The COVID pandemic has significantly changed the way business have operated over the last year. With restrictions on trading varying from reduced hours to forced closures, as well as restrictions on travel, and Government guidance on working from home, there have been huge changes in the way property can be used. But can those changes be reflected in reduced rateable values?
The rateable value of a property is an estimate of the rent that a business would pay to operate from those premises. It is based on rental levels at a specific date, currently 1 April 2015. Sometimes events may occur after the valuation date which affect the demand for property and reduce rental values, but not all such changes can be reflected in the rateable value.
The legislation provides that where there is a ‘Material Change of Circumstance’ the rateable value can be altered to reflect it, but the legislation closely defines what changes are ‘material’ in this context. The kind of changes that are included include physical changes to the premises or changes in the locality that are ‘physical’ or capable of being observed. For some property types, such as retail, the closure of retail units nearby is accepted as being a physical change in the locality. For premises in Central London or large city centres the reduction in the operating hours and frequency of public transport may also be a change in the locality that can be taken into account.
For those occupying units in industrial areas it may be more difficult to link a reduction in trade to a physical change in the locality. The definition of ‘locality’ itself is subject to interpretation and changes outside the locality will not qualify as ‘material’. Further, the valuation does not take account of the actual business in occupation. Some businesses have benefitted from the effects of the pandemic and might be interested in acquiring additional premises at an unreduced rental. In order to succeed in reducing the rateable value it must be shown that the rental in the open market would be reduced, and that the reduction is due to a qualifying change.
Our clients occupy a wide range of properties across the UK and operate a range of different business. At Aitchison Raffety we are working to identify material changes that are due to the COVID pandemic and are engaging in negotiations with the VOA to seek reduced rates liability where it is appropriate.
Aitchison Raffety’s Business Rates Team consists entirely of Members of the Royal Institution of Chartered Surveyors (RICS). We are a firm regulated and governed by the professional standards, conduct and ethics demanded by the RICS and the IRRV. We have appealed in excess of £1 billion of client business rates and saved our clients in excess of £100 million.
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