Wei Xiaoli v Nicola Johnson (Valuation Officer)

This case concerns an appeal against a decision of the Valuation Tribunal for England (‘VTE’) in which it dismissed an appeal against a decision notice issued by the Valuation Officer (‘VO’) confirming the 2023 rating list assessment of a small shop in Clapham (‘the Property’) at rateable value £17,500.

At the hearing the appellant, Ms Xiaoli, represented herself and spoke through a Tribunal appointed interpreter. Mr Karl List represented the VO and called Mr Wai Hung Mak, MSc LLB (Hons) BSc (Hons) MRICS as an expert witness.

I inspected the Property on the day before the hearing. I was accompanied by Ms Xiaoli, Mr List and Mr Mak. I was shown the ground floor and basement areas and I also viewed neighbouring shop units from the street.

I am grateful to both parties for their submissions.

The Property is a retail shop arranged on ground and basement levels. It forms part of what was originally a parade of six shops although one of the shops has latterly been converted to residential use. The parade appears to have been built in late Victorian times and above each shop there are two floors of residential flats. The other shops in the parade comprise a restaurant, a barbershop, a small convenience store and a launderette.

Clapham is a suburban location about 3 miles south of Central London. The Property is approximately 300 metres east of Clapham North Underground Station, which itself is situated at the northernmost part of Clapham High Street.

Ms Xiaoli’s business trades as the ‘Dr Gu Acupuncture Clinic’ and aside from acupuncture offers, massage, reflexology, herbal remedies and hijama cupping. Internally, the ground floor is arranged as a reception area, two treatment rooms, a kitchen/staff room, two stores and staff and customer toilets. The basement which is accessible by a staircase is used for storage.

The shop has a timber shop front which is partly glazed and partly boarded to provide a space to advertise the services on offer. The internal parts of the shop are finished to a basic standard with plastered walls and ceilings. The floor has a laminated wood covering and heating is provided by free standing electrical appliances. There is no air conditioning.

The plan that follows shows the general arrangement of the shop. The partition wall in the staff/kitchen area (shown hatched) had been removed by the time of my inspection and it is not clear whether it was in place at the material day. The area shown cross hatched on the plan is outdoor space which does not currently form part of the assessment.

The statutory basis of valuation for rating is found in paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988. A rateable value is an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on the antecedent valuation date, or AVD which in this case is 1 April 2021.

It is assumed that the property is in a state of reasonable repair immediately prior to being let and that the tenant undertakes to pay all the usual tenant's rates and taxes and to bear the cost of the repairs, insurance and other expenses necessary to maintain the property in a state to command that rent. By paragraph 2(6) and (7)(a) of Schedule 6 matters affecting “the physical state or physical enjoyment of the hereditament” are taken to be as they were on the “material day”, which is the date on which the 2023 rating list came into effect or the date, if later, when the hereditament was entered into the rating list. In this particular case the material day is 1 April 2023.

In practical terms this means that the rateable value of the Property is the 1 April 2021 rental value on a defined set of terms but with the physical state of the Property assumed to be as it was on 1 April 2023.

This appeal has its origins in a challenge (proposal) made by Ms Xiaoli on 3 November 2023 seeking a reduction in the existing assessment of rateable value £18,750 to rateable value £11,000. This assessment was effective from 1 April 2023. During the course of dealing with the challenge the assessment was amended to rateable value £18,250 and the challenge decision was at rateable value £18,000. This latter figure was based on a Zone A rate of £450 per m² applied to an area expressed in terms of Zone A (‘ITZA’) of 40.24m². The total area was 98.1m².

Ms Xiaoli’s valuation was also based on a Zone A rate of £450 per m² but her floor areas were substantially different. The ITZA amounted to 24.5m² and the total area was 68.6m².

At the VTE hearing the VO sought a determination at rateable value £17,500 and the VTE came to a decision at that figure. The VTE decision was based on an ITZA of 39.36m² and a total area of 98.3m². All of the 2023 rating list assessments utilised a Zone A rate of £450 per m² but with successive alterations to the floor areas. All were effective from 1 April 2023. I will return to the correct floor areas later in the decision.

The Property is occupied on a full repairing and insuring lease for a term of 15 years from 1 August 2022. The rent is £17,000 per annum and there was no rent free period or any other form of rental concession. The landlord is the London Borough of Lambeth. A copy of the lease was included in Mr Mak’s report.

At the hearing Ms Xiaoli said that she had taken an assignment of an existing lease for the Property in 2014 and at that time the lease had an unexpired term of 5 years. The rent had been adjusted to £16,100 per annum in 2019. When a new lease was granted in 2022 she accepted the rent proposed by the London Borough of Lambeth. She had not been professionally advised in relation to these transactions.

