In our recent article on business rates, we discussed the case of Newbigin v SJ & J Monk, in which the Court of Appeal had held that rates were payable during demolition or strip-out, contrary to the guidance in the Valuation Office Agency’s ratings manual.
On Wednesday 1 March 2017, the Supreme Court overturned the Court of Appeal decision, ruling that an office building was undergoing reconstruction works rather than being in a state of disrepair and was accordingly incapable of beneficial occupation. This decision reduced the property’s rateable value from £102,000 to £1.
The Court of Appeal had decided that the “principle of reality” could be displaced by contrary statutory assumption that the repairs would return the property to its former state, provided that they were economic, and so the property should be valued as if it were in a reasonable state of repair. However the Supreme Court restored the Upper Tribunal’s determination, holding that the property had been stripped out to such an extent that to replace its major building elements would go beyond the meaning of repair and so it should be rated as a “building undergoing reconstruction”.
This decision is undoubtedly a victory for developers. Following this decision, anyone with a property which has been redeveloped should seek professional advice to determine whether they are entitled to a reduction in their ratings assessment.