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Cold front moves North

16th February 1995
Page 32
Page 32, 16th February 1995 — Cold front moves North
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Which of the following most accurately describes the problem?

Have you received a letter from your local Valuation Officer regarding the 1995 Revaluation of your transport depot? Although appeals may not be made before 1 April 1995, many hauliers will have received notice of the new rateable value of their property, and some will be wondering what it all means.

The Uniform Business Rate was introduced in 1990 and, unlike the local taxation of residential property—now the Council Tax it is a system of rating by poundage according to property values, just like the old General Rate. The difference is that instead of the local authorities setting their own rate in their respective areas, the Government sets one rate for the whole of England and the whole of Wales, but not for Scotland which continues to use regional multipliers.

Rateable value

The Government announced in the November budget that the Uniform Business Rate for 1995/6 will he 43.2 pence in the pound for England and 39 pence in Wales. If you know the new rateable value of your property you can work out your business rates bill by multiplying the value by 43.2 pence. This figure can be subject to adjustment by allowances and by the phasing provisions recently announced which are designed to soften the impact of any large increases. They also delay the effect of significant reductions, as a consequence of the current Rating Revaluation.

The new system of rating valuation set out in the Local Government Finance Act 1988 requires a revaluation of all property every five years. Valuers previously had to assess all new properties on the basis of 1973 values. Rateable values are assessed on prevailing rental values at a fixed date before the revaluation date, to allow time for transactions which took place around that date to be researched and analysed. It's also to give the valuation officers and rating valuers the evidence necessary for accurate valuations.

The 1990 revaluation was by reference to values at the former valuation date of 1 April 1988. The current 1995 revaluation is by reference to rental values at 1 April 1993. However, the physical state of a property as at 1 April 1995 is to be taken into account. But, despite this refinement, there are considerable problems in valuing property by reference to rental levels. The current recession and the peculiar workings of the commercial property market have combined to obscure the true level of rental values as at 1 April 1993.

Evidence for rental values comes from three main sources: new open market lettings; lease renewals; and rent reviews. In a recession, open market lettings —the best type of evidence—are few and far between and when they do occur, concessions such as rent-free periods and other incentives distort the evidence. Valuers have to rely mainly on rents achieved on lease renewals, where rent can be just one of many factors subject to negotiation, and on rent reviews—the most common evidence available.

The problem with rent reviews is that they take place in the unreal world of the "hypothetical lease" according to artificial rules set out in the current lease, rather than in a genuine open market environment in which the parties could walk away from the deal if figures were not agreed.

The main difficulty is the "upward only" rent review system under which rents set at the very high levels produced by the strong market of the late 1980s cannot be adjusted downwards to reflect its subsequent collapse. Consequently, many rental values as at the current valuation date of 1 April 1993 will be unchanged from the previous date of 1 April 1988, despite the fact that the true rental value of the property achievable in the open market may be significantly reduced.

Periodic revaluations take into account fluctua tions in property values, both between different types of property and dif ferent geographical loca tions. In addition, new types of property emerge over the years such as campus-style offices, or retail warehouses, which may not have been taken into account in earlier valuations. At the last revaluation, the highest property values were in the South, and this was reflected in rateable values. Following the recent recession, property values in the South-East have collapsed in many sectors, while property in the Midlands and North has been less badly affected. So we can expect a general rise in rateable values in the Midlands and North, and look for reductions in rateable values in parts of the South-East.

Rateable values in central London are set to fall by an average 40%, whereas some Northern businesses will suffer substantial increases. However, the Government's phasing provisions Will mean that the increase on large properties is limited to 10%, and on small properties to 7.5% in the first year. Conversely, the reductions are to be limited to 5% and 10% respectively. These limits will be adjusted for inflation and may well be altered in subsequent years.


Businesses should not be content just to accept the new values set on their property. Even if the actual passing rent supports the rateable value, it may be possible to achieve a reduction if that assessment is inconsistent with those of similar neighbouring properties.

You can appeal against a rating assessment but there are now strict time limits in which to do so. The period in which an appeal can be made begins on 1 April 1995 and is usually six months—but it could be less. Full announcements will be made soon. Failing a material change in circumstances, this is the one chance in the five-year valuation period when an occupier can appeal against the rateable value. As soon as businesses receive initial notification of the revaluation, they should contact a qualified rating surveyor, avoiding cowboy operators who promise fixed reductions for an upfront fee.

An expert opinion will show whether there is any chance of a reduction, and expert representation before the Valuation Tribunal will increase the chances of success.


Organisations: Valuation Tribunal
Locations: London

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