The Problem With Business Rates In The Real World

Legal practitioners have been spoilt in recent years by a wealth of important cases concerning business rates. This has helped understanding in respect of key areas such as valuation of contiguous hereditaments, whether ATM machines are separately rated and whether a stripped-out building should be assumed to be in repair when considering its rateable value. Whilst great news for lawyers, it is frustrating for business and property owners that the rating system continues to throw up uncertainty in its operation. There are two recent cases worthy of note.

Telereal Trillium

In Telereal Trillium v Hewill (Valuation Officer) [2019] UKSC 23, the Supreme Court had to determine whether or not a property for which there was no market in the real world should be assumed to have a market on the basis of the rating hypothesis. The property was situated in Blackpool and had been continuously used as government offices since 1972. The property had been vacant since the start of the 2010 rating list. At trial, the parties agreed that, at the relevant valuation date, there was no real world market for the property. They agreed that a hypothetical tenant was to be assumed but that the issue for determination was whether or not a general demand should also be assumed as evidenced by the occupation of other office properties with similar characteristics. If so, then the rateable value was to be £370,000. If not, then it would be £1 - a significant and substantial difference.

Unsatisfactorily, the result ping ponged between the Valuation Tribunal, the Upper Tribunal and the Court of Appeal before it reached the Supreme Court. The Supreme Court in a majority (not unanimous) verdict held that a general demand was to be assumed and the value was £370,000. The court drew a distinction between a property at the end of its economic life and one that happened to exist in a saturated market. The former would attract a nominal rateable value whereas the latter would and should not. Therefore, the rating hypothesis is to assume a willing tenant sufficiently interested to enter negotiations to agree a rent on a statutory basis. This is the case even if the property is unoccupied and there is no market for it in the real world. Valuation evidence is to be assessed by reference to the "general demand" derived from occupation of other properties with similar characteristics.

This decision is of concern. It moves away from real world realities - the position adopted by the...

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