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Rating assessment - occupying different floors in a building

Today's Supreme Court decision in Woolway v Mazars clarifies the way in which different floors of an office building are to be treated for the purposes of rating assessments. Non-domestic rates are a tax on property, and not on persons or businesses. The heriditament is the unit of assessment. Each heriditament is separately identified in the ratings list and separately assessed.

The question before the Supreme Court was how different floors in an office building should be assessed when occupied by the same party. Owing to the common occupier should the separate floors form one heriditament? 

The ordinary practice of valuers has been to treat different parts of a building as a single heriditament if they are located together, but as separate heriditaments if they are not. For example, if a company occupied floors one and two of a building, these would be treated as one heriditament. However if they occupied floors one and three, the two floors would be separate heriditaments and, thus, separately assessed for rating purposes.

Mazars occupied the second and sixth floors of an office building. According to normal valuation practice, the two floors would be assessed separately for rating purposes. However, the third, fourth and fifth floors of the same building, which were occupied by another business, were treated as one heriditament.

In looking at how separate floors should be assessed, the Supreme Court has provided some welcome clarity:

  • The primary test is one of geography – if the units are not interconnected and can only be accessed by passing over land in the ownership of a third party, there is a strong indication that they should be assessed separately. This will include the situation where common parts (such as staircases, hallways, lifts) have to be used to access the other floor.
  • If the geographical test is not satisfied, there may be circumstances in which a functional test enables the floors to be treated as a single heriditament. This will not be the norm and will only occur if the use of one unit is necessary for the effectual enjoyment of the other. 
  • Effectual enjoyment will be objectively assessed, and will not be influenced by the business needs of the ratepayer.

Following the case it is clear that the practice of valuers to assess floors of a building which are not contiguous as separate heriditaments should continue. Whilst the court did not have to decide on the treatment of sequential floors in a building, both Lord Gill and Lord Neuberger were of the view that, if access to the different floors had to be achieved via common parts, they, too, would constitute separate heriditaments. This should provide welcome clarity to valuers and brings the position in England and Wales in line with that in Scotland.

Contibutor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

by Matthew Forrest

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