Rating Manual section 1: statutory authority and legal background

Part 3: Landlord and Tenant Act 1954 (amended) - determination of rateable value of business premises

The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.

NB. “Section and sub-section” in this section refer to the Landlord and Tenant Act 1954 (as amended), unless otherwise stated.

1. Requirement for determination of rateable value

1.1 The Landlord and Tenant Act 1954 (amended by the Law of Property Act 1969, the Land Compensation Act 1973, the Local Government and Housing Act 1989 Sch 7, and various statutory instruments) contains provisions in Part II which give the tenant occupying business premises a right to a new tenancy, subject to certain conditions and exceptions, when a tenancy ends.

On application for a new tenancy under Section 24; Section 37 provides that, where a court is precluded from making an order for a new tenancy under Section 24 the new tenant on quitting the holding, shall be entitled to recover from the landlord by way of compensation an amount based on the rateable value of the holding.

1.2 Additionally a rateable value is required to be determined in deciding whether jurisdiction under Part II of the Act (security of tenure for business, professional and other tenants), or under Part 1 of the Landlord and Tenant Act 1927 (compensation for improvements on the termination of tenancies of business premises), shall be exercised by the County Court or the High Court (s.63).

2. Disputes - references to the commissioners of HM Revenue and Customs

Section 37(5) provides for any dispute arising, whether in proceedings before the court or otherwise, as to a determination of rateable value, shall be by reference to the Commissioners of HMRC for a decision by a Valuation Officer: an appeal may be made to the Lands Chamber of the Upper Tribunal from such a decision but, subject to that the decision is final.

3. Rules for determining “rateable value”

3.1 The words “rateable value” and “annual value”, “holding” and “relevant date”, have specific meanings and are defined in paragraphs 4, 5 and 6 below.

3.2 The “rateable value” to be determined for the holding in accordance with s.37(5) of the Act (and Sch 6(2)(1) (as amended) of the Local Government Finance Act 1988) is, as follows:-

a) where in the rating list in force at the relevant date a value is shown as the rateable value of the holding, the rateable value of the holding shall be taken to be that value (s. 37(5)(a));

b) where no such value is so shown with respect to the holding but such a value or such values is or are so shown with respect to premises comprised in or comprising the holding or part of it, the rateable value of the holding shall be taken to be such value as is found by a proper apportionment or aggregation of the value or values so shown (s.37(5)(b));

Note: An apportionment or aggregation of value(s) under this rule should be a division or addition of rateable value(s) without regard to any increase or reduction which might result if a division of assessment or amalgamation of assessments were being made for rating purposes;

c) where the rateable value of the holding cannot be ascertained in accordance with the foregoing paragraphs, it shall be taken to be the value which, apart from any exemption from assessment to rates, would on a proper assessment be the value to be entered in the said rating list as the annual value of the holding.

3.3 The following criteria apply to the determination:

a. if part of the holding is domestic property, as defined in s.66, LGFA 1988, the domestic property shall be disregarded in determining the “rateable value” of the holding (s.37(5A));

b. if the whole of the holding is domestic property the “rateable value” of the holdingshall be taken to be an amount equal to the rent at which it is estimated the holding might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenants’ rates and taxes and to bear the cost of repairs and insurance and other expenses (if any) necessary to maintain the holding in a state to command the rent (s.37(5C)).

c. The date for determination of the “rateable value” for Section 37(2) purposes is the date of the relevant landlord’s notice – see Section 37 (5D) and 4.1(a) above;

d. any deduction made under paragraph 2A of Schedule 6 to LGFA 1988 (deduction from valuation of hereditaments used for breeding horses etc) shall be disregarded to the extent that it relates to the holding in determining the rateable value (Section 37 (5E) introduced by The Local Government Finance (Miscellaneous Amendments and Repeal) Order 1990 SI 1990/1285).

4. “Annual value” and “rateable value”

4.1 The definition of “annual value” in s.37(7) means the “rateable value” (except where prior to 1.4.90 the net annual value differs from the rateable value, the net annual value is to be utilised). The annual value to be ascertained on this basis is the rateable value ignoring any part, which is exempt from non domestic rates.

