2017 and August 2018. A further post depicted staff readying the shop in late September 2022.

Mr Schroeder said that the buildings comprising the Property are “agricultural buildings used in connection with farmland and entirely ancillary to the farming use. The planning permission is for agricultural use…”. However, full details of the planning application made in 2016 (16/502112/FULL) appear to be unavailable. There seems to have been an additional planning application in 2018 (reference 18/501362/FULL) as to which correspondence was provided. This suggests that in 2018 permission was given for the construction of additional accommodation which is now used as the larger of two open sided sales/storage areas. We were also provided with an aerial photograph depicting the Property in 2015 which shows no buildings other than one large building which corresponds to the café/shop and grotto areas. A second photograph was included in the hearing bundle which showed the situation as at May 2018 when the smaller of the open sided areas had been constructed. By 2022 a substantial new open sided area to the north had been added.

The VO received a report from Maidstone District Council, the relevant billing authority, on 25^th of June 2021 and set about making new assessments with a view to bringing the Property into the rating list. Following an inspection by the VO on 2 February 2022 the Property was entered onto the Rating List with effect from 1 April 2017. Mr Schroeder’s challenge was made on 30 of June 2022. It read as follows:

“30th June 2022

In regards to Kingswood Christmas Trees, Gravelly Bottom Road, Kingswood, ME17 3NU, I am challenging your decision on the business rates for this property because the property should be removed from the rating list.

The reason this property should be removed from the rating list is the fact that the building is an agricultural building and the use is ancillary farm use and is only used for trading for 4 weeks of the year. This is a very similar set up to all other Christmas Tree growers in England, none of whom have been asked to pay such rates. This is also exactly the same as the building I have directly next to this one, which has correctly been declared as exempt due to the agricultural use of the property.

I thank you for your solving this matter.”

The Appellant’s ‘Challenge’ was made on a single sheet of paper to which he appended some photographs. The VO website contains a form for the submission of a challenge. It contains a number of grounds for the user to select and one of these is that the property should be deleted from the rating list. This form was not used in this case but since it was clear that Mr Schroeder intended that the property should be deleted and there was no intention to query the valuation the VO accepted it as a challenge under the sixth of the grounds on the form (‘I want to remove (delete) this property from the rating list’).

Following this appeal to the Upper Tribunal, the VO inspected the property again and decided that the assessment ought to be amended to rateable value £16,250 with effect from 1 April 2017. We can discern from the valuation forming part of the decision notice that £1,985 of rateable value had been ascribed to the larger of the two open sided areas but this part of the Property was not constructed until after the material day. However, by the time it was realised that the assessment was excessive the 2017 List had closed and the existing, higher entry therefore remains unaltered.

The statutory scheme is set out in the 1988 Act and subsequent regulations. Paragraph 2 (1) of Schedule 6 provides that:

“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 –

a)

the first assumption is that the tenancy begins on the day by reference to which the determination is to be made; The term ‘rateable value’ is defined in paragraph 2(1), Schedule 6 to the Local Government Finance Act 1988 (as amended);

b)

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;

c)

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”).

Section 51 and schedule 5 of the 1988 Act provide the agricultural exemption, the material part of which reads as follows:

“1.

A hereditament is exempt to the extent that it consists of any of the following—

(a)

agricultural land;

(b)

agricultural buildings.”

Agricultural buildings are defined as :

“3.

A building is an agricultural building if it is not a dwelling and—

(a)

it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land, ...”

Ms McArdle directed us to The Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (SI 2009 /2268) (2009 Regulations) which set out the circumstances in which proposals can be made.

Miss McArdle went on to say that the scope of the challenge which resulted in the appeal before the Tribunal was solely limited to the question of whether the hereditament should be deleted from the rating list and was not concerned with valuation as that issue had to be raised at the proposal stage. We were referred to the Tribunal’s decision in Nelson Plant Hire Ltd v Bunyan (VO) [2022] UKUT 309 where it was held that the extent of the challenge is limited to the ground or grounds set out in the proposal. At paragraph 66 the Tribunal (Martin Rodger QC, Deputy Chamber President and Mark Higgin FRICS) said:

“There is nothing in the 2009 Regulations in their amended form to suggest that it was intended to depart from the long-established position that the scope of any appeal depends on the scope of the proposal. In our judgment the old rule continues to apply.”

