AN BINSE LUACHÁLA
VALUATION TRIBUNAL
AN tACHT LUACHÁLA, 2001
VALUATION ACT, 2001

Paddy McLaughlin APPELLANT
and
Commissioner of Valuation RESPONDENT

RE: Licensed Shop at Map Reference 9C Dristernan,
Gleneely, County Donegal

B E F O R E
Fred Devlin - FSCS.FRICS Deputy Chairperson
Frank O'Donnell - B.Agr.Sc. FIAVI. Member
Joseph Murray - Barrister Member

JUDGMENT OF THE VALUATION TRIBUNAL
ISSUED ON THE 6TH DAY OF JUNE, 2003

By Notice of Appeal dated the 25th October 2002, the appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of €50 on the relevant property above described.

The Grounds of Appeal as set out in the said Notice of Appeal are that:
"The valuation is incorrect in comparison to other relevant properties in the same rating area.

1. This appeal proceeded by way of an oral hearing held in Letterkenny on the 28th of February 2003.

2. At the hearing the appellant was represented by Mr. Patrick McCarroll MRICS FIAVI ASCS IRRV MCIArb, and the respondent by Mr. John Kirwan B.Agr.Sc. Valuation Diploma, a valuer in the Valuation Office.

3. Prior to the hearing the Valuers exchanged written submissions and valuations which were forwarded to the Tribunal and subsequently received into evidence under oath at the oral hearing.

The Property
The subject property is known as Carricks Bar and comprises a licensed premises with a small section used as a chip shop located in the Village of Glenealy. Glenealy is on the R238 almost half way between Moville and Culdaff.

The building is a single storey structure and the agreed area of the accommodation provided is as set out below:
Bar Lounge and Poolroom - 117.28m2
Chip Shop/Bar- 24.30m2
Kitchen - 10.35m2
Store - 20.25m2

Rating History
At the 2000/2 revision the rateable valuation of the subject premises was determined at €77, which was reduced to €50 at first appeal stage. The appellant being aggrieved lodged a further appeal to this Tribunal.

The Appellant's Evidence
Mr Mc Carroll having taken the oath adopted his written précis, which had previously been received by the Tribunal as being his evidence in chief. In his evidence Mr. Mc Carroll said that the subject property was not located in an established tourist area and consequently relied primarily on local custom mainly at weekends and late evenings. The chip shop section of the property he said was open only in the evenings during the spring and summer months when there was a small level of tourist activity. Mr.
Mc Carroll went on to say that generally speaking Donegal tourism had suffered badly in recent years due to the foot and mouth outbreak and the events of September 11th. The level of business being conducted at the subject premises could only continue as a family run enterprise operating on a part time basis only.

Mr. Mc Carroll contended for a rateable valuation of €34 calculated as set out below: -

Turnover
31/08/98 €92,872
31/08/99 €94,603
31/08/00 €104,559
31/08/01 €123,086

Average turnover = €103,780 but say €110,000 backdated to November 1988 (by reference to the Alcoholic Drink Index) = €76,047
Net annual Value @ 9% = €6844
Rateable Valuation @ 0.5% = €34.00.

In support of his opinion of Net Annual Value Mr. Mc Carroll relied upon four comparisons as set out in Appendix 1, which forms part of this judgment. In particular Mr. Mc Carroll relied upon the licensed premises at Ardmalin townland near Malin Head. This property he said occupied a better location than the subject property and the turnover achieved therein benefited from some tourist activity during the summer months.

The Respondent's Evidence
Mr. Kirwan having taken the oath adopted his written précis, which had previously been received by the Tribunal as being his evidence in chief. In evidence Mr. Kirwan concurred with Mr. Mc Carroll in relation to the description and area of the subject property but opinioned that the tourist element of the business was better than Mr. Mc Carroll alleged and in his opinion could be further developed. He did not however challenge the accounts introduced by the appellant but expressed the view that a hypothetical tenant in the market would reasonably expect to achieve a higher turnover having regard to the size and the facilities of the premises and its location on a fairly busy road. In his opinion the area of the premises was a factor that must be taken into account in arriving at an opinion of rental value as this could dictate the number of customers that could be accommodated in the premises at any one time. Mr. Kirwan contended for a rateable valuation of €55 calculated as set out below.

Bar Lounge and Pool Room 117.28 metres @ €75.17 = €8815.94
Area used as Café and Bar 24.30 m2 @ €61.50 = €1494.45
Kitchen 10.35 m2 @ €34.17 = €353.60
Store 20.25m2 @ €20.50 = €415

Net Annual Value = €11,079 but say €11,000 Rateable Valuation @ 0.5% = €55.