4.2 It should be noted that the “rateable value” to be found is that appearing in the rating list at the date on which the landlord’s notice under section 25 or as the case may be, the landlord’s counter-notice (sub-section (6) of section 26) is given. This is particularly relevant where there is an outstanding proposal or appeal, as any subsequent alteration cannot apply retrospectively.

5. “The holding”

The holdings of which the VO may be required to determine the “rateable value” are:-

5.1 Under Part 1 of the 1927 Act (section 17)

Any premises, excluding agricultural holdings, held under a lease other than a mining lease, and either used wholly or partly for carrying on thereat any trade or business, or regularly used for carrying on a profession.

“Lease” in this connection includes an underlease or other tenancy, an assignment operating as a lease or underlease, or an agreement for such a lease, underlease or assignment.

5.2 Under part II of the 1954 Act (s.23 and s.46)

5.2.1 The property comprised in a tenancy to which Part II of the Act applies, if it is property which is or includes premises which are occupied by the tenant, and used either wholly or partly for the purposes of a business carried on by the tenant. “Business” in this connection includes any trade, profession or employment, and any activity carried on by a club, institution, trade union, society or other body of persons whether corporate or unincorporate.

5.2.2 “The holding” under the 1954 Act:-

a) includes any part of the property comprised in the tenancy occupied by an employee of the tenant, provided that the employee is employed in the business for which the premises are used;

b) excludes any part of the property comprised in the tenancy which is occupied neither by the tenant nor by an employee as in (a);

c) refers to the whole of the property comprised in the current tenancy whether occupied by the tenant or his employee or not if the landlord has required any new tenancy ordered by the court to be a tenancy of the whole of that property (see s.32).

6. Relevant date

6.1 The relevant date referred to paragraph 3(2)(a) above for determining the rateable value means:-

6.1.1 Compensation purposes:

The date on which the landlord gives notice to the tenant under s.25 or, as the case may be under s.26(6), s.57(4)(a) or s.58(1)(b): or under s.39(2) as amended by s.47(3) LCA 1973 the date on which the acquiring authority obtains possession.

6.2 Jurisdiction Purposes:

The time at which application is made to the Court.

6.3 Transitional Provisions:

6.3.1 Paragraphs 4 and 5 Sch 7 LGHA 1989 provide that in any case where:

1) the tenancy concerned was entered into prior to 1.4.90 or was entered into on or after that date in pursuance of a contract made before that date, and

2) the landlord’s notice under s.25 or, as the case may be, s.26(6) is given prior to 1.4.2000, and

3) within the period referred to in s.29(3) for the making of an application under s.24(1), the tenant gives notice to the landlord that he wants the special basis of compensation provided by para 4 of Schedule 7 to the LGHA 1989.

The relevant date for determining the rateable value shall be 31.3.90 instead of the date on which the landlord’s notice is given. The tenant’s election means that the amendments made to s.37 (in particular sub sections 5A to 5D) shall not have effect and the compensation will be assessed on the ‘old’ s.37 basis.

6.3.2 - However, the transitional provisions will not have effect in any case where above applies and on 31.3.90 the rateable value could only be determined as outlined in paragraph 3(2)(c) above - (s.37(5)(c), No notice as outlined in (2) above can be made.

6.3.3 - These modifications mean that the date which is relevant for determining the rateable value of the holding under s.37(5) is the 31 March 1990 instead of the date on which the landlord’s notice is given.

6.3.4 - The tenant is given the benefit of the ten year transitional arrangement from 1 April 1990. Therefore, the number of references where these provisions bite will reduce with the efflux of time.

7. Multipliers

7.1 The ‘appropriate multiplier’ for the purposes of s.37(2) on or after the 1 April 1990 (apart from paragraph 4 of Sch 7 of the LGHA 1989 referred to in 6.2 above) is:- 1. This has not been altered since 1990.

Where the transitional arrangements referred to in paragraph 4 of Sch 7 LGHA 1989 apply the appropriate multiplier is: - 8.

7.2 The amount of compensation is arrived at (where no part of the holding is domestic property (see s.66 LGFA 1988) by the product of the appropriate multiplier and:-

a) the rateable value of the holding or;

b) twice the rateable value.

7.3 The higher compensation (b) will be payable when:-

1) during the whole of the 14 years immediately preceding the termination of the current tenancy, premises being or comprising the holding have been occupied for the purposes of a business carried on by the occupier or for those and other purposes;

2) That if during those fourteen years there was a change in the occupier of the premises, the person who was the occupier immediately after the change was the successor to the business carried on by the person who was the occupier immediately before the change – s.37(3).

