Business rates: Occupying separate floors in a building

by Peter Rolph, 11 August 2016

The eagerly awaited business rates judgment from the Supreme Court has clarified that two non-adjacent floors occupied in a single office block by the same company should be treated as two separate rateable properties, leading to increases in the amount payable by the ratepayer (Woolway (Valuation Officer) v Mazars LLP [2015] UKSC 53).

Business Rates: The Facts

Mazars were the occupier of two floors (level two and level six) in an eight storey, modern office building under separate but similar leases, for an identical term. The Valuation Officer entered each floor in the rating list as a separate hereditament. On appeal, Mazars argued that the floors are interdependent and adequately close to constitute a single hereditament. It is worth bearing in mind that the floors were accessed via lifts located in the common parts of the building. The Upper Tribunal and the Court of Appeal agreed with Mazars’; treating the two levels separately did not reflect the realities of occupation in a modern office block.

The Supreme Court Decision

The Supreme Court however allowed the appeal by the Valuation Officer, considering three tests to determine whether units should be treated as single rateable properties:

The Geographic test

The geographic test considers whether the units are sufficiently linked so that direct communication between them can occur without access onto another’s property? If not, this strongly indicates that the units are separate hereditaments.

The Functional test

Where the geographic test shows that the units are distinct, they may still be considered as one hereditament for the purposes of non-domestic rates if the use of one of the units is necessary for the enjoyment of the other. If the units could not be let individually, this may indicate a single hereditament.

The Objective necessity test
To determine the functional test, it is the ascertainable character of the properties that must be considered by the valuer not what use the occupier makes of the units. This test clarifies the way in which the functional test operates.

Mazars were unsuccessful in proving both the geographical and functional tests.
How will this decision affect you?

All ratepayers who let spaces in multi-occupied buildings are likely to be faced with higher rates bills, as separate units will accrue separate rates bills. However, the decision of the Supreme Court has provided necessary clarification regarding how properties should be assessed as to their rateable value. But, it leaves open the possibility for each case to be decided on its own facts. It will fall to the ratepayers and their surveyors to demonstrate that units are unable to be let separately and that they are not interlinked.

If you would like any further information on this subject please don’t hesitate to contact Peter Rolph, a senior associate in the dispute resolution team specialising in property litigation on 01202 204 535 or peterrolph@steeleraymond.co.uk.

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Peter Rolph

Managing Partner
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