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Completion Notices in the spotlight in latest tribunal appeal

You may think I just spend my days trawling online tomes to find the latest rating appeals as I’ve written about quite a few lately, but this one is worth a read.

This appeal was heard by the Valuation Tribunal for England (VTE) which has just issued its full decision in Delph Property Group Ltd v Alexander (VO) and Leicester City Council [2018].

The complex case looked at Completion Notices – used to enter unoccupied new properties into the rating list to make them liable for non-domestic rates. It centred on a building called The Horizon, in Leicester.

The Horizon was originally a 1970s 17-storey office tower. It underwent works in 2006 to convert the third to sixteenth floors into residential dwellings, with the ground, first and second floors refurbished and returned to office use.

As work started, the rating assessments for the building (four in all) were all deleted from the rating list.
The residential dwellings on the upper floors were completed in 2008 and were brought into the Council Tax valuation list from the end of 2008. The offices on the ground, first and second floors were refurbished to a “shell and core” finish and marketed two years later.

After practical completion of these floors, Leicester City Council, served Completion Notices; deeming the floors complete and eligible to be included in the rating list, as from February 2009. At the time, there was no appeal against the Completion Notices, or consequent entries in the 2005 rating list.

The office floors were also assessed in the 2010 rating list but remained unoccupied and in a shell and core condition until the ground floor was let – part in 2013 and then part the following year. The first floor followed in 2015.

In 2015 the new owner made proposals to delete the entries from the 2010 rating list on the grounds that the properties concerned were not “new buildings”, not subject to Completion Notices and should not have been entered in the rating list.

The VTE hearing was in two parts…

The first part was procedural to decide if the VTE had jurisdiction to override the Completion Notice procedure by an appeal. Without going into the technicalities, the VTE concluded it did and they moved on to the substantive hearing in respect of those rating list entries.
On the first preliminary issue, the Appellant contended that the VTE had jurisdiction to determine appeals against the rating list entries, even if no appeal had been made against the Completion Notices that those entries were consequent upon. After hearing the evidence, the VTE concluded it did have jurisdiction to determine the case.

In respect of the second preliminary point, the second Respondent (the City Council) contended that there was an irrebuttable presumption that the Completion Notices were valid as a result of the Appellant’s delay in making proposals to alter the rating list. The VTE determined that the only constraints on making proposals were those set out in the relevant regulations and the Appellant had complied with these, there was therefore no basis on which to assume the Completion Notices were valid.

As no one appealed these findings they moved onto the substantive hearing to determine whether the rating list entries had been correctly made.

It was agreed between the parties that the parts of the building in dispute were not capable of beneficial occupation following practical completion of the works and until they were actually occupied.

This meant that if the Completion Notices should not have been served the rating list entries had to be deleted until the properties were occupied. The Appellant contended that the works carried out to these parts of the property were not “new buildings” and so were not properties on which Completion Notices could be served. The first Respondent argued the whole building had been so altered that it could be described as a “new building” – or that the respective parts were so transformed that they should be described as “new buildings”.

The results

• The Tribunal found that the building, taken as a whole, could not be described as a new building. The essential identity of the building remained the same despite the change of use of parts.
• In respect of the first floor, the parties agreed that there had been no structural works and the Tribunal found that in such circumstances a Completion Notice cannot be served and the property had therefore incorrectly been entered in the rating list. This meant that the assessment should be deleted from 1 April 2010 to 15 March 2015, when the property was first occupied.
• In respect of the second floor, the Tribunal found that there had been significant structural alterations including the removal of an atrium and that it could be described as a “new building” and included in the rating list following a Completion Notice. Here the Appeal was dismissed and the rating list entry remained.
• The ground floor question was the hardest to determine but using available evidence the Tribunal concluded that, whilst areas had been partitioned off for different uses, they had not been created as a result of structural alterations. Therefore, it couldn’t be said to be “new buildings”. Again, there could be no question of a Completion Notice applying and the assessment of the ground floor must be deleted from 1 April 2010 to 6 March 2013, when it was first occupied.

On the face of the ruling and in the words of one observer: “It appears that there is no means by which to bring back into the rating list property that has been deleted from the list because it is incapable of beneficial occupation, but which is not reoccupied and which, when works have finished, does not qualify as a “new building” that can be subject to a Completion Notice.”

Legislation could well follow governing Completion Notices but, in the meantime, owners of buildings that have been deleted from the rating list and have not been reoccupied will want to look carefully at Completion Notices or rating list entries.

This case once again highlights the difficulties that result from LA’s trying to claim business rates – which historically have been a tax on the occupation of a property – on properties which are incomplete and unoccupied.

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