by Paul Foster
In legislative terms, April Fools’ Day this year may or may not emerge as an apt choice of date. In addition to the community charge and the new uniform business rate, measures were introduced to regularise the situation in blighted areas and, in particular, to eliminate hardship in cases where development plans pose a threat to owner-occupiers.
It is, of course, no joke for the victims. Although proposals may be months or years away from fruition, the effect of their existence may be enough to undermine business confidence; to reduce the flow of customers; and, as a result, to have a damaging effect upon value.
The new legislation appeared in the guise of the Town and Country Planning (Blight Provisions) Order 1990. The order sets out the qualifying criteria under the blight notice procedure and brings section 207 of the Town and Country Planning Act 1971 into line with the provisions of the Local Government Finance Act 1988 regarding the new business rating scheme.
Although blight notices are few and far between it is important that owner-occupiers of business premises, particularly those in the South East, should be aware of the consequences of the new provisions.
What is a blight notice? Simply put, under the provisions of sections 193 to 207 of the 1971 Act, in certain circumstances owner-occupiers may turn the compulsory purchase tables by requiring the relevant local authority or government department to buy an affected property.
A blight notice may be served when land is adversely affected by the existence of central government or local authority development proposals. The proposals, whether they are shown within a development plan or form part of a CPO, may not be scheduled to take place for many years but, once the intent is known, they may have an immediate damaging effect upon the value of the property concerned.
The 1971 Act enables an owner-occupier to serve a blight notice compelling an authority to purchase land in advance of need to alleviate cases of serious hardship.
Those who can serve a blight notice fall into three categories:
(1) Owner-occupiers of agricultural units. Sections 79 to 81 of the Land Compensation Act 1973 set out the provisions which govern blight notices for agricultural property. In certain circumstances, a blight notice may be served in respect of an “unaffected area” (ie not subject to planning blight).
(2) Residential owner-occupiers of private dwellings. There is no rateable value limit for this category.
(3) Owner-occupiers of any business property of which the net annual value for rating purposes does not exceed £2,250.
The amended legislation which came about on April 1 affects only the latter category. For owner-occupiers of agricultural or residential properties the measures for assessing entitlement to serve blight notices are unchanged.
The changes are:
(1) The annual value limit has been raised from £2,250 to £18,000, in line with the revaluation of business properties and the introduction of the uniform business rate.
(2) The definition of “annual value” has been modified:
(a) In the case of business premises which contain no element of domestic property or property exempt from local non-domestic rating, annual value will be the rateable value.
(“Property exempt from local non-domestic rating” primarily concerns agricultural land and buildings, fish farms, places of religious worship, property used for the disabled and property in enterprise zones.)
(b) For business premises which contain either an element of domestic property or property exempt from local non-domestic rating, the annual value will be the sum of the rateable value of the business part of the property, and the “appropriate value” of the domestic/or exempt element.
The appropriate value for the domestic property element will be 5% of the compensation payable for that property, assuming it were to be compulsorily purchased with vacant possession, in accordance with the Land Compensation Act 1961. The appropriate value of the exempt part of the property will be the rateable value of that part of the property, assuming it were a non-domestic property and not exempt from rating.
To sum up, the main effects of the order will result from the increase in the annual value limit from £2,250 to £18,000. In England, the average revaluation increase for all property types is estimated to be a multiplier of about 8, in line with the increase in annual value limit. There is, however, a wide variation in revaluation factors among local authorities, ranging from 4.2 to 14.6.
Moreover, of the 20 authorities with the highest average revaluation factors, 13 are in the South of England. Predictably, perhaps, 18 of the 20 authorities with the lowest average revaluation factors are in the North and the Midlands.
On this basis, it seems that businesses in the South that would previously have been within the rateable value limit of £2,250 may find themselves “disqualified” from serving a blight notice because the new rateable value exceeds £18,000. A business property in Canterbury, for instance, with an old rateable value of, say, £2,000, becomes ineligible because the new rateable value, based on an average revaluation factor of 12.4, has soared to £24,800. Alternatively, a business in Darlington with a rateable value before April 1 of £2,500 (ineligible) is likely to have a rateable value of £15,500 (eligible) from that date, based on a multiplier of 6.2.
Blight notices are comparatively rare and the implications will obviously not be felt unless the property is adversely affected by development proposals and cannot be sold. So, for most, the scenario will continue to be academic.
But businesses in the South, and particularly the South East, may be the victims of an unintended legislative anomaly because a higher proportion of development proposals are likely to be concentrated in this region, compared with the North and the Midlands. If that is so, an equally large proportion of businesses will be disqualified from serving blight notices for no other reason than the fact that they have broken the £18,000 rateable value “barrier”. The overall effect is that, in the years ahead, fewer businesses will have the opportunity to offset the threat of a substantial loss (because of the existence of local authority or central government development plans) by way of a blight notice.
