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New Clause—(Amendment Of S 3 Of Valuation For Rating Act, 1953)

Volume 639: debated on Wednesday 3 May 1961

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Subsection (2) of section three of the Valuation for Rating Act, 1953, shall have effect as if the words "substantially the whole" were deemed to apply where either—

  • (a) four or more bedrooms; or
  • (b) sleeping accommodation for eight or more persons; or
  • (c) more than half the available accommodation is ordinarily available for letting.—[Mr. Woodnutt.]
  • Brought up, and read the First time.

    I beg to move, That the Clause be read a Second time.

    The purpose of the Clause is not to extend the scope of subsection (2) of Section 3 of the Valuation for Rating Act, 1953, but clearly to define precisely what the Section means. The purpose is not to change the definition of a dwelling house, but clearly to define what a boarding house is. Section 3 (2) of the Act reads:
    "For the purposes of this Act a hereditament which is used for the letting of rooms singly for residential purposes shall be deemed not to be used for the purposes of a private dwelling or private dwellings if the whole, or substantially the whole, of the available accommodation is used for such lettings; but save as aforesaid a hereditament shall not be deemed for the purposes of this Act to be used otherwise than wholly for the purposes of a private dwelling or private dwellings by reason that one or more rooms therein are let for residential purposes."
    I have no fault to find with the second part of that subsection. It is clearly the intention that, even if a dwelling house has two or three rooms let as a regular arrangement, it can still be assessed as a dwelling house. I would not wish to change that. I would not wish anybody using his property for this purpose to be assessed on any other basis than the present one. Neither would it be my wish to have a different basis of assessment where the whole of the hereditament is let for short periods as furnished holiday accommodation. But I wish to make sure that a property which is being used as a boarding house—as a business—is assessed as a business and not as a private dwelling. It is clearly the intention of the 1953 Act that that should be the case. The trouble is that the words:
    "the whole or substantially the whole"
    are interpreted in different ways by different valuation officers and different lands tribunals.

    If we substitute for those words the words contained in the proposed Clause there will be no doubt what a boarding house is, because the definition is precise. In this connection I should like to quote two cases which illustrate the unfortunate anomalies that are now being created because of this difference in interpretation of the existing definition. Both cases were in 1958. The first was Buckley v. Tudge—a valuation officer—in which it was held that six out of nine units of available accommodation was "substantially the whole", and the property was assessed as a business. The second was Willington v. Woodward—another valuation officer—in which it was held that five out of seven units of available accommodation was not "substantially the whole". Clearly that is ridiculous, because five out of seven is a higher proportion than six out of nine. These anomalies should be removed by means of a more precise definition.

    It is clearly not fair, and it was certainly not the intention of the 1953 Act, that two identical businesses being run as boarding houses should be differently assessed—one as a private house and the other as a business. In the areas where this is happening not only is it unfair as between two boarding house proprietors; it is not fair on the domestic ratepayer, who then has to bear a higher proportion of the total rate burden, and upon the local authorities, who suffer a loss of rate income.

    There is one other aspect of the matter. Local authorities have no power of inspection by their local health departments to ensure that there is compliance with the regulations regarding health and hygiene if a property is a private dwelling. It is not fair, and it is not reasonable, for two different businesses operating in the same manner to be treated differently in that respect. I am informed by the British Hotels and Restaurants Association that anomalies of this nature are very widespread. In one resort where an extensive investigation was recently carried out it was found that businesses accommodating from ten to as many as thirty people were assessed as private dwellings. That is clearly not right.

    It might be wondered why I have chosen this definition. In fact, the reference to four or more bedrooms is taken from the Report of the Catering Wages Commission to the Minister of Labour on the establishment of a wages board for unlicensed residential hotels. When the Minister was later defining the scope of the wages boards it was he who added the words "or accommodating eight persons." I have taken the figure of 50 per cent. because I believe that if a building is being used to the extent of more than 50 per cent. for letting it is clearly a business. If this definition is satisfactory for the Catering Wages Act it should also be satisfactory for rating purposes.

