Business premises undergoing redevelopment may be liable to business rates if they can be occupied during the works, the Lands Tribunal has ruled.  The decision marks a hardening of the line on the definition of ‘buildings undergoing reconstruction’.

Property owners have been able to escape paying business rates in properties being redeveloped since a landmark Supreme Court decision in Monk v Newbegin in March 2017 (see: Brunel News May 2017).  The Supreme Court had ruled that a property undergoing reconstruction was not liable to business rates as it was not capable of beneficial occupation.

Now in a new case, Colour Weddings Ltd v Ritchie Roberts, the Lands Tribunal has ruled that business rates could be charged on a building, even though some initial redevelopment work had started, because the building was still capable of use.

Mr Ehsan of Colour Weddings had taken the lease of a disused warehouse with the intention of converting it into a wedding venue.  Work on the reconstruction started in January 2015 and was completed in July 2017.  Mr Ehsan applied to the Valuation Office for the property to be removed from rating liability for the full period of the renovations.

The Valuation Office disagreed, claiming that the warehouse was capable of occupation and liable for rates during the initial parts of the work.  Having reviewed the schedule of works, The Lands Tribunal ruled that the building was capable of use until April 2015 and that rates could be charged for that period.

This case shows a hardening of the line by the Valuation Office,” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “Valuation officers will look at the programme of works carefully to decide exactly when it becomes impossible to use a property and will charge rates up until that time. The scheduling of works should be carefully considered to avoid paying unnecessary rates – and to avoid allegations from clients that that this has not been done and that rates have been paid unnecessarily,” he added.

Reports about the case have been published by Eversheds Sutherland and Town Legal LLP.

NB – we would draw attention to Evershed’s comments regarding keeping evidence such as photographs which could be used to support actions or positions taken at a later date.

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