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. For rating purposes, the Local Government Finance Act 1988 includes a statutory assumption that hereditaments are in reasonable repair. However, it was generally understood that properties would be considered in their actual state if they were incapable of beneficial occupation because they had been stripped out in readiness for development or improvement.
The Court of Appeal torpedoed this general understanding in SJ & J Monk v Newbigin [2015] EWCA Civ 78; [2015] PLSCS 57. The judgment in favour of the rating authority dismayed ratepayers and was seen as heralding a more restrictive approach to the circumstances in which properties qualify for rates reductions.
However, the Upper Tribunal decision in Barber (VO) v CEREP III TW SARL [2015] UKUT 521 (LC); [2015] PLSCS 288 has given ratepayers something to celebrate. It concerned an empty retail unit in Tunbridge Wells, which formed part of a site that was being assembled for redevelopment. The units immediately adjoining the unit had been surrounded by hoarding for several years and, although the property itself was not included within the area inside the hoardings, it had been boarded up. It was in disrepair – and had been vandalised, leaving asbestos exposed – and has since been demolished.
The Valuation Office suggested that the property had a rateable value of £57,500 in the period immediately prior to its demolition. It took the view that the building could have been put back into repair at a cost of £112,000 – and, although the statutory assumption that premises are in repair specifically excludes repairs that can reasonably be considered uneconomic, argued that the repairs would be economic because they would cost less than two years’ rent.
The tribunal asked itself three questions, adopting the approach in Newbigin. First, was the property in disrepair? The answer to this question was “yes”. Secondly, did the works needed to make the property reasonably fit for occupation constitute repairs? The answer to this question was also “yes”. The work required would not produce a building of a wholly different character and involved “restoration by renewal or replacement of subsidiary parts of a whole”, as opposed to the reconstruction of all or substantially all of the property.
Finally, could the repairs be done economically? The answer to this question was “no”. The redevelopment proposals had been on the drawing board for a long time. However, the tribunal took the view that a hypothetical landlord would consider that this indicated that the site would be redeveloped sooner rather than later – and would, as a result, be unwilling to spend £112,000 on repairs. The hypothetical landlord could have had no confidence that his investment in repairs would yield much, if any, profit. Therefore, a reasonable landlord would consider them uneconomic. So the property fell to be valued in its actual condition and the correct rateable value was £0.
Meanwhile, the decision in Newbigin is the subject of an appeal to the Supreme Court. Watch this space!
Allyson Colby is a property law consultant