Prior to the hearing Ms Xiaoli provided a detailed note of her experience in dealing with the VO and a list of the various changes to the assessment of her shop since 1 April 2017. According to Ms Xiaoli the alterations were as follows:

Ms Xiaoli was confused by the multiple changes in assessment and the different measurements that accompanied them. The VO had visited her shop three times between 2022 and 2025 and produced seven different assessments. She found this process extremely unfair and upsetting. Despite her repeated requests, the VO failed to offer a transparent and reasonable explanation for the inconsistent valuations. Furthermore, the VO selectively compared her property to neighbouring properties when it suited their arguments but dismissed similar comparisons raised in her favour. She also questioned why she was required to pay rates based on these new figures when her appeal against the original assessment remained outstanding.

Ms Xiaoli had visited the gov.uk website and understood the explanation of zoning that was provided. However, she noted that the zoning pattern was based on zone depths of 6.1 metres for the first three zones (A, B and C) and any space beyond the third zone was treated as a remainder. She appreciated that rental evidence was expressed as a value per metre squared per zone and that the value of each zone reduced by half with each successive zone.

Ms Xiaoli said that the guidance stated that each zone should have a depth of 6.1 metres but in her case Zone B of her property was measured at 7.62 metres and was followed immediately by a “remaining zone,” effectively skipping Zone C. She noted that the remaining zone was actually charged at Zone C rates (£112.50 per m²), when in fact, it should have been half of the Zone C rate. Ms Xiaoli concluded that this erroneous classification and the lack of transparency in the calculation had led to an unfair assessment of her property.

She also highlighted that the Property was the only one on Landor Road assessed above rateable value £15,000 and was the sole property with a remaining zone. She suspected that the VO had skipped Zone C and used the remaining zone to justify the application of the two-zone method, which was the only way their valuation would align with other properties on the same street. It appeared to Ms Xiaoli that the selective use of zoning methods and deviation from standard practices meant that the valuation had been adjusted to fit an inconsistent approach.

Ms Xiaoli said that the VTE had, in its decision, valued the staff room at the higher Zone B retail rate of £225 per m² despite being described as a staff room in the floor plan submitted by the VOA, and photographs of the space, both of which clearly marked the area as a staff room. Neighbouring properties with similar staff rooms have had these areas classified at a lower rate of £56.25 per m².

Finally, on 2 June 2025 Mr Mak had sent her 279 pages of information (the hearing bundle) which left insufficient time, with her very limited command of English, to digest the contents prior to the hearing.

The respondent acknowledges that the VO Rating Manual (‘the Manual’) states that shops are valued by reference to a zoning approach based on 6.1 metre zones. However, in the case of shops in Landor Road and in other secondary retail locations the VO still makes use of a historic 4.57/7.62 metre (15/25 feet) zoning pattern. The VO accepts that the text in the Manual is misleading and has led to considerable misunderstanding in this particular case. The VO says that the rent for the Property has been analysed by using a 4.57/7.62 metre zoning pattern and that all of the shops in the parade have been consistently valued on the same zoning basis.

The VO accepts that it is appropriate that the assessment for the Property is reduced. However, the reduction is not related to the grounds upon which the appeal was made. The VO says that the appeal prompted a review of the rental evidence in the locality and upon further analysis it was apparent that there should be a reduction in the tone (value per m²). Having applied this revised tone to the existing areas and zoning approach the resultant assessment is close to the figure originally requested.

In her Statement of Case Ms Xiaoli asserted that the assessment should be no more than rateable value £15,000. The VO made an offer to settle the appeal at this figure in February 2025 but the offer was rejected. In a letter to the Tribunal filed on 10 June 2025 Ms Xiaoli stated that the assessment for the Property should ‘be around’ rateable value £6,035. The VO’s case is that the assessment should be determined at rateable value £15,000 based on a zone A rate of £390 per m².

Mr Mak is a Lead Valuer in the National Valuation Unit of the VO, a position he has held since 2022. He primarily deals with the valuation of retail, office and industrial properties across the London Boroughs of Lambeth, Southwark, Lewisham, Hackney and Newham.

Mr Mak said that Ms Xiaoli considered that the VO had included excessive area in Zone B by using a depth of 7.62 metres instead of 6.1 metres. She also thought that the remainder should be valued at A/8 rather than A/4 and that the staff room, which was in Zone B, should also be valued at A/8.

Mr Mak said that floor areas of the Property and any comparables were all based on the net internal floor area (‘NIA’) calculated by reference to the Royal Institution of Chartered Surveyors (RICS) Code of Measuring Practice (6^th Edition) (‘the Code’). According to the Code the retail area of the shop is the NIA including “Storerooms and ancillary accommodation formed by non-structural partitions…” and excluding “Storerooms and ancillary accommodation formed by structural partitions”. It also states that “the use of zones when assessing the value of shops is a valuation, not a measurement, technique. Consequently, it is not part of this Code. Market custom shall prevail”.

