Rating – Alteration of list – Material change of circumstances – Refurbishment works – Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 – Hereditament shown in rating list as office and premises – Appellant proposing alteration to reduce rateable value of hereditament to £1 – Appellant relying on scheme of refurbishment rendering premises incapable of beneficial occupation while works carried out – Whether material change of circumstances justifying alteration – Assumed condition of premises at material day – Effective date of alteration – Appeal allowed
The appellant owned a hereditament comprising the first floor of a modern three-storey office block in Sunderland. In March 2010, the appellant engaged a contractor to carry out various renovation and improvement works, including the remodelling of the first floor to provide three separate office suites, serviced by new communal WCs, in place of the single office suite that had previously existed. The hereditament was entered in the 2010 non-domestic rating list, compiled in April 2010, as “office and premises” at a rateable value of £102,000.
In January 2012, the appellant made a proposal, under regulation 4 of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009, that the entry be altered to reduce the rateable value to a nominal figure of £1, with effect from April 2010. It relied on the scheme of refurbishment works as being a material change in circumstances occurring at the material date that made the list inaccurate by affecting the rateable value of the hereditament; in that regard, it argued that the hereditament was incapable of beneficial occupation while the refurbishment works, which included structural alterations, were being carried out.
That proposal was rejected by the respondent and by the Valuation Tribunal for England (VTE) on appeal. The VTE considered that the “material day” on which the physical state of the premises fell to be considered for valuation purposes, as defined in regulation 3 of the Non-Domestic Rating (Material Day for List Alterations) Regulations 1992, was the date of the appellant’s proposal in early January 2012 rather the date in April 2010 when the list was compiled. It took the view that, under para 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988, the hereditament had to be assumed to be in a condition of repair at that date and it upheld the rateable value of £102,000.
The appellant appealed, contending that the VTE had erred in relation to both the material day and the assumed physical state of the premises on that day. It submitted that para 2(1)(b) of schedule 6 to the 1988 Act did not apply where there were structural alterations rather than repairs, and that the premises therefore fell to be valued in their actual state.
Held: The appeal was allowed.
(1) Where a ratepayer relied on a material change of circumstances in the form of “matters affecting the physical state or physical enjoyment of the hereditament”, within para 2(7) of Schedule 6 to the 1988 Act, those “matters” were to be taken as they were assumed to be on the material day. By para 2(1)(b) of Schedule 6 to the 1988 Act, the hereditament had to be taken as it was on the material day, but assuming it to be in a state of reasonable economic repair. The legislation did not distinguish between repairs and alterations and it did not matter why the hereditament was in its actual physical state at the material day, or that it was undergoing a “scheme of refurbishment”. Para 2(1)(b) did not require an assumption that, provided that the cost was not uneconomic, the hereditament had been reinstated from its actual physical state on the material day to its former physical state prior to the commencement of the works that gave rise to the proposal and were relied on as the relevant change of circumstances.
At the material day, the appellant’s hereditament was not capable of beneficial occupation as an office and premises due to its actual physical state, since it had been stripped out to such an extent that to replace major building elements, such as an entire electrical circuit, heating and air-conditioning systems, would go beyond the meaning of repair, regardless of whether such works were economic. The assumption that the hereditament was in a state of reasonable repair did not extend to the replacement of systems that had been completely removed. Since a hypothetical tenant would pay no more than a nominal amount for the hereditament in its assumed physical state under para 2(1)(b) at the material day, the hereditament was affected by a material change of circumstances as at that day and the rating list should be altered accordingly to show a nominal £1 value, with a description of “building undergoing reconstruction”.
(2) The wording of the appellant’s proposal, referring to a change of circumstances, corresponded to the ground in regulation 4(1)(b) of the 2009 Regulations and to regulation 3(7) of the 1992 Regulations. The answers that the appellant had given to the questions on the standard proposal form were consistent with the grounds of the proposed alteration being a material change of circumstances, rather an inaccuracy in the list as originally compiled. It followed that the alteration was to take effect from the day on which the circumstances giving rise to the alteration first occurred. The alteration should none the less take effect from April 2010 in light of the appellant’s unchallenged evidence that most of the stripping out works and some of the construction work under the contract had begun by that date.
Dominic Bayne (instructed by Stuart Monk) appeared for the appellant; Matthew Donmall (instructed by the legal department of HM Revenue and Customs) appeared for the respondent.
Sally Dobson, barrister
