The Valuation Tribunal for England (VTE) has issued its full decision in Delph Property Group Ltd v Alexander (VO) and Leicester City Council (2018), a case concerning Completion Notices; which are used to enter new properties which are unoccupied into the rating list so as to make them liable for empty rates. The appeal in this case was heard by the President of the VTE and concerned a building in Leicester now known as The Horizon, but formerly called Thames Tower.

The Horizon was originally a seventeen-storey office tower constructed in the 1970’s. In 2006 works began to convert the third to sixteenth floors to into residential units, with the ground, first and second floors being refurbished and returned to office use. At that time there were four separate rating assessments for different parts of the building and these were all deleted from the rating list when the works commenced. The residential units on the upper floors were completed in 2008 and were brought into the Council Tax valuation list from the end of 2008. The offices on the ground, first and second floors were refurbished to a “shell and core” finish and marketed from 2010. After practical completion of these floors, the billing authority, Leicester City Council, served Completion Notices; the effect of which was to deem the floors complete and to require the Valuation Officer to include them in the rating list from February 2009. There was no appeal against the Completion Notices, nor against the consequent entries in the 2005 rating list.

The office floors were also assessed in the 2010 rating list but remained unoccupied and in a shell and core condition until the ground floor was let, part in 2013 and part in 2014, and the first floor in 2015. In 2015 the new owner made proposals to delete the entries from the 2010 rating list on the grounds that the properties concerned were not “new buildings” and therefore could not be subject to Completion Notices and, as a consequence, should not have been entered in the rating list. It was these appeals that were heard by the VTE. The hearing took two parts; the first on two preliminary issues as to whether the VTE had jurisdiction to override the Completion Notice procedure by an appeal against a consequent rating list entry, and whether the Completion Notices must be assumed to be valid because of the delay in appealing against the rating list entries; and the second a substantive hearing in respect of those rating list entries.

On the first preliminary issue, the Appellant contended that the VTE had jurisdiction to determine appeals against the rating list entries, even if no appeal had been made against the Completion Notices that those entries were consequent upon. The first Respondent (the Valuation Officer) contended that, where a Valuation Officer is bound to make a new entry in the rating list as a consequence of the statutory provisions, it cannot be challenged on the grounds relied upon by the Appellant; that the property ought not to be shown in the rating list. The VTE determined that the correct way in which to challenge whether a ‘valid’ completion notice was in force was through a proposal seeking a removal of the entry in the rating list. The VTE therefore had jurisdiction to determine this.

In respect of the second preliminary point, the second Respondent (the City Council) contended that there was an irrebuttable presumption that the Completion Notices were valid as a result of the Appellant’s delay in making proposals to alter the rating list. The VTE determined that the only constraints on making proposals were those set out in the relevant regulations and the Appellant had complied with these, there was therefore no basis on which to assume the Completion Notices were valid.

As none of the parties appealed against these preliminary findings, the matter proceeded to a substantive hearing to determine whether the rating list entries had been correctly made. It was agreed between the parties that the parts of the building in dispute were not capable of beneficial occupation following practical completion of the works and until they were actually occupied. This meant that if the Completion Notices should not have been served the rating list entries had to be deleted until the properties were occupied. The Appellant contended that the works carried out to these parts of the property were not “new buildings” and, because of this, they were not properties in respect of which Completion Notices could be served. The first Respondent contended that the whole building had been so altered as to be properly described as a “new building” or, in the alternative, that the respective parts had been subject to structural works which had so transformed the areas that they should properly be described as “new buildings”.

The Tribunal found that the building, taken as a whole, could not be described as a new building. The essential identity of the building remained the same despite the change of use of parts. It could not, taken as a whole, be described as a “new building”.

In respect of the first floor, the parties agreed that there had been no structural works and the Tribunal found that in such circumstances a Completion Notice cannot be served and the property had therefore incorrectly been entered in the rating list. This meant that the assessment should be deleted from 1 April 2010 to 15 March 2015, when the property was first occupied. In respect of the second floor, the Tribunal found that there had been significant structural alterations including the removal of an atrium and that it was therefore proper to describe it as a “new building” which could be included in the rating list following a Completion Notice. The Appeal in respect of the second floor was therefore dismissed and the rating list entry remained in place.

The position in respect of the ground floor was the hardest to determine and the Tribunal made clear the difficulty of making findings of fact now relating to circumstances in 2010. But on the available evidence the Tribunal concluded that, whilst areas had been partitioned off for different uses, they had not been created as a result of structural alterations and therefore could not be said to be “new buildings”. As this was the case there could be no question of a Completion Notice applying and, as a consequence the assessment of the ground floor must be deleted from 1 April 2010 to 6 March 2013, when it was first occupied.

This is an important decision for all involved with the assessment of new buildings for business rates purposes where they remain unoccupied. It appears that there is no means by which to bring back into the rating list property that has been deleted from the list because it is incapable of beneficial occupation, but which is not reoccupied and which, when works have finished, does not qualify as a “new building” that can be subject to a Completion Notice. No doubt the Government will wish to consider whether further change is needed to the legislation governing Completion Notices in order to address what it may regard as a lacuna. In the meantime, owners of buildings that have been deleted from the rating list and have not been reoccupied will want to look carefully at purported Completion Notices or rating list entries. But, what this case most of all shows is the difficulties that result from trying to use business rates, which historically have been a tax on the occupation of property, to try to tax property which is incomplete and unoccupied. Perhaps other legislative changes should be looked at instead.

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