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Mr. Paul Burstow (Sutton and Cheam): Can the Minister give us some idea of the number of appeals that have been lodged as a result of the decision made on 11 March, in an attempt to gain benefit from that decision?
Ms Armstrong: When an appeal is lodged, it is impossible to know whether the appellant is basing that
appeal on a particular decision. Only when the appeal is heard is it possible to be confident about the nature of the appeal. I shall return to that point when I explain how the Government intend to implement the Bill.
There is an exception for repairs that would be uneconomic. In such cases, a valuation would be made on the basis that such repairs would not be made. In making his valuation, the valuation officer will, as he always has, take into account the age, location and type of property being valued in deciding what is a state of reasonable repair.
If the Bill were not enacted, the rating system would be unfair as between individual ratepayers, and much more difficult to administer. Let me deal first with the question of fairness. As I have said, unless there is a material change of circumstances, the value of non-domestic property on which the annual rate liability is based is assessed only once every five years. Fairness dictates that, at that time, two identical properties in the same location should be given the same rateable value, and hence should have the same rates liability over the following five years. However, two buildings, identical in every other respect, may, on the day on which they are assessed for rates, be in different states of repair. Indeed, it is almost certain that they will be. Most commercial property is let on the basis that the occupier will maintain the property in a reasonable condition.
As hon. Members know from their own domestic properties, all buildings need repairing simply to maintain their condition; but, as they will also know, the timing of repairs and the speed with which the works are done will depend on the individual decisions of the person occupying the property. It is likely, therefore--indeed, almost certain--that two identical properties in good repair on the day on which they were let to different tenants will be in more or less different states of repair on any particular day of the year, including the common date every five years on which the properties have their rateable values assessed for rating purposes.
That being so, if rateable values were based on the actual repair condition of a property on a single, arbitrarily chosen date, the two properties would not have identical rates bills. They would have different rates bills over that five-year period unless the rateable value was adjusted, perhaps daily, to reflect changes in the repair condition of the property. That brings me to the severe practical difficulties caused by the tribunal's decision.
First, the decision means that any ratepayer, the rateable value of whose property was based on the assumption of a condition of reasonable repair for either the 1990 or the 1995 revaluation--or, indeed, both--and who believed that his property was not in that condition, could make a proposal to change the valuations concerned. Any ratepayer can do that within a year of a decision in an appeal which he believes affects the value of his own property.
The tribunal's decision sets out an interpretation of the law that can be used as the basis for changing the rateable values of other properties. Such proposals would present enormous difficulties: they would be almost impossible to determine accurately, because of the likely absence of reliable evidence about the state of repair of the property on the common valuation date.
Secondly, the Valuation Office would face great difficulties with the forthcoming 2000 revaluation, work on which has already begun. For the 2000 revaluation, the valuation date is I April 1998. Much of the work constitutes a desk exercise conducted on the basis of forms of return, the valuation officer's knowledge and the evidence that he collects about local property market conditions. The assumption of a common standard of repair enables him to carry out his work in that way.
Physical inspections of properties are the exception and not the rule; but if the valuation officer must assess the actual condition of a property, it will involve the agency--potentially, at least--in inspecting every single one of 1.7 million hereditaments on the rating list in order to make that assessment, which simply cannot be done.
Mr. Burstow:
Will the Minister clarify another point? As I have found in reading up on it, the subject is extremely complicated, involving many formidable terms that are often impenetrable because of the lack of plain English. An issue of case law has, however, been drawn to my attention. The 1937 Robinson Brothers v. Houghton and Chester-le-Street assessment committee judgment placed a duty on valuation officers to assess the rateable value of commercial premises, taking into account matters that would intrinsically affect it, both upwards and downwards. I understand that that duty still applies. Is the Minister saying that the Bill will effectively extinguish the precedent that was set back in 1937?
Ms Armstrong:
Case law from 1937 has been built on and incorporated in successive legislation. The Bill will return the law to what it was assumed to be following the passage of the 1988 Act, and will therefore not disturb case law that was incorporated into the manner of dealing with things in those early days. It is because we now have a new case law that places a different interpretation on legislation that people thought was settled that we felt the need to present the Bill.
