Mazars v Woolway
This is a Supreme Court decision regarding the Valuation Office’s valuations of non-domestic buildings. It relates to demises which are occupied by more than one person or a business and could mean a change in business rates for some ratepayers.
The case relates to offices occupied by Mazars on the second and sixth floors in Tower Bridge House, London with a rateable value of approximately £1m.
The Valuation Tribunal and Upper Tribunal agreed with the appellant, Mazars, who successfully claimed that together the two floors constituted a single hereditament for the purposes of setting business rates.
However in the unanimous judgment the Supreme Court reversed those decisions and agreed with the Valuation Officer that the two floors should be treated as two separate hereditaments and rated separately.
What Effect Will This Have?
The decision means a change in the approach to valuation where there are properties with occupiers that use two or more separated spaces within a building. It is now a legal obligation to treat different areas of the same building (which are accessed through communal areas) as separate premises for business rates purposes.
The case has given guidance as to whether separate premises occupied by the same occupier form a single hereditament :
- Geographically, do the spaces have visual or cartographic unity? Are they geographically part of the same space?
- Where the premises are adjoining vertically or laterally, is there direct communication between them?
- Where the premises are geographically distinct, is the use of one space necessary for the enjoyment of the other
Positive answers to these questions suggest that premises are combined to make one hereditament. Negative answers would suggest that the premises are separate hereditaments.
It is perhaps easier to use a scenario to put this case into context. For example, in a multi-storey office building with different occupiers, where two consecutive floors are occupied by the same person or company, these would have been considered as one “property” for business rates purposes. Following the Supreme Court’s decision, these must now be considered as two separate “properties”. There are further examples at the bottom of this page.
For example, if your business is in occupation of the second and third floors of an office block they may be currently assessed as one property for the purposes of rating. Following this decision it is likely the Valuation Office will seek to split these assessments. The effect of this is that as the floor areas of each individual office are smaller than the sum, the £/m2 may increase as the effects of economies of scale (or quantum as it is known in rating) will be lost. This reduces the rate /m2 as an assessment gets larger - you would pay less per metre squared for an office of 1,000m2 as opposed to one at 500m2.
If you are affected by this issue, you may be issued separate bills for different parts of your property and your overall rates bill could increase. This change may affect the business rates you have already paid, as any changes your business rates are likely to be backdated to whichever is the most recent:
- 1 April 2015 in England or 1 April 2010 in Wales
- The date you became the occupier
What Can I do?
There have been instances where our clients have been contacted by the Valuation Office with respect of this matter. In some cases the Valuation Office has been incorrect to do so, for example where a client was in occupation of the whole building.
Further Examples (courtesy of the Valuation Office)
To help make this clearer, these are some examples of how non-domestic buildings could be assessed in light of this decision. They don’t cover every possible scenario, but aim to help you understand how the decision may affect you.
- Company A occupies all seven floors of an office building. Every floor has a separate lease, but company A is the sole occupier. All floors are accessed by communal areas, such as lifts, stairwells and hallways. Company A will have one assessment for the entire building, because it is the only occupier of the whole building.
- Companies B and C share occupancy of an eight floor office building. Company B occupies the ground floor to 3rd floor, and Company C occupies the 4th floor to 7th floor. All floors are accessed by communal areas, such as lifts, stairwells and hallways. Companies B and C will have separate assessments for each floor they occupy; one assessment for each floor.
- Companies D, E, F and G occupy one floor each of a four floor office building. The floors are accessed by communal areas, such as lifts, stairwells and hallways. Companies D, E, F and G will have one assessment for each floor they occupy; one assessment for each floor. * Company H owns a five floor office block. It occupies four floors of the building, and rents one floor out. All floors are accessed by communal areas, such as lifts, stairwells and hallways. Company H (and the other occupier, where relevant) will have separate assessments for each floor; one assessment for each floor.
- Companies J, K and L share occupancy of a seven floor office building. Company J occupies the ground floor to 2nd floor, company K occupies the 3rd floor to 5th floor, and company L occupies the 6th and 7th floors. All floors are accessed by communal areas, such as lifts, stairwells and hallways. However, company K has private staircases between floors 3, 4 and 5. Company J will have three assessments (one for each floor). Company L will have two assessments (on for each floor), and company K will have one assessment, as floors 3, 4 and 5 are self-contained.
- Company M occupies two adjacent industrial units. There is no access between the two units, except by exiting from one building into a communal yard and then entering the other. Company M will have two assessments, one for each unit.