All change on business rates

Business ratepayers are becoming more alive to the possibility of appeals and aware of the options available to them

THE past two years have brought challenging times for ratepayers and there is little respite on the horizon. With the 2017 revaluation looming, rateable values are likely to increase substantially throughout large swathes of the country.

Together with changes to the appeal system and a raft of unfriendly judicial decisions, business ratepayers are understandably becoming more alive to the possibility of appeals and more aware of the options available to them.

According to Richard New, a real estate litigation partner at Eversheds LLP, ratepayers pay roughly half of what the Valuation Office assess to be the market rental value for each commercial property they occupy, whether or not they own the freehold or the leasehold of that property.

The last rating list was based on 2008 rental values and the impending revaluation comes into effect on 1 April 2017, with rental values being assessed as at April 2015.

New says the 2008-2015 period was an especially volatile period for the property market. ‘However,’ he adds, ‘many cities were over the worst of the downturn and had started to accelerate by 2015 so are gearing up for sizeable increases in their rateable values.

‘Certain areas of London are expected to increase by nearly 100%, which, even with transitional relief, will put a severe dent in the finances of every corporate occupier.’

The Valuation Office recently published the new rateable values in draft and is currently inviting representations from ratepayers as to any factual or other substantial errors. New advises ratepayers to instruct a RICS qualified rating surveyor to see whether there is any scope for challenge.

‘When the list goes live on 1 April 2017, ratepayers will be able to appeal their assessments formally, but a new system is coming into effect which will influence which battles ratepayers wish to pick.’

He says the Valuation Office is hoping the introduction of the Check Challenge Appeal process will reduce the number of frivolous claims and lead to more challenges being settled in the early stages, with fewer appeals being heard before the Valuation Tribunal. Under the present regime, it’s felt that too many appeals are being put in speculatively with little chance of success.

The finer details of Check Challenge Appeal place greater emphasis on the ratepayer ensuring that the appeal is well-founded. ‘Ratepayers will need to ‘frontload’ more than they currently do for the appeal process, both in terms of assessing opportunities and accumulating evidence,’ says New. He warns that except for physical changes to the property or its locality, the ratepayer will only get one chance to appeal.

Under the first step of the new regime, Check, the parties will agree factual evidence regarding the property concerned. ‘The ratepayer will be responsible for the accurate presentation of information regarding the property and the Valuation Office will reassess whether an amendment is merited,’ says New. He warns though, if ratepayers present false information they may find themselves fined.

Challenge follows if Check leads to no amendment.

New says ratepayers should expect to state the detailed grounds for the alteration and provide evidence in support. ‘This might be market data or legal or factual representations which support a change to the rateable value. There will then be a period for negotiation.’

With Appeal, it is likely that limited evidence can be brought in front of the Valuation Tribunal except for that disclosed during the Challenge phase. This is why New says that there is a real need for comprehensive thought to have gone into the submissions made at an early stage of an appeal. He notes that rather like an employment tribunal claim, those wanting to take an appeal to a hearing must pay a fee.

‘What is interesting about Check Challenge Appeal,’ says New, ‘is that it will undoubtedly put more of an onus on ratepayers, both in terms of time and money they spend on preparing its appeals and in compliance with time limits.’

He explains that under current proposals, if ratepayers fail to submit evidence by certain deadlines then their appeals will be terminated instantly, but how this will operate in practice is still open to speculation.
‘This would seem to be unreasonable given that the Valuation Office is recommending that it has 12 months to deal with the Check phase and 18 months in which to deal with the Challenge, so the prospect of an early decision is questionable.’

However, the Valuation Office hopes to bring these times down once the system is up and running; it is conscious that any new system of this nature will no doubt hit snags along the way and with the current backlog showing no signs of lessening, these measures are sadly necessary.

The lesson is clear. Businesses must make a point of checking their business rates valuation. If they feel that they have a genuine case to make they should engage an appropriate RICS qualified rating surveyor and put together their case for an appeal. They only have one bite of the cherry and so the case needs to be well researched.