7.4 Whilst the rateable value is to be determined in accordance with s.37(5) - see 6.1 above. It was held in Cardshops -v- John Lewis Properties Ltd 1982 3 All ER 746 CA (majority decision) that as the tenant was entitled to compensation only on quitting the holding and not before, his entitlement (to compensation) should therefore be assessed in accordance with the law at the date of quitting (or if he wrongfully stayed on, the date on which he should have quit).

8. Procedures

8.1 References

8.1.1 By virtue of s.37(6) the Commissioners of HM Revenue & Customs have made The Landlord and Tenant (Determination of Rateable Value Procedure) Rules 1954 which set out the procedure to be followed where a dispute about the “rateable value” of a holding is referred to the Commissioners.

8.1.2 The salient features of this procedure are:-

  • references to the Commissioners are to be made to them at 100, Parliament Street, London SW1A 2BQ and must be in the form “A” prescribed, or in a form substantially to like effect; (See Appendix 2 for copy of form amended to show the current address of the Commissioners and that the Upper Tribunal (Lands Chamber) has replaced the Lands Tribunal).
  • the parties (or party) making the reference are, on the day the reference is made, to serve a copy thereof on any other party to the dispute;
  • upon receipt of the reference of a dispute (see para 11.1 below) the VO is required to inform all the parties thereto that the VO is dealing with the matter, and invite their representations in writing. (See Appendix 1 for form of notice).

In the first instance the prescribed period of twenty-eight days should be allowed in all cases for making representations. If at the request of any party the VO extends this period all other parties should be informed.

The VO may:-

(a) require the parties to furnish such information as the VO may reasonably require for the proper determination of the “rateable value” of the holding; e.g. as to the relevant date (para 6), or as to the identification of the holding or premises in which it is comprised;

(b) arrange a meeting of all the parties before making his/her determination (in practice the VO should offer to hold such a meeting in all cases - (see para 10 below);

  • the VO must send a notification of the determination in the prescribed form “B” (see Appendix 3) to each of the parties together with a statement of their right of appeal to the Lands Tribunal. The provisions of Rule 8 requiring a notification to be sent to the Commissioners should be regarded as met by the copy sent to CEO NSU (see para 11.2.1 below).

8.2 Inspection

Though neither the 1954 Act nor the Procedure Rules give any power to the VO to inspect the holding or any premises of which it forms part an inspection should nevertheless be made in all cases and all parties or their agents invited to attend.

8.3 Church commissioners

Attention is drawn to Section 61(1)(c) as to the rights of the Church Commissioners in relation to certain ecclesiastical property, to “appear and be heard”. These rights do not make the Church Commissioners parties to the proceedings, neither is the VO required to serve upon them any notices or a copy of his/her decision.

8.4 Service of notices

Section 66(4) provides that s.23 of the Landlord and Tenant Act 1927 “shall apply for the purposes of this Act”. All notices which a VO is required to serve under the Act or under Procedure Rules 5 to 8 must be served:-

  • by handing the notice to the person concerned; or
  • by leaving it at the person’s last known place of abode; or
  • by recorded delivery service (addressed, in the case of a local or public authority or a statutory or public utility company, to the secretary or other proper officer at the principal office of the authority or company) (Recorded Delivery Service Act 1962).

Method (c) should be adopted whenever practicable and the certificate of posting retained.

9. Conduct of references

9.1 The importance of correct procedure in dealing with the matters to which these instructions refer must not be overlooked.

9.2 VOs must conduct references with impartiality and avoid any action which might reasonably be taken by any one of the parties as suggestive of bias; they should thus send, so far as possible, copies of correspondence (including representations under Rule 5) to all other interested parties. Representations should be circulated only when all parties have made them, or after expiry of the 28 days or longer period allowed for making them.

9.3 If the parties reach agreement before the VO’s determination is issued he/she should offer to withhold the determination for a few days in order to allow the parties an opportunity to withdraw the reference.

9.4 If any dispute referred to a VO concerns property in which either the VO personally or any member of his/her staff, or a person known to be a relative of same, has an interest the circumstances should be reported to CEO Human Resources before taking any action under the Procedure Rules.

