Canary Wharf wins rateable value fight over One Canada Square premises

Canary Wharf Ltd has won a battle over the rateable value (RV) of the top two floors of One Canada Square while they were in a “shell state” during reconstruction works, ahead of occupation by the European Banking Authority. The Upper Tribunal (Lands Chamber) (the UT) ruled that the RV during the period the office premises had been stripped out and incapable of occupation was only £1, rather than £1,830,000, as claimed by the valuation officer (VO). When tenants move out of the 46-storey One Canada Square, Canary Wharf strips out and markets the vacant space in a shell state, with a view to it being fitted out at a later date to a new tenant’s requirements. As part of that regime, the 45th and 46th floors of the tower were in a shell state between 17 February 2011 and 30 November 2014. The question faced by the UT was whether the appeal property should be valued for rating purposes during that period as offices in an assumed state of repair, as the VO submitted, or in its actual condition as premises undergoing redevelopment. If the former, the parties agreed the RV is £1,830,000; if the latter, they agreed that a nominal rateable value of £1 should be shown in the list. The basis of the dispute was the parties’ differing interpretations of the important Supreme Court decision in SJ & J Monk v Newbigin [2017] UKSC 14; [2017] EGLR 21. In March 2018, the Valuation Tribunal for England (VTE) sided with Canary Wharf, and now the UT has dismissed the VO’s appeal. Deputy chamber president Martin Rodger QC and Peter McCrea FRICS said that the crucial point, accepted by the VO, was that the premises could not be occupied on the material day of 16 January 2013, when Canary Wharf first proposed that the RV should be nominal with effect from 17 February 2011. They said: “If premises are not capable of beneficial occupation they are not a hereditament. The only basis on which they may then be included in the rating list is under the convention that allows property temporarily incapable of occupation to remain in the list at a nominal value as a matter of administrative convenience, rather than deleting the entry and creating a new entry when the property once again becomes capable of beneficial occupation. “The VO’s acceptance in this case that the appeal property is not capable of beneficial occupation is therefore the beginning and end of the appeal.” They added: “The property was stripped back to its shell so that substantial reconstruction and improvement work could be carried out. As the Parliamentary material referred to by Lord Hodge in Monk makes clear, in such cases it was the intent of the [Rating (Valuation) Act 1999] that the property would be considered in its actual state on the material day and, if it is incapable of beneficial use, would be removed from the rating list.” The European Banking Authority’s lease of floor 46 and part of floor 45 commenced on 8 December 2014. The remainder of floor 45, which had been fitted out to the minimum standard as part of the same programme, remained vacant until a lease was entered into with a new tenant, which was completed on 1 September 2015. With hundreds of other such strip-out cases awaiting the outcome of this decision, Robert Hayton, head of UK business rates at real estate adviser Altus Group, said the ruling should now bring an end to “far-fetched attempts” to try and distinguish Monk in an attempt to maximise rating income for local authorities. He said: “This case will, hopefully, encourage the Valuation Office Agency to now look objectively at schemes of refurbishment and allow owners immediate access to business rates relief during periods when they are improving properties. Refurbishment and improvements support growth in the economy and owners should not be penalised for doing the right thing.” Expressing the hope that cases delayed as a result of this decision will now be settled quickly, he added: “While the ruling doesn’t mean that everything an owner does to a property will automatically result in a nominal assessment, it does reaffirm the position returning advisers to a position to be able to give taxation advice that can be relied upon.” To send feedback, e-mail jess.harrold@egi.co.uk or tweet @estatesgazette Photo: Shutterstock