In support of his opinion of net annual value Mr. Kirwan introduced nine comparisons details of which are set out in Appendix 2 attached to this judgment. These comparisons comprise three licensed premises in Carndonagh two in Greencastle and one between Greencastle and Shrue. His other comparison was located at Armalin townland and was also used as a comparison by Mr. McCarroll. Five of these comparisons were valued by reference to turnover and the other four were valued on a square metre basis.

Mr. Kirwan said the appeal valuer had recommended that the rateable valuation be reduced to €55 but that a figure of €50 was issued in error to the Local Authority and the Appellant.

Mr. Kirwan said in his evidence said that whilst turnover was an important factor in determining net annual value he personally favoured the square metre basis of valuation. In his opinion whilst a hypothetical tenant would have regard to turnover he would also have regard to the size of the premises as this could dictate the level of achievable turnover.

Findings

1. In the subject appeal, the valuers have adopted different methods of valuation in order to arrive at their respective opinions of net annual value. Mr. Mc Carroll has relied upon the actual turnover whilst Mr. Kirwan has valued the premises by comparison with the assessments of other licensed premises on a square metre basis.

2. Over the past several years this Tribunal has dealt with a large number of appeals where the subject properties have been licensed premises. An examination of the judgments does not indicate a preference for any of the accepted methods of valuation and each case was determined on the basis of the evidence that was used at the hearing.

3. In the case Nallob Ltd t/a O' Donoghues VA95/5/024 the Tribunal dealt in some detail with the various methods of valuing licensed premises for rating purposes. At paragraph six of the judgment thereof the Tribunal made the following observations.

"6. Whilst entering the caveat that no one method is sacrosanct or conclusive, there is no doubt that in our opinion profits turnover etc. are hugely influential in the mind of a hypothetical tenant when determining the amount of rent which he is prepared to pay on an annual basis. Turnover seems to be more crucial than profit, this because it is the rent which is the measure of annual value and not profit. Knowledge of the existing turnover and the level at which the business is being conducted are vital elements in the calculation of any bid as is every other element which in either direction may affect the turnover. In considering this question of turnover one must be acutely conscious of the hereditament, which is being valued, in this instance it is the "premises" and not the business, though of course the latter is material in that the power to earn or increase profit can be an indication of value in respect of the said premises. Likewise good management should not be penalised and poor management be rewarded. Any "quite extraordinary", dedication, skill, character or other personal attributes, this whether having a positive or negative affect on the business must and should also be disregarded. Three years accounts without any distortion during that period are usually and should, on a confidential basis, be made available where possible. Shorter periods may indeed suffice, as where there is a start-up situation or where after major alterations/extensions, the nature and size of the operation is significantly different. In the absence of such accounts the following documentation may be proffered: An Auditors Certificate, the Profit and Loss Account, the Trade Account, the breakdown of the turnover between food, cigarettes and drink etc. and a copy of the Balance sheet. The breakdown as between drink and food is of particular significance. So once these limitations are observed and once it is appreciated that the actual turnover figure may and frequently will have to be adjusted then this is a method, which in our view is a forerunner in approaching the valuation of licensed premises".

4. This Tribunal fully agrees with the above findings that turnover is a primary factor in determining net annual value of a licensed premises. This is not to say that the physical characteristics of the premises should be totally disregarded. Indeed if the licensed area is too small it could in certain circumstances have the affect of limiting the level of business that a hypothetical tenant could reasonably expect to achieve.

5. Having carefully considered all the evidence adduced in this appeal the Tribunal accepts the appellant's evidence that the subject premises relies mainly on local based custom supplemented by some tourist business during the spring and summer months. The Tribunal also notes but does not necessarily fully accept the appellant's contention that tourism in the area has been adversely affected by the combination of unusual circumstances such as the Foot and Mouth outbreak and the events of September 11th.

6. Having regard to the above the Tribunal considers that the most appropriate method of valuation is to use the accounts/turnover basis as put forward by Mr. Mc Carroll. However having regard to the size of the premises, its location, the turnover and recent trading conditions the Tribunal has come to the conclusion that a hypothetical tenant in formulating his opinion of rental value would be prepared to apply a higher percentage of turnover than the 9% put forward by Mr. Mc Carroll.

7. Accordingly therefore the Tribunal determines the net annual value of the subject premises to be as follows.

Annual turnover (year ended 31st October 2001) €123,086 backdated to November 1988 say €76,000
Net annual value @ 10% = €7,600
Rateable Valuation @ 0.5% = €38. And the Tribunal so determines.