Business rates have dominated the headlines this month both in the Courts and in Parliament. In the Courts we have seen decisions which will have repercussions in valuation areas throughout Scotland and in Parliament, the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill continues its journey.
Cases
In June we brought you news of a case in which the Lands Valuation Appeal Court rejected a claim by a group of retailers that the impact of the recession could justify a cut in business rates. This month, two similar cases have been decided which highlight important limitations in the ability of rate payers to appeal the rateable value of their properties.
Background
All non-domestic properties in Scotland have a rateable value for local taxation purposes. The values are established every 5 years at revaluation when a new valuation roll comes into existence. Properties are currently valued two years before the new roll comes into force. This means that the valuations carried out to fix the rateable valuation rolls for 1 April 2010 to 31 March 2015 are based on April 2008 values.
An appeal against a valuation may be made within 6 months of acquiring an interest in a property, or, where the assessor alters the valuation roll (by making a new entry or changing the value) the appeal must be lodged within 6 months of the date of the valuation notice. Appeals can however be lodged at any time under s3(4) of the Local Government (Scotland) Act 1975 in the event of a material change of circumstances after the roll is made up.
The Dundee case
During the currency of the 2005 roll, numerous appeals were made by the proprietors and occupiers of the Overgate Centre in Dundee against the entries in the 2005 valuation roll. They argued that the rental values of the properties had fallen significantly during the currency of the 2005 Roll due to the economic recession and that this constituted a material change of circumstances. These appeals (unlike the appeal reported on in our June bulletin) were successful and were settled with the assessor on an agreement that the recession had constituted a material change of circumstances, occurring as at 1 April 2009. The rates were accordingly reduced with effect from 1 April 2009.
The ratepayers in this case argued that the reduction in rates which had been agreed by the assessor from 1 April 2009 should be taken into account in the 2010 roll. It was not equitable that the fall in value – which had been accepted by the assessor as affecting the previous roll – could not be taken into account in the new roll.
It was held that the assessor had been correct to value the properties as at April 2008 (before the effects of the recession were felt) and that he was correct not to take into account the fall in value which had been agreed to have happened as at April 2009. The legislation only allows an appeal in respect of changes in circumstances after the date on which the entry is made in the valuation roll. There is no provision for an appeal where the change occurs, as in this case, between the tone date (1 April 2008) and the date the entry is made in the valuation roll. In this case the material change in circumstances on which the ratepayers relied had affected values by 1 April 2009. Unfortunately only material changes after the valuation roll was finalised in March 2010 could be grounds for an appeal.
Although the result seems somewhat inequitable, it was held that the fundamental principle of the legislation is that all properties are valued to a common base. There will inevitably be increases and decreases in the values of various kinds of properties between April 2008 and the revaluation date – but for there to be consistency in the valuation roll, it was essential that all properties are valued as at one fixed date.
A similar decision was reached in respect of properties at the Mercat Shopping Centre in Kirkcaldy.
The Bellshill case
A different aspect of the rating legislation was looked at in the case of Cosmopolitan Bellshill Limited and Almondvale Investments (Jersey) Limited v North Lanarkshire Council. In this case, the question of when rates liability arises in respect of a newly built but unoccupied building was debated. Until this decision there was a view that a rating authority could not levy rates on the owner of a newly erected and unoccupied building without first having served a completion notice under schedule 3 of the Local Government (Scotland) Act 1966. Lord Hodge held that this was not the case. The language in the 1966 Act did not indicate that the completion notice procedure was intended to be the only method by which the owner and rating authority could establish the date of completion of a building.
Parliament
We reported on the Local Government (Unoccupied Properties etc.) (Scotland) Bill in April. The Bill has now passed stage 2 and the Scottish Parliament is due to have their final stage 3 debate on Wednesday 31 October 2012. The Bill looks certain to be passed and only time will tell what effect it will have on the Scottish property industry.
