Strategic timing and the forthcoming business rate changes

London based businesses face sharp rises in rates from April 2017, but businesses in the Midlands and North may benefit.

Changes to business rates from 1 April 2017
The Valuation Office Agency has published a new rating valuation list (in draft) which will take effect on 1 April 2017.

Under the new list, the rateable value of business premises may increase or decrease.

Generally (and there are certainly some exceptions to this), the rateable value has increased for premises in London and the South, whereas the rateable value has decreased for premises in the Midlands and the North.

Resources to check and compare your rates
You can check your new draft rateable value at the following link: https://www.gov.uk/correct-your-business-rates

You will be able to compare the draft valuations for April 2017 (which you should note are still subject to change until they come into force) against your current valuations (and previous valuations), and also appeal your new rateable value or request changes to details you think are incorrect.

Effects on Landlords and Tenants and tactics to consider
The new valuation list has implications for landlords and tenants of protected business leases when the landlord is seeking to end or oppose a tenant's statutory right to a lease renewal at the end of the contractual term:

• If the rateable value is due to increase, and the landlord is contemplating regaining possession of the property for one of the reasons set out below (the "no fault" grounds* in the Landlord and Tenant Act 1954), then it may be advantageous for the landlord to serve a 'section 25 notice' before 1 April 2017.  This is because the compensation awarded to a tenant under the Landlord & Tenant Act 1954 for "no fault" grounds is calculated with reference to the rateable value of the property as at the date of service of the notice.  The compensation is simply equivalent to the rateable value if the tenant has occupied for less than 14 years, or twice the rateable value if they have occupied for 14 years or more.
• Conversely, if your rateable value is due to decrease, then as landlord it may be worthwhile waiting to serve your notice after 1 April 2017 when the compensation figure is likely to be lower. 
• The opposite can be said for the advantages available to tenants, as if the rateable value is due to increase then as tenant it may be worthwhile waiting to serve any section 26 notice until after 1 April 2017, but if the rateable value is due to decrease, then as tenant it may be worthwhile ensuring that the section 26 notice is served before 1 April 2017.

* The "no fault" grounds for regaining possession are:
1. The tenant was granted a sublease of part, and the landlord wishes to let or dispose of the premises as a whole.
2. The landlord intends to demolish or reconstruct the premises. 
3. The landlord intends to occupy the premises for their own business purposes or as a residence.

Clearly, every property will be subject to unique circumstances, so we recommend professional advice is taken in every case prior to notice being served or delayed.