16 June 2015
Dilapidated premises do not mean rate reduction
Landlords of disused and dilapidated commercial premises undergoing refurbishment might expect to receive a cut in their rates bills whilst receiving no rent. However, an important Court of Appeal ruling has put any such hopes in jeopardy.
An office suite had been empty for six years and had had all its internal elements removed, including walls, part of the floor, plumbing and electrics, with a view to refurbishment. In those circumstances, the Upper Tribunal (UT) ruled that the suite's rateable value should be assessed at a nominal amount of £1.
The property's landlord had successfully argued that the 'principle of reality' applied and that the suite fell to be valued 'as it stands' on the relevant valuation date. However, a local authority valuation officer (VO) challenged the UT's decision and persuaded the Court that it was wrong in principle.
In upholding the VO's appeal, the Court noted that, by virtue of the Local Government Finance Act 1988, the suite had to be valued on the assumption that it was 'in a reasonable state of repair'. Although it had been stripped almost bare by the valuation date, the works could properly be described as 'repairs' being carried out on an economic footing in the hope of attracting a tenant.