business rates

News - 05/07/2019

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Upper Tribunal ruling clarifies law on rating of buildings undergoing redevelopment

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The decision by the Upper Tribunal in Jackson (VO) v Canary Wharf Ltd [2019] is the latest blow to the Valuation Office Agency’s (VOA) continued resistance to reduce the rateable values of some properties while subject to refurbishment or redevelopment works.

Following its defeat in the Supreme Court case of Newbigin (VO) v Monk [2017], the VOA had sought to argue that unless a programme of works is continuous with no pause in activity between stripping out and thereafter construction works, a property should be assumed to be in a state of repair and fit for occupation.

This latest decision concerned a number of floors at 1 Canada Square, which had been stripped back to shell and core. The subsequent fitting out works, however, were not scheduled to be undertaken until after a tenant had been found. The appeal was made during this period of inactivity and in accordance with established rating law the property had to be the valued based on the physical facts at the date of the appeal. The VOA argued that as no works were being undertaken at the date of the appeal and in the absence of a programme of works, the property should valued as offices in a state of repair

The Upper Tribunal rejected the VOA’s argument confirming that the issue of whether a building was capable of beneficial occupation first had to be established before the application of the repairing assumption. If a property is incapable of beneficial occupation, then it is not a rateable property at all, and it should not be entered into the rating list other than at a nominal figure. As the VOA had accepted that the property was incapable of beneficial occupation a nominal rateable value was correct in this case.

Paul Nash, Director of Business Rates, commented:

“This decision returns us to the position that existed before the VOAs attempt to strictly apply the repairing assumption contained in the Rating (Valuation) Act 1999 and is good news for owners of properties that are incapable of beneficial occupation. What constitutes beneficial occupation is itself subject to much case law and careful consideration still needs to be given to each individual case including the timing of such appeals, which is crucial in cases such as this.”

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