Can a landlord get a rate cut if property is not fit to rent out?

If a landlord doesn’t want to carry out repairs on a commercial property unless he has a tenant waiting to move in, is he entitled to have the rateable value reduced?

A recent case saw landlord Christopher Shaw appeal after a valuation tribunal refused to reduce the rateable value of one of his business units.

Mr Shaw had managed a business park since purchasing it in 1986. A large building in the park had been rented by a metalwork company until it went into administration.

The building was then split into two, which created a unit and a second property. The second property became occupied, but the unit remained empty. It was subsequently listed as ‘workshop and premises’ with a rateable value of £18,000.

However, it was in poor condition due to the metalwork company’s processes. Mr Shaw was willing to spend money on repairs but couldn’t find a tenant. He argued that it would be uneconomical to carry out speculative repairs when it may prove impossible to rent out the unit.

The case went to the Upper Tribunal (Lands) which ruled against Mr Shaw. It held that when assessing the rateable value of commercial property, landlords could not argue that it was uneconomical to put the property into a state of reasonable repair if they had not secured a tenant.

The question was whether it was economical to carry out the necessary repairs to secure such a letting.

In this case, a reasonable landlord would consider that it was. The repairs would cost less than twice the annual rent, and Mr Shaw had confirmed that he would spend twice or even three times the annual rent if he was confident of securing a letting.

However, the tribunal also concluded that a hypothetical tenant would have negotiated a 10% reduction in rent due to the lack of toilet facilities in the unit and another 2.5% for the lack of heating.

The unit therefore should have a rateable value of £16,000.

Please contact Shyam Patel if you would like more information on the issues raised in this article or any aspect of commercial property law.