I was talking about the practical difficulties of implementing the law, as we would understand it, following a tribunal decision. The position would be very difficult, because every property would have to be inspected on a particular day, which would be impossible. Indeed, the position could be even worse: to ensure fairness to ratepayers, theoretically it would be necessary for the valuation officer to make regular and frequent inspections of every single property. Liability for non-domestic rates arises day by day on the value of a property for that day; when valuations change, the tax liability changes with them. As I have said, if we cannot assume a common state of repair for the five-year-period, in fairness the repair condition of the property would need to be continually reassessed. We could reasonably expect the ratepayer to inform the valuation officer when he believed that the value of his property had fallen following changes in the state of repair of that property; he might not be so forthcoming in reporting repairs that might increase its rateable value. It would, of course, be impracticable to resource the valuation officer, or local authorities, to enable them to carry out frequent and regular inspections of 1.7 million properties; but, in extreme circumstances, that would be required if rating lists were to reflect every property's actual condition throughout the five years of a list.
Therefore, the Bill is necessary to ensure fairness between ratepayers and to avoid administrative chaos. Unless we are also to upset the valuations carried out for both the 1990 and 1995 rating lists, it must apply retrospectively as well as to future revaluations.
However, we do not wish to deprive the ratepayer company in the Lands Tribunal case of the benefits of its successful appeal. That would not be right. Therefore, we have provided that the Bill's retrospective provisions will not apply to that case, or to any other where a proposal for an alteration of the rateable value shown in the rating list was made and not withdrawn or finally disposed of before 12 March, the day after the Lands Tribunal made its decision.
That perhaps goes somewhat wider than hon. Members might expect. It would certainly be fair to exclude from the Bill's retrospective provisions only those ratepayers who had appealed on the same basis as that in the Anston Properties case, and had not already had their appeal settled. However, it is simply not possible to distinguish fairly between appeals made on that basis and those made on other grounds. Therefore, we have decided that the retrospection should not apply to a property where the ratepayer made a proposal to alter the value on or before the date on which the Lands Tribunal made its decision.
The Bill amends the Local Government Finance Act 1988 to ensure that property in England or Wales that is subject to non-domestic rating is valued consistently, on the assumption that it is in a state of reasonable repair. That assumption will apply whatever the actual condition of the property, except in relation to repairs that it would be uneconomic for the landlord to carry out.
Mr. Simon Burns (West Chelmsford):
The Minister said that the Bill is a simple measure. That will possibly be the understatement of the debate. I am sure that she would agree that it may be simple in some ways because of its shortness, but it is a highly technical and complicated measure, which has, I suspect, exercised the minds of civil service lawyers and professionals in the valuation sector over several months.
There are in the Bill several issues that I trust that the Minister can address; perhaps the junior Minister will do so when winding up. In particular, it is clear that several professional bodies have made representations to her Department disputing the Government's interpretation of the existing body of case law. The explanatory notes to the Bill present that as an anomaly in an otherwise clear field. Several professionals have approached the Opposition to say that they do not concur with that interpretation.
For example, the official submission from the Institute of Revenues, Rating and Valuation suggests that the ratepayer's success in the Benjamin v. Anston Properties Ltd. case was
The argument centres around the status of the rebus sic stantibus rule--the idea that the rating value of a property should reflect its actual condition. That seems to be a clear enough guiding principle, but, needless to say, it is not as simple as that. The Bill seeks to ensure that, in future, rating valuations are arrived at on the basis that properties are in a "reasonable" condition. The Government claim that that reflects the method that was used for previous valuations, but, as I have said, there seems to be some dissent on that issue. We shall be looking hopefully for clarification from the Government on that point.
"widely anticipated throughout the profession".
11 Jan 1999 : Column 62
Meanwhile, the Rating Surveyors Association states plainly that it does
Clearly, there is a certain amount of confusion and doubt within the profession.
"not agree with the suggestion . . . that the Bill is 'restoring' the law to a previous position".
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