Victory for ratepayers in Supreme Court

Potential rates savings on properties undergoing refurbishment and redevelopment works

by BHA Partner, Altus Group

The Supreme Court has overturned the unhelpful court of appeal ruling in Monk v Newbigin.

We know that the VOA intend to spend time contemplating the ruling.  They will be looking to establish what the precedent means in practice and start to try and find its edges.

Brief facts of the Monk case

The case is of interest to ratepayers because it provides far more certainty concerning the way that property undergoing works of alteration or refurbishment will be treated for business rates purposes.

The central issue was whether a property should be valued as it actually stood on the material day (that is the day by reference to which the facts of the property are taken) or whether, as the VOA contended, it should be assumed to be in a reasonable state of repair and thus capable of a hypothetical letting.

In the Monk case on the Material Day the property had been stripped back to shell and the ratepayer’s appeal contended that the property should be deleted from the Rating List for the period of works because it was “incapable of beneficial occupation”.

Decision

The Court referred to what it described as a “helpful intervention” from the Rating Surveyors’ Association  to establish a correct approach. (NB. This intervention was part funded by Altus Group together with a small group of interested practices).

The decision determined that the principle of reality applied and premises were not capable of beneficial occupation and further ruled that it was “an objective fact” that the property was incapable of beneficial occupation.

Wider repercussions

This decision has implications for a great many of the sorts of refurbishments that ratepayers undertake. Buildings undergoing significant building works such as a refurbishment scheme or redevelopment to another use may not be liable for rates liability whilst the works are ongoing.

Whist this decision has now brought some clarity to the issue of beneficial occupation and whether rates should be levied during building works, we would always encourage ratepayers to still take advice when undertaking a scheme of works to determine that the works comply with this ruling.

There is the possibility that the VOA resists claims that some refurbishments which might not render a property de facto incapable of occupation and we would recommend that BHA members who are contemplating works of this sort should let us know as it may be possible to modify the planned works and bring them more comfortably within the scope of the precedent.

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