The Upper Tribunal has clarified the law on rating of buildings undergoing redevelopment. Dan Kolinsky QC and Luke Wilcox analyse the ruling.
The Upper Tribunal has issued an important decision on the approach to the valuation of buildings which are rendered incapable of beneficial occupation by a scheme of redevelopment. In doing so it has clarified the proper interpretation and application of the Supreme Court’s decision in Newbigin (VO) v Monk  1 WLR 851.
Jackson (VO) v Canary Wharf Ltd  UKUT 136 (LC) concerned a number of floors in Canary Wharf’s iconic tower at 1 Canada Square. In accordance with Canary Wharf’s usual practice, following the vacation of the previous tenants each of the floors had been stripped back to shell condition, and upgrading works were carried out to the risers in the core. The fitting out works, however, were not scheduled to be undertaken until after a tenant was identified. The material day for the appeal fell during the “pause” after the strip out works were completed, but before the tenant was identified or the fit out works were commenced. It was common ground that at the material day the property was incapable of beneficial occupation.
The VO argued that, in the absence of a programme of works, there was no admissible evidence of a scheme of redevelopment capable of bringing the property within the ambit of Monk. The VO thus valued the floors as though they were offices in repair. The VTE rejected the VO’s approach, and valued the properties at RV £1. The VO appealed.
The Upper Tribunal (Martin Rodger QC and Peter McCrea FRICS) rejected the VO’s appeal (unusually, it did so without calling on the respondent’s counsel). The Rating Manual was mistaken, the Tribunal held, to treat Monk as establishing an exception to the repairing assumption. Rather, the issue of whether a building was capable of beneficial occupation was logically prior to the application of the repairing assumption. If a property is incapable of beneficial occupation, then it is not a hereditament at all, and the only basis on which it could be entered in the List at all is under the convention that such properties could stay in the List at a nominal RV for administrative convenience.
On that basis, the VO’s acceptance that the properties were incapable of beneficial occupation was, the Tribunal held, “the beginning and end of the appeal.”
As to Monk itself, the Tribunal confirmed that neither the existence of a detailed programme of works, nor the outline of the proposed future development of the property, nor the splitting of the hereditament into three, were prerequisites for the treating the property as a building under construction in the Monk sense. Rather, those factors were, in Monk, simply evidence of a scheme.
Whilst the landowner’s subjective intentions were irrelevant, the objective facts arising from that intention were not. Those facts could include the landowner’s pattern of behaviour in respect of other properties in its portfolio; the actions of other owners in the market were also relevant. The Tribunal held that “the most cursory investigation by the VO would, and did, readily reveal that refurbishment was inevitable”. The absence of a known end-date for the scheme, or of a contract showing how or when the floors would be refurbished, did not prevent that outcome. Insofar as the Rating Manual suggests that the existence of a single programme of works, with strip out works followed immediately by a reconstruction project, was an indispensable condition for a Monk reduction, it was wrong to do so.