The Valuation Office Agency has confirmed that it plans to revise how it values properties where occupiers use two or more separated spaces within the building, a year after the release of the original decision in Mazars vs Woolway [Woolway v Mazars [2015] UKSC 53] at the Supreme Court, over a disputed valuation.

The original case centred on a dispute between accountancy firm Mazars and the Valuation Office Agency valuer over the valuation of the firm’s office space which was split over several non-adjacent levels.

As a result of the ruling at the Supreme Court, issued in July 2015, the conventional approach to valuations will now be overturned.

In a statement, the Valuation Office Agency said: ‘We are now legally obliged to treat different areas of the same building (which are accessed through communal areas) as separate premises for business rates purposes.

‘We had previously valued separate but adjoining areas (occupied by one individual or company) as a single property.’

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.

The Supreme Court’s decision, which came after a lengthy legal battle through the tribunals and Court of Appeal, ruled that the two floors will be treated as separate hereditaments going forward for valuation purposes – in other words, they must now be considered as two separate ‘properties’.

From the examples given on the VOA website, it appears likely that there will be a demand for extensive revaluations as many companies have complex lease arrangements in buildings across multiple floors of buildings with various tenants sharing premises.

What this change will mean for ratepayers

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 be retrospective and could affect business rates already paid, as any changes to business rates are likely to be backdated to whichever is the most recent:

1 April 2015 in England or 1 April 2010 in Wales; or

the date you became the occupier.

The VOA has confirmed that any affected property owners will be contacted and advised about next steps.

It stresses that the onus is on the VOA, stating: ‘Unless you hear from us, you don’t need to do anything. Until we review each property, we will not be able to let you know whether your property is affected, or how much your rates bill could change.’

Commenting at the time of the ruling, Radhika Kapila, trainee solicitor at Olswang LLP said: ‘The Supreme Court’s ruling draws on key points from previous cases and is rooted in practicality; if two floors are capable of separate occupation and require the tenant to use common areas before entering another floor, there is both practical and legal grounding to evidence the fact that these two units are separate.’

Practical examples

This is how the VOA expects the decision to affect different tenants, using multiple and various floors in office buildings:

Example 1

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.

Example 2

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.

Example 3

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.

VOA guidance

The VOA and business rates guide (non-domestic rates) is available here