COMMENT | Supreme Court delivers landmark ruling in business rates case

Chris Perrin, Manchester partner and national head of real estate litigation at Irwin Mitchell, discusses the implications for developers.

Property companies across the UK who have been disputing the level of business rates they pay on buildings undergoing renovation have been boosted by a recent Supreme Court ruling.

The case focuses on SJ & J Monk, a property developer from the North East of England. The business owns the freehold of the first floor of a three-storey office building which underwent a major renovation and refurbishment to attract new tenants.

On 6 January 2012, the date for determining the rateable value of the property, the premises were empty and stripped to a shell. The developer proposed at the time to the valuation officer that the property description should be altered to ‘building undergoing reconstruction’ and the rateable value should be reduced to £1 as the property could not be occupied due to the building works. The 2010 rating list listed the property as ‘offices and premises’ with a £102,000 rateable value.

On 1 March 2017, the Supreme Court agreed and declared that SJ & J Monk should not have been charged business rates on a property as if it were fully usable when it was undergoing refurbishment.

The decision overturns an earlier Court of Appeal decision in 2015 and will not only mean a reduced rates bill for the company, it is expected to reduce business rates bills significantly for other property developers in the same situation.

This is an important test case and will no doubt be welcomed by property developers from across the UK. There are a significant number of cases involving valuation officers and developers which have been awaiting the outcome of this dispute and I expect that they will now be settled quickly now that there’s greater clarity on the issue.

I would also urge any developer that has redeveloped or altered a property to the extent that it was incapable of being occupied during the refurbishment to seek specialist rating advice as it might be possible to get the rating assessment altered for the 2010 rating list.

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