Why a decision in the Supreme Court is good news for property developers

Last week’s Supreme Court decision in Newbigin (VO) v S J & J Monk is being heralded as some much needed good news for property developers.

Real Estate

The Court ruled that properties undergoing redevelopment should be assessed at reduced business rates and, in doing so, overturned a 2015 Court of Appeal decision in the same case. The Court of Appeal’s decision had resulted in developers being charged millions of pounds in business rates for buildings undergoing redevelopment.

Instead, the Supreme Court ruled that a commercial building in the course of redevelopment such that it was incapable of rateable occupation should not have to be valued for the purposes of rating as if it were still useable but in a state of disrepair. The decision reflects the valuation practice as reflected in Valuation Office Agency’s rating manual prior to the 2015 decision and is clearly good news for property developers.

The Court said that a valuation officer must assess objectively whether, on the material day, a property is undergoing reconstruction, and therefore incapable of beneficial occupation, rather than simply being in a state of disrepair. In doing so, the valuation officer can have regard to the programme of works being undertaken on the property. If the works are assessed as involving redevelopment then there is no basis for the valuation officer to assume that the property was in reasonable repair on that date. If, however, during redevelopment, some part of the property becomes capable of occupation, the repair assumption might apply to that part only but would not deem the whole development complete.

Monk is an important test case with a significant number of disputes between valuation officers and developers being put on hold pending the Supreme Court’s decision. These are now likely to be resolved and property developers in the same situation as Monk may see considerably reduced business rates bills.

The Supreme Court’s judgment is available here.

Please contact our Real Estate team if you would like more information on how your organisation may be affected by the decision.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of March 8, 2017.