In our view, Mr Schroeder’s challenge to the VO’s decision was correctly construed as an application to treat the Property as one that should be deleted from the Rating List and not as a challenge to the valuation of the Property. It was open to Mr Schroeder to submit a proposal which required the VO to justify its valuation of the Property, but he did not do so. The scope of the ratepayer’s challenge for the purposes of this appeal is solely an application to delete. This affected both the scope of the decision reached by the VO, the subsequent challenge before the VTE and this appeal to the Tribunal.

Mr Schroeder explained that his family had been growing Christmas trees at Kingswood for the last 69 years. Alongside the trees he and his family offered tree lights and decorations for sale and they attracted customers from all over Kent and South London. The customers could also enjoy a hot drink in the café area and toilet facilities were also provided.

The Property is usually open for a period of five weeks in the run up to Christmas. The opening hours are 9.00 to 5.00, seven days a week. Mr Schroeder calculated his opening hours as being a total of 280, out of 8,760 in a year. This amounted to 3.19% of the year. Mr Schroeder confirmed that that new stock of decorations and other Christmas goods was procured in February of each year for the following Christmas season, and was delivered between 11 and 12 weeks before Christmas and that old stock was mothballed for the rest of the year. On our site visit we noticed that the old stock was covered in plastic sheets.

Mr Schroeder said that the site had an agricultural planning permission and no one would pay rent for premises that do not have planning permission for the intended use, and the value was therefore nil. In addition, the buildings were not in a reasonable state of repair and no one would take on the repairs or insure them. The buildings also had no energy performance certificate, electricity safety certificate or fire certificate. To prove the point, he had advertised the premises for use as a Christmas shop with weekly outgoings of £700 for rent and £350 for rates but had received no responses.

He noted that the 1988 Act (as we set out in paragraph 14) defined an agricultural building as being (a) not a dwelling and (b) occupied with agricultural land and is solely used with agricultural operations on that land. Mr Schroeder submitted that those circumstances were there same as existed at the Property; the growing and selling of Christmas trees was the lawful use and the buildings were therefore agricultural. He also stated that the 1988 Act stipulated that in coming to a determination whether a building was used solely in connection with the agricultural land, use of the building for another purpose could be ignored if the time spent on that use did not amount to a substantial part of the time during which the building was used. In Mr Schroeder’s view the use of the building for 3.19% of the year was not substantial. He was unable to reconcile his own understanding of the term ‘de minimis’ and the Court of Appeal’s decision in Hambleton District Council v Buxted Poultry [1992] 2 All ER 70 CA where 6-8% of the time was held not to be de minimis.

Finally, Mr Schroeder said that no tenant would pay rent for the whole year when the shop was only open for five weeks each year.

In her opening remarks Ms McArdle stated that the only question before the Tribunal was whether the Property was exempt by virtue of the agricultural exemption which exists in Schedule 5 of the 1988 Act. She said that for this to be satisfied it was necessary for Mr Schroeder to show that the hereditament in question was either agricultural land or agricultural buildings. A building which is occupied “together with agricultural land and is used solely in connection with agricultural operations on that and other agricultural land” would be exempt. She said the case law including Buxted Poultry established the meaning of the words “used solely”. She said that a hereditament used for four – five weeks for hospitality, was not “used solely in connection with agricultural operations on that or other agricultural land”. Mr Schroeder’s use of the Property amounted to 9.6% of the year, she said, was well above the “de minimis” use which Mr Schroeder relied on. There was no agricultural use within many parts of the Property, which were “mothballed” for large parts of the year. She said that no part of the Property was continuously used for agriculture, although there may have been some intermittent storage of agricultural equipment.

