Top business rates cases of 2024

After a dearth of cases in 2023, 2024 has proved to be a more fruitful year for litigation in the rating world. 

Here's a quick rundown of our top 5 cases for 2024 from the tribunals:

1. Shoosmiths and Mando Group v Hitchings (VO [2024] VTE CHG100528632
   
   Following on from the Acendon House case in 2023, this was another appeal involving the value attributable to offices which on the material day were in Category B condition [ie including tenant’s rateable fit-out works] and what enhancement should be applied for Category B over Category A [shell].
   
   The winner? The ratepayers, in that they achieved reductions in value, albeit enhancements for Category B fit out were applied and we understand that the valuation office (VO) has appealed to the upper tribunal (UT). 
   
   The valuation tribunal (VT) applied a £15 per sq m uplift for Shoosmiths’ office in Manchester whilst they ascribed £10 per sq m for Mando (Liverpool). This compared to the £25 per sq m uplift “universally accepted” [in the tribunal’s words] for offices in and around London, where costs would be higher. 
   
   Watch this space. Even with an UT appeal looming, there are bound to be plenty of fit out cases coming the way of the tribunals in light of this decision and Acendon House. Having been an area which previously had garnered little attention, tenant’s fit out has become somewhat of a battleground. Tenants, in some instances having spent millions on fit out works, may now find themselves subject to a double whammy as their expenditure will increase their rating liability – and it is not necessarily just in the office market where this effect will be felt.  
   
   
2. Prosser v Rickets (VO) [2024] UKUT 264
   
   This appeal involved a set of barristers’ chambers in Pump Court. The chambers were let to four senior barristers on trust for all members. Members had individual rooms in which to carry out their practice, with certain shared space. 
   
   The ratepayers argued that each individual barrister’s room should be a separate hereditament in the list, which would allow each barrister to claim small business rates relief. The VO considered that the entire chambers were a single hereditament.
   
   The winner? VO. The UT placed considerable weight on the facts that the barristers’ constitution indicated that property would be held jointly between them on trust and that the barristers had all agreed to sign up to this constitution. There was, in essence, a collective occupation of the chambers.
   
   Watch this space. Although this case went down a slightly different track, there have been other well-known cases regarding single or multiple hereditaments, paramount control and common purpose hitting the headlines in recent years. For example, we've been dealing with a number of serviced office enquiries, where variations to lease or licence agreements have been agreed with VO representatives. The VO focus on contractual obligations is slightly at odds with the paramountcy of what happens ‘on the ground’, but it means that ratepayers have to be extra vigilant if they wish to argue the extent of a hereditament.  
   
   
3. Carey Group PLC v Ricketts (VO) [2024] UKUT 356
   
   The lower floors of a newly-built office block were temporarily incapable of occupation because of water ingress which led to mould infestation.
   
   The VO considered that the statutory assumption of the premises being in ‘repair’ at the material day had to be applied, whereas the ratepayer argued that the remediation of this condition went beyond what Parliament intended by ‘repair’.
   
   The winner? VO. UT held that on the material day they would assume that repairs had been carried out to prevent the water ingress and any damage caused by the ingress.
   
   Watch this space. With rating mitigation once again in the Government spotlight and the VO clamping down on Newbigin v Monk deletions, we're expecting several more repair/incapable of beneficial occupation arguments hitting the tribunals next year.  
   
   
4. List (Valuation Officer) v Network Rail Infrastructure Ltd [2024] UKUT 351 (LC)
   
   The issue in this case concerned the business rates treatment of advertising rights at Liverpool Street Station and Victoria Station in London. In particular, whether these rights should be treated for rating purposes as part of a the central list entry comprising the national railway network in the occupation of Network Rail, or each treated as separate hereditaments in the occupation of the company entitled to exercise the rights.
   
   The Upper Tribunal (UT) confirmed that under section 64(2) of the Local Government Finance Act 1988 (LGFA 1988), a right to use land for exhibiting advertisements is a separate hereditament if it is ‘let out or reserved to any person other than the occupier of the land’, and that, under section 65(8) of LGFA 1988, a right which is a hereditament under section 64(2) shall be treated as occupied by the person entitled to that right under section 65(8).
   
   The winner? VO. The UT held that the advertising rights at Liverpool Street Station and Victoria Station had been ‘let out’ to J.C. Decaux under a 2010 Rail Advertising Concession Agreement, creating separate hereditaments occupied by J.C. Decaux that could not form part of Network Rail's railway hereditament assessed in the central rating list. 
   
   Watch this space. The principle of ‘landlord control’ and determining paramount occupation did not apply when identifying advertising hereditaments under sections 64(2) and 65(8), as Parliament had provided a specific statutory regime for rating advertising rights. Therefore the ratepayer was successful in arguing that the advertising rights formed a separate hereditament, with the rates payable by the party with the benefit of the advertising rights.
   
   
5. MEC London Property 2 (Nominee 1) Limited & MEC London Property 2 (Nominee 2) Limited v City of London Corporation (Billing Authority) [2024] VTE VT00022936 (NDC)
   
   The case of MEC v City of London Corporation dealt with completion notices served by the respondent in respect of 26 floors within a high-rise development at 8 Bishopsgate, London. The building comprised 50 floors in total, with 48 as accommodation and plant and machinery on the top two floors.
   
   Non-Domestic Completion Notices are sent by the billing authority, and are issued when a newly constructed building (or existing building that has been split or merged) is considered complete for business rates purposes. The completion notice specifies the completion date, which is the date on which a premises becomes rateable and enters the rating list.
   
   The appellant’s contention was whether the completion notices allowed sufficient time to complete the outstanding work at the premises, and the answer turned on whether practical real-life constraints which restrict simultaneous fitting out of multiple floors should be taken into account when setting the completion date. The respondent submitted that the premises had achieved practical completion on 19 June 2023. The billing authority therefore proceeded on the basis that the date of practical completion was the date that the property was completed, save for tenant’s fit out works.
   
   The winner? The billing authority. In reaching its decision, the VTE considered that the real-life constraints of fitting out all floors at the same time were preparatory works, and therefore should not be taken into account for the impact on the completion date. As a result, the VTE concluded that each floor should be treated as a separate hereditament, and assuming works started for each floor on the date of practical completion of the building, then both parties agreed that the works to fit out each floor would take between 16 and 20 weeks. The VTE therefore considered that 8 June 2024, eleven and a half months after practical completion was reasonable.
   
   Watch this space. Ratepayers should be mindful of the extent of works required to achieve practical completion, and be aware that delays to completion of the overall development does not preclude the billing authority from treating individual floors of the development as separate hereditaments capable of being entered in the list at an earlier date.

Our business rates team is class-leading and can advise you on any issues arising from the above cases. We have three cases proceeding to High Court and tribunal in the early stages of next year as well, and we shall be in touch with more details once judgments are published. 

For business rates enquiries, please contact our team.

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