It is a well-known principle of valuation that a valuer must value property as it stands on the valuation date. However, this principle can be displaced by contrary instructions in the statute or contract pursuant to which a valuation is made.
SJ & J Monk v Newbigin [2015] EWCA Civ 78; [2015] PLSCS 57 concerned a valuation for rating purposes. The Local Government Finance Act 1988 includes a statutory assumption, which was introduced by the Rating (Valuation) Act 1999, that hereditaments are in reasonable repair (although the assumption specifically excludes repairs that would reasonably be considered uneconomic). However, during its passage through Parliament, the Government explained that properties would be considered in their actual state where they “are stripped back to the shell so that substantial reconstruction or improvement work can be carried out”.
The premises at the heart of the dispute in Monk were being renovated and improved. The ratepayer had stripped out most of the interior and was remodelling the building to provide three separate suites of office in place of the single office suite that had been there previously. The issue for the Court of Appeal was whether the property had a rateable value of £102,000, or £1 because the building was incapable of beneficial occupation due to its physical condition.
The court accepted that the hereditament was not in reasonable repair on the relevant date. However, the statutory assumption introduced by the 1999 Act requires the valuer to assume that a hereditament is in repair, unless the statutory exception applies.
We know from the law that applies between landlords and tenants that work constitutes repair where it involves the restoration by renewal or replacement of subsidiary parts of a whole – and that this is to be contrasted with work that involves the reconstruction of the entirety or substantially the whole of a building. None of the elements that had been stripped out of the building in this case were structural and the court decided that the work needed to replace them could fairly be described as the replacement of subsidiary parts of the whole.
It would be wrong to confuse the subjective intention of a ratepayer in relation to a partly executed scheme of works with the objective question of whether the work required to put a hereditament into a reasonable state of repair would be economic. The mere fact that a ratepayer intends to produce a building of a different kind to the building that exists on the valuation date cannot determine whether the hereditament could be put back into reasonable repair at an economic cost on the valuation date.
Each case must be considered on its own facts and, on the facts of this case, it would not be uneconomic to repair the building. Consequently, it was possible to apply the statutory assumption that the premises were in reasonable repair and it would be wrong to assess the rateable value of the premises at £1.
It seems probable that the Valuation Office will rely heavily on this decision whenever properties are being refurbished and that valuations of such properties are likely to remain contentious for the foreseeable future, especially as empty properties qualify for empty rates relief for a short initial period and are then liable for full business rates.
Allyson Colby is a property law consultant
