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The Supreme Court has today handed down judgment in Newbigin (VO) v S J & J Monk, a rating case with wide-ranging implications. Monk concerns the proper interpretation of the statutory assumption that property is in a state of reasonable repair when it is valued for rating purposes. The Court of Appeal [2015] 1 WLR 4817, overturning the decision of the Upper Tribunal (Lands Chamber) and years of valuation practice (as reflected in the VOA’s own rating manual), held that the repairing assumption applies to buildings which have been deliberately ‘stripped out’ by their owners in the course of redevelopment or improvement works. The Supreme Court allowed the appeal, and has restored the previous established practice of ascribing nominal values to property undergoing redevelopment. The Court acknowledged that, before the repairing assumption can be applied, the valuer must first consider the “logically prior” question of whether the property is capable of beneficial use. The repairing assumption has no role to play in addressing that question. Similarly, the repairing assumption is relevant only to the physical state of the property; it cannot require property to be valued as though its mode or category of occupation were otherwise than they are in reality (para 20). As to the correct analytical framework in which to address these questions, Lord Hodge said (para 22): In a helpful intervention, the Rating Surveyors’ Association and the British Property Federation submitted that, where works were being carried out on an existing building, the correct approach was to proceed in this order: (i) to determine whether a property is capable of rateable occupation at all and thus whether it is a hereditament, (ii) if the property is a hereditament, to determine the mode or category of occupation and then (iii) to consider whether the property is in a state of reasonable repair for use consistent with that mode or category. The first two stages of that process involve the application of the reality principle. At the third stage the valuation officer applies the statutory assumption in para 2(1)(b) if the reality is otherwise. In my view, this is a helpful approach where a building is undergoing redevelopment. But it is subject to the useful practice, which I discuss in para 31 below, of reducing the rateable value of a building, which is incapable of rateable occupation because of such temporary works, to a nominal figure rather than removing it from the rating list altogether. In deciding whether a property is undergoing redevelopment, rather than being in disrepair, valuers can have regard to the programme of works which is in fact being undertaken. If, assessed objectively on the material day, the property is undergoing redevelopment and no part of it is capable of beneficial use, then there is “no basis” for applying the repairing assumption to the property, which must be valued as it stands (para 23). The Court also endorsed the use of “building undergoing reconstruction” as a valid description of a hereditament in the Rating List, where the objective facts support its use (para 31). The Supreme Court’s judgment is available here. Dan Kolinsky QC and Luke Wilcox represented the interveners, the British Property Federation and the Rating Surveyors Association, instructed by Roger Cohen of Berwin Leighton Paisner LLP.
