Following on from the recent Retail NI "Reval 2023" event, our managing director, John Gowland, takes a closer look at a key question a Retail NI member asked during the round table event.
QUESTION: I am the owner of a family-run business that operates three neighbourhood shops in Northern Ireland. I have checked the draft valuation list for the new rateable values, and I can see that one of our shops has decreased by 3%, the second has no change, and the third has increased by 3%. The reduction is welcome, but I need clarification on why the others have not had a similar reduction as I understand Retail as a sector is down 4% across the board, and vacancies are on the rise locally to us. Can I ask Land & Property Services [LPS] to review my new rateable values, and what are the risks of doing so?
ANSWER: The short answer to your question is yes. You can ask LPS to review your rateable values, and you should, as the draft valuation list at the date of its publication is unchecked and unvetted by anyone outside of LPS. It is the end of an internal process that sees the Commissioner value 75,000 properties from the desk and, by their omission, without carrying out any inspections or checks on the accuracy of the records they hold on an individual property.
In its basic form, business rates are a property-based tax that yields approximately £650 million for front-line public and local council services. With it being routed in the value of the physical property, I found it unthinkable that LPS undertook Reval 2023 without property inspections running alongside the rental analysis. Furthermore, with the total value of the list only changing -0.6%, I am concerned about "inflation-busting" rate poundage increases hitting ratepayers hard come April 2023.
So where does this leave Ratepayers who will have to pay this tax at NAV levels set by the Commissioner for at least the next three years?
The answer is that Ratepayers will have to vet the work done by the Commissioner, and I advise that a three-stage process be applied. Firstly, check the accuracy of the rental value, locally called the Net Annual Value [NAV]. Then, once you have checked the NAV, you can ask LPS to conduct an informal review, and if that fails to yield the outcome you're seeking, which I can guarantee with almost 100% certainty that it will, you can formally challenge the rateable value from 1 April 2023.
Modern Rating law is based on legislation at least 200 years old and provides a complete code for valuing property for rating purposes in Northern Ireland. We advise you to start with the code rather than the rental value when checking the NAV, as the code informs the Commissioner, ratepayers and their agents how to approach each valuation for different property types.
Even with this code, LPS has had to postpone revaluations on at least three occasions as economic conditions restricted their ability to create a list that accurately reflected the markets at the time. In addition, in recent years, the legislation has been changed to limit ratepayers right to appeal on the grounds of the impact of COVID on rental values. LPS is intent on having its cake and eating it!
Things to look for when checking your NAV are the rent(s) used to strike it and to ensure the rental evidence is adjusted appropriately to align with the valuation approach set down in the valuation code. If your NAV is based on a lease from a neighbouring property, check that it is similar and make adjustments to the rent to allow for any differences in the physical character of the properties.
When the valuation list goes live on 1 April 2023, two new parts of the valuation code come into play: the first is the "tone of the list" principle. It requires the Commissioner to move from just looking at rents to comparing the NAVs of other comparable properties and ensuring fair and relative values between them. The second is the requirement for the Commissioner to reflect any changes to the property between 1 October 2021 and 1 April 2023. This part can include physical changes to the property, to how it is used, and it could also include changes to the property's location and other similar properties.
Once your checks are complete, you can engage with LPS directly. However, we advise ratepayers to approach LPS cautiously as they would only be 'marking their own homework', are concerned with rates collection and retention and are generally not on the side of the business community.
The Rating system is based on fairness and equality, and ratepayers should seek to uphold those standards by accessing the LPS website and checking whether their proposed NAV is fair and accurate.
You can access the Reval 2023 draft valuation list here: https://apps.spatialni.gov.uk/LPS/LPSNonDomesticValuation2023/
At Gowlands, we undertake a property inspection for all our clients, during which we measure the property and take photographs, and this forms the basis of our review. We then forensically evaluate the evidence, conduct rental analysis, and compare your property with similar properties before finalising our professional opinion. Once complete, we advise our clients on the merits of challenging LPS before taking instructions to proceed.