Business Rates And “Reasonable Repair”

The case of Newbigin (Valuation Officer) v SJ & J Monk (a firm) (2017) addressed the intricacies of business rates and the concept of ‘reasonable repair’.

This legal dispute between a property owner and the local rating office clarified a fundamental principle: a property should be valued based on its actual condition, not on how it ‘should be’, even if it is undergoing redevelopment. The Supreme Court succinctly framed the issue: “Does a commercial building in the course of redevelopment have to be valued for rating purposes as if it were still a usable office?”

The property in question was an office building undergoing renovation. During the assessment for rateable value in January 2012, the premises were vacant, and significant elements such as flooring, ceilings, lighting, and fittings had been removed.

The owner’s representative proposed to the local valuation officer (LVO) that the rateable value should be drastically reduced from £102,000 to £1, given the uninhabitable condition of the premises. However, the LVO declined, citing legislation requiring them to assume a property is in ‘reasonable repair’ for valuation purposes.

The matter was brought before the Valuation Tribunal, which ruled in favour of the property owner, recognising that the building’s condition precluded any assertion of reasonable repair.

In its deliberation, the Court embraced the ‘reality principle,’ emphasising that a property must be valued based on its actual state at the relevant time. Consequently, the presumption of reasonable repair was untenable.

This landmark decision overturned a previous ruling by the Court of Appeal, which had raised doubts about the applicability of the ‘reality principle.’ It offers significant reassurance to property developers engaged in refurbishment projects.