9.5 The VO should be reasonably satisfied that an agent is authorised, by the party claimed to be represented, to accept documents or otherwise to act on behalf of the party in connection with the dispute.

9.6 Subject to any informal request from the Registrar of the Upper Tribunal (see para 13), the VO should not give any additional particulars of his/her determination to the parties either in the prescribed form “B” or subsequently.

10. Meetings

10.1 The VO may call a meeting of the parties at his/her office or at such other place as he/she may think convenient (Rule 7). Regard should be had to any reasonable request from any one or more of the parties as to the time or place for the meeting.

10.2 The meeting need not be conducted in a formal manner, but a note should be taken of the principal points made by the parties. VOs should bear in mind that their function is to determine the “rateable value” of the holding, having regard not only to the representations of the party but to all the circumstances affecting the case. VOs are not acting as an arbitrator.

10.3 A properly convened meeting may proceed notwithstanding that all the parties are not present. If, in the opinion of the VO, the absence of any one or more of the parties is not due to their wilful refusal or neglect he/she should consider, having regard to all the circumstances and the matters raised or intended to be raised, whether the interests of the parties and his/her obligation of impartiality would best be served by adjourning the meeting and inviting all the parties to attend at later date.

11. Procedure

11.1 Reference from CEO

A dispute will be referred to a VO through CEO NSU who will supply the VO with a copy of the original reference.

11.2 Action by VO

11.2.1 Having determined the “rateable value” of the holding, the VO should complete and deal with the form “B” (Appendx 3) as follows:-

  • send one copy to each of the parties to the dispute;
  • retain one copy;
  • send a copy to CEO NSU.

11.2.2 If the reference is withdrawn the VO should notify CEO NSU of the withdrawal.

11.2.3 Wherever the VO has been unable to issue his/her decision within three months of the reference of a case he/she should forward a full report of the circumstances, to CEO NSU.

11.3 Reference direct to a VO

In the event a reference is sent direct to a VO by the Commissioners the papers should be immediately forwarded to CEO NSU and no further action taken until instructions are issued in accordance with sub-para 11.1 above.

If a reference is made direct to a VO by a party (or parties) to a dispute, the papers should be returned to the party and their attention drawn to the Procedure Rules (see para 8) without delay.

12. Local office procedure

12.1 Recording of cases

VOs should keep a “Register of References (Landlord and Tenant)”. An A4 Note Book appropriately ruled should be used for this purpose and the following information recorded:

  • the date of receipt of the reference;
  • the situation of the holding as given on the original reference;
  • where it differs from (b), the situation of the hereditament in the file for which the papers relating to the reference are filed; and
  • the date of the determination.

A separate filing system should not be introduced in respect of the references to which these instructions refer. The VO’s copies of the forms “A” and “B”, and all papers and correspondence relating to a reference, should be filed.

12.2 VO to act in person

It is emphasised that a dispute is referred to a VO in his/her official capacity as the officer authorised by the Commissioners to act as Valuation Officer. For this purpose he/she must personally carry out all the essential functions of a reference, e.g. the signing of documents, inspection of the premises and the holding of meetings. Any circumstances in which this is not possible should be reported to CEO NSU.

13. Appeals to upper tribunal

13.1 Under s.37(5) an appeal lies to the Upper Tribunal against any decision of the VO and may be instituted within twenty-one days from the date of the decision. The VO will not be a party to any such appeal.

13.2 Part 5 of The Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 prescribes the procedure for the purpose of these appeals, and Rule 28. requires the party to make a notice of reference.

13.3 Any request by the Tribunal, in connection with an appeal, to be furnished with particulars of any determination by the VO should be dealt with without delay. The particulars to be sent to the Registrar should be approved by CEO NSU and a copy forwarded to the appellant and to each other party to the reference.

13.4 The decision of the Tribunal will not be binding for rating purposes but clearly there will be circumstances where it should not be disregarded and consideration may need to be given for action to alter the rating list by the VO.

14. Reserved

15. Points of law of procedure

If a point of law arises on a reference, or there is a question as to procedure, the VO should report to CEO NSU.

16. Alteration of rating list and proposals unaffected by references

The alteration of the rating list, or right to make a proposal, in respect of any “holding” (see 3 above) is unaffected by a reference.

