by Douglas Evans and Patrick McLoughlin
September 30 is the last day upon which ratepayers of commercial properties are free to propose alterations to a rating list without proving special grounds. Until that day regulation 9(2) of the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1990 as amended (the regulations) allows interested persons to propose alterations if they are aggrieved by the value shown or any statement made in or omitted from a list.
From the beginning of October ratepayers will be able to make proposals only on the more limited grounds listed in regulations 9(1) and 9(3) to (10). It is important, therefore, that practitioners are aware of the seven grounds upon which a proposal may be made from that time.
The grounds may be considered to fall broadly into two categories: those grounds in respect of which proposals for alterations may be made at any time; and grounds in respect of which proposals may be made only within specific time-limits.
Grounds upon which proposals may be made at any time
In some circumstances proposals may be made at any time before a new list is compiled. This open-ended opportunity in practice will operate largely for exceptional cases — for example, where there might be an argument for exempting a property or part of it from commercial rating or if the method of valuation used is entirely wrong. There are three grounds which justify the making of a proposal at any time.
Inclusion or exclusion from a list
Where a charging authority or interested person is of the opinion that a property in a list should be excluded from a list, or conversely that a property not in a list should be included, a proposal may be made at any time before compilation of a new list (regulation 9(1)).
The regulation does not indicate the grounds upon which a person might argue for the inclusion or exclusion of a property. One obvious case would be that of a ratepayer arguing that a property should be excluded from a list for the reason that it is a domestic property and not be subject to non-domestic rating. Alternatively the property might fall within one of the exemptions to non-domestic rating in Schedule 5 to the Local Government Finance Act 1988 as amended (the Act), which includes exemptions (among others) for agricultural premises, parks and property used for the disabled.
A charging authority relying upon the regulation is likely to be arguing for the inclusion in a list of a property excluded from it, bearing in mind the same considerations mentioned above.
Treatment as a single hereditament or as several hereditaments
If an interested person is aggrieved because a property is treated as one hereditament rather than several or as several instead of one, a proposal may be made at any time (regulation 9(3)).
The right to apply in this case would be useful if, for example, an occupier of several adjoining premises used one of them but not the others. In such a case he would benefit if each were rated as a separate hereditament so that one would be rated as unoccupied property. If the premises were treated as one hereditament he would be considered to be in occupation of the whole and subject to a full rate for the combined premises.
Order of Secretary of State for different basis of valuation
Normally the rateable value of a property is calculated by estimating the rent which it might reasonably attract if let from year to year, with the tenant responsible for outgoings, repairs and insurance.
Under para 3(1) of Schedule 6 to the Act the Secretary of State for the Environment may order that non-domestic properties of certain descriptions will be valued in an alternative manner. Under regulation 9(8) of the regulations a ratepayer or interested person may propose an alteration in this respect at any time.
Grounds for making proposals subject to time-limits
In the more usual cases, where the basic liability to rating is not challenged but the level of rateable value is disputed, the opportunity to make proposals is normally limited so that proposals may be made only within a period of six months following a relevant event. There are four such grounds.
Material change of circumstances
Under regulation 9(4) if a charging authority or interested person is of the opinion that the rateable value is wrong owing to a material change in circumstances, a proposal may be made within six months of the change.
“Material circumstances” are referred to in Schedule 6 to the Act (as amended) as matters affecting physical state or enjoyment, the type of occupation, the quantities of minerals, waste or other substances on the property, the physical state of the locality and the use or occupation of other property within the locality.
Interestingly, a material change includes the fact that a part of the property ceases to be or becomes liable to be included in a list. This appears to be in contrast to regulation 9(1) giving an unfettered right to make a proposal if the whole of the property is included or excluded from the list.
Decision of VCCT, LT or Court of Appeal
The same regulation also gives a right to make a proposal within six months of a decision of a Valuation and Community Charge Tribunal (VCCT), the Lands Tribunal or the Court of Appeal, presumably in respect of other property. Following such a decision the authority or interested person may consider that the rateable value of a property is wrong bearing in mind a decision made in respect of the other property. If a proposal is made for this reason then evidence of the comparability and relevance of the property subject to the decision may be tested severely.
New ratepayer
Regulation 9(5) offers considerable opportunities and much flexibility which might be missed without expert advice. It is primarily designed to give new occupiers of property (whether owners, tenants or licensees) the right to propose an alteration within six months of becoming the ratepayer in relation to the property, unless a proposal for alteration on the same grounds has already been considered and determined by a VCCT or the Lands Tribunal. However, the right to make a proposal is not limited to new occupiers. It is available to any person “who has not [during the period in which the list has been in force] been the ratepayer”.
It follows that owners of properties which were subject to leases or licences when a list came into force will be able to propose alterations on the termination of such leases, since the owner will become the ratepayer when the previous tenant or licensee ceases to occupy, unless a new tenant or licensee immediately takes up occupation. Purchasers of reversions subject to rights of occupancy similarly have rights to make proposals once tenants or licensees cease to occupy.
There are anti-avoidance provisions to prevent occupiers from procuring rights to make proposals by giving interests to associated companies or by the formation of new partnerships. So a right to make a proposal cannot be obtained by, for example, assignment of a lease to a company associated with the current tenant and ratepayer. The right of a new occupier to challenge the assessment is likely to be a right often used since most existing occupiers have the benefit of phasing relief and have not generally sought to challenge valuations, but relief is not available after a change of occupier, who is likely therefore to be more interested in challenging the assessment.
