Bearing the burden of business rates
Earlier this month, The Telegraph published that businesses appealed their business rates bill on one in three commercial UK Properties between 2010-15. In fact, an important decision is being eagerly awaited in the Supreme Court. The current position is as per the decision in Newbigin (Valuation Officer) v SJ&J Monk (A Firm)  EWCA Civ 78. This case determines that vacant buildings undergoing refurbishment can be liable for business rates. This clearly creates great uncertainty for anyone undertaking a refurbishment and it is hoped that the Supreme Court will provide clarity.
Background to the Newbigin case
In 2010 the owners of a vacant floor of an office building planned to redevelop the floor into three self-contained units. In order to carry out these works the air-conditioning system, ceiling tiles and sanitary fittings were removed and the electrical wiring was stripped out.
The owner and the rating valuation officer, Mr Newbigin, disagreed on the rateable value of the property. The owner argued that, due to the physical state of the property ie. it was “beyond repair”, it should not be liable for rates.
The ratings officer’s argument was that the building was capable of being put back into its former state economically and thus liable to pay business rates. The Upper Tribunal (Lands Chamber) held that, as the property was not capable of beneficial occupation, the property had a rateable value of just GBP 1.
Court of Appeal Decision
Mr Newbegin appealed to the Court of Appeal arguing that on the date that he had valued the property it was indeed in a state of disrepair but that a hypothetical owner would rather carry out the necessary repair works than leave the building in its state as of the date of valuation.
Despite the owner’s arguments that the redevelopment works were alterations and improvements that went far beyond repairs, the Court of Appeal agreed with Mr Newbigin. In the Court’s view the replacement of the items which had been removed (the air-conditioning system etc.) would constitute repairs. It did not matter if these items were going to be replaced just that it would constitute economic repairs if they were to be replaced.
The Court of Appeal ruled that the property had to be assumed to be in a reasonable state of repair and as such was liable for rates.
Let’s Talk About It
So what does that mean for you? As explained, the case will be determined in the Supreme Court this week, however the interim message is not to assume that substantial refurbishment automatically puts a stop to rateable liability. The wise property owner should “talk” and engage the services of a building surveyor to assist with representations about the level of disrepair/necessity of works.