Property Week Article – business rates for multi-occupied properties

Property Week Article
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PLA criticises draft bill on business rates for multi-occupied properties

By Guy Montague-Jones  Thu 22 March 2018

The government’s draft bill correcting how multi-occupied properties should be assessed for business rate purposes leaves too many areas open to interpretation, the Property Litigation Association (PLA) has warned.

In its consultation response to the Ministry of Housing, Communities and Local Government (MHCLG), the PLA said the draft did not go far enough to reinstate the practice of the Valuation Office Agency (VOA) prior to the seminal Supreme Court decision in Woolway v Mazars, 2015.

The government intends to revert to the scenario pre-Mazars whereby contiguous (touching) property units occupied by the same occupier are treated as one and therefore benefit from a discount in business rates for larger spaces.

The PLA said the wording in the draft bill fails to address the complexity of multi-occupied buildings such as the situation that arises where a void space exists between two floors or between two units on the same floor.

“Arguably, this would make the units non-contiguous from both a structural and legal perspective but from a practical and common-sense point of view, the floors are still contiguous and should benefit from the discount,” said Bryan Johnston, vice chair of the PLA.

The PLA is also concerned that the scope of the draft legislation extends only to occupied properties. For example, a company occupying floors 5-10 in a building will be treated as one assessment but if it vacated these floors, each one would then be treated separately. Prior to Mazars, VOA practice would have been to leave it as a single assessment.

Furthermore, under draft clause 1 (3ZA), if there are four contiguous units and one becomes vacant or used for a different purpose, all four units would then be individually assessed. What should occur is an assessment for the three units and another for the fourth, argued the PLA.

“By failing to address these gaps in the legislation, MHCLG is creating inconsistencies in how contiguous floors should be interpreted for the purposes of business rates and is likely to fall short of its own objectives,” said Johnston.