    9.30 p.m.

    I should like to quote the Master of the Rolls in the case of Walls v. Peak, a Bournemouth case heard in the Court of Appeal on 25th March, 1960. In that case it was ruled by the Master of the Rolls that seven out of eleven letting rooms was not substantially the whole. The Master of the Rolls said:
    "This case raised a question of the construction of Section 3 of the Valuation for Rating Act, 1953, which has left me with a most unhappy feeling that the Parliamentary intention in the end may have been defeated."
    I agree with the Master of the Rolls. Twenty-one of my hon. Friends also agree because they have added their names to the Amendment. The British Hotels and Restaurants Association agrees, and so do the vast majority of local authorities. I hope that my right hon. Friend will also agree, and accept the Amendment.

    I support the proposed Clause, and I want to impress on the Committee the strong feeling which exists on this subject among bona fide hoteliers. I have been amazed at the pertinacity with which they have presented their case to me and to some of my hon. Friends. Their case adds up to a real sense of injustice among many of them.

    In an earlier discussion, the hon. and learned Member for Kettering (Mr. Mitchison) referred to my constituency as being both happy and healthy. I do not know so much about healthy, but it is certainly a happy constituency, and it is so largely because we cater annually for about 800,000 resident holiday makers. In fact, in Bournemouth we have more overall accommodation than in any other seaside resort. It is for that reason that hoteliers in my constituency feel particularly strongly on this issue.

    The issue is simply stated. It is that there are many businesses carried on today in premises which are rated as private residences. I underline what my hon. Friend said. We are not trying to get at the small person. We are not trying to stop the small person in a university town who takes in one or two students from time to time. We are not trying to stop the person who during the peak seasonal period may let a couple of rooms to help tide her over. We are not trying to get at the part-time person.

    We are concerned about the people who have a business and do a number of things, such as advertise in local papers that they can accommodate ten, twenty or thirty visitors in their premises; display signs outside their door to the effect that it is a guest house; and invite applications for rooms overnight.

    There is an example of that in the official guide to Bournemouth. I will not mention the name, because I do not want to draw the attention of anybody outside the Committee to the name of this establishment. The advertisement takes up half a page in the official guide. The people who are advertising are members of the local hotels association. They can accommodate a substantial number of residents throughout the year but the premises are nevertheless rated as private premises. It does not add up and make sense. These people are carrying on a business, and they should be treated as business people. That is the sum total of what we are trying to bring to the attention of the Committee this evening.

    My hon. Friend quoted a number of examples, one of the most notorious of which was the Bournemouth case which the Bournemouth valuation officer took to court. He lost the case, unfortunately, because it was said that seven rooms let out of eleven did not constitute substantially the whole of the building.

    I appreciate full well that the Minister or the Parliamentary Secretary may share the view expressed in the journal, Income Tax and Rating, in April, 1960. They may take the line that, in the light of the forthcoming changes, by 1963 this will not be such a big problem and that by 1968 it will have diminished further and the situation will not be anything like so serious. They may equally say that whatever definition is given will give rise to further litigation and anomalies and that there will always be the marginal case which will be the subject of dispute. I do not doubt that the latter may well be so, but there are good grounds for improving on the definition which is at present contemplated and which has been in force for the last four or five years.

    But I do not accept the argument, if this is to be the case, that by 1963 or 1968 onwards the position will not be anything like so drastic. It is true that for rating purposes they will all be on current values whether they are bona fide business premises or regarded as private residences. But there still remains the fact that some will be treated as businesses, and their profitability will be taken into account, and the starting point will be slightly different in the eyes of the valuation officer. If in any case it is a business, why should it not be recognised as such and recognised for all the purposes and not just for the purposes of getting custom and clients? So I hope that my right hon. Friend will feel inclined to give serious consideration to our case.

    Having studied the proposed Clause with some care, I accept straight away that it may not fully meet the case that we have in mind. I accept that it might be possible to shoot holes in the drafting. If that is so, I hope that that will not be used by the Parliamentary Secretary as an argument for doing nothing in this direction. If what I have suggested is the case, I hope he will seriously consider what use he can make of another place in bringing forward another new Clause of this kind.

