The first place to start when assessing a property is whether it is capable of beneficial occupation. If the property is not, it may be removed from the rating list completely, thereby removing the liability entirely.
The test of whether a property is fit for beneficial occupation can be nuanced and will depend on a myriad of factors.
Properties Undergoing a Programme of Alteration/Redevelopment
A property can be removed from the rating list if it is no longer capable of occupation due to ongoing alterations or redevelopment. Removal from the list is only possible once the works have begun. Properties that are demolished are also no longer rateable. Light refurbishment works such as a new shop fit do not always justify a removal from the rating list.
The VOA often challenge appeals related to alterations and redevelopment and will require proof of works including, for example, that planning permission exists or evidence that demolition/strip out has begun. We typically supply a broad spectrum of relevant information to build the strongest, most defensible case to the VOA.
A new build or redeveloped property becomes liable for rates on the date it is completed, so developers may try to delay formal completion until they have tenants ready to occupy the space. This can be achieved in a number of ways depending on the circumstances and the type of property. Some local authorities are more proactive than others in monitoring building works, but most go through a formal process to formalise completion for business rates purposes.
The local authority may serve a completion notice if they believe the property could be completed within three months. The 3-month or 6-month rate relief period will then commence after the property is completed. This gives developers a potential for a minimum of 6 months where rates will not be payable.
Properties in a State of Disrepair
Properties that are damaged and “beyond economic repair” will benefit from rates relief.
Firstly, the works must be deemed as repairs and not renewals or improvements by the VOA. Then the VOA will consider if the required repairs are worth the landlord carrying them out. Both the nature of the repair and the economic worth of the repairs are subject to legal tests defined by previous case law.
If the repairs are substantial, and can be demonstrated to be uneconomic for the landlord to undertake then we can seek for the property to be removed from the rating list.
What constitutes a repair over a renewal or improvement depends on the circumstances, and the same applies for determining what is economically reasonable. A full assessment of the property and its circumstances will be carried out to ensure the best outcome.
It is worth noting that when determining a property’s rateable value, the property is valued by the Valuation Office Agency (VOA) as if it were in a state of good repair, regardless of the actual situation. Therefore, a property that is not fit for occupation will stay on the Rating list unless it is challenged.
Where a property becomes incapable of occupation due to a flood or storm or other external factor such as a fire, the property can be removed from the rating list. In this case, the damage to the property would need to be severe enough that substantial repair works will need to be carried out to bring it up to a level where occupation is possible.