Newbigin v S J & J Monk

A non-domestic hereditament undergoing redevelopment must be valued in its actual physical condition on the material day. The assumption of reasonable repair in paragraph 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988 does not deem redevelopment complete or restore the premises to their former mode of occupation.

The valuation officer must assess objectively whether the premises are capable of beneficial occupation and identify their actual mode or category of occupation before applying the repair assumption. The programme of works may inform that assessment, although the owner’s subjective intention is irrelevant. Radical alterations which make the premises unoccupiable may justify describing them as a building undergoing reconstruction and assigning a nominal rateable value.

The appellant owned the first floor of an office building. Contractors were extensively stripping out and reconfiguring the premises so that they could be let as one or three office suites. On the material day, the premises were vacant, essential services and fittings had largely been removed, and the redevelopment remained incomplete.

The Valuation Tribunal treated the property as an office suite in disrepair. The Upper Tribunal allowed the owner’s appeal and reduced the rateable value to £1 because the premises were incapable of beneficial occupation and undergoing reconstruction. The Court of Appeal, in [2015] EWCA Civ 78, restored the office valuation by applying the reasonable-repair assumption in paragraph 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988.

The central issue was whether the premises had to be valued in their actual condition or as offices restored to reasonable repair.

1. Appeal allowed unanimously. Lord Hodge, with whom Lord Neuberger, Lord Kerr, Lord Reed and Lord Carnwath agreed, held that the premises were undergoing reconstruction on the material day. The Upper Tribunal’s determination, reducing their rateable value to £1, was restored.

2. The principle of reality remains fundamental to rating law. A hereditament is ordinarily valued as it physically exists on the material day and according to its actual mode or category of occupation. Paragraphs 2(6) and 2(7) of Schedule 6 to the Local Government Finance Act 1988 embody that principle.

3. The reasonable-repair assumption in paragraph 2(1)(b) does not wholly displace the principle of reality. The Rating (Valuation) Act 1999 restored the earlier treatment of reparable defects after Benjamin v Anston Properties Ltd. It did not abolish the established distinction between disrepair and renewal, refurbishment, improvement or redevelopment. Whether premises are capable of beneficial occupation is logically prior to the repair assumption.

4. For a building undergoing redevelopment, the valuation officer should first determine whether the property is capable of rateable occupation. If it is, the officer should identify its mode or category of occupation. Only then should the officer consider whether the property is in reasonable repair for use consistently with that mode or category. The first two stages apply the principle of reality; the third applies paragraph 2(1)(b).

5. The distinction between reconstruction and disrepair is objective. The owner’s subjective intentions are irrelevant, but the programme of works actually being undertaken may be considered when assessing the property’s physical state. Here, the extensive stripping out and incomplete reconfiguration made every part incapable of beneficial use. Paragraph 2(1)(b) could not create a hypothetical letting of the former offices in repaired condition.

6. If part of a redevelopment becomes capable of beneficial occupation as a separate hereditament, the repair assumption may apply to defects in that part. It neither deems the development complete nor restores the building to its former use.

7. Section 46A(5) of the Local Government Finance Act 1988 does not prevent alteration of the rating list during redevelopment. Radical alterations, whether structural or otherwise, may justify an altered description and nominal valuation while the hereditament is unoccupiable. Economic impossibility of restoring the former premises is not a prerequisite.

1. United Kingdom Supreme Court: Allowed the owner’s appeal unanimously and restored the Upper Tribunal’s determination.
2. Court of Appeal: In [2015] EWCA Civ 78, allowed the valuation officer’s appeal and dismissed the owner’s underlying appeal. It held that the reasonable-repair assumption required valuation as repaired offices.
3. Upper Tribunal (Lands Chamber): Allowed the owner’s appeal after a rehearing. It described the hereditament as a building undergoing reconstruction and reduced its rateable value to £1.
4. Valuation Tribunal for England: Dismissed the owner’s appeal. It treated the premises as an office suite in economically remediable disrepair.