Appeal No. VA10/5/079
AN BINSE LUACHÁLA
Highview Inns Hotel Ltd. (Michael Carroll) APPELLANT
RE: Property No. 436745, Hotel at 25/26 Harbour, Skerries, County Dublin
B E F O R E
JUDGMENT OF THE VALUATION TRIBUNAL
By Notice of Appeal dated the 26th day of August, 2010 the appellant appealed against the determination of the Commissioner of Valuation in fixing a valuation of €177,400 on the above described relevant property.
The grounds of appeal are set out in the Notice of Appeal and in accompanying documents, a copy of which are attached at Appendix 1 to this judgment.
The appeal proceeded by way of an oral hearing and was held in the offices of the Valuation Tribunal, Ormond House, Ormond Quay Upper, Dublin 7 on the 18th day of January 2011, and was resumed on the 26th day of January 2011. At the hearing the appellant was represented by Mr. Alan McMillan, Director, GVA Donal O Buachalla, while Mr. Liam Cahill, Valuer and Team Leader in the Valuation Office, represented the respondent, the Commissioner of Valuation.
The valuation as assessed is attached herewith at Appendix 2.
The Appellant’s Case
He also mentioned a meeting that was held on 11th January, 2007 between the respondent and the Irish Hotels Federation (IHF). He said that at this meeting the R&E method was advised by the VO as being the correct method of valuation to be used for valuing hotels. He further stated that the suitability of R&E was subsequently affirmed at a symposium that was jointly organised by the SCS and the IAVI in September 2008.
Mr. McMillan continued his evidence by explaining that the R&E method of valuation seeks to establish and analyse the trading potential of what is not a hypothetical but a real property, and thereby to establish the rent which the hypothetical tenant would pay at the relevant date, as defined by Section 48 of the Valuation Act, 2001. This is achieved by estimating the sales and costs in order to deduce the Divisible Balance (being the amount to be shared between the hypothetical tenant and the hypothetical landlord). The tenants share is defined as the amount which must be sufficient to induce the tenant to take the property and to provide a proper reward to achieve profit, an allowance for risk and a return on tenant capital.
Mr. McMillan explained for the Tribunal the Receipts & Expenditure (R&E) guidance note in the appellant’s précis under the heading ‘Salaries’(page 13 paragraph 5.29) that says “…. where the occupier is an individual or where the hypothetical tenant might be expected to carry on the undertaking without advice from directors it is normal to allow for remuneration solely in the tenants share’’. In this case there are just two working directors, and if they were to be replaced, then two new staff members would need to be employed to replace them.
He contended that the proposed 50:50 split of the Divisible Balance was fair and reasonable and consistent with former decisions made by the Tribunal including the Kelly’s Strand Hotel v Commissioner of Valuation (VA/97/6/007), Glentworth Catering Services v Commissioner of Valuation (VA94/1/015), Berne Hotel t/a Killiney Court Hotel v Commissioner of Valuation (VA93/3/048) and Mary O’Neill t/a O’Dea’s Hotel v Commissioner of Valuation (VA94/1/014). Mr. McMillan then outlined for the Tribunal the rate of development and the increase in hotel room capacity in the Dublin area from 2005 to 2009 which indicated an increase of 36% in room capacity in peak season, and said that this oversupply had now reached a capacity crisis.
Mr. McMillan concluded his evidence by stating that in his opinion a fair and proper estimate of valuation of the subject property is €87,000.
26th January 2011.
The Respondent’s Case
He said that in regard to the rental evidence there was one rent on the Twelfth Lock Hotel available to him. In relation to the comparative method he said that he relied on two judgments in relation to hotel properties in South Dublin including Q.E. Facilities Ltd. t/a Tower Hotel v Commissioner of Valuation (VA08/5/225) and Kingsoak Taverns Ltd t/a Clarion Hotel Liffey Valley v Commissioner of Valuation (VA08/5/224). In the Tower Hotel determination the Tribunal accepted in principal Mr. Cahill’s valuation model, which appears to have been accepted by a number of ratepayers and other advisers, while in the Clarion hotel it determined that the NAV of the property be in accordance with Section 48 of the Valuation Act, 2001.
Commenting on the contractor’s method, Mr. Cahill said that when valuing the subject he did not rely on this method. When commenting on the R&E method, Mr. Cahill said that he had learned a lot and is now considerably more informed of its application and methodology having regard to the experience of the Fingal revaluation exercise. He said that this method is very complex and requires attention to detail and that if all of the financial information is not given then it is extremely difficult to apply R&E.
Mr. Cahill continued his evidence by listing the matters to be considered when using the shortened method, and that this method is part of the comparative method. In this instance matters to be considered include the financial accounts, the economy, rent, the tenant’s share in relation to salaries, repairs and the split here, as well as the treatment of depreciation. He was advocating the shortened method for the subject. When asked under cross-examination to comment on when using the shortened method that rental evidence is needed, Mr. Cahill said that he had the rental evidence of the Twelfth Lock and the purchase price of the subject to rely on. Mr. Cahill concluded his evidence by saying that he considered the application of the Shortened method in this case to be correct.
And the Tribunal so determines.