Espresso Rooms UK Limited v Nicola Johnson

This appeal concerns the 2017 rating list assessment of a shop and premises at Ground Floor, 77 Shaftesbury Avenue (“the Property”). It deals with a single valuation issue concerning the weight to be given, in determining rateable value at the antecedent valuation date (“AVD”) of 1 April 2015, to the letting of the Property in November 2017. The matter was heard under the standard procedure.

The Property was initially entered into the rating list at £151,000 with effect from 27 December 2018, and the figure reduced to £146,000 (£2,160/sqm Zone A) on 6 February 2020. The appellant appealed to the Valuation Tribunal for England (“the VTE”) and proposed a rateable value of £64,500 (£950/sqm Zone A). The respondent defended the entry in the list at £146,000 and the appeal was dismissed on 9 May 2025.

In the appeal to this Tribunal the appellant’s expert valued the Property at £75,000 (£1,100/sqm Zone A) and the respondent’s expert valued it at £109,000 (£1,600/sqm Zone A). The respondent has therefore conceded that the rateable value defended at the VTE was excessive and that the appellant is at least partly successful in its appeal.

The appellant vacated the Property in December 2023 following a surrender agreed with the landlord. The Property was subsequently incorporated with adjoining space and let to Marks and Spencer as an M&S Food retail store. On 15 January 2026 I made an external inspection of the former Property and the comparable properties, accompanied by the experts and representatives of the parties.

The hearing commenced in court on the morning of 21 January 2026 but was adjourned at lunch time due to illness of counsel. The hearing was completed by video link on the morning of 29 January 2026. I am grateful to both counsel for their submissions.

77 Shaftesbury Avenue is a seven storey building on the northern side of Shaftesbury Avenue stretching from Dean Street to Frith Street. It was redeveloped in 2016 to provide some 6,360 sqm of high quality office accommodation with banking and retail at ground floor level. The Property was a café on the ground floor and basement of the building, with frontage to Shaftesbury Avenue adjacent to the main entrance. It was the only retail premises in the frontage of that block. The net internal floor area is agreed at 152.8 sqm, comprising 46.34 sqm of Zone A retail space, 33.16 sqm of Zone B space at ground floor and 73.31 sqm of basement accommodation. This is agreed to equate to 67.61 sqm in terms of Zone A (“ITZA”), the area to which a Zone A rent should be applied to assess rateable value. The parties agreed that a sum of £557 for air conditioning should be added to the assessment.

The Property was advertised to let in January 2017 at £80,000 per annum. It was subsequently let to the appellant with effect from 27 November 2017 on a ten year full repairing and insuring lease excluded from the provisions of sections 24-28 in Part II of the Landlord and Tenant Act 1954. The headline rent was £90,000 per annum, with an upward only rent review at the end of year five. The lease terms included a three month rent free period for fit out, although rent did not actually become payable for six months, which was agreed to be an extended fit out period. The rent was analysed to £1,331/sqm Zone A. The Property was let as a shell unit but, since information relating to fit out costs was provided only shortly before the hearing, it was agreed between the parties that no addition to rateable value would be made for fit out costs in the appeal. Due to delays with installation of air conditioning, the Property was not occupied until 27 December 2018, which is the material day for this assessment.

The permitted use under the lease was as “a high end retail shop for the sale of coffee, hot drinks and cold drinks and other associated products within Class A1(a) of Part A of the Schedule to the town and Country Planning (Use Classes) Order 1987 and which shall provide a breakfast and lunch offering to customers”.

The tenant was to trade at all times under the name of Flocafe Espresso Rooms, with a landlord’s option to call for a surrender in the event of a name change or rebranding. Assignment was permitted after 27 November 2019, subject to a requirement to offer the premises back to the landlord.

Schedule 6 of the Local Government Finance Act 1988 (“the 1988 Act”) contains provisions about valuation for the purposes of non-domestic rating. Paragraph 2(1) provides that the rateable value of a hereditament is taken to be equal to the rent at which it might reasonably be expected to let from year to year if let on the antecedent valuation date on certain assumptions.

The first assumption in paragraph 2(1)(a) is that the tenancy begins on the day by reference to which the determination is to be made. The second assumption, in paragraph 2(1)(b), 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".  The final assumption, in paragraph 2(1)(c), 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 agreed rent.

Statute requires that the valuation must reflect certain matters as they existed on the material day, which for this appeal is 27 December 2018, by reference to values pertaining at the AVD of 1 April 2015. The matters which must be taken at the material day are set out in paragraph 2(7) of Schedule 6, of which those relevant to the appeal are:

The street plan below shows the location of the Property at 77 Shaftesbury Avenue, the properties on Frith Street (30, 31 and 35) and Shaftesbury Avenue (102 Wingate House) put forward as comparable evidence by the respondent and the property at 96 Shaftesbury Avenue used by the appellant’s expert.

