Court ruling gives business rates boost to property developers

Judges have decided that a building should not be charged full business rates as if it were fully usable when it was undergoing refurbishment.

In Scotland properties only escape rates if they are being converted into another use, but now lawyers will be able to argue that major works or alterations should be covered too.

The case focuses on SJ&J Monk, a property developer from the north east of England, owner of the freehold of the first floor of a three-storey office building that underwent a major renovation and refurbishment so as to attract new tenants.

On the 6th January 2012, the date for determining the rateable value of the property, the premises were empty and stripped to shell. The developer proposed 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. In the 2010 rating list listed the property as ‘offices and premises’ with a £102,000 rateable value.

The Supreme Court has this week 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 for other property developers in the same situation.

Louise Daly, senior surveyor with Colliers International in Scotland, said the ruling would give lawyers something more to rely on when negotiating rates with local authorities.

She told The Herald: “While there is a system in place in Scotland, the court’s decision gives us something else to rely on. It could be a big help to property developers, allowing them to make big savings on their business rates which they can then plough back into the development. Going forward, the court’s decision will have implications and it will be interesting to see what the assessor does next.”

A Scottish Government spokeswoman said: “We note the judgment of the Supreme Court. Our package of measures delivers a tax cut of £155 million which will help those who might be impacted by a revaluation.

“From April 1 more than half of businesses will pay no rates, seven out of 10 will pay either no or less rates than they do currently, and the total package of reliefs we are offering will increase to more than £660m.”