Important business rates ruling for commercial property owners

20 Apr 2017

The Supreme Court has overturned the decision of the Court of Appeal in a business rates case that has important implications for commercial property owners.

The Newbigin v Monk case revolved around office premises that were in the process of being redeveloped on the day that they were also due for valuation. The Valuation Office argued that the rateable value should be assessed on the amount that a willing tenant would pay a willing landlord for the property. Therefore, although the redevelopment works in question were significant, it would be economic for the property to be made useable on the relevant date, and so the property should be valued in its previous state and for its previous use.

The main question placed in front of the Court was whether the reality principle applied, in which case the property's rateable value should be based on the physical condition it was in on the particular rating day. Or, even though redevelopment works were underway, should the valuation officer assume that the property was in a reasonable state of repair on the material date?

The Court ruled that if a property is undergoing redevelopment and is therefore incapable of occupation, the assumption of repair does not displace the principle of reality. In Newbigin, the property was, due to the ongoing redevelopment works, incapable of occupation, and accordingly the rating list should reflect this.

The Supreme Court's approval of the reality principle means that when a property is being redeveloped or reconstructed, the crucial question is whether the property is capable of rateable occupation. If the works taking place at a property prevent it from being occupied, it is not necessary to consider whether the property is in a state of repair.

However, it remains important for businesses to consider the extent of works necessary to rule a property ”incapable of occupation” and to remember that during the process of redevelopment a property/part of a property may become capable of beneficial ownership, and consequently become rateable.

Business rates moved to new valuations from 1st April 2017, although the government did announce some relief for those hardest hit by the increases in the Spring Budget earlier this month.


Further reading

Employer's question: how to effectively deal with stress related sickness in lockdown

There are a variety of contributing factors caused by the pandemic that have seen a rise in stress related claims at work, but how can employers deal with this more effectively?
Read more Read

Use of statutory demand to make company insolvent suspended until June

Blog, Legal Updates
Cheraine Williams looks at more temporary Covid-driven measures that will protect businesses and tenants from possible legal action
Read more Read

New guidance issued for valuation of flats and investigating fire safety

Blog, Legal Updates
Cheraine Williams looks a the current situation facing leaseholders looking to sell or re-finance their property; will new guidance provide clarity?
Read more Read

Government sets new energy targets for domestic and commercial buildings

Blog, Legal Updates
UK law requires net zero greenhouse gas emissions by 2050; new rules and standards for heating and powering buildings will have a significant impact
Read more Read
  • Brighton Office

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax


    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Get in touch