Office buildings undergoing renovation may be entitled to a significant cut in business rates following a landmark Supreme Court ruling.  Property developer S J & J Monk (Monk) had the rateable value of an office it owned slashed from £102,000 to just £1.00 after the Supreme Court decided that property should be rated as a ‘building undergoing reconstruction’.

Monk owns the freehold of the first floor of a three-storey office building. The premises had originally been occupied by tenants as a single office suite, but in 2010 Monk decided to renovate the property to make it usable as either a three office or as a single office suite.

On 6 January 2012, the date for setting the rateable value of the premises, the office had been stripped to a shell.  Monk asked the valuation officer to change the property description to being a ‘building undergoing reconstruction’ with a rateable value of just £1.00 on the grounds that it could not be occupied due to the ongoing works.

The valuation officer rejected Monk’s proposal, a decision which was upheld by the Valuation Tribunal.  The case was then referred to the Upper Tribunal which allowed Monk’s appeal on the grounds that the building had been stripped out beyond reasonable repair. The Court of Appeal then reversed this decision on the basis that the repairs would return the premises to their former state.

The case was referred to the Supreme Court for a final decision.  The justices concluded that it has “long been an established principle of rating law that property should be valued as it in fact existed on the material day” and unanimously allowed Monk’s appeal.

“This test case will be welcomed by property developers across the UK, who had complained of having to pay high rates on offices which could not be occupied during renovation,” said James Burgoyne, Director – Claims & Technical, Brunel Professions. “This is a victory for commonsense that where a building is not in a state that it can be occupied, this reality takes precedence over a statutory assumption.”

The Supreme Court has published a press summary which outlines its decision.  The case has also been reported by law firms Irwin Mitchell and Osborne Clarke.

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