    I stress again that this matter is considered by the hotel industry to be of the greatest possible importance, and that the industry itself is of the greatest possible importance to our economy and that we ought in justice to it to recognise its views on the matter.

    I cannot agree with the proposed Clause, though I appreciate the difficulties which it seeks to overcome. As my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) has said, a number of different decisions have been reached by the courts about the exact proportion of a house which may or may not be let vis-à-vis the owner in this respect. Our difficulty here is the three definitions which are given—"four or more bedrooms let", "sleeping accommodation for eight or more persons", or "50 per cent. of the total accommodation let".

    Here we refer to letting four rooms separately, or four units, whereas if we let four separate flats that might represent four times the accommodation. It does not add up. I consider that the definition should specify the total proportion of the whole house which the owner-occupier uses for himself, and that the judgment should not be on the basis of the number of persons accommodated or the exact units into which the owner-occupier chooses to divide the accommodation. One might well have four persons in a single room, or one might well let it as one flat.

    Although I agree that there is an anomaly in the law, I cannot support the proposed Clause. My view is that we should go for a definite proportion of the whole house and also leave it to a certain extent to the rating authorities to decide whether in an individual case accommodation is being occupied as a private house or as a business.

    It pains me to have to tell my hon. Friends, who speak with such emphasis and vigour on the subject, that the proposed Clause does not achieve what they set out to achieve.

    I will deal first with the technical background. I make no apology, because the subject is important to so many people, for dealing with it at some length. I shall then come to what is behind the proposed Clause and deal with that.

    Concealed here under the general name of a lodging house of one sort or another are three quite different categories of premises. First, there is the open, avowed boarding house. I would say in passing that a boarding house needs planning permission. A boarding house has, I suppose, two main features in that it takes not only single people but families and provides some amount of board. A boarding house is not a dwelling house within the meaning of the 1953 Act, so it is quite untouched by the Clause. Indeed, it was not the intention of the Clause to alter the position concerning the open and avowed boarding house.

    A boarding house is now a commercial hereditament for rating purposes and at the moment it gets 20 per cent. derating. That extent of derating will end in 1963.

    The second category is the dwelling-house, the owner of which lets one or more rooms to lodgers. Such a house is still a dwelling house for rating purposes, even if one or more rooms are let for residential purposes. This arises, as my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) indicated, as a result of the second half of Section 3 (2) of the Valuation for Rating Act, 1953. It states:
    "…a hereditament shall not be deemed for the purposes of this Act to be used otherwise than wholly for the purposes of a private dwelling or private dwellings by reason that one or more rooms therein are let for residential purposes.
    A dwelling house is at the moment still valued for rating purposes on the 1939 basis, and in 1963 it will revert to current value, but it will benefit for a period of five years from any derating power exercised by my right hon. Friend. Of course, I accept, as the mover of the Clause stressed, that no one wants to prejudice the position of the ordinary householder who takes in a lodger or two. That is understood. My hon. Friends were quite right to stress that the country needs more and more householders willing to take in lodgers from universities, colleges of advanced technology, technical colleges and the like.

    But it is suggested that some families, particularly in seaside resorts, squeeze themselves into one, two or three rooms during the holiday season and take visitors into the other rooms, deliberately competing with boarding houses, although their houses are still valued for rating as dwelling houses at 1939 values.

    I must emphasise to my hon. Friends that the Clause does not touch any such cases. They are confusing the first half of Section 3 (2) of the Act, which applies to a quite different category of dwelling, with the second half of that subsection.

    The fact is that the first half of subsection (2) in which occur the words
    "…substantially the whole…"
    which my hon. Friends seek to define, is limited to governing the case of the letting of rooms
    "singly for residential purposes."
    That is a different hereditament in terms of rating from a boarding house where the rooms are not let only singly and not let only for residential purposes. The rooms are let sometimes singly, sometimes in groups, sometimes for single people and sometimes for families and let not only for residential purposes but with board. There is a clear distinction.

