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Appeal No. VA96/5/016 AN BINSE LUACHÁLA James McHugh, Arcade Taverns Limited t/a Newtown Pery
APPELLANT RE: Licensed shop and restaurant at Lot No: 49, 50
(ground floor, basement, and 1st floor. rear), B E F O R E JUDGMENT OF THE VALUATION TRIBUNAL By Notice of Appeal dated the 7th October, 1996 the Appellant appealed against the determination of the Commissioner of Valuation in fixing a rateable valuation of £255 on the above described hereditament. The grounds of appeal as set out in the Notice of Appeal are that:- "the valuation is excessive and inequitable when compared with existing type of premises in the area. Also on the basis of lack of profitability of the enterprise and location of premises." The Property: Ground Floor Valuation History: Written Submissions: In his written submission, he set out the background to the subject appeal. He also supplied details of the accommodation of the subject premises and his valuation considerations. Mr. Killen submitted that the appropriate rateable valuation on the subject premises should be calculated by reference to the accounts method and he set out a detailed valuation on this basis which assessed rateable valuation at £190. Mr. Killen submitted an additional summary of evidence to the Tribunal on 14th April 1997 in which he provided a valuation using the comparative method of valuation, on foot of information supplied to him by the Respondent. The rateable valuation proposed by Mr. Killen on this basis is £170. A written submission was received on the 3rd day of April 1997 from Mr. Brian O'Flynn, District Valuer with 21 years experience in the Valuation Office on behalf of the Respondent. In his written submission he set out the recent valuation history of the subject premises. He described the subject premises and said that it was completely redeveloped in 1989 and let by the developer on a 35 year lease with five year reviews from the 26th January 1990 at £75,000 pa. In addition, he submitted that there was an expenditure of £200,000 on improvements, fitting out and equipment. He submitted that half of this sum related to leased equipment. Mr. O'Flynn set out his valuation on the subject premises based on: 1. The renegotiated shell rent in 1993 £ 60,000 2. Purchase of landlord's interest March 1994 £420,000 3. Turnover basis for the years 1994 & 1995 Mr. O'Flynn offered three comparisons of licensed premises in the area which are summarised below. 1. Teds (The Brazenhead) pt. 102 O'Connell Street 2. The Texas Steakhouse, 116 rear 117 O'Connell Street 3. Lot 1, 2, 3, 4 Baker Place, Custom House & Shannon Ward Oral Hearing: On a preliminary issue as to whether a letter from the said Mr. McHugh to Mr. Gregg in the Valuation Office on the 29th January, 1992, prohibited the appeal from proceeding, on the basis of an agreement entered into by the Appellant, the Tribunal decided as follows:- a. A trading company known as Featherleaf, of which Mr. McHugh was a
Director had, since this agreement gone into liquidation. The Tribunal therefore concluded that the Appellant was not estopped
by the earlier agreement and the appeal should proceed. Mr. McHugh gave evidence that he never considered the off-licence in the property to be profitable and it has since been replaced by a restaurant, which is open from 10.00 am to 9.00 pm. The property also incorporates a night club which opens from 11.30 pm to 2.00 am. Mr. McHugh indicated in his evidence that since having become involved in the night club business, he was conscious of quite a lot of competition in the area around O'Connell Street, Limerick. He produced a set of financial accounts for the years 1994 to 1996 to the Tribunal and confirmed that he himself dealt with most, if not all, of the accounts of the business as he previously had, by profession, been an accountant in the Royal George Hotel. In producing the accounts, Mr. McHugh was prepared to add back the rent in the usual manner, because of the relationship that existed between landlord and tenant. He further indicated in his evidence that, taking an average figure of £8.30 psf, the rateable valuation would amount to £170, which he felt was reasonable in the circumstances. On cross examination, Mr. McHugh admitted that he had previously sent a letter of agreement to the Valuation Office on behalf of Newtown Pery, but indicated that matters had changed as earlier set out. When questioned about the rent of the property in 1989, he indicated that it was on a 35 year lease, with a rent of £15,000 pa. He further replied, on questioning, that there was an expenditure of £200,000 on improvements and equipment for the night club following purchase of the premises. In his own direct evidence, Mr. O'Flynn relied on his précis as his evidence in chief. He indicated that the property was of a good standard and in a very central location at the axis of the city access street. It was further his view that any changes to the property were improvements and considered that the file relating to the first appeal was important in this regard. He also noted that there was a disco licence attaching to the property. Mr. O'Flynn highlighted the important aspects of his case as follows:- a. There is shell rent in place. In reference to his comparisons, Mr. O'Flynn quoted his first comparison as Teds (The Brazenhead) Part, 102 O'Connell Street and confirmed that this was a lease of two years and nine months at a rent of £200 per week and was very comparable. His third comparison of Lot No. 1,2,3 and 4 Baker Place, Custom House in Shannon Ward, showed a rateable valuation based on turnover and taking into account gross profits. In this comparison, he quoted an RV agreed at £240, which was equivalent to 9% of the November, 1988 turnover. In cross examination, by Mr. Killen, Mr. O'Flynn calculated a rateable
valuation of £235 based on a rent of £75,000 pa put to him
by Mr. Killen with bar takings of £9,000 per week. Mr. O'Flynn did
not disagree with Mr.Killen's contention to him that since the revision
in November, 1990/4 to £150 there was a change in circumstances
regarding the rent, the property being sold, and downturn in trade. However,
he did remark that he did not know if the accounts were audited accounts.
On further cross examination, Mr. O'Flynn indicated that he had never
used the accounts method and had particularly not used it on pubs. He
felt that he would have more confidence in turnover figures. Mr. Killen
questioned the witness in relation to his allowance of 20% for rental
growth, and he stated that his estimation of rent was not on the basis
of evidence, but was his opinion as a professional Valuer. He further
confirmed that the figure of 8% of turnover to represent the NAV was not
related to any particular analysis. Mr. Killen considered that this property was somewhat superior to the subject and traded extremely well. His suggestion in this regard was not disputed by Mr. O'Flynn. In relation to one of his comparisons, Mr. O'Flynn admitted that he only had one year's accounts to assess the turnover, as at the time it was only a new property. Mr. Killen further suggested to Mr. O'Flynn that Thomas Street, was a good place for young people, and had many fast food outlets, which impinged on the subject and this was accepted by the witness. Mr. Killen further submitted that the Desmond Arms at number 38 near the subject traded well. In summing up, it was Mr. Killen's view that the actual rent is the best evidence in determining any NAV if it is an open market rent. However, he felt that he should use the accounts method in this particular circumstance as it reflected the true trading situation. In these circumstances, the company had three years trading and a hypothetical tenant would look to the trading accounts to show what has happened in the business. He further submitted that in the circumstances as earlier set out, his client was entitled to apply for revision. Mr. O'Flynn summed up his evidence by referring to the fact that there was a rent in place. It was a re-negotiated rent and there was a purchase. He further submitted that the purchase price of £400,000 is prime evidence of value where a sitting tenant is in place. Having previously determined the preliminary issue, the Tribunal considered the further evidence submitted to it and on the basis of the factual evidence as set out by both parties, it is the view of the Tribunal that the Commissioner's decision on rateable valuation be affirmed and so determines.
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