Ms McArdle submitted by reference to Buxted and the other cases on which she relied, that to fall within the de minimis exception the non-agricultural use had to be considerably less than the 6-8% identified by the Appellant in that case. She relied on the case of W & JB Eastwood Ltd v Herrod (VO) [1971] AC 160. In that case Lord Reid (at 247J) considered the intention of the legislation with which he was concerned (the Rating and Valuation (Apportionment) Act 1928). The legislation defined “agricultural buildings” as “buildings (other than dwelling houses) occupied together with agricultural land or being or forming part of a market garden and in either case used solely in connection with agricultural operations thereon”. This was meant to apply to “all types of ordinary farm buildings in use” when the Act was passed. Furthermore, as methods of farming changed he would presume an intention to include new types of such buildings. However, the definition “used…in connection with agricultural operations” suggested that the buildings must be subsidiary or ancillary to the agricultural operations and not only a small part of the enterprise”.

Miss McArdle also explained, in her skeleton argument, that the question of whether or not the Property’s EPC certificate or fire certificate had been obtained are immaterial to the question of whether the agricultural exemption is engaged. Statute requires the Tribunal to assume that all necessary licences and similar would be granted to a hypothetical tenant (see Schofield (VO) v RBNB, [2008] at paragraph 14).

Mr Genchev joined the VO in June 2019 and since that time has been dealing with rating work throughout the southeast of England and outer London.

His report covered the valuation of the property and included details of the comparables that he had relied upon. As we have concluded that the scope of the challenge made by Mr Schroeder does not extend to the valuation it is germane for us to consider only the sections in his report which are relevant to the question of exemption.

The first of these is the trading pattern. Mr Genchev referred to two properties which were said to operate in the same seasonal way as the Property. Both were included in the rating list. The first is Wylds Farm, at Warren Road, Liss, Hants, GU33 7DF. It is assessed on the 2023 Rating List at a rateable value of £10,000 and extends to a total area of 35 acres of which 16 acres is the Christmas tree growing area. The farm cultivates 22,000 trees at any one time. The farm has a bar/café area on site that serves costumers visiting the farm and purchasing Christmas trees. It trades from late November to the middle of December which Mr Genchev thought was a very similar trading period to the subject property. The sales area amounts to 103 m² which has beenvalued at £96.66 per m². Wylds Farm also hosts a Shakespeare festival once a year and wedding events (up to 10 events per year). These additional uses are not reflected in the assessment which is now subject to review.

Mr Genchev’s second comparable is Cotley Farm, Whimple, Exeter, EX5 2QR which was assessed at rateable value £5,100 in the 2017 rating list. Cotley Farm is a dairy farm with a total area of 700 acres of which 10 acres are used for growing Christmas trees. It has a Christmas shop and tearoom area that serves customers visiting the farm and purchasing Christmas trees. It trades for four weeks each year from the last weekend of November until midday on Christmas Eve. The sales area is approximately 97.37 m² which was valued at £45 per m², and ancillary storage areas were valued at £22.50 per m².

Mr Genchev also referred to Southend-on-Sea Corporation v White [1900] 65 JP 7 where the tenant of a seaside shop closed it during the out of season winter months and removed the stock, leaving only a few shelves and other chattels which would be needed on re-opening for the new season. The tenant was held to be in rateable occupation for the whole year (including the closed winter months). They had been in occupation and had every intention of returning; the shop being closed over the winter months was part of the normal operation of the business carried on there.

Mr Schroeder questioned Mr Genchev’s failure to distinguish between an activity carried on for a small part of the year and an activity carried on “365 days” each year. He put to Mr Genchev that the Property was a unique one, or as he described it “sui generis”, stating that items had to be left there throughout the year as they could not conveniently be used for any other purpose, and there was no other use to which the parts of the Property where they were stored could be put. There would be no point, for example, in removing the café. Mr Schroeder pointed out that both of Mr Genchev’s comparables were assessed at figures below the threshold for inclusion in the Small Business Rate Relief scheme and therefore attracted no liability.

