Owners of Old Course ‘showhouse’ apartments lose appeal against valuation roll entry

The Lands Valuation Appeal Court upheld a decision of the valuation appeal committee, which rejected the appellants’ argument that each of the apartments was a “dwelling” and that they fell to be excluded from the valuation roll.

The Lord Justice Clerk, Lord Carloway, sitting with Lord Malcolm and Lord Doherty, heard that while showhouses had been entered in the valuation roll for many years, this case was the first appeal against any such entry to have gone to a hearing before a valuation appeal committee or the Lands Tribunal for Scotland.

The court was told that The Grand Hotel in St Andrews, which was built in about 1895 on a prominent corner site with elevations on The Scores and on Golf Place, was purchased by the University of St Andrews in 1949 and renamed Hamilton Hall after being converted into a student hall of residence.

The appellants, The Old Course Limited, purchased the category B listed building from the university and redeveloped it between 2010 and 2013, creating 26 luxury apartments within the building at 21 Golf Place, which was renamed Hamilton Grand and enjoys spectacular views overlooking the 18th green of the Old Course and the West Sands.

The appellants furnished two of the apartments – apartments 5 and 7 – and used them as showhouses in order to promotes the sales all of the flats, prices for which range from £2 million £7.5 million.

In February 2014 the Fife Council Assessor entered apartments 5 and 7 in the valuation roll as a single entry with the description “showhouse”, and with an NAV/RV of £240,000.

Apartment 5 was sold in June 2014 and the entry in the roll was altered to reflect the fact that the showhouse now only comprised apartment 7 – the altered value being NAV/RV £120,000.

Upon their completion the other 24 apartments – none of which had been furnished or used as a showhouse by the appellants – were entered by the assessor in the council tax valuation list on the basis that they were dwellings.

The appellants challenged both of the entries in the valuation roll, but the valuation appeal committee upheld the values entered by the assessor and agreed with the assessor that having regard to their occupation and use, apartments 5 and 7 were not dwellings and therefore the subjects had been correctly entered in the valuation roll as a showhouse.

On appeal to the court, the appellants contended that the committee erred in law, arguing that each of those apartments was a “dwelling” in terms of section 72 (2) of the Local Government Finance Act 1992, and that they fell to be excluded from the valuation roll in terms of section 73(1).

It was submitted that in order to determine whether lands and heritages were a “dwelling” in terms of s. 72 (2) and a “dwelling house” in terms of s. 72 (2)(a)(i) one looked only at the nature of the subjects, i.e. their physical characteristics, and their use was “irrelevant”.

However, Lord Doherty – with whom the Lord Justice Clerk and Lord Malcolm agreed – held that on the facts found there was “no real scope for the committee to have reached any other conclusion”, as at all material times the appellants were in rateable occupation of apartments 5 and 7 and the “showhouse use” was the “only use” to which those apartments were put.

In a written opinion, Lord Doherty said: “It is elementary that in characterising subjects for the purposes of valuation for rating it is proper to look not only to their physical circumstances but also to the use to which they are put. Subjects are valued in their actual state and according to their existing use.

“In my opinion the short answer to this appeal is that s. 72(2)(a) does not say that the existing use of subjects is to be irrelevant to the issue whether the subjects are a ‘dwelling house’. It does not provide that the only relevant consideration is to be the physical characteristics of the subjects.

“The appellants’ suggested construction is not the natural and ordinary reading of the provision. On the contrary, it is a rigid and restrictive gloss on the subsection.

“No justification for that gloss can be found in the language of Part II of the statute, or in the statutory purpose, or in any decided cases. It is an interpretation which would produce absurd results.

“Lands and heritages with the physical characteristics of a dwelling house but used only for another purpose or purposes (e.g. as a commercial office or store) would be a ‘dwelling house’, and therefore a ‘dwelling’. In my view it is plain that it was no part of the statutory purpose that such subjects should be excluded from the valuation roll and entered in the valuation list.”