The table below sets out the comparable evidence of rents agreed between the experts:

30 Frith Street was a ground floor retail unit, with ancillary basement accommodation, let in April 2013 for 10 years on FRI terms with an upward only review at five years. It has been occupied as a betting shop.

Unit 2 Wingate House was a ground floor retail unit with frontage onto the north side of Shaftesbury Avenue. It was let in December 2013 for a term of eight years and five months, with provision for an upward only review in 2018, which has also been included in the schedule of comparable evidence. It has been occupied as a mobile phone shop.

31 Frith Street was a ground floor retail unit with ancillary basement and first floor office accommodation. A lease renewal was agreed in October 2014 for 15 years on FRI terms with five yearly upward only reviews and a landlord’s break clause at year 10. It is currently occupied as an art gallery.

35 Frith Street was in the same refurbished block as the Property, with its entrance from Frith Street and a return frontage into Romilly Street. It was let to Pret a Manger in August 2016 on a 15 year FRI lease with six months rent free for fit out and five yearly upward only rent reviews. Like the Property it was let as a shell unit, and no adjustments have been made for fit out costs. The 2017 list rateable value of £2,000/sqm Zone A was subject to a challenge, following which it was reduced to £1,600/sqm Zone A. Few details were available of how that figure had been agreed, including how fit out and the return frontage were accounted for.

96 Shaftesbury Avenue was a retail unit on the south side of Shaftesbury Avenue with a small ground floor area, including a return frontage to Macclesfield Street, and a much larger first floor. It was let in August 2017 on FRI terms for 10 years with an upward only review after five years.

Both parties referred to the guidance of the Tribunal (Mr J H Emlyn Jones FRICS) in Lotus and Delta Limited v Culverwell (VO) and Leicester City Council [1976] RA 141, which is set out below:

Mr Mark Staples MRICS of the Valuation Office Agency (“VOA”) provided expert evidence for the respondent. In his report he relied on comparable evidence of the letting of Unit 2 Wingate House, and of the three lettings in Frith Street. He considered them all to be retail premises in close geographical proximity to the Property which would have had a similar footfall. By contrast, Mr Staples did not consider 96 Shaftesbury Avenue to be comparable with the Property since it is located on the south side of Shaftesbury Avenue where values are higher due to a higher footfall arising from the close connection with Chinatown. When pressed by Ms Traynor to explain the evidence on which he based his assessments of footfall, Mr Staples acknowledged that this was based on his professional knowledge of the streets in question, rather than any statistics or measurements taken by him.

Mr Staples considered that although under the guidance in Lotus and Delta the letting of the subject property would usually be a starting point for assessment, in this case reliance could not be placed on the rent achieved at the Property. It was agreed two years and nine months after the AVD and analysis to a Zone A rate revealed it to be an outlier sitting well below the comparable evidence. In his opinion the terms of the lease were unusual and this cast doubt on whether they complied with the rating hypothesis set out in paragraph 2(1) of the 1988 Act.

Looking at the comparable evidence, Mr Staples noted that the letting of 30 Frith Street at £2,034/sqm Zone A was an outlier at the high end, but the three lettings of Unit 2 Wingate House and 31 and 35 Frith Street showed a tight range of rents between £1,516/sqm Zone A in December 2013 and £1,627/sqm Zone A in August 2016.

Unit 2 Wingate House let in December 2013 for £75,000, on lease terms which included an upwards only rent review after five years. The rent agreed on review in December 2018 was £95,000, suggesting a market increase of 26.7% over the five year period. Mr Staples assumed a straight line increase across that period and used this to adjust the three comparable rents for time to the AVD, resulting in a range from £1,513/sqm Zone A to £1,630/sqm Zone A. Ms Traynor challenged Mr Staples on the fact that he based his adjustments for growth on evidence from just one property, to which his answer was that it was the best evidence available in close proximity to the Property and other comparables.

Mr Staples placed most weight on the adjusted rent of Unit 2 Wingate House which, like the Property, has a frontage onto Shaftesbury Avenue, and some weight on the lettings of 31 and 35 Frith Street. In was his opinion that the rateable value of the Property should be reduced from £2,160/sqm Zone A, which had been confirmed by the VTE, to £1,600/sqm Zone A.

This resulted in a value of £108,176, to which was added £557 for air conditioning, to give £108,773 and a rounded rateable value of £109,000.

Mr Austin Marshall MRICS IRRV (Hons) of Conneely Tribe provided expert evidence for the appellant. Mr Marshall had appeared before the VTE as advocate and expert for the appellant, and he continued to represent the appellant in this appeal until counsel was instructed close to the date of the hearing. I will return later in this decision to consider how this might suggest a lack of independence.

