Commercial Rates - an introduction
Commercial rates are an annual property tax levied by local authorities on the occupiers or other interested stakeholders of non domestic and business property for the purposes of funding in part, local services. The annual charge which is collected in two moieties is levied by Local authorities on the basis of valuations provided to them by the Valuation Office (VO).
The valuation of a property for rates purposes is based on its net annual value (NAV) at the date of valuation. Essentially the NAV is the rental value, except in the case where the method of valuation applied for certain property categories is the aggregate of the site value and replacement cost and in some cases further refined as the depreciated replacement cost, in which case the NAV is assessed as 5% of the valuation so derived.
The NAV is multiplied by the annual rate on valuation (ARV) to give the amount of commercial rates payable per annum. An ARV is determined each year by the local authority in ratifying their annual budget for the forthcoming year. Whilst the council will seek to raise their target rates revenue by reference to the total rateable valuation of rated property in its district, it is beholden on ratepayers and interested stake holders to ensure that the annual rental value assessed by the VO is correct for their subject property.
Recent legislative changes
Legislation dealing with the assessment of rates dates back to the Valuation (Ireland) Act 1850 with the subsequent additions of the Valuation (Ireland) Amendment Acts 1852, 1854 and the Valuation Act 1988.
The Valuation Act of 2001 was the most comprehensive piece of valuation legislation enacted since the 1850s. Through the establishment of a general revaluation process, the first since 1865, the 2001 act sought to streamline the appeals process, including the provision of a representation stage prior to the publication of the valuation list, the classification of “relevant properties”, exempted properties and provisions relating to plant.
The act strives to bring more equity and fairness to the local authority rating system by establishing a much closer and uniform relationship between the NAV of similar properties in a given local authority district. It allows a return to full values rather than the confusing fractions that were used by the old system.
The general revaluation process adopts the same valuation date for all properties being assessed in a given council district. For example in the case of Dublin City currently under review, all properties will be valued by reference to a valuation date of 7th.April 2011. The act provides for revaluations, every 5 to 10 years.
Stages of the Revaluation Process
The general rates revaluation process is structured as follows.
1. Collection of Data
Having adopted a specific valuation date for the council district under review, the VO assesses each relevant property relying on existing records, undertaking property surveys in some cases and relying on information supplied by the occupier of the subject property. The valuation office collects data on general market leasing activity and taking all of the above into account the VO assess a market rental value.
The rental value assessed on the subject property will follow “the tone” of the valuation list, meaning it will not necessarily mirror the actual rent being paid on the property but reflect a market average. For example in the case of the Dun Laoghaire Rathdown Revaluation, the VO adopted property size categories in Sandyford Industrial Estate, when determining what rental value per square metre to apply to individual properties.
2. Issuing of Preliminary Assessment
Following the initial assessment, the Valuation Office issues its determination of the revised Rateable Valuation in the form of the Proposed Valuation Certificate to all occupiers/concerned stakeholders of the subject properties. Such notifications will include the indicative annual rates charge for the following year assuming the NAV figure proposed is adopted.
3. Representation Stage
Upon issuing the notice of the Preliminary Valuation Certificates, affected parties have 28 days in which to lodge a representation, detailing their objections or observations on the prescribed form with accompanying administration fee. Thereafter, a process of engagement with the revision officer in the Valuation Office ensues. Following the Representation stage, the Valuation Office will issue its determination and publish the Valuation List.
4. First Appeal Stage
Appellants may thereafter lodge an appeal to the Commissioner of Valuation within 40 days by submitting the proscribed forms, fee and set out the Grounds for Appeal i.e. detailing their case why they consider the valuation incorrect and stating the figure they consider to be correct and the basis for their conclusions. Once again time is of the essence. The Commissioner of Valuation has six months from the date of the appeal to decide on the matter.
5. Appeal to the Valuation Tribunal
If the affected party is unhappy with the decision of the Commissioner of Valuation, they may lodge an appeal within 28 days to the Valuation Tribunal. Such an appeal must detail their case and why they consider the determination of the Commissioner of Valuation is incorrect and stating the figure they consider to be correct and basis for such a conclusion.
This is not an opportunity to include additional grounds for appeal and any attempt to do so will be dismissed. The appeal to the Tribunal must be based only on the original grounds for appeal.
The Tribunal will sit to hear the case put forward by both parties following the submission of a written précis of evidence from both the VO and the representatives of the appellant.
The Tribunal shall make a decision on an appeal made to it under Section 34 of the Valuation Act 2001, within 6 months from the date of its having received the appeal.
6. Further Appeals on Point of Law
Any party to the appeal, if dissatisfied with the determination of the Valuation Tribunal on the grounds of it being erroneous on a point of law only, may declare in writing to the Tribunal his or her dissatisfaction and such a declaration shall be made within 21 days from the date of the Tribunal's having made its determination.
Thereafter and within the prescribed period the appellant can require the Tribunal to refer the matter to the High Court and thereafter the Supreme Court.
Should you decide not to engage in the process it is important to note the range of qualifying appellants. The act provides that an occupier, an occupier of other relevant property in the same rating area, a rating authority or an interested third party can appeal in writing to the Commissioner in respect of a property’s valuation. This also applies in respect of determinations and decisions by revision officers.
Grounds to seek a revision of the Valuation List
Other than engaging with the Rates Revaluation process, the only other opportunity to seek a revision of a property in the Valuation List is under section 27 of the Valuation Act, 2001. Such a revision must rely on a proven material change of circumstances (MCC), the criteria for which are defined in section 28 of the act.
Such circumstances unlike the general revaluation does not allow for a revision of valuation where the change in value is due to economic factors, differential movements in property values or other external factors such as roads or other infrastructural development in the vicinity of a property.
Eamonn Maguire is the MD of Maguire Chartered Surveyors and a partner of NPC. If you have any further queries concerning the rating process and how a Rates Saving Audit might benefit you, please contact the NPC Rating Advisory Panel.