Completion Notices for Business Rates IRRV London and Home Counties Association December 2013 Gordon Heath BSc IRRV (Hons) IRRV National Council Member Chairman IRRV Law and Research Committee Honorary Member of the Rating Surveyors Association
COMPLETION NOTICES Purpose to establish starting point of empty period of a new building for business rates purposes ONLY Served by the billing authority Not directly related to completion for other purposes Enables empty rate to be charged after the exemption period 2
COMPLETION NOTICES Still important despite 18 months relief for some new buildings if an authority is aware that the remaining work to be carried out on a new building can be reasonably expected to be completed within three months, the authority shall serve a notice on the owner of the building unless the valuation officer (VO) directs otherwise in writing if the building is complete then a notice may be served on the owner unless the VO directs otherwise in writing
COMPLETION NOTICES Basic Problem - what is complete? 3 stages recognised by the construction industry Shell and core - not complete Category A Builders finish - floors, ceilings and services - probably capable of completion in 3 months for small developments, but what about large developments? Category B - Partitioned ready for occupation complete meets the VOA Rating Manual s definition of a hereditament and a completion notice is probably not necessary but complete means complete and not very nearly complete 4
The Tewksbury Case Porter (VO) v Trustees of Gladman Sipps Upper Tribunal (Lands Chamber) [2011] UKUT 204 (LC) 28 March 2011, London Re: Completion and inclusion in the list of 19 Office Units, Miller Court, Tewkesbury
The Tewksbury Case Gloucestershire VT deleted all 19 entries No completion notices served Speculative office development 20 units 19 units empty on 1 May 2006 Plastered walls, suspended ceilings, lighting, air conditioning, raised floors with voids, WCs Some units had alarms, tea points, passenger lifts Power as far as the central core only External doors, double glazing, some fire doors No partitioning, data cabling or telephones Car Parking for each unit
The Tewksbury Case VO contended that the remaining work was minor or de minimis and cabling, tea points, etc. were tenant s fit out VO felt the properties were complete and were hereditaments Ratepayer contended that the properties were not capable of occupation as offices without substantial work VO Rating Manual property not a hereditament when substantially complete but without tenant s fit out Completion notice required at that stage
The Tewksbury Case Decision building is a hereditament if it is ready for occupation Must be assessed in the light of the purpose for which it is designed to be occupied No scope for rating a building that is very nearly ready for occupation without a completion notice first Occupier would require more power points, tea points and some partitioning plus consequential fitting out VT correct Appeal dismissed
Prudential Assurance case Prudential Assurance Co Ltd v a Valuation Officer 2011 VTE Surrey case 24 May 2011 Before Prof. Zellick RE:3 and 4 The Heights, Weybridge Principle established the validity of a completion notice can be challenged on a proposal to TOR in the VTE Challenge must be timely Principle not generally realised before this case
Prudential Assurance case Proposals to delete on ground hereditaments improperly entered as not complete Completion notices served but on developer not the owner Subsequent agreement between owner and BA as to completion day
Prudential Assurance case VO argued the VTE had no jurisdiction to consider whether or not the notice was valid as: There is a statutory right of appeal for completion notices VO in no position to defend validity of completion notice as he did not serve it President rejected VO s submissions If no completion notice then properties not complete and entries unsound BA could be added as a party Decision - VTE did have jurisdiction Decision completion notice invalid
Prudential Assurance case Did purported agreement document change position? - Yes VTE noted the agreement :- did not purport to be a CN, did not appear to be a CN and the parties thought they were signing an agreement BUT VTE saw no impediment to concluding that, if not an agreement, it should be treated as a completion notice It contained all the information Not an essential precondition to an agreement for a CN to be served on the owner
Prudential Assurance case President clearly unhappy about the ratepayer s stance: unattractive argument by which a corporate body professionally advised at the time seeks to resile from an agreement freely entered into simply because it later discovers that a technical failure offered it a possible escape route. Common ground between parties that naming and serving CN on developer rather than owner was fatal to its status. But: Evidence as to the fate of that notice following its receipt would have been necessary to support any argument that it was indeed a valid completion notice and we leave open to another day the question when a notice incorporating mistakes may nevertheless be valid. Entries confirmed on basis of the agreement
