Rates and 'reasonable repair'

Posted: 23rd March 2017

RenovationsWith changes to business rates upon us, property valuation is very much a live issue.

A recent dispute between a property owner and the local rating office has confirmed the principle that if a property is not in a reasonable state of repair, it is to be valued as it is, not as it ‘should be’, or as the Supreme Court put it: 'Does a commercial building which is in the course of redevelopment have to be valued for the purposes of rating as if it were still a useable office?'

The property concerned was an office building which was in the course of being renovated. When the rateable value was being assessed in January 2012, the premises were vacant and a great deal of the flooring, ceilings, lighting and other fittings had been removed. The owners' agent suggested to the local valuation officer (LVO) that the rateable value should be reduced from £102,000 to £1, because the premises could not be occupied. The LVO refused, citing legislation which required the LVO to assume a property is in 'reasonable repair' for valuation purposes. The dispute matter was referred to the Valuation Tribunal, which agreed with the property owner, holding that the condition of the building precluded the conclusion that it was in reasonable repair.

In considering the arguments, the Court gave weight to the 'reality principle', which establishes that 'the property must be valued as it exists at the relevant date'. Accordingly, the presumption that it was in reasonable repair could not stand.

The decision overturned a decision by the Court of Appeal which had cast doubt on the applicability of the ‘reality principle’. It will come as a considerable relief to property developers who are refurbishing properties.