    Section 3 (6) states:

    "In this Section references to the letting of rooms are references to the letting thereof by way of a tenancy or of a licence, and either with or without board…"

    9.45 p.m.

    Yes, but that does not alter the fact that the first part of subsection (2) does not refer to any sort of hereditament other than the one where the letting of rooms occurs singly for residential purposes, and that, I am advised, cannot cover boarding houses.

    The sort of premises it does cover are, in fact, premises of the third variety, namely, the flatlet house, the house divided into what are almost self-contained flatlets each being let singly for residential purposes. It is the flatlet house and the flatlet house alone which would be affected by the new Clause if it were accepted.

    I am much obliged to my hon. Friend for giving way again. I am sure that he knows more about this than I do, but the cases I quoted related to boarding houses.

    I know that this is very confusing, and I have now to explain to the Committee that the interpretation of this subsection has caused a very great deal of confusion in the past. Even the pundits in the Valuation Office at one time were disposed to regard the proportion of rooms devoted to bed and breakfast or board residence as a valid test of whether a hereditament was a boarding house or dwelling house even in the case of houses in holiday areas. This view appears to have been approved by decisions of the Lands Tribunal, but, after a review of their practice—this is, I am sorry to say the trump with which I am obliged to defeat my hon. Friend's intervention—following the decision of the Court of Appeal in the case of Walls v. Peak, the Valuation Office concluded that the first part of Section 3 (2), to which the new Clause relates, is not in any way relevant except in relation to the flatlet house. I am advised that, as the law now stands, the new Clause would affect only the flatlet house, and, of course, the flatlet house is not the target.

    I am sure that the Committee will not wish me to go into great detail about Walls v. Peak, but I will say that to take premises out of the class of dwelling-house for rating purposes and put them into the class of flatlets, it is necessary under Section 3 (2) for the whole or substantially the whole of the accommodation available to be let singly. As my hon. Friend explained, Walls v. Peak decided that seven rooms out of eleven was not substantially the whole, and it decided also that accommodation retained for the proprietor's own use had to be counted in the calculation.

    The Government are not discontented with the position as it was left by Walls v. Peak. Broadly, the Government's intention in this part of the 1953 Act was to distinguish between those people who, as it were, were trading in rooms and those who still occupied their own houses and used their houses mainly for their own occupation while making use of some rooms for letting. The decision in Walls v. Peak is, therefore, broadly in line with the Government's aim.

    As my hon. Friend the Member for Clapham (Dr. Alan Glyn) feared, and as my hon. Friend the Member for Bournemouth, West (Mr. Eden) said was not at all his intention, the new Clause if passed would cause to be treated as a flatlet house and not a dwelling-house—and therefore cause to be treated at present substantially more severely for rating purposes—a house of only, say, three bedrooms and one living room and kitchen, owned, perhaps—I do not want to pile on the agony—by a widow who let three rooms singly to lodgers. I know that that is not the intention of my hon. Friends, but that is what this proposal would do. It would cause serious damage all over the country and would do nothing about boarding houses or houses competing with boarding houses. I therefore hope that the Amendment will not be pressed.

    So much for the technicalities. I now come to the substance of the complaint that there are—[HON. MEMBERS: "Oh."] It was a sufficiently confused situation to justify an explanation. I now wish to deal with the substance of the complaint. My hon. Friend says, and I do not doubt it, that there are dwelling houses still retaining the rating advantages of dwelling houses which are competing with boarding houses. My hon. Friends say that the boundary line between the two categories should be better drawn. I can only agree with my hon. Friend the Member for Clapham and with the fears expressed by my hon. Friend the Member for Bournemouth, West that any movement of the boundary line would only cause another crop, probably equally as large, of anomalies and be equally unjust.