17. Forms

Form A Landlord and Tenant Act 1954 [Appendix 2]

Form B landlord and Tenant Act 1954 - Determination of Rateable Value [Appendix 3]

Form A Landlord and Tenant Act 1954 [Appendix 2]

Form B landlord and Tenant Act 1954 - Determination of Rateable Value [Appendix 3]

Appendix 1: VO’s inviting representations

Dear ………………….

Landlord and Tenant Act 1954

Landlord and Tenant

(Determination of Rateable Value Procedure) Rules 1954

Determination of rateable value of premises at

(See note (1))……………………………………………………………

A dispute concerning the rateable value of the above holding for the purposes of (see note (2)) of the Landlord and Tenant Act 1954 has been referred to me by the Commissioners of HM Revenue and Customs for decision.

The parties named in the Reference are:-

AB CD EF

of of of

The parties above-named, or their respective representatives, are hereby invited to make representations in writing to me in connection with the dispute within 28 days of the date of this notice. It is requested that any such representations should include a statement of the date by reference to which the rateable value of the holding needs to be determined.

I will arrange and hold a meeting of the said parties or their representatives if so requested before the making of my determination.

Yours faithfully

Valuation Officer

Valuation Area

To the said AB (1) Insert situation of holding

the said CD (2 )Insert “section 37(2)” or

and the said EF “section 63(2)” as the case may be

Appendix 2: Form “A”

Landlord and Tenant Act, 1954

Reference of dispute arising as to the determination of the Rateable Value of any holding for the purposes of Section 37 (2) or of Section 63 (2).

To: The Commissioners of HM Revenue and Customs

100, Parliament Street

London, SW1A 2BQ

PART I (Applicable to all references).

*I We being *a party parties to a dispute which has arisen as to the determination *Delete as appropriate

For the purposes of Section [*37 (2)] of the rateable value of a holding known as† [63 (2)]

…………………………………………………………………………………… …………………………………………………………………………………… …………………………………………………………………………………… †Insert here address or situation, and such further particulars as necessary for the Identification of the holding

Hereby refer the dispute for decision by a Valuation Officer.

(1) (2) (3) See headnote

to Part II of

form.

Signed ……………….. .. ……………… …. . .. ……………

Capacity in

Which reference …………………. ………………….. ………………..

Made (e.g. Ten-

Ant, Landlord, …………………. …………………. ………………..

Etc.)

Address …………………. …………………. ………………..

…………………. …………………. ………………..

…………………. …………………. ………………..

Date …………………. …………………. ………………..

LANDLORD AND TENANT

PART II (Applicable where the reference is not made by all the parties to the dispute).

Note: - Where the reference is not made by all the parties, the party or parties making the reference should sign and complete the form in Part 1 above, and should give below the name or names of the other party or parties to the dispute, and should send a copy of this form.

Name(s) and address(es) of other party(ies)

(A) (B)

Name ………………………………………. …………………………………………..

Address ………………………………………. …………………………………………..

………………………………………. …………………………………………..

………………………………………. …………………………………………..

RM2:13 APPENDIX 3

FORM “B”

Landlord and Tenant Act, 1954

Determination of Rateable Value

Whereas a dispute has arisen as to the determination for the purposes of Section *[37 (2)] of the rateable

*Delete as [63 (2)]

Appropriate. value of the holding described in the first column of the Schedule hereto.

Now I the undersigned being the Valuation Officer to whom the Commissioners of HM Revenue and Customs have pursuant to Section 37 (5) referred the dispute for determination hereby determine that for the said purposes the rateable value of the said holding shall be the amount set out in the second column of the said Schedule.

THE SCHEDULE above referred to

†Description of Holding Rateable Value as Determined

† The description will follow that in (form) “A”

Dated this …………………day of…………………………19……

Signed……………………………………………………….

Valuation Officer

For ……………………………………….

Official Address ………………………………….

………………………………….

………………………………….

To: - The Commissioners of HM Revenue and Customs

and to: - [The Parties to the Dispute]

…………………………………………………………

…………………………………………………………

…………………………………………………………

Any party who is dissatisfied with the foregoing determination may appeal to the Upper Tribunal (Lands Chamber) by giving written notice of such appeal to the Registrar of the Upper Tribunal (Lands Chamber) within 21 days from the date hereof.