When a tenant leaves your premises you may want to strip it out and market it to a new tenant to fit it out to suit their brand. The question of what the rateable value of the property should be between strip out and fit out has been considered by The Upper Tribunal and is an excellent result for landowners and developers.
Canary Wharf Ltd had stripped out two floors of a 46 storey building when the tenant left leaving them in a shell state in order that a new tenant could fit them out. The Valuation Office wanted to value the premises based on an “assumed state of repair” which would have resulted in a value of £1.83m. CWL successfully argued that it was the actual state of the premises that should be used – the premises was undergoing redevelopment and should be listed with a rateable value of £1. The Tribunal agreed with CWL that where a premises is in a “shell state” it is not capable of beneficial occupation and should not be valued on “assumed state of repair” but should be valued as premises undergoing redevelopment.
This is clearly good news for landlords of pubs and restaurants who are stripping out premises and leaving them empty pending letting to a new tenant. Refurbishment supports growth in the economy and going forward the Valuation Office should look objectively at refurbishment schemes and allow owners immediate access to business rates relief.
Case: Jackson (VO) v Canary Wharf Limited
