The Upper Tribunal's latest decision as to whether advertising rights within train stations are part of the railway hereditaments has left the station in List (Valuation Officer) v Network Rail Infrastructure Ltd [2024].
Following the Valuation Tribunal for England's (VTE) decision that advertisements at Victoria Station and Liverpool Street Station were not separate hereditaments for rating purposes, the Valuation Office (the public sector's independent property valuation agency) appealed to the Upper Tribunal.
The appeal concerned two advertisements in particular; a two-sided, back-lit 6.0m by 1.6m box at Victoria Station with a rateable value of £83,000, and a digital “transvision” 4.0m by 2.3m installation over the Broadgate Circus exit of Liverpool Street Station with a rateable value of £77,500.
The rights to display these advertisements had been granted by Network Rail to J.C. Decaux UK Ltd under a wider Rail Advertising Concession Agreement. The Valuation Officer argued that the rights to display the advertisements did not fall within the railway hereditaments, as separate hereditaments had been created. In practical terms, the Valuation Officer's position was that the advertising rights should be subject to a separate tax on its occupation/ownership, and not fall within the rates applied to the railway stations.
Victoria Station and Liverpool Street Station are both railway hereditaments, falling within section 64(1) of the Local Government Finance Act 1988, included in the central list. The definition of a standard hereditament has been built up through centuries of case law and statute, but – put simply – it is a property which is liable to a rate and is shown as a separate item in the valuation list.
Section 64(2) of the 1988 Act defines an advertising hereditament as a "right to use any land for the purposes of exhibiting advertisements" which is "let out" to someone other than the owner or occupier of the land. As an advertising hereditament is a right (and not a physical parcel of land), it falls within what are sometimes called "incorporeal hereditaments".
The Upper Tribunal decided in favour of the Valuation Officer, confirming that the advertising rights existed as advertising hereditaments separate from the railway hereditaments of Victoria Station and Liverpool Street Station. The crux of this decision focused on the meaning of the phrase "let out" in section 64(2) of the 1988 Act.
The Upper Tribunal distinguished between to "let out" and to “let out so as to be capable of separate assessment”, the former being the language used in the Railways (Rating for Valuation) Act 1930. While the VTE had reasoned that Network Rail retained sufficient control over the advertising rights for them to not be considered as "let out", the Upper Tribunal noted there does not need to be a technical or proprietary letting or grant, but a transfer or conferral of the right is sufficient. Network Rail, in the eyes of the Upper Tribunal, did not retain paramount control of the advertising rights on the basis that:
- J.C. Decaux UK Ltd had complete control of all commercial risks;
- Network Rail exchanged "the exclusive right to maintain, manage, promote and exploit the sale of Advertising Space" for a fee and profit share;
- Although Network Rail retained the discretionary right to permanently withdraw any display, if it exercised that right it could not offer any space which was subject to the Concession Agreement to anyone else and for the rest of the term, the space would cease to be a commercial advertising site;
- Section 64(2) of the 1988 Act deems the occupier of an advertising hereditament to be the person entitled to exercise that right and so Network Rail is not the occupier of the advertising right; and
- Any liability Network Rail has in respect of the advertising right is limited to the indemnities it gave under the Concession Agreement.
Therefore, the advertising rights granted to J.C. Decaux UK Ltd existed as separate advertising hereditaments to the railway hereditaments of the stations the advertisements are placed in.
Underlying this was the understanding that an advertising hereditament is a "special kind of hereditament" and so is governed by separate rules to standard hereditaments – for example, the case law defining an "occupier" of a hereditament does not apply to section 64(2).
The Upper Tribunal also noted that "let out" would likely require "some degree of longevity and exclusivity", but these factors were not at their discretion to comment on the facts presented.
Read the full decision here.
As an addition to the long history of case law on hereditaments, this appeal demonstrates how the time-honoured understanding of what a hereditament is – woven long before the digital age – is still applicable today.