    There is a number of questions which anyone seeking to redraw the boundary line would have to answer. Should the dwelling house lose its domestic valuation because a family of guests is taken in? Should it make any difference whether the guests are relatives of the owners of the house? Should the motive of the letting make any difference? If a family depends on the letting for its income, should that move a dwelling house into the commercial category? If so, does that mean that, if a wife lets a room on a bed and breakfast basis in order to earn pin money for herself, the house should remain rated on a domestic basis? What would happen to a house the owner of which accepts lodgers only in the holiday season? Would the owner have to prove the house's domestic status by not taking lodgers at any other time of the year? What would happen to the house which accepts visitors only after the height of the holiday season? Decisions on all these questions would have to be made if we sought to make a distinction between boarding houses and dwelling houses and we would be bound to create fresh hardships and anomalies.

    Although the outcry of the British Hotels and Restaurants Association may be strident at the moment, the outcry from all over the country if we changed the definition and inadvertently penalised people who are letting their rooms for all sorts of good and reasonable purposes would be infinitely more serious and just as justified.

    I come to the last part of what I have to say. As my hon. Friend the Member for Bournemouth, West guessed, the difference between the rating treatment of houses and boarding houses—that is, the difference in treatment between domestic hereditaments and commercial hereditaments—will have dwindled by 1963 and practically have disappeared by 1968 when any derating under Clause 2 will be finished. If it is said that between 1963 and 1968 the harm could still be serious, then I must remind my hon. Friends that in 1963 the power in the ratepayer to challenge the valuation of a hereditament other than his own will revive. At the moment, that power has been temporarily extinguished, but in 1963 it will revive. Therefore, after that date anyone thinking that a dwelling house should be rated as a boarding house will be able to draw the attention of the valuation officer to what is alleged is going on.

    Finally, I deal with the claim that, even after 1968, there will remain a gap in assessment between the boarding house on the one hand and the dwelling-house of equal size that is said to be surreptitiously competing with the boarding house on the other. At that time they will both be valued on a current basis and neither will benefit from any derating. However, it is said that there may still be a gap. I acknowledge that this may still be true to some extent. The valuation officer must estimate the rent which a hypothetical tenant would be prepared to pay for the hereditament if it were vacant and available for letting. Any factor influencing the hypothetical tenancy must be taken into account—for example, whether the house could be used as a boarding house without the need to get planning permission. If planning permission had not been already obtained it would turn on the general question whether the proposed use constituted a material change of use. That would depend, among other things, on for what length of time and to what extent the hereditament had been used for boarders.

    It is not therefore possible to give a general answer to this question. It all depends on the facts of the individual case. But again I say that it will be open to the third party ratepayer to challenge the valuation on any hereditament if he thinks that someone is getting away with it.

    To summarise all these different technical points, my answer to my hon. Friends is that any redefinition of boundary between boarding house and dwelling house would cause a fresh batch of anomalies and might raise much injustice in every town, especially university towns, as well as in seaside resorts. Secondly, the importance of the rating gap between domestic and commercial premises—in this case, between the dwelling house and the dwelling house operating surreptitiously in competition with the boarding house—will dwindle by 1963 and practically disappear by 1968.

    Thirdly, after 1963 the citizen will once again have the right to challenge any valuation of premises other than his own, as well as his own, which he thinks is wrong. Finally, the Amendment does not touch the question of substance. It would penalise heavily at random a large number of houses all over the country that were not competing in any way with boarding houses, and I very much hope that it will be withdrawn.

    I gather that the Parliamentary Secretary does not like the proposed Clause. I merely call his attention to one other anomaly. I think I am right in saying that a boarding house, one room of which is occupied as the proprietor's dwelling, is a dwelling for the purposes of rent control.

    On behalf of my hon. Friends and myself who proposed the Clause, I should like to thank my hon. Friend the Parliamentary Secretary for the great trouble to which he has gone in answering at such length. I appreciate most of the difficulties that he has pointed out, but I still think that there are bad anomalies where, obviously, somebody is running a large property as a business and it is being assessed as a dwelling-house. I appreciate that it is difficult to do anything about it, but I hope that my hon. Friend will look at this problem and try, probably over the next year or two, to think of a way of dealing with it. In the circumstances, I beg to ask leave to withdraw the Motion.

    Motion and Clause, by leave, withdrawn.