"It Never Rains..." : Repair & Reality in the Upper Tribunal, Carey Group PLC v Ricketts (Valuation Officer) [2024] UKUT 356 (LC)

In the recent judgment of Carey Group PLC v Ricketts (Valuation Officer) [2024] UKUT 356 (LC), the Upper Tribunal (Lands Chamber) found that despite water ingress rendering premises incapable of beneficial occupation the repair assumption operated to make the hereditament liable to a rate.

The Upper Tribunal acknowledged there was a “question mark” over the relationship, as set out in the judgement of the Supreme Court in SJ & J Monk v Newbigin [2017] UKSC 14, between the repair assumption, which derives from statue, and its application as against the reality principle in ratings law for works which fell short of a radical programme of works:

Repair assumption – the valuer must assume that in the hypothetical tenancy the hereditament is in a state of reasonable repair at a given date but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic.

Reality principle – the hereditament should be valued as it in fact existed in reality on the material day: the physical and use characteristics of the hereditament itself, and the locality in which it is situated.

Monk concerned a building undergoing redevelopment. On appeal, the ratepayer was successful in amending the ratings list to a nominal £1 for the period of those works. The court found that the redevelopment works were not repair works so the repair assumption could not operate to exclude their effect from the valuation.

Carey Group occupied the office space on the basement and ground floors in a mixed-use development. Water ingress via a joint rendered the premises incapable of occupation in the period March 2020 to April 2021 until remedial works to seal the joint were carried out. The Ratepayer stopped trading from the premises due to the health hazard it presented, and on appeal it was common ground that the premises were incapable of beneficial occupation during that period.

Carey Group said that, viewed objectively, works to the premises to prevent further water ingress were not works of repair so that the repair assumption could not  operate to  assume  those  works had been carried out.   

The Upper Tribunal agreed that the question was whether the works to prevent further water ingress were works of repair or not. It affirmed that in answering that question common law principles apply. Applying those principles, it dismissed the appeal the key reasoning being:

•  Put bluntly, and counterintuitive as it may appear, disrepair requires some deterioration from a previous condition such as the initial construction of the premises absent which the mere functional inadequacy of them was not enough to engage the obligation to repair, per Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.
   
•  However, despite the history of works to the seal joint it was unclear on the factual and expert evidence whether those works were to improve or repair.
   
•  Instead, following a line of case law culminating in London Borough of Hounslow v Waaler [2017] EWCA Civ 45, the Tribunal found that repair can include eradicating an inherent defect or pre-emptive measures to avoid the recurrence of deterioration.
   
•  On the evidence the water had caused damage to Carey Grant’s premises and would reoccur, and so works to remediate it could be considered repair such that the statutory repair assumption was engaged.

Parties to appeals in the Upper Tribunal have a right of appeal to the Court of Appeal. At the date of writing it remains to be seen whether Carey Group will seek permission to appeal.