Council tax valuations and affordable housing

Tony Reynolds, a partner in our Commercial Dispute Resolution team in Edinburgh, has successfully acted for the Assessor of the Lothian Valuation Joint Board (the Assessor) in connection with a council tax appeal that was heard by the Inner House of the Court of Session. 

Key facts

Mr and Mrs McLaughlin purchased an affordable housing unit from Persimmon Homes in November 2016. The unit was a ground floor flat at Stanwell Street in Edinburgh. It formed part of a wider development of 49 properties; 11 of those units were affordable homes. The remaining 38 units were sold on the open market.

The agreement entered into between Persimmon Homes and the local authority made it clear that no affordable housing unit was to be occupied other than by an ‘eligible purchaser’ and that the price of a unit was not to exceed the approved maximum disposal price, which was 80% of a similar open market unit situated within the development (‘the Golden Share Provision’). Mr and Mrs McLaughlin were ‘eligible purchasers’ and they purchased their ground floor flat for £129,600, which represented 80% of the open market value of £162,000 using the ‘Gold Share Provision’ that they were eligible for. 

In December 2016, the Assessor listed Mr and Mrs McLaughlin’s flat as being in Band D for council tax purposes. In doing so, the Assessor took into account the fact that the value of any dwelling ought to be the amount, which it might reasonably have been expected to realise, if it had been sold on the open market i.e. £162,000. The Assessor relied on the statutory hypothesis outlined in the Local Government Finance Act 1992 and the Council Tax (Valuations of Dwellings) (Scotland) Regulations 1992. Mr and Mrs McLaughlin disagreed. They argued that the Golden Share Provision should be taken into account and the valuation band ought to be Band C. 

The Assessor referred the dispute to the Valuation Appeal Committee (the Committee) who agreed with Mr and Mrs McLaughlin. They said that Golden Share Provision should be taken into account for valuation purposes and they remitted the matter back to the Assessor to reconsider the banding for the property. 

The Assessor subsequently appealed to the Court of Session. He argued that the Committee had misunderstood the statutory hypothesis on which council banding should be assigned i.e. that the value of any dwelling ought to be the amount, which it might reasonably have been expected to realise if it had been sold on the open market. In other words, the Assessor was required to determine the hypothetical amount the property would sell for on the open market if it was not limited by the Golden Share Provision. 

The decision

The Court of Session allowed the Assessor’s appeal. They held that the Committee’s decision was wrong because it had incorrectly focused on the sale price, which a proprietor could have achieved, if it has been constrained by the Golden Share Provision, instead of focusing on the dwelling's open market value in accordance with the statutory hypothesis. The Court of Session also held that the Committee had failed to appreciate that the Golden Share Provision was incompatible with that statutory hypothesis.

What this means in practice

This Court of Session decision is significant. The decision will affect other elements of affordable housing for council tax purposes throughout Scotland, affected by the same statutory hypothesis, when applied to joint enterprises undertaken by local authorities and house builders. If you have any queries about the issues raised by the Court of Session’s recent decision, then please do not hesitate to contact Tony Reynolds. 

Contributor: Shelley Bishop, Legal Director, Professional Support Lawyer 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.