In Mr Marshall’s opinion the letting of the Property in November 2017 at £90,000 per annum, a Zone A equivalent of £1,331/sqm, was prime evidence. He considered that the letting terms were not particularly onerous or unusual, and the reason the rent was lower than the comparable evidence was the inferior pitch and the isolated nature of the single retail letting. The Property had been advertised to let at £80,000 in January 2017, which Mr Marshall took as evidence that the landlord recognised it was an inferior pitch, particularly after the letting to Pret a Manger in the same block the previous year.

Mr Marshall viewed the letting in August 2017 of 96 Shaftesbury Avenue, on the opposite side of the street, as the best evidence of the market at the time. That letting was at £3,400/sqm Zone A, which he said showed a rental relativity of 39% between the north and south sides of Shaftesbury Avenue. Mr Marshall then applied the assumed relativity of 39% to the rating tone of £2,340 on the south side to produce what he called a “contextual” figure of £912.60/sqm Zone A at the AVD. That had been used in the VTE to justify a proposed rateable value of £64,500, based on £950/sqm Zone A, but in this appeal Mr Marshall acknowledged that the figure was too low.

In cross-examination Mr Marshall acknowledged that it was difficult for pedestrians to cross from the south side of Shaftesbury Avenue to the opposite side, that the letting particulars for 96 Shaftesbury Avenue emphasised “exceptionally high footfall throughout the day” and that it was not suitable as a comparable for the Property. However, he defended its usefulness in providing market context because the letting was close in time to that of the Property. He also considered that the letting was evidence of 45% market growth from the AVD tone of £2,340/sqm Zone A to the rent of £3,400/sqm Zone A agreed in August 2017, two years and four months later.

In Mr Marshall’s opinion the rental evidence from Frith Street showed that it was a stronger retail pitch than the block in which the Property was located, as an isolated retail unit. In his opinion the rateable value for the Property should be lower than the adopted tone in Frith Street of £1,600/sqm Zone A, following the challenge at 35 Frith Street. Mr Marshall considered that the letting of Unit 2 Wingate House, four years before that of the Property and in a different block, should carry limited weight.

However, Mr Marshall accepted that the rent agreed on review at Unit 2 Wingate House was evidence of rental growth of 27% across the five year period from December 2013 to December 2018. Mr Staples had not revealed the detail of the calculations by which he used that figure of 27% to adjust comparable rents for growth to and from the AVD, but Mr Marshall considered that the same principle of adjustment should apply to “roll back” the rent of the Property to the AVD. He used his valuer’s judgement to assume growth of 20%, adjusting downwards from the rent of £1,331/sqm Zone A to £1,100/sqm Zone A.

This resulted in a value of £74,371 to which £557 was added for air conditioning to give £74,924 and a proposed rounded rateable value of £75,000.

Mr Mackenzie submitted that the approach taken by Mr Marshall in relying on relativity was unconventional and repugnant to the rating hypothesis. Different market dynamics were operating on the south and north sides of Shaftesbury Avenue, which could not be shoehorned into a relativistic relationship. Moreover, the rent of the Property was revealed to be much lower than the comparable evidence, while the rent agreed for 96 Shaftesbury Avenue was high, so it was a mistake to assume that this would be a reliable relativity.

Mr Marshall’s use of valuer judgement to reduce the rent for the Property by 20%, to account for growth after the AVD, was described by Mr Mackenzie as inexplicable. Where valuer judgement was to be relied on, it should be explained and reasoned. Regarding Mr Marshall’s firmly held opinion that Frith Street was a stronger retail pitch, Mr Mackenzie submitted that the lettings there were in the same mode and category as the Property, in a tight geographical environment and, although there was no footfall evidence available, there was no reason to suggest that it would be significantly different from that on the north side of Shaftesbury Avenue.

In conclusion, Mr Mackenzie submitted that the rental evidence adjusted for growth to the AVD provided a tight range which supported the rate of £1,600, a figure which had been agreed between valuers for 35 Frith Street. To determine a Zone A rate below £1,600/sqm would be unfair when advised tenants had not appealed the assessments during the seven years of the list and the list was now closed.

Ms Traynor submitted that Mr Staples was wrong to give little or no weight to the Property’s rent simply because it was an outlier in his basket of evidence. It was the only evidence of rent in the pitch where the Property was located so should not be dismissed but taken as evidence that justified a lower Zone A rate in that pitch. Moreover, as the rent had been agreed in a rising market it should be rolled back to the AVD, as proposed by Mr Marshall, to a figure of £1,100/sqm Zone A and a rateable value of £75,000. The respondent’s proposed figure of £109,000 did not reflect the disadvantage of the Property and the pitch.

