Local Tax Flashcards
What is the definition of Rateable value
For Non Domestic Properties. Its the amount equal to the rent at which it is estimated the hereditament may be expected to be let from year to year based on 3 assumptions.
What are the 3 assumptions in the definition of Rateable value.
Tenancy starts on the Antecedent Valuation Date (AVD).
The hereditament is in a reasonable state of repair.
The tenant bears the cost of repairs, insurance and taxes.
Where is the definition of rateable value found?
Schedule 6 (2(1)) of the Local Government Finance Act 1988
What is a composite hereditament
Non domestic properties with a domestic property within them
What is a Hereditament?
Property/unit which may become liable to rate
Where is the definition of Hereditament found?
General Rate Act 1967 Section 115(1)
What is meant by ‘the rent at which the hereditament might reasonably be expected to let’?
‘what would be the probable rent in the market’ (Bruce vs Howard (VO) 1964. E.g., A Kiosk would negotiate a different rent to a Car Showroom (lease term, value, etc…)
Why is it the rent the hereditament might ‘reasonably’ be let is used in the definition?
The actual rent may not conform to the statutory assumptions (e.g., may not be agreed bang on the AVD)
What is meant by ‘year on year’?
When a tenant occupies the property for an indefinite amount of time
What is meant by ‘reasonable prospect of continuance’?
When a hypothetical tenant/landlord negotiates a rent they would want to the terms to be appropriately in their favour, therefore valuers will assume a reasonable prospect of continuance. (E.g., Hardman (VO) vs British Gas 2015)
In the lead judgement of the Court of Appeal in Newbigin (VO) v Monk (2015), what were the 3 questions of the statutory requirement?
Is the Hereditament in a state of reasonable repair?
If not can the works which are required to put the property into a state of reasonable repair properly be described as repairs?
Would a reasonable landlord consider the repairs to be uneconomic?
What are some questions to consider when identifying a scheme of works or disrepair?
- the nature of the building
- the terms of the lease
- the state of the building at the date of the lease
- the nature and extent of the defect sought to be remedied
- the nature, extent and cost of the proposed remedial works
- at whose expense the proposed remedial works are to be done
- the value of the building and its expected lifespan
- the effect of the works on such value and lifespan
- current building practice
- the likelihood of recurrence if one remedy rather than another is adopted
- the comparative cost of alternative remedial works
- the impact of the works on the use and enjoyment of the building by its occupants.
What are the 3 tests to identify what constitutes repair? (McDougall v Easington District Council (1989))
- Whether the alterations go to the whole/part of the structure
- Whether the effect of the alterations is to produce a building of a wholly different character to what’s being let
- What is the cost of works in relation to the previous value of the building (effect on the value + lifespan?)
How is the decision from Newbigin (VO) v Monk 2015 relevant to identifying repair/scheme of works?
The supreme court examined the question of whether the situation was different when the reason a hereditament was in poor order was the result of it being subject to a programme of redevelopment/reconstruction works.
In the statutory definition, what does it mean for the ‘tenant must bear the costs of repairs, insurance and other expenses’?
In rating we assume all properties being valued are on a FRI lease. The ‘other expenses’ are ones to maintain the hereditament in a state to command the rent/any expense associated with occupying the property automatically becomes the responsibility of the tenant
How is uniformity encouraged in rating valuation?
All hereditaments are assumed to be vacant and to let
What does the idea mean when a tenant comes “fresh to a scene”
The tenant coming into the property will not know the risks and issues like the current occupier would. The fresh tenant would judge the property on its merits at the date of valuation (higher value than the current occupier).
Why is Rebus Sic Stantibus used in rating?
Valuers will examine leases to see if there are any restrictions to the tenant modifying the property. To remedy this courts assume that the hypothetical tenancy restricts the property to its current mode or category (preventing prospective tenants from making major physical alterations to the property), at the valuation date.
What are the 2 limbs of rebus?
The restrictions of mode or category of use
Restrictions on what physical changes can be envisaged
What does mode or category mean?
A use for the same general purpose as the existing use of the hereditament
What does sui generis mean?
‘of its own kind’ - e.g., bus garages have their own individual unique use
How is the use of a vacant hereditament?
Look at the purpose for which it was designed last/rebus sic stantibus.
What does rebus sic stantibus mean?
Any value attributable to the prospect of making substantial changes it to be ignored. The hereditament is valued as is.
What are the terms of a hypothetical tenancy?
- The property is to be valued as vacant and available to let
- Held on an annual tenancy
- FRI terms
- Landlord let the property in a reasonable state of repair
- Tenant is responsible for the rates
- the use is restricted to its existing mode or category of use
What is the dates of valuation in rating?
Effective Date - when the general level of values is taken
Material Date - when the physical circumstances of a property are taken
Why have 2 valuation dates in rating?
When one property is built later to an Identical counterpart, if rental values had risen since a revaluation it would have a higher rateable value. Having 2 dates incorporates inflation or extensions/alterations to value
When preparing for a new list, what date will a property having a physical change be noted as?
The start of the next list (e.g., 1/4/2017)
When is the Antecedent Valuation Date?
2 years before the next rating list starts (e.g., 2017 list AVD is the 1/4/2015)
What are the factors to be taken at the material day?
Physical factors concerning the physical state of the hereditament
Physical state of the locality
How are changes from economic recessions incorporated in Rating valuations?
Economic changes are non physical factors which are ignored in assumption. The changing demand for property is taken at the AVD
What is the tone of the list?
The level of values in the rating list. The correct rental value as at the AVD
