In Merlin Entertainments Group Ltd v VO (2018) UKUT 406 (LC) the Upper Tribunal was concerned with whether there had been a material change of circumstances under paragraph 2(7)(d) of Schedule 6 to the Local Government Finance Act 1988. It was held that there had not been such a change. The change (a fall in visitor numbers at Alton Towers following a fatal crash) was not a matter which was “physically manifest” in the locality of the hereditament on the relevant day.
Paragraph 2(7) enacts the physical state and user limbs of the reality principle, in relation to both the hereditament and its locality. Regulation 2(7) sets out the factors to which the reality principle applies. They include, (d), matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless “physically manifest” there. One of the issues which arose was whether a purely economic matter can fall within paragraph 2(7)(d).The Upper Tribunal held (paragraph 76) that the change in circumstances relied upon was not an “essential” or relevant characteristic of either the hereditament or its locality. They were simply concerned (paragraph 79) with the way in which Alton Towers operated its business and the reaction of potential customers. Success or failure is no more than an attribute of the actual occupier. It is not a characteristic of the property being valued or of the locality in which it is set. That was sufficient for the appeal to be dismissed.
Also, the appellant’s proposal was (paragraph 102) in substance to do with the hereditament, indeed the conduct of the appellant’s business on the hereditament, rather than its locality.
The Upper Tribunal addressed the proper construction of paragraph 2(7)(d) from paragraph 107. They stated at paragraph 149 that the second limb of paragraph 2(7)(d) is referring only to a matter which, although not affecting the physical state of the locality, is nonetheless itself physically manifest there. They said at paragraph 151 that the fact that people choose either to visit or not visit a particular hereditament does not make public attitude a physical characteristic of a locality. It remains simply an aspect of market demand.
At paragraph 193, the Upper Tribunal gave practical guidance for surveyors and Tribunals.