Mr Genchev’s investigations into the planning permissions at the Property led him to the conclusion that commercial rather than agricultural use had been accepted by Maidstone Borough Council. He said in his report that ‘the site has approval for Christmas Tree sales and the planning evidence indicates that the planning authority are fully aware of the activities on site and have not taken any enforcement action to prevent the sales of other Christmas goods’.

Mr Genchev also commented on Mr Schroeder’s assertion that the Property was in such poor repair that no prospective tenant would bid for it. He considered that Mr Schroeder had not provided any evidence of disrepair and explained that the statutory definition of rateable value assumed that the hereditament was in repair but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic. He noted that the majority of buildings on site were constructed after 2002 and he did not consider them to be in poor repair or uneconomic to repair. Similarly, there was no evidence of water ingress on the day of inspection, and no areas which were not accessible to customers due to poor condition.

We are in no doubt that the Property is occupied with agricultural land. The question to be resolved is whether it is used solely in connection with agricultural operations on that or other agricultural land. Mr Schroeder urged us to conclude that the Property is only open to the public for 4-5 weeks a year and therefore cannot be equated with a permanent form of activity. This argument amounts to an assertion of de minimis use for rating purposes. In other words, the selling of Christmas Trees, lights, decorations, the running of a grotto, and operation of a cafe for five weeks each year together with the storage of Christmas goods for other parts of the year was so slight a use that it could be considered de minimis.

This argument has been fully considered in the authorities, for example, Buxted, in which the Court of Appeal had to consider a case in which the ratepayer company occupied hereditaments consisting of a provender mill and a poultry processing factory, as well as 67 poultry rearing, breeding and feeding farms situated at various distances up to 120 miles away from that mill and factory. The rating authority, as one of the appellants, successfully argued before the Lands Tribunal that both the mill and factory were agricultural buildings within the meaning of the then rating legislation (s.2 of the Rating Act 1971). The Court of Appeal disagreed, pointing out that the mill, which operated 6 – 8% of total time to provide feedstuff and other material used in poultry farms, could not be regarded as a “de minimis” use for the purposes of applying the agricultural exemption in the legislation.

By analogy with the facts in this case, Mr Schroeder was unable to convince us that any part of the Property was used solely in connection with agricultural operations on the adjoining agricultural land. The sale of Christmas trees and related activities is not an agricultural use. The Christmas trees and other Christmas accessories are brought to the Property not for the purposes of agricultural operations but for the purposes of their disposal to the public – a commercial enterprise. The Property is not solely used in connection with agricultural operations, the position being analogous to a farm shop which acquires its produce from a nearby farm but the use of which is wholly retail. This was considered by Lord Reid in the case of Eastwood v Herrod relied on by Miss McArdle, which we consider to be an authority pertinent to the facts of this case.

Even if the Property were solely used for the sale of Christmas trees during the Christmas period and that use were the extent of the non-agricultural use, this would not amount to de minimis use as it would take no account of the activities necessary to set up a successful retail operation in the Christmas period let alone the substantial storage or “mothballing” of those facilities outside the Christmas season. Nor did the Property in our judgment in fact fall wholly back to an agricultural use at any part of the year, although there may be some transitory storage of agricultural equipment in part of the Property. In any event, Mr Schroeder himself contended that the non-agricultural use was “less than 10%” which is in excess of that which was held by the Court of Appeal in Buxted, which was later approved by the House of Lords. That case concerned a 6 – 8% non-agricultural use. In fact, the Christmas season use of the Property is likely to be close to the 9.6% non-agricultural use identified by Miss McArdle which could not be regarded as de minimis.

Finally, there is no evidence that the property is in such a poor state that it would be uneconomic to repair.

Accordingly, the Tribunal does not consider that the Property falls within the agricultural exemption.

The VTE reached the correct conclusion on the question of agricultural exemption and it was unnecessary for it to decide the rateable value for the purposes of the 2017 Rating List. Accordingly, this appeal is dismissed.