You instruct a specialist rating surveyor, who carries out detailed calculations to ascertain your rateable value (RV) and engages in lengthy negotiations with the Valuation Officer (VO) – then something changes at your property so your RV is no longer accurate – are you left paying a higher RV until the next revaluation of the rating list or can you seek a reduction due to the material change of circumstances (MCC)?
Regulation 4 (1)(b) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 provides that an RV may be reduced due to a "… material change of circumstances which occurred on or after the day on which the list was compiled".
The MCC must have occurred after the rating list went live (i.e. after 1 April 2017 for the 2017 revaluation).
But what is an MCC?
Paragraph 2(7) of Schedule 6 to the Local Government Finance Act 1988 defines an MCC as:
- Matters affecting the physical state or physical enjoyment of the hereditament – matters relating to either (1) the physical state of the hereditament e.g. extensions or part demolitions and/or (2) the physical enjoyment/use of the hereditament.
- The mode or category of occupation of the hereditament – changes to the type or category of a hereditament e.g. a change in use of a premises from a shop to a factory. (NB: A change in intensity of use or occupier would not, on its own, constitute an MCC.)
- The quantity of minerals or other substances in or extracted from the hereditament.
- Matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there. This relates to changes affecting the property which the hypothetical landlord and tenant would observe on the ground if they were standing at the property, e.g. an increase in pedestrian flow, an extension of licensed trading hours or frequency of aircraft movements. There is no statutory definition of locality. Case law suggests that the starting point is to have regard to the area surrounding your hereditament, in which comparable premises and facilities can be found.
- The use or occupation of other premises situated in the locality of the hereditament – this covers all changes of use of premises in the locality.
How material must an MCC be?
There is no quantitative test for whether or not something constitutes an MCC. Provided a change, even a minor change, falls within one of the categories above, it can be deemed to be an MCC and can reduce your RV.
OK, so an MCC has taken place – what do you do?
If your hereditament is affected by an MCC, you should contact your VO with your proposal, containing details of the MCC and supporting evidence to show its impact on the RV. The VO will then investigate the MCC to determine whether it has an impact on the RV.
In order to obtain the benefit of an MCC, you must contact the VO before the date the ratings list is revised (i.e. prior to 31 March 2017 for the 2010 list).
Can the VO refuse to change the RV?
Yes. However, if the VO does reject your proposal you can appeal its decision. If the VO cannot resolve the matter with you, the proposal will be sent to the valuation tribunal. You will then follow the usual appeal procedure. The appeal process is subject to controversial reform and will be dealt with later in this series.
What information do you need to provide to appeal the VO's decision?
Your proposal must:
- include a statement of the nature of the MCC;
- confirm the date on which you believe the MCC occurred; and
- incorporate all evidence to support your contention that the MCC has occurred and has an impact on your RV.
Assuming the MCC is accepted, what happens next?
If the VO or tribunal concludes in your favour, the RV will be reduced accordingly. The reduction will take effect from the material day. This is usually the date on which the circumstances leading to the MCC first took place. Your rates bill will then be amended accordingly.
In reviewing the proposal, could the VO increase my RV?
Where a tribunal had previously determined the original RV, the VO cannot use the MCC as an opportunity to seek to reassess the hereditament. However, if the proposal proceeds to the tribunal, the tribunal is not so precluded from examining whether the current entry in the list is correct.
As such, you could successfully reduce your RV due to the MCC, but the tribunal may, in its review, determine that the initial RV in the list was incorrect and seek to amend the RV as a whole. This could therefore lead to an overall increase in your RV.
What happens if my MCC is temporary?
Provided that the MCC is more than transient – which is generally considered to mean it has existed for at least six months (except in extreme circumstances, where shorter periods may be acceptable) – an MCC can be temporary.
If you are seeking to reduce your RV due to a temporary MCC, you must make a proposal to the VO during the period in which the MCC occurs. A retrospective or late proposal cannot be made.
Keith Norman, Partner at Gerald Eve LLP, comments: "MCC appeals can encompass a lot more than simply physical changes to a property. For example changes in the local area or legislative changes which impact on the use of a property may qualify as an MCC. The very recent decision of the Supreme Court that properties undergoing redevelopment, conversion or refurbishment should not be subject to rates will also lead to opportunities to reduce rates whilst works are on-going through an MCC appeal. However it's critical that appeals are served whilst works are on-going."