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NO BENEFICIAL OCCUPATION - OR REPAIR? (and just a thought about Charitable Relief)

AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

November 2014.

You will have read, in an earlier column of mine, of the case of Monk –v- Newbigin (VO) [2014] UKUT 0014 (LC) in which the Lands Chamber upheld a ratepayer’s appeal against a decision of the Valuation Tribunal for England, ordering a reduction in assessment to rateable value £1 with effect rom 1st April 2010. The judge decided that the relevant question (for the purposes of this piece) was: “What physical state should the hereditament be assumed to have been in on the material day?”

There was a difference of view between the two valuers as to the effect on proceedings of the 1999 Act. The battle swung to and fro, with arguments by both sides being rejected. In essence, the judge held that, at the material day, the hereditament was incapable of occupation as “offices and premises”. The Valuation Officer has appealed, and a decision by the Court of Appeal is awaited.

The action then moves to the Valuation Tribunal for England, in a case called Sarl –v- Kendrick (VO) – Appeal 227022176758/144N10, which was heard in July 2014 and in which the parties were both represented by counsel. Of course, the decision is not a binding one; but in the context of Newbigin and of the latest case, the arguments will repay study.

The issue was whether the appeal hereditament, situated in a conservation area and forming part of a larger site, scheduled for comprehensive redevelopment, having been empty since 2008, was incapable of beneficial occupation, or whether it was to be treated as a vacant shop unit, capable of repair which should be assessed to full value. The Appellant also contended that, should the panel hold that the hereditament was deemed to be in a state of reasonable repair, such was the state of the surrounding property, all being in effect, condemned to demolition, “full value” would still mean an assessment of Rateable Value £0.

In addition, there was evidence of exposed asbestos in he property, which it was conceded would have to be removed before any deemed works of repair could be said to be carried out. This perhaps weighed somewhat against the Valuation Officer’s argument that the works required to re-establish (to use a neutral word) the hereditament did not require major works of stripping out (unlike the building in Monk) and so fell comfortably within the deemed repairing provisions of Schedule 6 to the Act of 1988. Alternatively, counsel submitted that removal of the exposed asbestos was work which a landlord would do in order to be able to let the property.

The panel agreed with the Appellant, finding, essentially, that the property had been empty since 2008, it had been vandalised and that, by 2012, it was incapable of beneficial occupation, the opinion evidence being that it would have been so incapable from an earlier date.

I do not know whether or not this case has been appealed by the Agency.

So far: 2:0 to the ratepayers; but the Agency has pulled one back in the Lands Chamber in R3 Products Ltd –v- Salt (VO) [2014] UKUT 333 (LC), when the judge (Mr. P D McCrea FRICS), found that the appeal hereditament, although undergoing a programme of works, was nonetheless capable of beneficial occupation as the ratepayer (which was not represented before the Chamber) had to take occupation of it in order to execute its works, during a three-month, rent-free period following completion of the lease. It mattered not, said that Judge, that no manufacturing could take place during the execution of the three-phase programme of works.

Dismissing the appeal, with costs, the judge nonetheless sympathised with the ratepayer (para. 101)

  • However, I would conclude by expressing some sympathy for lay ratepayer appellants in circumstances such as this. It is understandable that (the ratepayer) pursued his appeal to this Tribunal, where in essence his honest and genuine attempt to regularise a situation that he considered unfair (and he was quite prepared to pay rates for those elements of the appeal property that he considered to be viable) was rebuffed by the VOA without an inspection being carried out. (Counsel for the VO) indicated that the VO’s non-compliance with its own manual was a matter of process, not of substance. I agree with that, but it is easy to see why (the ratepayer) considered he had a valid case to pursue and he presented his case, including citing authorities, with a commendable determination.

So the ratepayer, trying to follow the Rating Manual, lost, even though its opponent apparently failed to follow its own guiding principles. Hmmmm….. We will see what the Court of Appeal has to say about the whole of this decision, when Monk is argued before it.

Now, on a completely different subject, and with limited space, the expression “…wholly or mainly” in the context of charitable relief, needs to be settled. The judge in the PCST case gave a definition which thus far has escaped comment, namely that the character of the occupation should be “….substantially and in real terms for the public benefit, so as to justify exemption from ordinary tax in the form of non-domestic rates”. Further, the practice of insisting on 50% floor coverage in order to qualify for relief has been thrown into doubt by evidence of logistics, and has been overturned. More in Telford!

Peter Scrafton

©J.P. Scrafton, 2014

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