15/03/2017

When a commercial property is in the midst of renovation works, the Valuation Office (VO) has in recent times given such a property a business rateable value if it could be occupied by a hypothetical tenant despite the fact that it was in a state of disrepair.

As we are all aware there are many phases to construction works and in the developers’ eyes, once the property has been stripped to a shell (to enable the renovation works to commence) it cannot in reality be occupied and should therefore not attract any business rates value other than a nil rating at that point in time.

For those involved in property development, there is at last some good news concerning the payment of business rates.

The Supreme Court has held (Newbigin v S J & J Monk [2017] UKSC 14) that a commercial premises being renovated was ‘undergoing reconstruction works’ rather than simply being in a state of disrepair making any beneficial occupation impossible. The Supreme Court applied ‘the statutory reality principle’ which meant that the VO must assess objectively whether the property is undergoing reconstruction works and if it is, whether it is therefore incapable of actual occupation. The impact of this decision for the developer in this case meant that the property’s rateable value decreased from £102,000 to £1.00 per annum.

A significant victory for property developers and a welcome dose of reality for the VO.

Please contact Karen Elder at Beswicks Legal if you have a commercial property which is in the process of being redeveloped and you are considering whether you are entitled to a reduction in your business ratings assessment, or if your require assistance with any aspect of construction law on 01782 205000 or karen.elder@beswicks.com