The recent revaluation of the rateable values of business premises has placed the spotlight squarely on the issue of business rates.

In a recent court case, the Supreme Court had to determine if an office building, which was in the process of undergoing extensive redevelopment works, had to be valued as if it was a useable office or in its actual physical state.

The facts:

SJ and J Monk (the firm) own of a floor in a three story commercial building in Sunderland. The floor was previously occupied by a tenant as a single office suite. The firm entered into a building contract in 2010 to renovate and improve it and the property was marketed as available for rental. The firm applied to alter the rating list and the relevant date for determining the rateable value was 6 January 2012. On that day the property was just an empty shell, as it was subject to substantial construction work and clearly vacant.

The issue:

The issue in dispute was whether a property should be rated on its physical condition on the relevant day or whether the valuation officer was obliged to assume the property was in a reasonable repair in its previous state as offices.

The judgement:

The court confirmed that the premises were undergoing reconstruction on the material day and that the rating list should’ve been altered to reflect that reality.

This judgement should be considered with some caution, as this does not mean that property owners can now avoid rates liability by implementing (and delaying the completion of) spurious works. Abuse of the system (for example, deliberately removing essential equipment, such as sanitary facilities or windows, purely in order to claim that the property is incapable of beneficial occupation rather than as part of a proper documented scheme of works) would likely result in the authorities making anti-avoidance regulations to disregard the state of an unoccupied property.

However, this decision is clearly good news for developers and property owners.

The case I refer to is Newbigin (Valuation Officer) (Respondent) v S J & J Monk (a firm) (Appellant) [2017] UKSC 14 and if you’d like to read the summary of the judgement, it can be found here

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