Alterations by valuation officers
If a valuation officer has altered an existing entry an interested person has six months in which to propose an alteration (regulation 9(9)). Not only can the interested person make a proposal for restoring the list to its original state but he can propose some other alteration.
This right to make a proposal deserves attention. It does not mean that if a person has made a proposal and the valuation officer gives effect to it by altering the existing entry a further proposal may be made by an interested person within six months of the service of a notice upon him of the alteration. The right is limited in that the proposal to alter can be made only after a notice has been served on the ratepayer under regulation 8(2). Such notices are not served following every alteration. In particular a notice does not have to be served following alterations correcting clerical errors, decisions of valuation officers that proposals are well founded, agreed alterations (under regulation 15), changes in the area of the charging authority, or decisions of VCCTs or the Lands Tribunal in relation to properties.
Consequently, the right to make a proposal under regulation 9(9) is much less valuable than would at first appear. It applies only where a valuation officer makes an alteration on his own initiative and not as the result of a proposal.
Persons entitled to make proposals
Generally, proposals may be made by “ratepayers”, “interested persons” and “charging authorities”. The use of terminology is somewhat confusing since the terms “ratepayer” and “interested person” overlap in that they both include occupiers and owners. The difference is that the term “ratepayer” refers only to the occupier or, if the property is unoccupied, the owner, while the term “interested person” is wider, including occupiers and any person having a legal estate (other than a mortgage not in possession) or any equitable interest which would entitle the person (after the cessation of any prior interest) to possession of the property (or part of it).
Most proposals may be made by charging authorities or any interested person, but three of the grounds for proposal are not so widely available. First, it should be noted that regulation 9(5) is available only to a new ratepayer and not to any other new interested person (nor a charging authority). The proposal to treat a property as a single or several hereditaments and the order of the Secretary of State are not available to charging authorities. The first and last of these limitations might be thought understandable, but it seems strange that a charging authority should not be able to argue about the treatment of property as a single or as several hereditaments.
Making proposals
Proposals must be made in writing to the valuation officer with the reasons for the making of the proposal. It is extremely important that the proposal be correct in every respect since any error, however minor, may make the proposal invalid. Where a time-limit is involved there will not be an opportunity to serve an amended proposal if the relevant time-limit has expired when the error is discovered.
The recent decision of the Court of Appeal in R v Northamptonshire Local Valuation Court, ex parte Anglian Water Authority [9] 2 EGLR 168; [1989] 48 EG 161 demonstrates the importance of getting the proposal right. An error in describing the address of a property was held to invalidate a proposal with the consequence that the ratepayer paid for a substantial period of time rates which otherwise might not have been payable.
The ratepayer was the Anglian Water Authority. In 1985 it made 40 proposals to expunge works from a list. One proposal gave the address of “Rushden Sewage Treatment Works” (which were works that had been closed down for several years) instead of the intended Broadholme Sewage Treatment Works. The proposal was accepted by the valuation officer who was aware that the property intended was Broadholme. The proposal was dealt with as if it were valid, until 1988 when the rating authority contended that the proposal was invalid.
The contention was rejected at first instance, but on appeal to the Court of Appeal it was decided that the proposal was void, and since any alteration could not be backdated earlier than the beginning of the year during which the proposal was made, the error caused the water authority great loss, through its liability to pay rates in the interim period.
The decision is of importance in relation to most proposals as alteration cannot normally have effect earlier than the beginning of the year in which the alteration is made. Thus, even though a new proposal might be made once it is discovered that the original proposal was void, there may be a substantial delay before a valid proposal is dealt with during which time the disputed rate will remain effective.
In addition, if there is a six-month time-limit on making the proposal and the invalidity is not discovered until the time-limit has expired, then the opportunity to propose an alteration may be lost completely.
Procedure following proposals, and appeals
Following the making of a proposal a number of alternatives arise. First, the valuation officer might assert that the proposal is invalid for some reason. If he wishes he can within six weeks of service of the proposal serve a notice to this effect on the proposer. The proposer can then appeal to a VCCT, although in many cases it will be simpler to make a new proposal, but this would not be possible if a time-limit for making the proposal has expired (regulation 11).
Assuming that the proposal is valid, the valuation officer might treat it as well founded and simply alter the list (regulation 13). Alternatively, if all parties to the proposal agree, the list may be altered in a way different to that proposed. If there is such an agreement in writing the valuation officer can make the alteration and the proposal is treated as withdrawn (regulation 15).
Withdrawal is a further alternative. The proposer can withdraw by notice in writing, but if another interested person wishes to continue with the proposal such a person can serve a notice of his wish to do so (regulation 14).
In the last resort, if the valuation officer disagrees with the proposal, the valuation officer must refer the proposal to the relevant VCCT within six months of service of the proposal (regulation 16). The referral to the tribunal takes effect as an appeal. The referral to the VCCT can be avoided by withdrawal or the parties can agree to refer the matter to arbitration instead (regulation 46). Some practitioners might consider this to be particularly appropriate where the issue is purely of valuation. A further appeal, from the decision of the VCCT, lies with the Lands Tribunal.
When the Government indicated that there would be an unfettered right to make proposals from April 1 1990 until September 30 1990 most commentators predicted a torrent of applications, normally being made by surveyors and property consultants on behalf of ratepayers. This has not occurred to the extent anticipated probably owing to the phasing provisions (Sunday Correspondent August 5 1990) which have limited the increases in rates paid by existing occupiers. After September 30 the grounds for making proposals will take on more importance. It is probable that there will not be a flood of applications. Instead it is likely that a steady flow of proposals will be made, often by new occupiers who suddenly find that they have to take the full brunt of the new rate.
