Rating – Hereditament – Unoccupied property – Development of office units – Units entered in rating list – Units unfinished and no completion notice served by local authority in respect of them – Units lacking small power, tea points and internal partitioning – Valuation tribunal deleting entries – Whether units constituting hereditaments for rating purposes – Whether units capable of occupation for purpose for which intended – Appeal dismissed
The respondents owned a development of 20 office units that an associated company hd carried out between 2005 and 2006. Before the local authority had served completion notices in respect of the units, the appellant valuation officer entered 19 of them in the rating list with effect from May 2006.
At that date, the units were unoccupied and unfinished. All had plastered walls and suspended ceilings, with recessed fluorescent lighting and air-conditioning. There were raised floors with voids below to accommodate wiring, pipes and fixtures and WCs had been installed. External doors and external double-glazed windows had been installed. Power had been installed as far as the central core to each floor, with one double power point installed on each floor within the office area close to the entrance. However, small power, floor boxes and outlet sockets had not been installed in the office areas. Not all the units had tea points and none had full height partitioning in the office areas or data cabling for IT or telephone equipment. The units were advertised as vacant and to let in their existing state, with the incoming tenants having to carry out further works in conjunction with the building owners to make the premises capable of occupation.
The valuation tribunal subsequently determined that none of the units qualified as a rateable hereditament since none met the test of rateable occupation or ownership; it therefore ordered the deletion of the entries from the list. In doing so, it found that although the respondents had actual and exclusive occupation and control of the buildings with a sufficient degree of permanence, the premises were not yet capable of beneficial occupation and the works required to make them so were more than de minimis. The appellant appealed.
Held: The appeal was dismissed.
Liability for rates arose only in respect of a property that constituted a “hereditament”. Where a property was unoccupied, the test of rateable occupation was unhelpful in determining whether it was a hereditament. The respondents were not in actual occupation of the units; there was no actual occupation of a building that was being constructed or altered because it could not be occupied for the purpose for which it existed: Arbuckle Smith & Co Ltd v Greenock Corporation [1960] AC 813 applied. None the less, the concept of a hereditament was closely bound with the concept of occupation given that, before the rating of unoccupied buildings was introduced by the Local Government Act 1966, liability for rates had depended on occupation. What made a property into a hereditament was the fact that it would, when occupied, become liable to the rate. It followed that a property that could not be occupied would not constitute a hereditament.
A notice deeming completion could be served only where the building was, or when completed would be, comprised in a relevant hereditament. The test of whether a building was a hereditament and whether it was completed, for the purposes of serving a completion notice, were the same; accordingly, cases on the latter issue were good authority on the former: Watford Borough Council v Parcourt Property Investment Co [1971] RA 97, Ravenseft Properties Ltd v Newham London Borough Council [1976] QB 464 and Post Office v Nottingham City Council [1976] 1 WLR 624 applied. The authorities established that a building was a hereditament only if it was ready for occupation for the purpose for which it was designed to be occupied. If the building lacked features that would have to be provided before it could be occupied for that purpose, and those features would, when provided, be part of the occupied hereditament and form the basis of its valuation, the building did not constitute a hereditament and did not fall to be shown in the rating list. There was no scope for including in the list a building that was almost ready for occupation unless the completion notice procedure had been followed.
The respondents’ buildings were intended to be occupied as offices. A potential occupier of any of the buildings would have required small power (a ring main and power points), tea points and at least some full-height partitioning to be installed before occupying them as offices; the installation of partitioning would involve further consequential fitting out. Those items, when provided, would be part of the hereditament. It followed that the units were not ready for occupation on the material day and the valuation tribunal had correctly concluded that they did not satisfy the requirements for entry in the rating list as hereditaments.
Galina Ward (instructed by the legal department of HM Revenue & Customs) appeared for the appellant; Daniel Kolinsky (instructed by PriceWaterhouseCoopers LLP, of Birmingham) appeared for the respondents.
Sally Dobson, barrister
