In a guideline decision of great interest to commercial property landlords, the Upper Tribunal (UT) has ruled that prestige office premises which were stripped bare in preparation for the arrival of a new tenant had a nil rateable value.
The case concerned two floors of an iconic 50-storey office block which, in line with the landlord’s usual practice, had been stripped to a shell on a tenant’s departure. A local authority valuation officer (VO) took the view that the premises had a rateable value in excess of £1.8 million but, after the landlord appealed, the Valuation Tribunal for England set that value at nil.
In challenging that decision before the UT, the VO pointed to the requirement of the Local Government Finance Act 1988 that commercial premises are to be valued on the assumption that, immediately before a tenancy begins, they are in a state of reasonable repair.
In rejecting the appeal, however, the UT noted that that statutory assumption did not entirely supersede the common law reality principle that a property is to be valued as it in fact exists on the day of valuation. After the relevant premises were stripped to the bone, they ceased to be capable of beneficial occupation and were thus not a unit of property – or hereditament – at all. The ruling meant that, as a matter of administrative convenience, the stripped-out premises would remain on the local authority’s rating list at a nominal value of £1.