The Supreme Court has given judgement in favour of the ratepayer in the case Newbigin (Valuation Officer) v S J & J Monk [2017] UKSC 14 in a decision which will come as a relief to those involved in the refurbishment of existing commercial property stock. A number of rating appeals have been delayed pending this decision and anyone who has redeveloped, reconstructed or reconfigured a property that was incapable of beneficial occupation during that process may now wish to consider if it may possible to get the rating assessment altered.
The facts of the case are that the owner of office premises proposed the property description should be altered to “building undergoing reconstruction” and the rateable value reduced to £1 as the property could not be occupied due to the building works.
At the time when the premises were to be valued, they were stripped to a shell under a scheme of works to convert them into three separate office suites. The legislation provides that rateable value is to be determined as an amount equal to the rent at which it is estimated it might be expected to be let from year to year, subject to the assumption that immediately before the tenancy begins, the property is in a state of reasonable repair.
The Court of Appeal determined in February 2015 that the replacement of stripped out non-structural parts of the premises was "repair" so rates remained payable. Since that decision owners or developers refurbishing, redeveloping or altering commercial premises have had to allow for the payment of business rates from completion of the strip out to completion of the refurbishment or other works, with the consequent impact on pricing and therefore the viability of some schemes.
The Supreme Court held that the "reality principle” in rating law, that property should be valued as it in fact existed on the material day, was not displaced by the assumption that property is in a state of reasonable repair. A valuation officer must assess objectively whether a property is undergoing reconstruction and is therefore incapable of beneficial occupation, rather than simply being in a state of disrepair. In carrying out that assessment the valuation officer can take into account the programme of works being undertaken. If the works are assessed as involving redevelopment, the repair assumption does not apply because a building under redevelopment, like a building under construction, is incapable of beneficial occupation.