In what is thought to be an unprecedented move, the Upper Tribunal (Lands Chamber) has dismissed a business rates appeal before the ratepayer even had to make its case in person.
Martin Rodger, the Deputy Chamber President, last week handed down a stinging rebuke in the case of David Jackson -v- Canary Wharf Limited reminding the Valuation Office Agency that “if premises are not capable of beneficial occupation they are not a hereditament” for the purpose of business rates.
The appeal from the Valuation Tribunal by the Valuation Office Agency appertained to One Canada Square, an iconic tower of over 1.2 million square feet of office space across 46 storeys.
Upon a tenant moving out, it was the owner’s practice to strip out and market the vacant space in a shell state with a view to it being fitted out at a later date to a new tenant’s requirements subject to a minimum standard.
The question for the Upper Tribunal was whether the property should be valued for rating purposes as offices in an assumed state of repair at a Rateable Value of £1,830,000 as the Valuation Officer contended or in its actual condition as premises undergoing redevelopment at £1.
The previous occupier of floors 44, 45 and 46, which hadn’t been comprehensively refurbished for 20 years, surrendered their lease on 17 February 2011 at which time marketing of the vacant floors commenced.
Works were then carried out between 14 February and 18 September 2011 involving the removal of raised flooring, suspended ceilings, partition walls and mechanical/electrical services at significant cost. It was accepted by the Valuation Officer, at the material day, the property was fully stripped out to a concrete shell and was incapable of beneficial occupation as an office.
In late 2013 negotiations began with the European Banking Authority for it to take a lease of floor 46 and part of floor 45. An agreement for a lease was entered into on 14 May 2014 and contractors employed by the new tenant to carry out the required fit-out works.
The Valuation Office Agency sought to argue that it was “objectively ascertainable” that the property was a building under reconstruction and that statutory repair assumption in the Supreme Court ruling in SJ & J Monk v Newbigin should not apply.
The Upper Tribunal rejected that contention saying that the acceptance that the property was not capable of beneficial occupation was the beginning and end of the appeal.
Robert Hayton, Head of U.K. business rates at Altus Group, says the ruling should now bring an end to “far-fetched attempts” to try and distinguish the Monk decision in an attempt to maximise rating income for local authorities saying “This case will, hopefully, encourage the Valuation Office Agency to now look objectively at schemes of refurbishment and allow owners immediate access to business rates relief during periods when they are improving properties. Refurbishment and improvements support growth in the economy and owners should not be penalised for doing the right thing.”
Hayton hopes that those cases delayed as a result of this case on the basis of going “beyond the scope of Monk” will now be settled quickly adding that “Whilst the ruling doesn’t mean that everything an owner does to a property will automatically result in a nominal assessment, it does reaffirm the position returning advisers to a position to be able to give taxation advice that can be relied upon.”