Office premises assumed to be in repair for rating purposes

A hereditament temporarily incapable of beneficial occupation due to disrepair should not be removed from the rating list or have its rateable value reduced to a nominal £1. The Upper Tribunal (Lands Chamber) has considered this issue dismissing an appeal in Carey Group plc v Ricketts (VO) [2024] UKUT 356 (LC); [2024] PLSCS 202. The case concerned office premises on the ground and basement levels of an office and residential development at Hand Axe Yard south-east of King’s Cross railway station, of which the appellant was lessee. In early February 2020, water ingress became apparent with moisture build-up in various parts of the lower ground floor and water ponding beneath the raised floor in the basement. Due to health and safety issues, the office was closed from 27 March 2020. The cause of the problem was identified as a failed waterstop on the construction joint between the basement floor slab and the liner wall. Remedial works – an injection of hydrophilic waterproofing resin and applying a waterproof coating – were completed by the developer in April 2021. The appellant submitted that the property was incapable of beneficial occupation from 27 March 2020 – due either to flooding and drainage problems or an inherent defect – and should be removed from the list from that date. The valuation officer rejected both arguments and confirmed the rating list entry. The Valuation Tribunal for England agreed, dismissing the appellant’s appeal. Under the Local Government Finance Act 1988, premises must be valued on their physical state and use on the material day. The rateable value is equal to the rent a hereditament might command if let, assuming that it is in reasonable repair at commencement and the tenant undertakes to bear the cost of repairs required to maintain the rent. The rating list can be changed to reflect reality where extensive works radically alter premises so that they have become a “building undergoing reconstruction”; SJ & J Monk v Newbigin [2017] 1 WLR 851. It was common ground that the property was incapable of beneficial occupation between March 2020 and April 2021 and that the remedial works were works of repair. The appellant argued that, if the property was not capable of rateable occupation, it was not a hereditament and the repair assumption should not be applied. The tribunal considered that the penetration of water through the construction joint gave rise to a state of disrepair even if the cause was an inherent defect. Consequently, it had to be assumed that the defective joint had been remedied on the material day.   Louise Clark is a property law consultant and mediator