The Supreme Court considered whether a commercial building undergoing redevelopment had to be valued, for the purposes of business rates, as if it were still a useable office. On the valuation date, various major building elements had been removed. These included the air conditioning system, electrical wiring, sanitary fittings and most of the ceiling tiles.
The Local Government Finance Act 1988 provides that, where non-domestic property is vacant, the rateable value of the property is based on the amount of annual rent reasonably obtainable for the property, on the assumption that before the tenancy commences the property is in a state of reasonable repair, but excluding any repairs that a reasonable landlord would consider to be uneconomic.
The court held that where a property is undergoing redevelopment and incapable of occupation, the assumption of repair did not displace the principle of reality. The “reality principle” is long established in rating law and means that a property is to be valued based on how it existed on the relevant valuation date. In this instance, the property was not capable of occupation due to the redevelopment works and the rating list was entitled to be amended. The Court of Appeal’s earlier judgment was overturned.
Those owning and developing vacant commercial premises will be pleased with the Supreme Court’s decision in this case.
For further advice contact Tom Warrender, Head of Commercial Property, or John Gordon Head of Commercial Litigation on 0800 088 6004.