On 1 April 2017, the first revaluation of rateable values since
2010 will take effect in England and Wales. This revaluation should
be taken into account when considering the amount of tenant's
statutory compensation payable under the Landlord and Tenant Act
1954 (1954 Act).
Business rates revaluation
Business rates are a tax payable on
In England and Wales business rates
are calculated using the rateable value of the property. In turn,
rateable values are based on the annual open market rent for the
property as estimated by the Valuation Office Agency (VOA).
The first revaluation of rateable
values since 2010 will come into effect in England and Wales on 1
While the changes to rateable values
will mean that some will see a reduction in their business rates
bill, others, particularly retailers in central London, may see a
Draft rateable values have been
published on the VOA's website making it possible for
ratepayers to estimate their rates bill for 2017-18.
Effect on statutory compensation payments pursuant to the 1954
If a landlord successfully opposes
the renewal of a business lease pursuant to the 1954 Act on a
"no fault" ground (such as wishing to develop the
premises or occupy them itself) this can give rise to the payment
of statutory compensation to the tenant.
The amount of statutory compensation
payable under the 1954 Act is based on the rateable value of the
premises multiplied by the "appropriate multiplier"
(which for most cases is currently one). However, where the tenant
(or its predecessor) has occupied the premises for 14 years or
more, the statutory compensation will be twice the rateable value
of the premises multiplied by the appropriate multiplier.
The rateable value used to calculate
the statutory compensation is based on the valuation list in force
at the date either of the following is served:
the landlord's notice ending the
current tenancy (section 25 notice); or
the landlord's counter-notice
opposing the tenant's request for a new tenancy (pursuant to
The last day that the current
valuation list will be in force is 31 March 2017. From 1 April
2017, the amount of compensation will be calculated using the new
The timing of service of either of
the above notices could have a significant impact on the level of
statutory compensation that may be payable by landlords to tenants
pursuant to the 1954 Act.
Landlords and tenants should check
whether the rateable value of the premises will increase from 1
If the rateable value is set to
increase on 1 April 2017, then service of a section 25 notice or a
landlord's counter-notice opposing a lease renewal on or after
1 April 2017 will mean that more compensation could be payable. If
it has decreased, then the reverse will apply.
If applicable, landlords should
consider serving a section 25 notice (to end the tenancy) by 31
March 2017 so that a lower rate of statutory compensation (based on
the old list) is payable. If a section 26 request is received
from a tenant before 1 April 2017 and the renewal is opposed,
landlords should serve a counter-notice within the two-month
deadline and by 31 March 2017 to ensure that the old list
If applicable, tenants should
consider whether to wait until after 1 April 2017 to serve a
section 26 request for a new tenancy so that more statutory
compensation could be received from the landlord in the event of an
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