Friends Life case Friends Life Company Limited v Alexander (Valuation Officer) and Huntingdonshire District Council 2012 Unit 1, Eaton Drive, St. Neots, Cambs. Developers - Miller Developments Ltd July 2006 Miller sold freehold to Friends Life April 2007 Completion notice served on Miller Developments Ltd November 2011 Friends Life made a proposal to delete from April 2010 because incomplete and no completion notice served Argued that Completion notice was defective and invalid
Friends Life case Council argued that: 1. Completion notice correctly served because onus is on Friends Life to show Miller were not entitled to possession 2. Even if not correctly served, Miller were agents or representatives of the owner or were managers of the property 3. Even if not correctly served, VT had a discretion to withhold relief 4. Even if VT did not have discretion, Friends Life had waived their rights to impugn the notice
Friends Life case Appeal allowed - TOR from 1/4/10 because: 1. Completion notice not served on correct person because owner (person entitled to possession) was Friends Life it was for the billing authority to show another party was entitled to possession billing authority not diligent 2. Service on Miller was not effective because no evidence of agency 3. VT had no discretion to withhold relief because there is no authority to support the contention that the VT has underlying discretion to do what was fair and just and may did not imply that discretion was intended
Friends Life case 4. The contention that Friends Life had waived their rights was rejected because failure to seek judicial review and continued payment was not a waiver, Huntingdonshire insisted that it was correct to serve on Miller even when the error was pointed out and although excessive delay would create a presumption of validity, it was not excessive because the ability to challenge by a proposal was not generally realised until the Prudential case Property deleted from the 2010 list Challenge must be timely but the ability to appeal in the VTE was not generally realised until the Prudential case
St Paul s Square Liverpool case Valuation Tribunal case heard by Prof. Zellick English Cities Fund (General Partners) Ltd and Standard Life Assurance Ltd (formerly Standard Life Investment Funds Ltd) v Mr D Grace (VO) and Liverpool City Council Appeal against the entries in the list of 2 new office buildings Validity of completion notices
St Paul s Square Liverpool case 5 St Paul s Sq. - completion notice Aug 2008 Correct owner not named notice invalid Incorrectly served on Standard Life Investments Ltd Rates had been paid Removed from both the 2010 and 2005 lists 4 St Paul s Sq. - completion notices March 2012 Unlawful to serve floor by floor seeking one tenant Attempt to circumvent the 3 month limit notice invalid Removed from the 2010 list
Aviva and PPG case Aviva Investors Property Developments Ltd and PPG Southern Ltd v Whitby (VO) and Mills (VO) 2013 Upper Chamber (Lands Tribunal) [2013] UKUT 0430 (LC) 4 newly erected warehouse buildings in Reading and Milton Keynes no completion notices Entered in the 2005 rating list from 1/4/05 and 3/7/06 No small power distribution, no or limited lighting, no partitioning of office space, one unit having no gas supply Held Not rateable hereditaments that can be entered in the rating list appeals allowed All 4 were deleted from 2005 list Completion notice procedure important 50,000 costs awarded against the VOA
Beluga House case Tull Properties Ltd v South Gloucestershire Council 2012 Valuation Tribunal case heard by Prof. Zellick Beluga House built in 1980s, TOR in 2003 following vandalism in an illegal rave Brought back in the list in 2007 but retrospectively deleted as not being capable of beneficial occupation Completion Notice 14 Aug 2008, effective from 20 Aug 2008 Not a new building and not a structural alteration producing a different hereditament or hereditaments Therefore the completion notice is invalid Must be deleted from the list
Beluga House case My conclusion On this basis, for an existing hereditament that is taken out of rating, if there is no structural alteration making it a new hereditament, a completion notice cannot be served and the VO can only bring it back into the list if it is a hereditament which means Practically complete and ready for occupation for the purpose intended Further points to consider:- 1. Landlords repairing obligations 2. TOR or reduce to RV 0 or RV 1
MY OVERALL CONCLUSIONS The completion notice procedure needs a full review and reform Completion notices should be served by and defended by the VOA Billing authorities should refer completed buildings to the VOA and advise on the person entitled to possession There needs to be a process suitable for large hereditaments There needs to be a process for hereditaments that are TOR See my article in the IRRV magazine in December 2013 Completion Notices Not Fit for Purpose