Delay to 2015 Rating Revaluation - Good or Bad News for Occupiers?
The Government has recently announced a 2 year delay in the business rates revaluation. Michael Moon, Head of Rating at Newton Perkins, has been looking at whether City occupiers should welcome this news.
"The essence of the change is that the valuation "base" date has been deferred from April 2013 to April 2015, resulting in rateable values which will now not change until April 2017. Rateable values will be based upon open market rental values two years further down the line.
If economic recovery gets up a head of steam over the next 2 years and rents rise further, this would not be good news for City office occupiers as rate liabilities will rise.The Government will however gain significantly in terms of additional rates income (hence a political rationale for the deferral).
Under the 2013 base date, for example, the well-known Heron Tower building in Bishopsgate might have been expected to increase from a base of £480 per square metre to £560 per square metre, an increase of just over 16%. Small office suites such as those in say Cannon Street might have risen by around 19%. If however there is now further rental growth of 10% over that 2 year period, rates will go even higher (and will then be fixed for 5 years after that).
The retail sector will continue to argue (with some justification) the delay in revaluation is penal to this sector of the property market as current RV's represent the peak of the market in 2007/8 and not the current extremely difficult trading circumstances for many retail concerns.
In unusual circumstances however, the increase in rateable values would be offset by a corresponding reduction in the UBR multiplier. However, this is dependent on the national rateable value and not that for the City and Central London (which accounts for a substantial percentage of the National RV).
One sure way to mitigate an occupier's liability is to seek Newton Perkins' help on value of appealing and to have ensured in any lease negotiations that Newton Perkins' advice has been taken on keeping annual rents to a minimum.
It is also possible to register successful appeals against the current assessments appearing in the 2010 Rating List but this should only be done after careful, professional consideration".
To discuss further, please contact Michael Moon
or David Alcock
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