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UK Supreme Court finally makes judgement on significant business rates case

“Sanity prevails” says JLL’s Head of Rating in case of Newbigin v S J & J Monk

London, 1 March 2017 - The UK Supreme Court today issued its judgement in a case of major significance in the world of rating.

Newbigin (VO) v S J & J Monk (appellant), was a rating case concerning the physical state of a vacant, non-domestic property which had been stripped out for renovation for the purposes of assessing liability for business rates under the Local Government Finance Act 1988. The Upper Tribunal (Lands Chamber) applied only a nominal rateable value to the property because it was deemed incapable of beneficial occupation. The Valuation Office Agency (VOA) appealed to the Court of Appeal against the decision.

The Court of Appeal held that the rateable value of a vacant property undergoing a scheme of works would not automatically be reduced to a nominal amount. Instead, the rateable value would be based on the amount of annual rent which may be realistically expected assuming that it is in ‘reasonable repair’, despite that actually being the case. As a result, no reduction in business rates would be received by the ratepayer whilst undertaking the work, despite the property being incapable of occupation.

Commenting on today’s historic judgement, Tim Beattie Head of Rating at JLL said: The Supreme Court found that the Court of Appeal had erred in its interpretation of Schedule 6 of the 1988 Act, which determined that the valuation for rating must assume that the property is in a ‘reasonable state of repair’, not in its actual condition. This is the outcome that the property industry has been hoping and praying for and will restore the law to its previous position. Now the battle is over, developers and investors will be able to commission new schemes with far more certainty going forward.

Tim Beattie, added: I am personally pleased to see that The Supreme Court has ordered that the valuation officer must assess objectively whether a property is undergoing reconstruction, and is therefore incapable of beneficial occupation, rather than simply being in a state of disrepair. Based on all the facts, the building was undergoing reconstruction in early 2012 and the Upper Tribunal was entitled to alter the rating list to reflect that reality.”