The calculation of rateable value for office premises undergoing refurbishment is to face Supreme Court scrutiny in an appeal hearing in November. A 2015 ruling that sent a “shockwave” through the industry is to come under attack from the British Property Federation and the Rating Surveyors Association.
Lords Neuberger, Kerr, Reed, Carnwath and Hodge will hear the case of Newbigin (Valuation Officer) v SJ & J Monk Ltd on 7 November.
Appellant solicitors firm SJ & J Monk was initially successful at the Upper Tribunal (Lands Chamber) in securing a nominal rateable value of only £1 for property it owns, before the Court of Appeal overturned that decision last year.
The Court of Appeal found that works being carried out on the premises fall 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.
The Supreme Court is being asked to decide, where a commercial property has been stripped out for renovation, what physical state is it assumed to be in for the purpose of liability for rates?
Such is the importance of the issue that the British Property Federation (BPF) and the Rating Surveyors Association (RSA) have been granted permission to intervene, and will be represented in the appeal.
Roger Cohen, of Berwin Leighton Paisner, who is acting for the interveners, said: “The decision being appealed sent a shockwave through the development industry. Appraisals had to be rewritten and some schemes became non-viable. The BPF and RSA took the initiative when I proposed an intervention. Together, we are working for developers in this critical appeal. We are doing all we can to persuade the Supreme Court to restore the rules that applied up to the Court of Appeal decision last year.”
At the Court of Appeal, 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 is 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.