This is a case where the guidance in Lotus and Delta underpins the difference between the parties. The appellant stopped at the first point in the guidance, relying heavily on the letting of the Property as the only sound basis for a rating assessment. The respondent relied on the subsequent points in the guidance, considering that little weight could be attached to the letting because it took place so far after the AVD, on terms which did not appear to relate closely to the statutory assumptions. Rents of similar properties were available, and these appeared not to confirm the level of rent indicated by the letting. In addition, the rating assessment of a comparable property, agreed between valuers, was available as an indication of comparative value.

It is not disputed between the parties that the Property let at a rent which was surprisingly low in the context of the comparable evidence. In Mr Marshall’s opinion the low rent was accounted for by the limitations of the pitch, evidenced by the fact that the landlord sought an even lower rent than was eventually agreed. Mr Staples considered the lease terms to be unusual and one of the reasons for placing little weight on the rent agreed. I can see that in the context of a substantial newly refurbished office block, it would have been beneficial to have a small coffee shop near the entrance, and important to have control of its branding and occupation, which would have required some restrictive lease terms.

I agree with Mr Staples that because the rent of the Property was agreed two years and seven months after the AVD it should be viewed cautiously. However, the Property was not in existence at the AVD so it was not possible to consider the hypothetical tenant at that date, and the same applied to the letting of 35 Frith Street.

Considered in the round, I find that the rent of the Property is a conspicuous outlier in the basket of comparable evidence and conclude that the circumstances under which the rent was agreed, both as to time and conditions, are not sufficiently close to the statutory rating assumptions that I can attach much weight to it. I need give no further consideration to Mr Marshall’s assessment of relativity between the lettings of 96 Shaftesbury Avenue and the Property because in the end he did not rely on it in proposing a rateable value of £1,100/sqm Zone A.

The comparable rental evidence of Unit 2 Wingate House, 31 and 35 Frith Street provides a close range of rental values from £1,513/sqm to £1630/sqm Zone A when adjusted to the AVD. I accept Mr Staples’ use of a straight line approach in his adjustments. All of these lettings were in the same mode and category as the Property and located in close proximity to it on the north side of Shaftesbury Avenue or in Frith Street. Other than the surprisingly low rent for the Property, which I have found can be given little weight, I have received no evidence in support of Mr Marshall’s contention that the Property sits in a less valuable pitch.

The comparable evidence clearly provides support for the rate of £1,600/sqm Zone A, which was agreed for 35 Frith Street following a challenge. Mr Marshall pointed out that the adjusted rent of 35 Frith Street, at £1,513/sqm Zone A, sat below the agreed rate and suggested that this was evidence the rate was too high. However, we have no details on how fit out costs were dealt with in the agreed rate, nor how the return frontage was accounted for. Given those uncertainties Mr Marshall’s concern cannot be taken further.

I consider that the appellant had good cause to make an appeal to the VTE against the list entry of rateable value based on £2,160/sqm Zone A although the rate of £950/sqm ITZA, sought on the basis of relativity with 96 Shaftesbury Avenue, was clearly unsupportable. The amended rate, following challenge, of £1,600/sqm Zone A for 35 Frith Street should have been included in evidence given by the respondent to the VTE, in acknowledgment that the original tone, in Frith Street at least, was too high.

But in this appeal, once Mr Staples had produced his report, the respondent conceded that point, so the appeal is partly successful. However, for the reasons already given, I can find no evidence that suggests the rate on the Property should be different from the one agreed on 35 Frith Street. I therefore determine the rateable value of the Property at £1,600/sqm Zone A and £109,000 overall.

Mr Mackenzie pressed Mr Marshall to explain how he could give an independent expert opinion when he had acted for the appellant in the capacity of both representative and expert right up until the time counsel was instructed in the week before the hearing. Mr Marshall was confident that, although he had in theory had two hats to wear during that period, when he was wearing his expert hat he knew his duties to the Tribunal and had provided independent evidence.

Paragraph 19.6 of the Tribunal’s Practice Directions permits an expert to assist a party in preparation of the case before the hearing, and at the hearing in a supportive capacity, provided those services are acknowledged in the expert report. I do not see such an acknowledgement in Mr Marshall’s expert report. Paragraph 19.15 states, inter alia, that an expert’s report must include “…a statement of the substance of the instructions received by the expert (whether written or oral)”. In his report Mr Marshall did not provide details of any instructions which he may have received, in writing or orally.

The Tribunal is conscious of its overriding objective to deal with cases fairly and justly, and conscious that parties must have regard to their costs when deciding how they should be represented. However, an expert who provides an expert report in support of a position in pleadings which he has written may find himself in difficulty demonstrating impartiality and objectivity in his evidence. Particular care must be taken in these circumstances to acknowledge the position and explain how compliance with the duties of an expert has been achieved.