Two leading bodies of surveyors and developers have won the right to be heard in a major rating appeal to be heard by the Supreme Court this summer, amid claims that a 2015 ruling is stalling important redevelopment works.
The Rating Surveyors Association (RSA) and the British Property Federation (BPF) have won permission to intervene in the appeal, scheduled to be heard in July, over the calculation of rateable value for office premises undergoing refurbishment.
In what was already one of the most anticipated property cases of the year, the RSA and BFP will now make representations on the issue, due to concerns over the impact of a February 2015 Court of Appeal ruling in the case.
According to law firm Berwin Leighton Paisner (“BLP”), which represents the RSA and BFP in the action, following that decision valuation officers are keeping vacant properties about to undergo redevelopment in the rating list until the new development work begins. This means that business rates continue to be payable, when formerly they were not.
Simon Taylor, chair of the BPF’s commercial committee and head of asset management at Derwent London, said that if the decision is not corrected, the built environment and the public will suffer, because some urban regeneration and upgrading schemes will no longer be viable.
Roger Cohen, a real estates disputes partner at BLP, said: “We are working in conjunction with organisations representing leading developers. This is a hugely important case for them and the public. The intervention ensures that all the arguments that ought to be made are presented to assist the court.”
Andrew Hetherton, a past president of the RSA and current committee member leading on this issue, added: “The Valuation Office has issued new guidance following the unfortunate Court of Appeal decision in February. The members of the RSA in private practice wish to see a rational approach to the rating of premises due for refurbishment.”
John Webber, head of rating at Colliers International, welcomed the news that the voice of developers will be heard by the Supreme Court.
He said that the Court of Appeal decision had removed what had been a “long-standing, pragmatic approach to the rating of buildings that were preparing for strip-out or demolition” and had given local authorities a lucrative revenue stream they are seeking to take advantage of while it lasts.
Expressing the hope that the Supreme Court will render this loophole “historic”, he added: “In this new world, the decision is having a serious impact on the viability of redevelopment schemes and the Supreme Court needs to hear this directly from developers.
“Business rates continue to be a system creaking at the seams. In some parts of the country, we are witnessing rates higher than rents and, thanks to the Court of Appeal’s ruling last year, the economics of rates is putting the brakes on development, particularly in the fragile yet growing economies of the UK’s metropolitan cities. Let me be clear: none of this helps oil the wheels of regeneration in our city centres.”
Solicitors firm SJ & J Monk – which was initially successful before the Upper Tribunal (Lands Chamber) in securing a nominal rateable value for its premises of only £1 – saw that decision overturned by the Court of Appeal in February 2015.
The court allowed a valuation officer’s appeal, finding that works being carried out fell within the definition of “repair”, and that the Upper Tribunal was wrong to rule that the refurbishment – which includes reconfiguration as three separate units – went beyond that.
Lewison LJ said that it is the nature of the works that is determinative of what constitutes repair, not the intention of the owner, and considered that the VOA Rating Manual as it then stood was wrong to have regard to the question of intent.
He said that this violated the long-standing principle: “The rateable quality of land is not to be determined by what it once was, or by what it may hereafter become.”
The case centres on the valuation of offices on a single floor of a three-storey block known as Avalon House at Sunderland Enterprise Park. The property stood vacant since 2006 and in March 2010 the owner entered into a contract to carry out improvement works, including the removal of all internal elements other than the lift and the staircase enclosure. The works also included construction of new common parts to the first floor and reconfiguration as three new letting units. The refurbishment was being carried out at the key date for rating purposes of 6 January 2012.
The freehold owner, solicitor SJ & J Monk, won a ruling from the Upper Tribunal that the premises at that date were not capable of beneficial occupation as offices, and that the rateable value – formerly £102,000 – should be assessed at the nominal amount of £1.
