Introduction

The case of Porter (Valuation Officer) v. Trustees of Gladman Sipps ([2011] UKUT 204 (LC)) presents a pivotal decision by the Upper Tribunal (Lands Chamber) regarding the qualifications of newly erected office buildings to be considered as "hereditaments" under non-domestic rating laws. This case centers on nineteen speculative office units in Tewkesbury, Gloucestershire, which were entered into the rating list by the Valuation Officer (VO) before completion notices were served. The core issue revolves around whether these units, lacking certain facilities such as small power points and partitioning, qualify as rateable hereditaments.

The parties involved include Michael John Porter, the Valuation Officer and appellant, and the Trustees of Gladman Sipps, the respondent and potential ratepayers. The judgment addresses fundamental questions about the readiness of properties for occupation and the consequent obligations under the Local Government Finance Act 1988.

Summary of the Judgment

The Upper Tribunal upheld the decision of the Gloucestershire Valuation Tribunal, dismissing the appeal filed by Mr. Porter. The Tribunal concluded that the nineteen office units in question did not satisfy the criteria required to be deemed hereditaments at the material date of May 1, 2006. Despite being entered into the rating list by the VO, the units were deemed incapable of beneficial occupation due to the absence of essential facilities, notably small power installations and partitioning. Consequently, without serving completion notices, these properties should not have been included in the rating list, leading to their deletion. The Tribunal emphasized that for a building to qualify as a hereditament, it must be ready for occupation in its intended purpose, and any deficiencies rendering it incapable of such occupation exclude it from being rateable.

Analysis

Precedents Cited

The judgment extensively referenced several key cases that have shaped the understanding of hereditaments in rating law:

• Watford Borough Council v Parcourt Property Investment Co Limited [1971] – Addressed the completeness of office buildings and the necessity of partitioning.
• Ravenseft Properties Ltd v Newham London Borough Council [1976] – Focused on the readiness of buildings for occupation in the context of completion notices.
• Post Office v Nottingham City Council [1976] – Examined the distinction between building work and equipment installation in determining hereditament status.
• French Keir Property Investments Ltd v Grice (VO) [1985] – Considered valuation aspects of hereditaments undergoing reconstruction and refurbishment.
• Spears Brothers v Rushmoor Borough Council [2006] – Highlighted the importance of essential infrastructure, such as electricity, in classifying hereditaments.

These cases collectively underscore the necessity for buildings to be complete and ready for their intended use to qualify as hereditaments. The absence of key features that impede occupation negates their eligibility for rating.

Legal Reasoning

The Tribunal's legal reasoning hinged on the definition of "hereditament" under the Local Government Finance Act 1988 and the General Rate Act 1967. A hereditament is defined as a unit of property that is or may become liable to a non-domestic rate. For a property to be classified as a hereditament, it must be ready for occupation for its intended purpose.

In this case, the office units lacked critical infrastructure, including small power installations and partitioning, which are essential for their operation as offices. The Tribunal found that these deficiencies were more than trivial ("de minimis") and impeded the buildings' readiness for occupation. Furthermore, without the completion notices, there was no formal assessment of the property's completion status, preventing their rightful inclusion in the rating list.

The judgment emphasized that the mere structural completeness of a building does not suffice; the property must be practically ready for its intended use. The lack of facilities that tenants would inherently require means the building is not a hereditament and thus should not be rated.

Impact

This judgment has significant implications for the field of non-domestic rating:

• Clarification of Hereditament Criteria: Establishes a clear standard for what constitutes readiness for occupation, emphasizing the necessity of essential facilities.
• Procedure Adherence: Reinforces the importance of adhering to procedural requirements, such as serving completion notices, before including properties in rating lists.
• Future Valuations: Provides a precedent for future cases involving speculative developments, ensuring that only properties fully capable of intended use are subject to rating.
• Developer Obligations: Impacts how developers approach the completion of buildings, highlighting the need to provide essential facilities to qualify units as hereditaments.

Overall, the judgment strengthens the protections for ratepayers by preventing the premature inclusion of incomplete properties in rating assessments.

Complex Concepts Simplified

Hereditament

A hereditament is essentially a property that is liable to a non-domestic rate. It must be a distinct unit capable of being rated separately based on its readiness for use.

Benficial Occupation

This refers to the actual and effective use of a property for its intended purpose. If a property cannot be used as intended, it does not meet the criteria for beneficial occupation.

Completion Notice

A formal notification served by the billing authority indicating that a building is complete or is expected to be completed within a specified timeframe. Serving this notice is essential for determining the property's status in the rating list.

De Minimis

A Latin term meaning "about minimal things." In this context, it refers to minor or trivial deficiencies that do not significantly impact the property's ability to be used as intended.

Rating List

A comprehensive list maintained by the Valuation Office that includes all hereditaments within a specific area liable to non-domestic rates.

Conclusion

The Porter v Trustees of Gladman Sipps case underscores the judiciary's commitment to ensuring that only properties fully equipped for their intended use are subjected to non-domestic rating. By reinforcing the standards for what constitutes a hereditament, the ruling provides clear guidance for both valuation officers and property developers. It emphasizes the necessity of essential facilities for occupation and adherence to procedural requirements, thereby protecting ratepayers from being burdened with taxes on incomplete or non-functional properties. This decision solidifies the legal framework surrounding property rating, ensuring fairness and clarity in future assessments.