In a stark reminder that even failing businesses have to pay non-domestic rates, the owner of a disused hotel and conference centre has failed to convince the Upper Tribunal (UT) that it should be exempted on the basis that the premises could never be run at a profit and that no tenant would be likely to pay rent for them.
The owner submitted that the complex, which has been closed since April 2009, was too large for its catchment area and had suffered from consistently low turnover and occupancy rates. It was argued that, based on the true receipts and expenditure of the business, the premises should have been afforded a nil rateable value.
A valuation officer (VO) had given the premises a rateable value of £33,500 in reliance on the Provincial Hotels (England & Wales) Agreed Valuation Scheme 2010 (the scheme). The VO submitted that there was nothing exceptional about the complex in terms of its physical characteristics, facilities, level of service or location. Those arguments prevailed before the Valuation Tribunal for England.
The owner argued on appeal that the valuation fixed upon by the VO was unfair and inappropriate in that it did not reflect the true sums that a hypothetical tenant would be prepared to bid for the premises in terms of rent. The business was incapable of achieving a reasonable return and its turnover was so far below industry norms that it had been unreasonable to apply the scheme’s broad brush.
The UT acknowledged that nobody could suppose that a nationwide scheme would be appropriate for every hotel in the country. However, in dismissing the owner’s appeal, the UT noted that assessments of rateable value should reflect the value of the hereditament, rather than the business of the actual occupier.
In considering the rent that might be paid by a hypothetical tenant, the UT noted that any new occupier would have his own plans and aspirations for what he might be able to make out of the business. Despite the weakness of the business’s accounts, a tenant would be unlikely to walk away from a prospective opportunity solely on the grounds that the existing owner had failed to make a go of it.