The question of whether business rates are payable while a
property is being redeveloped has been determined by the Supreme
Court in a decision which will be welcomed by owners and
developers. Overturning the Court of Appeal decision in Newbigin
(Valuation Officer) v SJ & J Monk, it was held that where a
property is undergoing redevelopment and cannot be occupied, the
rating list should reflect this reality.
The facts of the case
SJ & J Monk are the owners of the first floor of an office
block. The property had previously been occupied by a single tenant
but had been vacant since 2006. In 2010 Monk decided to separate
the property into three separate offices and instructed contractors
to carry out the work.
In 2012 the property was valued for ratings purposes. On the
valuation date, it was vacant and was undergoing significant
refurbishment: the entire air conditioning system had been removed,
together with all electrical wiring, all sanitary fittings and
drainage connections and the majority of the ceiling tiles.
However, the property was listed as "offices and
premises" with a rateable value of £102,000.
Monk challenged the rating and argued that, due to the physical
state of the property, it should be listed as "building
undergoing reconstruction" with a rateable value of a nominal
The Court of Appeal decision
The Valuation Tribunal disagreed but Monk's challenge was
accepted by the Upper Tribunal. However, the Court of Appeal
overturned the Upper Tribunal's decision and found in favour of
the Valuation Officer.
The rating legislation states that, where a property is vacant,
the rateable value is based on the amount of rent reasonably
obtainable for the property, based on the assumption that the
property is in a state of reasonable repair (excluding any repairs
that the landlord would consider uneconomic), with the assumed
tenant having undertaken to bear the cost of these repairs.
The Court of Appeal applied this "repair assumption"
and found that the property should be valued as if the necessary
works had been carried out.
The Supreme Court decision
The Supreme Court overturned the decision of the Court of
Appeal. It held that the "reality principle" must first
be applied. This is a 19th century principle of rating law which
states that "the rateable value of the land is not to be
determined by what it once was or what it may hereafter
The court held that the starting point, where works are being
carried out to a property, is to determine whether a property is
capable of rateable occupation at all. Only if it is capable of
occupation should the repair assumption be applied.
In this case, it found that the property (like a building still
under construction) was not capable of occupation for use as
offices. As such the rating list should be amended to reflect
reality with a rateable value of £1.
This decision clarifies that the reality principle is not
displaced by the repair assumption. Where a building is in fact
undergoing significant redevelopment so as to render it unfit for
occupation, it should be rated accordingly. This clear guidance
will be welcomed by developers, though in less clear-cut cases
there will continue to be disputes over the factual question of
whether a property is being redeveloped and whether this
redevelopment prevents occupation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The recent County Court decision in Camelot Property Management Limited (1) and Camelot Guardian Management Limited (2) v. Greg Roynon is an uncomfortable reminder to landowners of how easy it is to inadvertently grant a tenancy when only a licence was intended. The consequences of getting it wrong can be time consuming and costly.
In December 2016 at the FIDIC Users Conference held in London, FIDIC presented a pre-release version of its second edition of Conditions of Contracts for Plant and Design Build ("the Proposed 2017 Yellow Book") which is due to be published during the course of 2017.
If you are an investor currently using overseas entities to hold UK property you should be aware that the UK Government is putting together proposals for greater transparency of the beneficial owners of UK properties owned by overseas entities.
For well over a hundred years it has been standard practice for contract administrators to be used on construction contracts. Architects have been engaged to supervise and manage building contracts and engineers engineering contracts. More recently, project managers and construction managers have undertaken similar roles under new forms of contract.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).