Business rates revaluation and the impact on statutory compensation
The rateable value of property is established by reference to the current valuation list in force. A new rating valuation list comes into force from 1 April 2017. The previous revaluation took place some seven years ago in 2010 so given the passage of time it is likely that rateable values will change quite considerably in the new list.
Statutory compensation under the Landlord and Tenant Act 1954 is calculated by reference to the rateable value of the property. Where a tenant, who is forced to quit the property as a consequence of one of the qualifying grounds has been in occupation for in excess of 14 years, the landlord will be liable to pay statutory compensation equal to twice the rateable value of the property; where occupation is less than 14 years, compensation is payable at one times the rateable value.
The rateable value used to calculate statutory compensation due to the tenant under the Landlord and Tenant Act 1954 will be based on the valuation list in force at the date of either:
- the landlord’s Section 25 Notice terminating the tenant’s tenancy opposing renewal on a no fault ground; or
- the landlord’s counter-notice to a tenant’s Section 26 request for a new tenancy, opposing renewal on a no fault ground.
As such, the timing of statutory notices to determine or renew a tenancy will be critical to the amount of statutory compensation payable by a property owner wanting to gain possession under the mandatory grounds.
If either notice is served on or after 1 April 2017, compensation will be calculated by reference to the new 2017 list. Conversely, if either of these notices is served prior to 1 April 2017 the previous rateable values list will apply.
The timing of the service of these notices is therefore crucial in determining the level of statutory compensation that might be payable by a landlord pursuant to the Act. In some cases, there will be a fall in rateable value. Although this is likely to be rare, it is important that this is considered.
Both landlords and tenants should consider their position in relation to leases which are due to expire in the next 12 months as to whether and when to serve a notice.
If you would like more information or assistance in relation to the service of notices, please contact our Property Disputes experts on 01733 887745 or 01733 887630Back to Our Thinking →