His report contained a helpful summary of the two zoning methods adopted by the VO in the London Borough of Lambeth. He explained that for main shopping centre locations a three 6.1 metre zones and a remainder (A/B/C/R) approach was used, but in secondary locations such as Landor Road a two zone and remainder method is adopted where Zone A is 4.57 metres deep, and Zone B has a depth of 7.62 metres (A/B/R). He also included some illustrations showing how the two methods would apply to a shop of 18 metres in depth. This was supplemented by diagrams from the Code depicting how net internal area was determined where non-structural walls were present.

When Mr Mak inspected the property on 24 August 2024 he noted that the two treatment rooms and the staff room were enclosed by non-structural partitions. These were ignored for the purposes of calculating the floor areas.

In coming to his revised valuation Mr Mak had investigated the tenure of the other shops in the parade. I set out below his summary of the rental evidence:

It should be noted that Mr Mak had adjusted the rents to take account of rental growth to the antecedent valuation date by reference to a CoStar report, a copy of which was made available to the Tribunal. The adjustment was +2% from 2021 to 2022 and +3% for 2021 to 2023 regardless of when in the year the rent was effective from.

In arriving at the appropriate zone A value Mr Mak ignored No.31 as an unreliable outlier. The rent was set two years after the AVD and the property was used as a restaurant. He applied a weighting of 40%, 30%, 15% and 15% to Nos. 21 to 29 respectively which resulted in a figure of £390 per m² zone A. Mr Mak’s offer to reduce the assessment to rateable value £15,000 was based on this lower zone A rate.

Discussion and determination

It is apparent that the primary issue that underlies this appeal is the disparity between what is written about zoning in the Manual and the approach adopted by the VO in secondary locations including Landor Road. It is also clear that there have been difficulties in communication between Ms Xiaoli and the VO. It is regrettable that the misunderstandings that ensued could not be resolved without recourse to the Tribunal and the Manual is in obvious need of revision to prevent similar disputes. It is surprising that in a shop of regular proportions and less than 100m² in area that it took so many attempts to arrive at the correct floor area. Ms Xiaoli said that Mr Mak had not undertaken internal inspections of some of the other shops in the parade and at the hearing he confirmed that in half of all cases the VO relied upon scale plans.

The floor area calculations for both parties were submitted in evidence. It was apparent from the challenge documentation that some of the difference between the parties was due to Ms Xiaoli having not counted circulation space created by partition walls on the ground floor and she had also omitted the area of the staffroom. I can discern that the total area as measured by Ms Xiaoli is 99.65m² which is slightly more than the area of 98.3m² used by the VO. As Ms Xiaoli’s zoned areas do not include all of the floor space that should be included in each zone I find that the VO’s areas are to be preferred.

Notwithstanding the two approaches to zoning in the London Borough of Lambeth, if the zoning methodology is used consistently across all of the shops in a particular location and the analysis of rents and subsequent valuations also use the same method, the results should be fair and reliable. There is no evidence to suggest that in this case the VO has acted erroneously in applying the chosen zoning pattern. Mr Mak did not provide the Tribunal with his detailed analysis of the comparables but the ‘in terms of zone A’ areas are very similar except for No. 27 which is used as a small supermarket and all of the internal walls have been removed. I accept that all the shops in the parade have been assessed on the same (4.57m/7.62m/remainder) approach and having had sight of the floor plans of the comparables, I find that Mr Mak’s analysis appears to be reliable.

The rating list is compiled on a uniform basis to ensure fairness between ratepayers. To assess shops of the type found in Landor Road, the VO uses the NIA as defined in the Code. The Code provides guidance to users about how to deal with non-structural and partition walls when calculating floor areas and I agree with Mr Mak that in this case those enclosing the treatment and staff rooms can be ignored.

It is noticeable from the plan after paragraph 9 above that there is a structural wall between the staff room and the stores/WC at the rear of the shop. It was evident when I carried out my inspection. It marks the point where the zoned retail area stops and the ancillary accommodation starts. In practical terms that means that Mr Mak’s zoning approach is correct and that after zones A and B there is a very shallow remainder area extending to 2.2m². Mr Mak valued the two ground floor store rooms at £48.75 per m² or in other words, an eighth of the zone A value. This is, in my view, entirely appropriate. The staff room at No.29, which was mentioned by Ms Xiaoli, also lies behind a structural wall and is assessed at the same ancillary rate of A/8, albeit based on the original zone A rate of £450 per m². The basement rate does not appear to be contentious.

