In a decision which is good news for developers, Newbigin -v- Monk , the Supreme Court held that properties undergoing substantial renovation are to receive nominal rating values.
The rate payer submitted that the value of a property undergoing substantial renovation should be nominal as it would be incapable of rateable occupation. The Valuation Office contended that the property should be deemed to be in reasonable repair and therefore should be valued as such – in line with rating assumptions.
The case concerned a large office block in Sunderland. On the relevant date for valuation, the rate payer was in the midst of redeveloping the property. Ceiling tiles and parts of the raised floor had been removed and services had all been stripped out. The likelihood was that the offices were going to be separated out into three new suites. The rate payer assumed that the property would be incapable of beneficial occupation during the period of work and had sought a rateable value of £1.
The Valuation Office tried to argue that rateable value should be assessed in accordance with what a willing tenant would pay a willing landlord for the property concerned, with the property's use and condition being assessed on a particular date and in line with various assumptions. One of these assumptions is that the property should be deemed to be in a reasonable state of repair unless the hypothetical landlord would consider it uneconomical to undertake those repairs.
The Valuation Office argued that although the redevelopment works were substantial, it would still be economic for the property to be put back into repair on the relevant date and the property should therefore be valued in its prior state and its prior use – offices – which resulted in a rateable value of £102,000.
In its judgement, the Supreme Court place great emphasis on the presumption of reality which underpins the rating hypothesis. On the relevant date, the property was not capable of being occupied as offices and was genuinely a property undergoing substantial works or reconstruction. The starting point should be whether a property can be beneficially occupied before the valuer begins to consider whether or not the property is in a state of disrepair or not. As the reality was that the property could not be occupied, as it had no services and no ceiling tiles and parts of the raised floors had been removed, the rating assumption that a property is in a reasonable state of repair did not bite.