PROPERTY developers across the UK, who have been disputing the level of business rates they pay on buildings undergoing renovation, have been boosted by a recent Supreme Court ruling says commercial property agent Prop-Search.
The case focuses on S J & J Monk, a property developer from the north-east of England. The developer owned the freehold of the first floor of a three-storey office building in Sunderland which underwent a major renovation and refurbishment so as to attract new tenants.
On the 6 January 2012, the date for determining the rateable value of the property, the premises were empty and stripped to shell – this included the removal of heating, air-conditioning, electrical systems and sanitary fittings. The developer proposed to the Valuation Officer that the property description should be altered to building undergoing reconstruction and the rateable value should be reduced to £1 as the property could not be occupied due to the building works. The 2010 Rating List listed the property as offices and premises with a £102,000 rateable value.
The Valuation Officer disagreed with S J & J Monk’s request. There then followed a series of tribunal and court decisions, with the Court of Appeal finding in favour of the Valuation Office. S J & J Monk subsequently appealed to the Supreme Court. The Supreme Court has now declared that S J & J Monk should not have been charged business rates on the property, as if it were fully usable, when it was undergoing refurbishment.
Samantha Jones, an Associate Director at Prop-Search, said: “In 2015, there were ructions in the development world when the Court of Appeal gave its judgment; confirming that in deciding a rateable value, a statutory assumption that premises are in a state of repair – unless such repairs were uneconomic – should apply to all premises, even ones in the process of being refurbished or redeveloped.
“The decision now by the Supreme Court will not only mean a reduced rates bill for the S J & J Monk, but is clearly good news for developers and property owners, particularly against a backdrop of potential rates hikes in the most recent rates revaluation.”
The Supreme Court did, however, sound a word of caution to property owners who might look to avoid rates liability by implementing and delaying the completion of spurious works. The court referred to anti-avoidance provisions in the Local Government Finance Act 1988 which envisage that regulations can be made to disregard certain changes in the state of a vacant property.
Samantha Jones concluded: “So any abuse of the system – for example, deliberately removing essential equipment, such as sanitary facilities or windows, purely in order to claim that the property is incapable of beneficial occupation rather than as part of a proper documented scheme of works – would likely result in anti-avoidance regulations being made.”
Further information or advice can be obtained from Prop-Search on 01933 223300 or 01604 492000 or at the website www.prop-search.com