Mr Mak was correct to remove the rent for No. 31 Landor Road from consideration. It is clearly an outlier and the rent review took place a little over two years after the AVD. At the AVD none of the four transactions relied upon by Mr Mak would have been available to the hypothetical tenant, the earliest took place at the beginning of February 2022 and the latest at the end of August 2022.

The starting point for the rental analysis must be the 2019 rent on the Property itself. By reference solely to that rent it would be difficult not to conclude that the assessment ought to be at least rateable value £16,100. On the VO’s floor areas the analysis is £409 per m². However, we know next to nothing about the circumstances of that transaction other than Ms Xiaoli was not professionally advised.

In Chifley Holdings Limited (BVI) v The Commissioners for His Majesty’s Revenue and Customs [2024] UKUT 00301(LC) the Tribunal (Peter McCrea OBE FRICS FCIArb) examined the circumstances in which it is appropriate to consider post valuation date evidence:

“47.

From all of the above I take these points. First, events after the valuation date, which would not have been known to either the valuer or (because every valuation begs the question of what a property would have sold for) the hypothetical buyer and seller, should not be taken into account.

48.

Secondly, what can provide retrospective assistance is what comparable properties were selling for around or some months after the valuation date, especially in the case of a transaction on the subject property, or very similar properties in close proximity. In conjunction with pre-date transactions, these can help inform the valuer as to the state of the market in the months around the valuation date. I accept that there may be a tension between those two principles, to the extent that some transactions might have been affected by impermissible events, and in that respect the valuer must be alive to outliers or sudden changes in market levels that might have been affected by post-date events, for instance a general election or a change to interest rates. The valuer must make a judgement as to whether the market, at the valuation date, anticipated a future event, which would be legitimate to take into account. With the passage of time, some market expectations become reality and some do not, and it is necessary to consider with any post-valuation date evidence whether something has changed in the intervening period which undermines the reliability of the evidence as a measure of value of the subject property at the valuation date. As ever, valuation is an art.

49.

Thirdly, for these reasons, as regards post-review transactions there can be no doubt that the further one moves away from the valuation date the less weight should be applied to a transaction, because it becomes ‘progressively unreliable’….”

In this case there is a paucity of evidence before the AVD and it is therefore apposite to consider the post AVD rents to form a view of the state of the market around the AVD. These show a significant variance amounting to 25.5% between the highest and the lowest. I note that at the effective dates of the rent reviews on Nos. 27 and 29 the new leases on the Property and No. 25 had not commenced and these latter two rents are therefore more likely to be indicative of market levels. For that reason, and because in principle a letting is a more reliable guide to value than a rent review, I therefore agree with Mr Mak that of the four rents it is appropriate to place most weight on the evidence of the new leases.

It is apparent from what Ms Xiaoli said about the Property that the rent had increased from £16,100 per annum in 2019 to £17,000 per annum in 2022. In other words it had risen by 5.6% over approximately 3 years. Mr Mak had included the leases for each shop in the parade and I note that the rent for No. 27 was £13,000 per annum when the lease was granted in 2012. At the review in 2017 it had risen to £16,000 per annum. The lease for No. 29 shows an increase from 2017 to 2022 of just £1,500 per annum or 12.5% in simple terms over the five years.

The CoStar report relied upon by Mr Mak ran to 97 pages and for the large part was not very useful. It contained scant particulars of 18 ‘Peer Property Details’ including 7 in Landor Road but none incorporated any tenure or rental details. The document included a page headed ‘Peers Historical Leasing Data’ which showed, on a quarterly basis, changes in asking rent growth. The data started in Quarter Two 2022 which had a value of nil. A further page headed ‘Rent Analytics’ contained data for ‘market asking rents’ for the peers and the whole of Lambeth. The former showed growth of 1.7% and 2.3% for 2021 and 2022. The latter showed values of 0.7% and 1.3% for the two years. It was therefore not entirely clear where the statistical basis for Mr Mak’s adjustment had come from. Bearing in mind that the statistics were based on borough wide changes in asking rents I do not place any weight on his conclusions about rental growth.

The evidence from the Property, notwithstanding the obvious limitations to its usefulness, shows that rental growth took place between 2019 and 2022 but there is no evidence to conclusively demonstrate that rental growth of the magnitude espoused by Mr Mak occurred between the AVD and 2022. It is unlikely that growth happened uniformly between 2017 or 2019 and 2022 and taking in to account that for much of 2021 the United Kingdom was experiencing the effects of the COVID-19 pandemic, it would be unwise to rely on an assumption. I have therefore had regard solely to Mr Mak’s unadjusted rents.

Taking all of the evidence into account it is my judgement that the Property should be valued at a zone A value of £410 per m².

The revised assessment is therefore as follows: