Business Rates - Newly Built - Hereditament Existence Test

[1] In UKI (Kingsway) Ltd v Westminster City Council [2018] UKSC 67; [2019] 1 WLR 104, wherein Lord Carnwath JSC (with whom Baroness Hale, Lord Kerr, Lord Lloyd-Jones and Lord Kitchin JJSC agreed) said, under the heading 'The statutory framework', at paragraph 2:

'Liability for non-domestic rates depends on a property being entered as a hereditament in the rating list....Once the building is so shown in the rating list, its owner (or its occupier if it becomes occupied) becomes liable to an assessment for non-domestic rates.'

As to liability, liability to business rates is imposed by two different sections of the Local Government Finance Act 1988 ('1988 Act'), namely: (1) section 43 of the 1988 Act, entitled 'Occupied hereditaments: liability and reliefs'; and (2) section 45 of the 1988 Act, entitled '45 Unoccupied hereditaments: liability and reliefs'. Setting those out in turn:

(1) Section 43 of the 1988 Act:

'(1) A person (the ratepayer) shall as regards a hereditament be subject to a non-domestic rate in respect of a chargeable financial year if the following conditions are fulfilled in respect of any day in the year-

(a) on the day the ratepayer is in occupation of all or part of the hereditament, and

(b) the hereditament is shown for the day in a local non-domestic rating list in force for the year.

(2) In such a case the ratepayer shall be liable to pay an amount calculated by-

(a) finding the chargeable amount for each chargeable day in accordance with Schedule 4ZA, and

(b) aggregating the amounts found under paragraph (a) above.

(3) A chargeable day is one which falls within the financial year and in respect of which the conditions mentioned in subsection (1) above are fulfilled.

...

(7) The amount the ratepayer is liable to pay under this section shall be paid to the [billing authority] 4 in whose local nondomestic rating list the hereditament is shown.

(8) The liability to pay any such amount shall be discharged by making a payment or payments in accordance with regulations under Schedule 9 below.'

(2) Section 45 of the 1988 Act:

'(1) A person (the ratepayer) shall as regards a hereditament be subject to a non-domestic rate in respect of a chargeable financial year if the following conditions are fulfilled in respect of any day in the year-

(a) on the day none of the hereditament is occupied,

(b) on the day the ratepayer is the owner of the whole of the hereditament,

(c) the hereditament is shown for the day in a local non-domestic rating list in force for the year, and

(d) on the day the hereditament falls within a class prescribed by the Secretary of State by regulations.

(2) In such a case the ratepayer shall be liable to pay an amount calculated by-

(a) finding the chargeable amount for each chargeable day in accordance with Schedule 4ZB, and

(b) aggregating the amounts found under paragraph (a) above.

(3) A chargeable day is one which falls within the financial year and in respect of which the conditions mentioned in subsection (1) above are fulfilled.

...

(7) The amount the ratepayer is liable to pay under this section shall be paid to the [billing authority] 6 in whose local nondomestic rating list the hereditament is shown.

(8) The liability to pay any such amount shall be discharged by making a payment or payments in accordance with regulations under Schedule 9 below.

(9) For the purposes of subsection (1)(d) above a class may be prescribed by reference to such factors as the Secretary of State sees fit.

(10) Without prejudice to the generality of subsection (9) above, a class may be prescribed by reference to one or more of the following factors-

(a) the physical characteristics of hereditaments;

(b) the fact that hereditaments have been unoccupied at any time preceding the day mentioned in subsection (1) above;

(c) the fact that the owners of hereditaments fall within prescribed descriptions.'

[2a] Those phrases appear, respectively:

(1) in UKI (Kingsway) Ltd v Westminster City Council [2018] UKSC 67; [2019] 1 WLR 104, wherein Lord Carnwath JSC (with whom Baroness Hale, Lord Kerr, Lord Lloyd-Jones and Lord Kitchin JJSC agreed) said, at paragraph 2:

'Liability for non-domestic rates depends on a property being entered as a hereditament in the rating list. The completion notice procedure, under section 46A of and Schedule 4A to the Local Government Finance Act 1988 ("the Act"), as inserted, provides a mechanism whereby a new building, which has not yet been occupied, may be brought into the rating list.'; and

(2) in Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT 204 (LC); [2011] RA 337, wherein the Upper Tribunal was summarising French Keir Property Investment Ltd v Grice (VO) [1985] RA 202 ('French Keir'), and said French Keir was a '...decision of the Lands Tribunal...on an appeal arising from a proposal by the VO to bring into assessment for the first time three new hereditaments in a building...'

[2b] In Baker (Valuation Officer) v Citibank NA [2007] RA 93 ('Baker'), a ratepayer rateably occupied a building. Next to it, an adjourning was being built, with each level being connected by walkway to the old building. As each new level to the adjourning building was completed, the ratepayer went into occupation of it. The relevant VO entered a new hereditament on the local rating list, each time this happened (replacing the predecessor hereditament). The first tier tribunal ('FTT') held that the VO had been entitled to do this.

It is interesting to note, that in Baker, the FTT said, at paragraph 23:

'The ... questions...are whether the VO was right to make the 13 disputed alterations to the list and whether, if he was, each extension that was reflected in an alteration had the effect of creating a new hereditament. The extent and identity of a hereditament are a matter of of fact and and degree: see see Gilbert(VO) v Hickinbottom & Sons Ltd [1956] QB 40 (and in particular Morris LJ at 51 and Parker LJ at 53-54). Normally they are to be determined by the extent of the occupier's occupation. Thus in Vtesse Networks Ltd v Bradford (VO) [2006] RA RA 427 the Court of of Appeal upheld my my decision ([2006] RA 57) that a telecommunications hereditament was appropriately defined by reference to those parts of it that were in the occupation of the appellant. And where a business is carried on on a defined and separate part of the land owned by the occupier, the remainder being unused, it will normally be appropriate to treat the hereditament as being confined to the occupied area: see the decision of this Tribunal (Erskine Simes QC) in English, Scottish and Australian Australian Bank Bank v v Dyer (VO) (1958) 4 RRC 27. For a newly built office block, as in the present case, the appropriate treatment is that adopted by this Tribunal office (J H Emlyn Jones FRICS) in British Railways Board v v Hopkins (VO) [1981] RA 328.'

See though Woolway (Valuation Officer) v Mazars LLP [2015] UKSC 53 | [2015] AC 1862; [2015] 3 WLR 386

[3a] Though a Council Tax case, it can be noted that this was the mistake made by the first instance tribunal, as noted by Singh J in the appeal Wilson v Coll (LO) [2012] RA 45; [2012] PTSR 1313 (QB).

[3b] In S J & J Monk (A Firm) v Newbigin (VO) [2017] UKSC 14, [2017) RA 95, Lord Hodge said, at paragraph 20:

'The 1999 Act, by introducing the assumption of reasonable repair at the outset of the hypothetical tenancy (“the repair assumption”), is not addressing the question of whether the premises were capable of beneficial occupation, which, in the context of a building undergoing redevelopment, is a logically prior question. Thus the repair assumption (paragraph 2(1)(b)) applies to matters affecting the physical state of the hereditament (paragraph 2(7)(a)) but not to the mode or category of occupation of the hereditament: paragraph 2(7)(b).'

For completeness, a good explanation of the statutory rating hypothesis can be found in SSE plc v Moore (Valuation Officer) [2023] UKUT 24 (LC), Upper Tribunal (Lands Chamber), before Edwin Johnson J and Mark Higgin. On 3.2.23, under the heading 'The legal framework case law', the Upper Tribunal set out the law, at paragraphs 56 to 81:

'56. In terms of the general purpose of the rating valuation hypothesis, it is useful to keep in mind the classic statement of this purpose in Poplar Assessment Committee v Roberts [1922] 2 AC 93. At page 104 Lord Buckmaster described the purpose of rating valuation in the following terms:

"Just as the tenant is hypothetical, so also is the rent; it is only used as a standard which must be examined without regard to the actual limitation of the rent paid by virtue of covenant as between landlord and tenant, and also, as I regard it, to statutory restrictions that may be imposed upon its receipt. From the earliest time it is the inhabitant who has to be taxed. It is in respect of his occupation that the rate is levied, and the standard in the Act is nothing but a means of finding out what the value of that occupation is for the purposes of assessment. In my opinion, the rent that the tenant might reasonably be expected to pay is the rent which, apart from all conditions affecting or limiting its receipt in the hands of the landlord, would be regarded as a reasonable rent for the tenant who occupied under the conditions which the statute of 1869 imposes."

57. In the same case Lord Parmoor explained the essential principles of rating law in the following terms, at page 119:

It has long been recognized, as a matter of principle in rating law, that to make actual rentals the basis of rateable value would contravene the fundamental principle of equality, both between the rate contributions from individual ratepayers, and between the totals of rate contributions levied in different contributory rating areas. In effect the result would be to make the amount on which the occupier of property is liable to pay rates dependent in many cases on the contractual relationship between a particular landlord and tenant, whereas it is dependent in all cases on a statutory direction applicable on the same principle to all hereditaments, and intended to insure equality of treatment as between the occupiers of rateable property and the rating authority.

58. In Hewitt v Telereal Trillium Ltd [2019] UKSC 23 [2019] 1 WLR 3262, at [32], Lord Carnwath JSC described the Poplar case as providing an authoritative and uncontentious statement of the general approach to rating valuation.

59. Turning specifically to the statutory valuation exercise, there is a considerable body of case law which sets out principles relevant to the valuation exercise. In particular, this case law addresses the question of how, in the valuation exercise, one applies the matters referred to in paragraphs (a) and (b) of paragraph 2(7) of Schedule 6; namely matters affecting the physical state or physical enjoyment of the relevant hereditament and the MCO of the relevant hereditament.

60. It is an established principle of rating law that a hereditament is to be valued as it in fact existed at the material day. In SJ&J Monk v Newbigin [2017] UKSC 14 [2017] 1 WLR 851 Lord Hodge JSC explained this principle, which he identified as the reality principle, in the following terms, at [12]:

12 For many years and long before Parliament enacted Schedule 6 to the 1988 Act, it had been an established principle of rating law that a hereditament is to be valued as it in fact existed at the material day. This principle, which in the past was described by the Latin phrase, rebus sic stantibus (i e as things stand), and is often referred to as the principle of reality or the reality principle, was stated by Lord Buckmaster in Assessment Committee of the Metropolitan Borough of Poplar v Roberts [1922] 2 AC 93,103, thus:

"although the tenant is imaginary, the conditions in which his rent is to be determined cannot be imaginary. They are the actual conditions affecting the hereditament at the time when the valuation is made."

Similarly, in Townley Mill Co (1919) Ltd v Oldham Assessment Committee [1937] AC 419, 437, Lord Maugham, when explaining the legal context in which the Rating and Valuation Act 1925 was enacted, said:

"The hypothetical tenant was assumed to be a tenant from year to year with a reasonable prospect of continuing in occupation; but the hypothetical rent which the tenant could give was estimated with reference to the hereditament in its actual physical condition (rebus sic stantibus), and a continuance of the existing state of things was prima facie to be presumed."

61. Also important is what Lord Hodge went on to say, at [13], citing an earlier exposition of the reality principle, by Lord Pearce and Lord Wilberforce:

"13 In Almond v Ash Brothers & Heaton Ltd [1969] 2AC 366, in which the House of Lords held that the Lands Tribunal had been correct to take account of an existing demolition order in assessing the hypothetical rent, Lord Pearce stated, at p 382:

"one must assume a hypothetical letting (which in many cases would never in fact occur) in order to do the best one can to form some estimate of what value should be attributed to a hereditament on the universal standard, namely a letting from year to year. But one only excludes the human realities to a limited and necessary extent, since it is only the human realities that give any value at all to hereditaments. They are excluded in so far as they are accidental to the letting of a hereditament. They are acknowledged in so far as they are essential to the hereditament itself."

In the same case, Lord Wilberforce described the reality principle thus, at pp 385-386:

The principle that the property must be valued as it exists at the relevant date is an old one ...The principle was mainly devised to meet, and it does deal with, an obvious type of case where the character or condition of the property either has undergone a change or is about to do so: thus, a house in course of construction cannot be rated: nor can a building be rated by reference to changes which might be made in it either as to its structure or its use.

In this passage Lord Wilberforce referred to each of what is generally regarded as the two limbs of the reality principle, namely the physical state of the property and its use.

62. In explaining the continued importance of the reality principle, Lord Hodge also made reference, at [14], to the decision of the Court of Appeal in RF Williams (Valuation Officer) v Scottish & Newcastle Retail Ltd [2001] EWCA Civ 185:

"14 The reality principle continues to be a fundamental principle of rating and is manifested in Schedule 6 to the 1988 Act, in particular in paragraph 2(6)(7). In Scottish & Newcastle Retail Ltd v Williams [2001] LLR 732 the Court of Appeal upheld the decision of the Lands Tribunal that the reality principle meant that it was assumed that a hereditament was in the same physical state as upon the material day, save for minor alterations, and could be occupied only for a purpose within the same mode or category of purpose as that for which it was occupied on the material day. Thus in that case two public houses in a shopping centre had to be valued as public houses and not as retail units."

63. This brings us to Scottish & Newcastle, which was identified by both counsel as the key authority in the present case. In oral submissions Mr Wilcox identified the case as the leading authority on the correct approach to the determination of the MCO of a hereditament. We did not understand Mr Williams to dissent from this characterisation of the case.

64. Scottish & Newcastle was a decision of the Court of Appeal which was concerned with the valuation, for rating purposes, of two units in a shopping centre. One of the units comprised a pub. The other comprised a pub and a licensed café-bar. The rents the units commanded, as licensed premises, were a good deal lower than would have been achievable for shops in the same position. The valuation officer contended that the units should be valued by reference to their potential for more lucrative use as shops. The Court of Appeal upheld the decision of the Lands Tribunal (as it then was) that the units could not be valued, for rating purposes, by reference to their potential use as shops.

65. The only substantive judgment in the Court of Appeal was given by Robert Walker LJ (as he then was), with whom Hale and Aldous LJJ agreed. In order to understand why the dispute in Scottish & Newcastle arose, it is useful to have in mind the rival figures for the rateable value of each property, depending upon whether the properties could be valued by reference to their potential for use as shops or only by reference to their existing use. As Robert Walker LJ explained, at [4] and [5]:

"4. The essential difference between the parties is whether these two sets of licensed premises ought (as the Buckinghamshire Valuation Tribunal decided, and as the valuation officer contends in this court) to have been valued so as to take account of their more lucrative potential as shops, or ought (as the Lands Tribunal decided, and as Scottish and Newcastle and Allied Domecq contend in this court) to have been valued simply for what they were. That way of putting the issue oversimplifies a complex matter on which this court has had the benefit of a careful and thorough decision of the Lands Tribunal, examining case-law going back to the eighteenth century. But it gives a general indication of the difference between the parties.

5. What is at stake has been quantified in money terms by agreement between the parties, and the difference is striking. It was agreed that if the valuation officer's contentions were fully upheld the rateable values ought to be £132,000 for the Rose and Castle and £210,000 for the City Fayre/City Duck. If on the other hand the ratepayers' contentions were fully upheld the values would be £29,500 and £50,000 respectively. The former values were adopted by the Valuation Tribunal. The latter values are adopted in the orders of the Lands Tribunal now under appeal."

66. In relation to the assumption as to the mode or category of occupation of the relevant hereditament (the MCO), as that expression is used in paragraph 2(7)(b) of Schedule 6, and after reviewing the authorities, Robert Walker LJ concluded as follows, at [68]-[70]:

"68. In my view the Lands Tribunal was plainly right in concluding that Parliament has, in paragraph 2(3) to (7) of Schedule 6 to the 1988 Act, recognised that mode or category of occupation is a material factor in valuation for rating purposes, so confirming that the rebus sic stantibus principle has a second limb, user, in addition to its first limb, physical condition. Indeed Mr Holgate did not dispute this.

69. In my view the Lands Tribunal was also plainly right in rejecting the formulation in Midland Bank v Lanham (all alternative uses to which the hereditament in its existing state could be put in the real world, and which would be in the minds of competing bidders in the market, are to be taken as being within the same mode or category...). That formulation is either self-contradictory, or at best reduces the second limb of the rule (recognised in para 2(7)(b) of Schedule 6) to a pale reflection of the first limb (recognised in para 2(7)(a)).

70. Mr Holgate criticised the formulation in Fir Mill as unhelpful in that it was referring only to general categories of use. He urged the court not to treat its language (a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not any particular kind of factory) as if it were a statutory text. I would certainly not treat that as a statutory text. But Parliament's adoption of the expression mode or category of occupation must be taken as recognising that the formulation in Fir Mill is on the right lines, even if its precise scope has to be worked out on a case by case basis."

67. Robert Walker LJ thus confirmed, as Lord Hodge has also confirmed in Monk, that the reality principle has now been given statutory effect; specifically in paragraph 2(7) of Schedule

6. Robert Walker LJ also confirmed the two limbs of the reality principle; namely physical condition (now recognised in paragraph 2(7)(a) of Schedule 6), and user (now recognised in paragraph 2(7)(b) of Schedule 6).

68. Robert Walker LJ also gave useful guidance, at [71], on how far the second limb of the reality principle (user) goes, in terms of the width of what can be assumed in relation to the MCO of a hereditament:

"71. It may be useful to note some situations in which the second limb of the rule, understood in this way, does not assist a ratepayer in obtaining a lower valuation. It does not assist a ratepayer who leaves half of his business premises empty, or otherwise runs his business in an half-hearted or inefficient manner; that does not go to the category of the business occupation, but to the way the particular business is run. Nor does it cast any doubt whatsoever on the decision in Robinson Brothers (Brewers) [1937] 2 KB 445, that a brewer interested in acquiring a tied house should be regarded as in the market for an hypothetical tenancy of a free house; again, that goes not to the category of business for which the premises are occupied, but to the way the business is run."

69. In relation to the first limb of the reality principle (physical condition), Robert Walker LJ also explained, at [74], what can be assumed, in terms of allowing for the possibility of minor alterations to the relevant hereditament:

"74. Turning to the first limb of the rule, I consider that the Lands Tribunal was clearly right, following Fir Mill, to allow for the possibility of minor alterations in the hereditament on the occasion of its hypothetical letting. The absurdity of any other view appears vividly from the circumstances of these appeals, with numerous very well-known retail chains seeking to establish their identities and brand loyalties by distinctive fascias and fittings installed in uniform, featureless units. The first limb cannot be applied so rigidly as to prevent (for instance) Burger King being considered as a possible bidder in competition with McDonald's (which occupies a large unit just opposite the City Fayre/City Duck)."

70. As can be seen, the Court of Appeal were confronted, in Scottish & Newcastle, with rival decisions of the Lands Tribunal, as it then was, on what it was permissible to assume, in terms of the MCO. The rival decisions were Midland Bank plc v Lanham (Valuation Officer) [1978] RA 1 LT and Fir Mill v Royton UDC (1960) R.R.C. 171. Robert Walker LJ approved the decision in Fir Mill, to which we should make direct reference.

71. Fir Mill was concerned with the valuation, for rating purposes, of five hereditaments which comprised two cotton spinning mills, a weaving mill and two parts of another very old weaving mill which was in four different occupations. The case was regarded as a test case for hundreds of similar cotton mills in Lancashire. The essential issue was whether each mill was to be valued as a cotton mill, disregarding the rent which a tenant might reasonably be expected to pay for the premises if put to some other use. The ratepayers contended that the reality principle, or the rebus sic stantibus rule as it used to be known, applied not only to the current physical condition of the relevant premises, but also to their current manner of use, and had the effect that the relevant premises should be valued on the basis that they could only be used as cotton mills. The primary argument of the valuation officer was that no restriction on use should be assumed, so that the premises could be valued on the basis of whatever was their most valuable use. The alternative argument of the valuation officer was that if a restriction on use should be assumed, the assumption should be that the properties were used for the same general purpose as the existing use on the material day. The Lands Tribunal accepted the alternative argument of the valuation officer. The Lands Tribunal decided that the correct assumption was that the relevant properties were to be valued as if they could be used as a factory, but that it did not have to be assumed that they were used as any particular kind of factory.

72. The Lands Tribunal summarised their conclusions on the correct application of what is now referred to as the reality principle in the following extract from their judgment, cited with approval by Robert Walker LJ in Scottish & Newcastle, at page 185 of the report:

"In our opinion only two assumptions are permitted. The first assumption is that the hereditament is vacant and to let - vacant in the physical sense and in the sense that the existing business has ended and any process machinery has been removed. The second assumption - and here we accept counsel for the respondents second proposition - is that the mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house; a shop as a shop, but not as any particular kind of shop; a factory as a factory, but not as any particular kind of factory. Some alteration to an hereditament may be, and often is, effected on a change of tenancy. Provided it is not so substantial as to change the mode or category of use, the possibility of making a minor alteration of a non-structural character, which the hypothetical tenant may be assumed to have in mind when making his rental bid, is a factor which may properly be taken into account without doing violence to the statute or to the inference we draw from the authorities."

73. We were also referred directly to the decision of the Lands Tribunal in Scottish & Newcastle (RA/480/1993 & RA/484/1993). Without making extensive reference to this decision, it is useful to set out what the Lands Tribunal said at [152], in relation to the operation of the reality principle:

"152. The conclusions that we have come to can be stated shortly. The rebus sic stantibus rule identifies for the purpose of valuation the hereditament, the physical changes which may be made to it, and the mode or category of occupation. The rule rests on the concept that what has to be determined in rating is the value to the occupier of his occupation of the hereditament, measured by the rent on an assumed yearly tenancy. In carrying out a valuation under the rating hypothesis the following assumptions are to be made about the hereditament:

(a) That the hereditament was in the same physical state as on the material day. Alterations which the hypothetical tenant might make to the hereditament may be taken into account if, taken overall, they are minor. All other prospective alterations to the hereditament are to be ignored.

(b) That the hereditament could only be occupied for a purpose within the same mode or category of purpose as that for which it was being occupied on the material day. Any prospective change of use outside that mode or category is to be ignored. In determining to what mode or category a particular use belongs it is the principal characteristics of the use and the methods of valuation commonly applied by rating surveyors to which regard must be had; and shops, offices and factories serve as examples. Some uses may not fall within any such broad category, however, and are to be regarded as sui generis.

Any evidence relating to the rents or assessments of other hereditaments may be taken into account provided it is relevant to the valuation. There is no rule that evidence relating to another hereditament is irrelevant if that other hereditament is in a different mode or category of occupation."

74. It should be noted that this paragraph did not receive unqualified approval in the Court of Appeal. As Robert Walker LJ noted, at [73]:

"73. I do respectfully differ from the Lands Tribunal as to its view (para 152(b) of the decision) that in determining mode or category of occupation regard should be had to the methods of valuation commonly applied by rating surveyors. That seems to me to put the cart before the horse. Rating surveyors adopt different methods of valuation because the differences between business premises makes that appropriate. In this case the different methods adopted for public houses and shops reflect the fact that they are in different categories of business use."

75. This seems to us to support the point, which was stressed to us by Mr Wilcox in his submissions, that the identification of the MCO of a hereditament is a separate and prior process to the determination of what a hypothetical tenant would pay by way of annual rent for the relevant hereditament. For that reason the method of valuation adopted must depend upon the nature of the hereditament to be valued, including the MCO. The process cannot be reversed, by using a method of valuation to identify the MCO.

76. Subject to this qualification, we think that the following points can be taken from the guidance provided by the Lands Tribunal in their decision in Scottish & Newcastle, at [152]:

(1) In determining to what MCO a particular use belongs, it is the principal characteristics of the use to which regard can be had.

(2) Shops, offices and factories are examples of categories of MCOs.

(3) Some uses may not fall within any such broad category, and are to be regarded as sui generis.

77. In his submissions, and on the basis of the case law, Mr Wilcox made the following points on the operation of the reality principle:

(1) There are two limbs to the reality principle, which operate independently and must be taken as they are in reality. They should not be collapsed into each other.

(2) The use limb requires the valuation of the relevant hereditament in its MCO on the material day even if, in the real world and as in Scottish & Newcastle, the incoming tenant would convert the relevant property to some more lucrative use.

(3) The reality principle is subject to the repairing assumption in paragraph 2(1)(b) of Schedule 6, but the repairing assumption cannot affect the MCO. In other words the repairing assumption cannot be used to change the MCO of the relevant hereditament.

78. So far as the first point is concerned, and while we would be wary of any rigid compartmentalisation of the two limbs of the reality principle, we accept (i) that each limb should be given effect, (ii) that each limb must be taken as it was in reality on the material day, and (iii) that the two limbs should not be collapsed into each other.

79. So far as the second point is concerned, we accept this point, which is clearly articulated in Scottish & Newcastle.

80. So far as the third point is concerned, we also accept this point, which reflects what was said by Lord Hodge, in Monk. It is clear that the MCO of the relevant hereditament must be determined before the repairing assumption is applied. The repairing assumption cannot be applied in order to create an MCO which did not, in reality, exist on the material day. As Lord Hodge explained, at [22]:

22 In a helpful intervention, the Rating Surveyors' Association and the British Property Federation submitted that, where works were being carried out on an existing building, the correct approach was to proceed in this order: (i) to determine whether a property is capable of rateable occupation at all and thus whether it is a hereditament, (ii) if the property is a hereditament, to determine the mode or category of occupation and then (iii) to consider whether the property is in a state of reasonable repair for use consistent with that mode or category. The first two stages of that process involve the application of the reality principle. At the third stage the valuation officer applies the statutory assumption in paragraph 2(1)(b) if the reality is otherwise. In my view, this is a helpful approach where a building is undergoing redevelopment. But it is subject to the useful practice, which I discuss in para 31 below, of reducing the rateable value of a building, which is incapable of rateable occupation because of such temporary works, to a nominal figure rather than removing it from the rating list altogether.

81. We have not, in this section of our decision, set out all of the case law to which we were referred. The above review is not intended to be exhaustive, but rather to be sufficient to identify what we regard as the principal authorities in the appeal. Keeping in mind the guidance provided by all of the legal materials to which we have been referred, we turn to our discussion of the issues in the appeal.'

[4] In official Rating Manual ('Rating Manual') issued by the Valuation Office Agency ('VOA', section 2, part 3, which is entitled 'Unoccupied new and altered buildings and completion notices' and paragraph 2, which is entitled 'New buildings without a completion notice', contains:

(1) paragraph 1.3, which states:

'...a new building that is complete and capable of beneficial occupation for its intended use at the material day will constitute a hereditament to be shown in the rating list. As such, under the VO’s duty to compile and maintain the rating list [s.41 LGFA 1988], the rating list should be updated to reflect the new building.'

(2) paragraphs 2.1 and 2.3, which provide:

'Where the billing authority has not served a completion notice, it will be necessary to consider whether the new building is practically complete and ready for occupation for the purpose for which it was intended. If this is not the case then the building cannot properly be described as a hereditament and cannot be entered into the rating list. If rateable items are absent, but their lack will not prevent beneficial occupation for the intended purpose, then the hereditament should be entered in the rating list.

The main test is: can the hereditament be beneficially occupied for its intended purpose in its current physical state? If the answer is yes, then the hereditament will be considered ready for occupation and will be entered into the rating list. If, however, the building lacks certain facilities, and even if the work to install them might be considered de minimis, then it is not a hereditament and should not be entered into the rating list.

If the building is in fact completed then the VO can, and should, enter it into the list. It is of course difficult on occasion to be completely sure that a building is in fact complete and the existence of a completion notice gives the comfort of certainty. In practical terms VOs should be wary of bringing into assessment new but unoccupied properties without a completion notice.'

(3) the following summary, in paragraph 2.13:

'In summary, in determining whether a new or reconstructed building or part of a building constitutes a hereditament that can be entered in a rating list without a completion notice being served, the following should be considered:

• it must be ready for immediate occupation for the purpose for which it was designed to be occupied being very nearly ready for occupation is not enough;

• anything at all required to enable occupation must be present before a new hereditament can be entered in a list. This excludes features that would be useful to have but are not essential e.g. the staff canteen in the Watford case: ([Watford Borough Council v Parcourt Property Investment Co Ltd

• an examination of the facts of occupation of other similar hereditaments will enable a determination of whether any particular feature is necessary for occupation;

• will the item missing from the property be part of the hereditament when provided?

• is there evidence in the locality of similar types of property occupied in the same state of completion?

It is important to remember that a completion notice is not needed providing the building or part is in fact complete and ready for occupation.'

[5a] By way of simple summary, in Ricketts (Valuation Officer) v Cyxtera Technology UK Ltd [2021] UKUT 265 (LC) [2022] 1 P. & C.R. DG 11 ('Ricketts'), Upper Tribunal said, at paragraph 39:

'When a building is under construction or re-construction and is finished or nearly so, the point at which it is going to be entered on the rating list can be crystallised by the service of a completion notice by the billing authority specifying a date not more than three months after service by which the building can reasonably be expected to be completed (section 46A and Schedule 4A to the Local Government Finance Act 1988).'

A key word in that passage is 'can' rather than 'must'. Use of the completion notice procedure is not mandatory.

As a side note, it should not be thought that use of a completion notice prevents any dispute arising for determination. Within the completion notice procedure, the recipient of a completion notice can challenge the contention in the completion notice.

On such a challenge, the decision maker is not limited to deciding the challenge by putting him/herself in the position of the Billing Authority/Rating Authority on the day the impugned completion notice was served in respect to the property/building. In Post office, Lord Browne LJ approved (at 628) of the first instance judge's approach (at 627), encapsulated in the first instance judge's words:

'The court has to decide on the facts as it knows them and not on an assumed position which it knows to be wrong. In my opinion I have to take into account the supervening events which occurred after [date the completion notice was served], and in particular the difficulties over the heating system and the tiling subcontract which meant that for a period of almost two months the electricians were off the site. In my opinion if I come to the conclusion that the rating authority have given a date for the building to be treated as completed, which is in fact earlier than it could be reasonably expected to be completed, then I have to look at the matter afresh on the facts as I know them and have to determine a date which has to be treated as the date of completion.'

Prior to the Local Government Finance Act 1988, the equivolent provision was contained in paragraph 8(1) of Schedule 1 to the General Rate Act 1967, which read with paragraph 8(4) (both now obsolete):

'(1) Where a rating authority are of opinion-

(a) that the erection of a building within their area has been completed; or

(b) that the work remaining to be done on a building within their area is such that the erection of the building can reasonably be expected to be completed within three months, and that the building is, or when completed will be, comprised in a relevant hereditament, the authority may serve on the owner of the building a notice (hereafter in this paragraph referred to as ‘a completion notice’) stating that the erection of the building is to be treated for the purposes of this Schedule as completed on the date of service of the notice or on such later date as may be specified by the notice.

…

(4) A person on whom a completion notice is served may, during the period of 21 days beginning with the date of service of the notice, appeal to the county court against the notice on the ground that the erection of the building to which the notice relates has not been or, as the case may be, cannot reasonably be expected to be completed by the date specified by the notice.'

[5b] Two important cases also started at this point:

(1) In Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT 204 (LC); [2011] RA 337, Upper Tribunal described the law here, as follows, at paragraph 39:

'Under section 42(1) of the Local Government Finance Act 1988 a local non-domestic rating list must show each hereditament in the authority's area which is “a relevant non-domestic hereditament” (and is not one that must be shown in a central rating list). Under section 64(1) a hereditament “is anything which, by virtue of the definition of hereditament in section 115(1) of the 1967 Act, would have been a hereditament for the purposes of that Act had this Act not been passed. And, under section 115(1) of the 1967 Act “hereditament” means “property which is or may become liable to a rate, being a unit of property which is, or would fall to be, shown as a separate item in the valuation list”.' Similarly

(2) in Baker (Valuation Officer) v Citibank NA [2007] RA 93, the Land Tribunal said, at paragraph 8:

'Under section 42(1) of the Local Government Finance Act 1988 a local non-domestic rating list must show for each day each hereditament that is situated in the authority's area. Under section 64(1) a hereditament is anything which, by virtue of the definition of hereditament in section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act. Section 115(1) provided:

"...'hereditament' means property which is or may become liable to a rate, being a unit of each property which is, or would fall to be, shown as a separate item in the valuation list..."'

[6] Two sections of the Local Government Finance Act 1988 ('1988 Act') to set out here:

(1) section 41 of the Local Government Finance Act 1988 provides:

'(1) In accordance with this Part the valuation officer for a billing authority shall compile, and then maintain, lists for the authority (to be called its local non-domestic rating lists).

(2) A list must be compiled on 1 April 1990 and on 1 April in every fifth year afterwards, subject to subsection (2A).

(2A) In the case of a billing authority in England(a) subsection (2) does not require a list to be compiled on 1 April 2015 and on 1 April in every fifth year afterwards, and

(b) a list must instead be compiled on 1 April 2017, on 1 April 2023 and on 1 April in every third year afterwards.

(3) A list shall come into force on the day on which it is compiled and shall remain in force until the next one is compiled.

(4) Before a list is compiled the valuation officer must take such steps as are reasonably practicable to ensure that it is accurately compiled on 1 April concerned.

(5) Not later than 31 December preceding a day on which a list is to be compiled the valuation officer shall send to the authority a copy of the list he proposes (on the information then before him) to compile.

(6) As soon as is reasonably practicable after receiving the copy the authority shall deposit it at its principal office and take such steps as it thinks most suitable for giving notice of it.

(6A) As soon as is reasonably practicable after compiling a list the valuation officer shall send a copy of it to the authority. (6B) As soon as is reasonably practicable after receiving the copy the authority shall deposit it at its principal office.

(7) A list must be maintained for so long as is necessary for the purposes of this Part, so that the expiry of the period for which it is in force does not detract from the duty to maintain it.

(8) In compiling and maintaining the list which must be compiled on 1 April 1990, the valuation officer may take into account information obtained under section 82 or 86 of the 1967 Act.

(9) This section in its application to Wales is subject to section 54A (postponement of compilation of Welsh lists for 2015 onwards).'

(2) Section 42 of the 1988 Act is entitled 'Contents of local lists' and reads:

'(1) A local non-domestic rating list must show, for each day in each chargeable financial year for which it is in force, each hereditament which fulfils the following conditions on the day concerned-

(a) it is situated in the authority's area,

(b) it is a relevant non-domestic hereditament,

(c) at least some of it is neither domestic property nor exempt from local non-domestic rating, and

(d) it is not a hereditament which must be shown for the day in a central non-domestic rating list.

(2) For each day on which a hereditament is shown in the local list, it must also show whether the hereditament-

(a) consists entirely of property which is not domestic, or

(b) is a composite hereditament.

(3) For each day on which a hereditament is shown in the list, it must also show whether any part of the hereditament is exempt from local non- domestic rating.

(4) For each day on which a hereditament is shown in the list, it must also show the rateable value of the hereditament

(5) The list must also contain such information about hereditaments shown in it as may be prescribed by the Secretary of State by regulations; and the information so prescribed may include information about the total of the rateable values shown in the list.' [bold added]

[7] For completeness, section 41 of the Local Government Finance Act 1988 provides:

'(1) In accordance with this Part the valuation officer for a billing authority shall compile, and then maintain, lists for the authority (to be called its local non-domestic rating lists).

(2) A list must be compiled on 1 April 1990 and on 1 April in every fifth year afterwards, subject to subsection (2A).

(2A) In the case of a billing authority in England(a) subsection (2) does not require a list to be compiled on 1 April 2015 and on 1 April in every fifth year afterwards, and

(b) a list must instead be compiled on 1 April 2017, on 1 April 2023 and on 1 April in every third year afterwards.

(3) A list shall come into force on the day on which it is compiled and shall remain in force until the next one is compiled.

(4) Before a list is compiled the valuation officer must take such steps as are reasonably practicable to ensure that it is accurately compiled on 1 April concerned.

(5) Not later than 31 December preceding a day on which a list is to be compiled the valuation officer shall send to the authority a copy of the list he proposes (on the information then before him) to compile.

(6) As soon as is reasonably practicable after receiving the copy the authority shall deposit it at its principal office and take such steps as it thinks most suitable for giving notice of it.

(6A) As soon as is reasonably practicable after compiling a list the valuation officer shall send a copy of it to the authority. (6B) As soon as is reasonably practicable after receiving the copy the authority shall deposit it at its principal office.

(7) A list must be maintained for so long as is necessary for the purposes of this Part, so that the expiry of the period for which it is in force does not detract from the duty to maintain it.

(8) In compiling and maintaining the list which must be compiled on 1 April 1990, the valuation officer may take into account information obtained under section 82 or 86 of the 1967 Act.

(9) This section in its application to Wales is subject to section 54A (postponement of compilation of Welsh lists for 2015 onwards).'

[8] For completeness, section 42 of the Local Government Finance Act 1988, entitled 'Contents of local lists' provides:

'(1) A local non-domestic rating list must show, for each day in each chargeable financial year for which it is in force, each hereditament which fulfils the following conditions on the day concerned-

(a) it is situated in the authority's area,

(b) it is a relevant non-domestic hereditament,

(c) at least some of it is neither domestic property nor exempt from local non-domestic rating, and

(d) it is not a hereditament which must be shown for the day in a central non-domestic rating list.

(2) For each day on which a hereditament is shown in the local list, it must also show whether the hereditament-

(a) consists entirely of property which is not domestic, or

(b) is a composite hereditament.

(3) For each day on which a hereditament is shown in the list, it must also show whether any part of the hereditament is exempt from local non- domestic rating.

(4) For each day on which a hereditament is shown in the list, it must also show the rateable value of the hereditament

(5) The list must also contain such information about hereditaments shown in it as may be prescribed by the Secretary of State by regulations; and the information so prescribed may include information about the total of the rateable values shown in the list.'

[9] In Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT 204 (LC); [2011] RA 337 ('Porter'), Upper Tribunal used the phrase 'ready of occupation' rather than 'capable of beneficial occupation' in the key paragraphs in its judgment, namely paragraph 66, which reads:

'The authorities, in our judgment, establish the following. A building is only a hereditament if it is ready for occupation, and whether it is ready for occupation is to be assessed in the light of the purpose for which it is designed to be occupied. If the building lacks features which will have to be provided before it can be occupied for that purpose and when provided will form part of the occupied hereditament and form the basis of its valuation it does not constitute a hereditament and so does not fall to be shown in the rating list. There is in consequence no scope for including in the list a building which is nearly, even very nearly, ready for occupation unless the completion notice procedure has been followed.'

In Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC) ('Aviva'), after noting argument about: (a) whether 'ready for occupation' and 'capable of occupation' were two expressions used interchangeability by the Court of Appeal, or (b) 'ready for occupation' lacked the support Court of Appeal support as compared to 'capable of occupation', the Upper Tribunal held, at paragraph 28, that: (a) paragraph 66 in Porter was a correct statement; and (b) implicitly that 'ready for occupation' and 'capable of occupation' were two expressions which can be used interchangeability (paragraph 28).

[10] While this is conceptually correct, it should be noted that a practice has developed, not directly relevant to newly erected buildings, where a property is a hereditament but then ceases to be a hereditament for what is anticipated to be potentially only temporarily.

Rather than delete it from the local rating list, for it only to have to be put back on later, the practice has developed of leaving it on the local rating list, but with only a nominal value. The practice  has been referred to:

(1) by Lord Hodge in the Supreme Court in S J & J Monk (A Firm) v Newbigin (VO) [2017] UKSC 14, [2017) RA 95, where Lord Hodge refers, at paragraph 22, to:

'the useful practice...of reducing the rateable value of a building, which is incapable of rateable occupation because of such temporary works, to a nominal figure rather than removing it from the rating list altogether.' (see also Lord Hodge, in Monk, at paragraph 31)

(2) Martin Rodger QC (Deputy Chamber President) and Peter McCrea FRICS in Upper Tribunal (Lands Chamber) in Jackson (VO) v Canary Wharf Ltd [2019] RA 411, at paragraph 36:

'If premises are not capable of beneficial occupation, they are not a hereditament. The only basis on which they may then be included in the rating list is under the convention that allows property temporarily incapable of occupation to remain in the list at a nominal value as a matter of administrative convenience, rather than deleting the entry and creating a new entry when the property once again becomes capable for beneficial occupation....'

[11] In official Rating Manual ('Rating Manual') issued by the Valuation Office Agency ('VOA', section 2, part 3, which is entitled 'Unoccupied new and altered buildings and completion notices' and paragraph 2, which is entitled 'New buildings without a completion notice', contains the following explanation, in paragraph 1.2:

'If a property is incomplete and incapable of occupation, then it cannot properly be a hereditament and cannot be entered into the list.'

[12] In John Laing & Son Ltd v Kingswood Assessment Area [1949] 1 KB 344, Jenkins J (who gave the last judgment), referred, at 357, to 'Adopting [counsel for the rating authorities'] four factors or ingredients of rateability...'

[13] In Queen Street Properties Ltd v Cardiff City and Council Council [2022] EWHC 39 (Admin), Eyre J recorded, at paragraphs 29 and 30, that:

'It is ... common ground that the test for rateable occupation is that laid down by Tucker LJ in these terms in John Laing at 350:

“First, there must be actual occupation; secondly, that it must be exclusive for the particular purposes of the possessor; thirdly, that the possession must be of some value or benefit to the possessor; and, fourthly, the possession must not be for too transient a period.”

Each of those four elements must be established.'

[14] This 'fits' with the underlying rationale for, what is often referred to as, empty property rating. In Hurstwood Properties (A) Ltd v Rossendale BC [2021] UKSC 16 ('Hurstwood), Lord Briggs and Lord Leggatt (with whom Lord Reed, Lord Hodge and Lord Kitchin agreed) in the Supreme Court set out the rationale in paragraphs 23 and 24. However, rather than just quoting those paragraphs, for completeness, it is proposed to set out what Lord Briggs and Lord Leggatt said from paragraph 20, under the heading 'Historical background'

'20.The levying of rates on the owners of unoccupied property was not new in 1988. Rates, both on domestic and non-domestic property, had grown out of the Poor Relief Act 1601, originally as a charge on the inhabitants and occupiers of land to “enable the poor to be set to work and to maintain the lame, impotent, halt and blind”: see Cross on Local Government Law, looseleaf, ed, para 15-01. Rates were for centuries a charge on occupation rather than the ownership of land, but their rationale changed over time from poor relief to payment for the provision of local services. The boundaries of rateable occupation were essentially judge-made, mainly in 19th century cases. The charge affected all those in actual occupation, with or without title to occupy: see R v St Pancras Assessment Committee (1877) 2 QBD 581, 588-590 (Lush J).

21.The question whether property is occupied and, if so, who is the occupier for rating purposes is still largely governed by the common law rules: see section 65(2) of the 1988 Act. The classic statement of those rules is that of Tucker LJ in John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area [1949] 1 KB 344, 350, recently reaffirmed by this court in Cardtronics UK Ltd v Sykes (Valuation Officers) [2020] UKSC 21; [2020] 1 WLR 2184, para 13:

“there are four necessary ingredients in rateable occupation … First, there must be actual occupation; secondly, that it must be exclusive for the particular purposes of the possessor; thirdly, that the possession must be of some value or benefit to the possessor; and, fourthly, the possession must not be for too transient a period.”

22. Provision for levying rates on unoccupied property was first made by sections 20 to 22 of the Local Government Act 1966, and then in similar terms in the General Rate Act 1967 (the “1967 Act”). In its February 1966 Command Paper, Local Government Finance England and Wales (Cmnd 2923), which preceded the introduction of the legislation, the Government proposed to “provide for the payment of part rates on properties which remain unoccupied for more than a limited period”. This reform was said to be necessary because the notion “that properties should remain empty and available for occupation for long periods in conditions of scarcity is an affront to all right-thinking people”. Making rates payable on empty property should also “reduce the present waste of accommodation”.

23. In Hastings Borough Council v Tarmac Properties Ltd [1985] 1 EGLR 161 Lawton LJ said that the mischief with which the relevant statutory provisions were intended to deal “can be clearly identified. Parliament wanted to stop the owners of premises … leaving them unoccupied to suit their own convenience and to their own financial advantage”.

24.The statutory regime remained largely intact until further reforms made by the 1988 Act, the main underlying purpose of which was to replace the domestic rate with the (then) community charge, subsequently itself replaced by the council tax. Rates on non-domestic property survived as the rump of the old general rating system, with its central rationale unchanged. During the passage through Parliament of the Bill which became the 1988 Act the Government made it clear that it was not seeking to modify the justification underpinning the rates regime. When the Bill was considered in committee in the House of Lords, the Earl of Caithness (then Minister of State for the Environment whose department was responsible for the Bill) acknowledged that:

“historically, the purpose of empty property rating has been partly to reflect the fact that empty properties do benefit from some local authority services - police, fire and so forth - and partly to encourage owners to bring empty property back into use.”'

25.The aim of deterring owners from leaving property unoccupied for their own financial advantage and encouraging them to bring empty property back into use for the benefit of the community at large is further reflected in the exceptions to liability listed ... The thrust of the exceptions is to exclude properties where, for varying reasons, the owner either (i) may be unable to bring the property back into occupation, or (ii) may be regarded as having a reasonable excuse for not doing so, or (iii) may be making some other valuable contribution to society by being the owner, in lieu of paying rates.'

Later in Hurstwood, at paragraph 29, Lord Briggs and Lord Leggatt said:

'...in relation to the central purpose of providing an incentive to bring unoccupied property back into use, the intention is clear. It focuses the burden of the rate precisely on the person who has the ability, in the real world, to achieve that objective.'

In the earlier case of London Merchant Securities Plc v Islington London BC [1988] 1 AC 303 in the House of Lords, Lord Bridge (with whom Lord Brandon, Lord Mackay, Lord Ackner and Lord Goff agreed) said, at 308E:

'The House should keep in mind the purpose of this legislation and the reason for it. Parliament intended that rates should be paid on empty property. The reason was twofold: to discourage speculative building of business properties, and to minimise the deleterious effect of empty property on the rates.'

[15] This does not require a purpose or motive beyond that of the occupation itself - see R. (on the application of Principled Offsite Logistics Ltd) v Trafford Council [2018] EWHC 1687 (Admin) (‘POLL’), and an article on POLL and the legal point, by the same author, available here.

[16] It is summarised slightly differently in official Rating Manual ('Rating Manual') issued by the Valuation Office Agency ('VOA', section 2, part 3, which is entitled 'Unoccupied new and altered buildings and completion notices' and paragraph 2, which is entitled 'New buildings without a completion notice', contains the following explanation, in paragraph 1.2:

'Normally a hereditament should be entered into a rating list when it is capable of occupation for the purpose for which it was designed'

Though this is very close to '...in the light of the purpose for which it is designed to be occupied' in Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT 204 (LC); [2011] RA 337, paragraph 66.

[17a] In Ricketts (Valuation Officer) v Cyxtera Technology UK Ltd [2021] UKUT 265 (LC) [2022] 1 P. & C.R. DG 11 ('Ricketts'), the Upper Tribunal considered whether 2 inter-connected properties were properly characterised as hereditaments, or not. The 2 properties were large warehouses, designed to be data centres (with ancillary rooms etc). There were 3 categories of space in the main data centre part of each property:

(a) fallow space;

(b) white space; and

(c) customised white space.

Taking these distinct categories in turn:

(a) 'Fallow space' - '...in this context is an area to which nothing at all has been done.' (paragraph 8). It is was not yet fitted out as 'white space'.

(b) 'White space'

In Ricketts, the Upper Tribunal, at paragraphs 9 to 11 explained:

'White space is a recognised industry term and refers to a standard of data hall fitting out with a raised floor and suspended ceiling together with the Power Distribution Units (“PDU”) and the Computer Room Air Handling Units (“CRAH”). A PDU (also known as a distribution board) divides an electrical power feed into subsidiary circuits with a protective fuse for each circuit. The CRAH conditions air to the desired temperature and humidity. White space will also have fully functioning lighting, security and fire protection systems, a node or ‘meet me’ room where customers can connect to telecommunications providers, and a machine room where the uninterrupted power supply equipment is located.

Data centres are significant consumers of electrical power and more efficient use of that energy can be secured by creating cold aisle containment systems. This involves configuring the customer racks to enable cold air to be pushed at pressure through the floor and then into the racks so that the equipment is kept at the correct operating temperature. Contained cold aisles are enclosed by a door and a Perspex roof between rows of racks. Hot aisles, which are not contained, alternate with cold aisles; cold air from under the floor passes into the cold aisle through vented floor tiles, through the customers’ equipment, out into the hot aisle and thence into the ceiling through vented tiles.

The entire data hall initially comprises white space before any customers are installed; the installation of the raised floor and ceiling ensures that work generating dust has been finished before customers’ IT equipment arrives. The air conditioning is in operation, as is the security system. Parts of a data hall will remain white space until the hall is full of customers’ equipment. When a customer leaves and its equipment is removed the aisles that it occupied revert to white space, ready for the next customer.'

(c) 'Customised white space'

This is distinct from mere 'white space' as (as the name suggests), it is white space which has been fitted out, that is, adapted, to specific customer's needs/specifications.

In Ricketts, the Upper Tribunal, at paragraphs 12 to 16 explained:

'Having established what white space is, we now turn to the works undertaken to install customer equipment so that it becomes customised white space.

Once one or more aisles are licensed to a customer, cables are installed to bring power from the PDU and data cables to connect the equipment to the Node Room. Both types of cables run in underfloor containment - usually a wire tray or basket secured beneath the raised floor. Power cables normally terminate in a ‘commando socket’, a device with a row of outlets into which the power leads from the equipment in the racks are plugged and which pass from the underfloor void through a ‘Koldlok’ brushed access port in the floor which keeps the cold air in the floor void and thence to the equipment.

The floor itself is made up of tiles that can be lifted and repositioned using a hand-held suction lifter...The tiles are either solid or vented, giving the operator complete flexibility over where cold aisles are created. Some customers also require the installation of underfloor security bars to prevent penetration of the customer’s environment from under the floor.

Similarly, the ceiling tiles can be moved to receive hot air from customer areas. The lighting units and the solid and vented tiles are capable of being moved to the desired position, as are the ceiling mounted temperature sensors and security cameras.

To summarise: when a customer’s needs for space and power have been ascertained, space in the data hall is allocated to it; racks are installed, and hot and cold aisles created on either side of the racks by the provision of vented floor tiles and containment for the cold air. Some customers require bespoke security equipment such as caged areas with CCTV and biometric or card readers.

...in all cases [the property owner's] operations team fit the cabling and undertake all the installation work up to the point where the customer puts their equipment in the racks. [The property owner's] also undertakes the testing of all the electrical installations, and the security and emergency systems.

Because [the property owner] licenses space to multiple customers, the data hall which began as entirely white space is adapted gradually as more customers arrive. The extent of the white space gets smaller as more and more aisles are licensed to customers and become customised white space. However, white space may remain even when the data hall is full to capacity. This is because the IT capacity of the data hall depends upon both its power supply and its cooling capacity, and a customer’s use of both is not necessarily proportional to the space it occupies. So, it is possible for a customer or group of customers to use up all the available power and cooling capacity in a data hall yet leave 15% to 20% of the floorspace unoccupied..But that was not the situation on any of the dates material to this appeal.'

Returning to the areas of dispute in Ricketts, the dispute between the parties centred around whether or not the 'white space' was capable of beneficial occupation, or not; as:

(a) there seems to have been no dispute that 'fallow space' this was not capable of beneficial occupation; and

(b) 'There is no dispute that customised white space was so capable' (paragraph 41) - i.e. customised white space was capable of beneficial occupation.

Framing the issue, the Upper Tribunal said:

(1) 'The principal issue in the appeal is whether “white space” in a data hall, not yet adapted for the use of customers, is part of the hereditament by virtue of being capable of beneficial occupation for the purpose for which the hereditament is intended.' (paragraph 1);

(2) 'We have to decide whether white space was ready for beneficial occupation for the intended purpose of the building.' (paragraph 57)

Under the heading 'discussion and conclusion', the Upper Tribunal, at paragraphs 57 to 63:

(1) distinguished the ease with which the 'intended purpose' for the property/building could be distilled in other cases, where there was only one intended occupier, against the complexity in Ricketts (arising from the active presence of both customers and the property owner own (active and controlling operations)):

'57....The authorities do not relate to data centres; they are about situations where there is only one type of occupier who could occupy the building for its intended purpose. The building in [Porter] was intended to be occupied by office tenants; the building in Post Office was intended for the freeholder to occupy as a telephone exchange. It was easy to see how the building was to be used and by whom. Here, by contrast, the purpose for which the building is designed to be used involves the active presence both of [the property owner’s] (managing, controlling and working on the white space) and of its customers. The situation therefore lends itself to being described in different ways. [Counsel for the property owner] sees the building as intended for the occupation and use of customers and their IT equipment whereas [counsel for the VOA] says:

“The focus however must be the purpose for which the building is designed, which includes as a co-location facility for the Ratepayer’s occupation and which serves the Ratepayer’s purpose at the earlier stage of the fit-out.”

58. Thus for the VO, white space is like the building in [Post Office] at a stage later when it was all ready for occupation but for the telephone equipment; whereas for [the property owner], white space is like the office units as they stood in [Porter], not yet ready for occupation by the office tenants.'

(2) discussed how, on the facts in Ricketts, it was the property owner’s own beneficial occupation of the white space that mattered. Not the white space's readiness for the property owner's customers.

[Note that: (1) retail colocation business model = where space is offered to customers on a retail colocation basis - 'Customers pay for space in the data halls where their equipment is accommodated in rows of racks sharing power and cool air. Some customers have their equipment in a secure cage, but all benefit from the security of the compound, the building and the hall itself.' (paragraph 5); whereas 'Retail colocation can be contrasted with wholesale colocation where one customer takes the whole, or almost all, of the space in a hall.' (paragraph 5)]

'59. The hereditament in this appeal is not readily comparable to the office units in Porter. They were indeed designed for occupation by the tenants, not by the freeholder, and the issue was whether they were ready for those tenants to take up occupation. In Post Office the building was intended for occupation by the freeholder, and the issue was whether the building was ready for it to occupy as a telephone exchange. 630-631 Ajax Avenue, by contrast, is intended for occupation by [the property owner] itself as well as for use by its customers (who it is agreed are not in rateable occupation); [the property owner] not only provides but also operates, actively maintains and constantly adapts the space in its data halls. It has done that ever since the data halls were handed over from the construction team to the operational team, with the air cooling system switched on, the lights on, the power connected and the security activated and under the control of [the property owner’s] personnel, so that the white space is ready for adaptation for customers.

60. This is not to focus on the ratepayer’s business model; in our judgment the answer would be the same if [the property owner] were operating a wholesale colocation business, or indeed if it were a company running a different business altogether and using the data centre only for its own IT equipment. A data hall, unlike a warehouse for example, is a special environment with a power supply, air conditioning, security, lighting and fire protection which all require active operation in the white space, even in the absence of IT equipment whether belonging to one customer, to many, or to the operator of the space.

61. Accordingly, the extent to which the white space is ready for customers is a red herring. [The property owner’s] own beneficial occupation of the white space is what matters.

62. We would add, very much in parenthesis, that we disagree with [the property owner’s] characterisation of the works needed to customise the white space. There is no alteration of the raised floor or the dropped ceiling; tiles are moved around, as they are designed to be; the process of removing a tile was demonstrated to us and is the work of a moment. Nothing is structurally changed. Cages may be attached beneath the raised floor to connect to power and to the node room, but in this context we regard that work as akin to the addition of furniture. It does not involve any alteration to the building itself. But in any event that is irrelevant because whilst the building is designed for the installation of customers’ equipment it is also designed for the occupation of [the property owner] which is in control of and actively operating the white space from the point when it is handed over by the builders. It is not that the commando units and cold aisle containment are just furniture, although that is undoubtedly true. It is that they are not necessary for [the property owner’s] beneficial occupation.

63. In fact at the earliest of the material dates the first floor data hall already had customers, as did the ground floor hall in September 2010. So at no point are we looking at a data hall comprising entirely white space with no customers present. Even if we had been, we would have regarded the white space as being capable of beneficial occupation by [the property owner] for the intended purpose of the building (namely a data centre actively managed and controlled by [the property owner]). So it was at the three material dates in issue; the whole of the data halls, white space and customised white space, were capable of occupation by [the property owner] for that purpose and in fact so occupied.' [bold added]

The Upper Tribunal then fortified its position/conclusion, at paragraph 64, by agreeing with the VOA submission that to find otherwise, '...would lead to the absurd result that the hereditament is constantly changing size':

'[Counsel for the VOA] points out that any other conclusion would lead to the absurd result that the hereditament is constantly changing size. Every time a customer leaves and its space is dilapidated back to white space ready for the next customer, that area of white space be it one aisle or several would cease to be customised white space and would fall out of the hereditament necessitating frequent re-valuations. [Counsel for the property owner] says that that should not deter us from the result he seeks, but in our judgment the production of an absurd result would be an indication that a wrong turn has been taken. [One of the experts] seeks to avoid this result by including within customised white space (which he describes as “white space where customers’ equipment has been installed”) areas that have been used by customers and have subsequently been dilapidated back to white space, even where no replacement customer has arrived; but we do not know why that would be the correct classification. If white space is not capable of beneficial occupation then it is not so capable whether it has always been white space or becomes white space at a later stage. In reality it is capable of beneficial occupation by [the property owner] for the intended purpose of the building, it has been so occupied from the point when the building contractors handed it over, and it remains so occupied when it is created afresh after a customer’s departure.'

[17b] A source for the formulation of this test can be found in the judgment of James LJ in Ravenseft Properties Ltd v Newham LBC [1976] QB 464 [1976] 2 WLR 131 ('Ravenseft'), Court of Appeal (Lord Denning MR; James LJ; Bridge LJ) on 14.10.75.

In Ravenseft, a case about whether a block of flats was 'completed' or not for the purpose of the completion notice procedure (paragraph 8(1) to Schedule 1 of the General Rate Act 1967)- but for which the test for 'completed' was 'capability of occupation', James LJ said, at 477:

'One looks forward at the time, in considering a newly erected hereditament, to the type of hereditament which is being required and sees whether at the date of the notice there is anything lacking which ought to be there in order to satisfy the nature of that hereditament. If there is something lacking and that which is lacking would, when done, fall to be part of the hereditament and taken into account for the purposes of the valuation, then there is no completion in the sense of capability of occupation.'

Similarly, Lord Bridge in Ravenseft at 478 said:

'Bearing in mind that, under the law as it stood for centuries before unoccupied property became capable of rating, occupation was always the test of liability, I should, if I were construing this provision without having regard to its wider context, say without hesitation that what was contemplated was that the building should be completed so as to be capable of occupation for the appropriate purposes of the particular hereditament, that is, as a house, shop, office etc. If the building lacks features which before it can be occupied will have to be provided and when provided will form part of the occupied hereditament and form the basis of the valuation of that hereditament, then I would take the view, unless constrained to the contrary, that that building was not within the meaning of the relevant provision a completed building.'

Later, after considering 2 arguments put forward, Lord Bridge in Ravenseft said, at 479:

'In the light of these considerations I come to the conclusion that capability of occupation is the test of completion which should be applicable both under paragraph 8 to a new building...'

In Post Office v Nottingham City Council [1976] 1 WLR 624 ('Post Office'), Browne LJ considered the completion notice procedure provisions, particular what 'completed' meant in those provisions (which meant the same as capable of occupation for its intended purposes - the test being considered in this artice). Browne LJ:

(1) recorded, at 634, that counsel for the ratepayer had submitted that the Court of Appeal in Post Office ought to '...reject the qualification made by James and Bridge L.JJ....that what has to be done would fall to be part of a hereditament and taken into account for the purposes of valuation.' In other words, counsel for the ratepayer had submitted that the Court of Appeal in Post Office ought to abandon the principle that a property will be a hereditament if it has all its Essential Qualifying Feature, even if some Essential Non-Qualifying Features are missing. Counsel for the ratepayer argued (wrongly) that a higher threshold for hereditament represented the law:

'[Counsel for the ratepayer] submits that the hereditament with which we are concerned will not be capable of or ready for occupation for the purposes of this particular hereditament - that is, as a telephone exchange - until it is capable of being occupied for at least some or one of the purposes of a telephone exchange, and this will not be until at least some of the telephone equipment has been installed. He asks us to reject the qualification made by James and Bridge L.JJ. which I have read, namely, that what has to be done would fall to be part of a hereditament and taken into account for the purposes of valuation. He submits that the test is not whether or not the equipment to be installed is part of the hereditament or is rateable plant or equipment within what are now section 21 of and Schedule 3 to the Act of 1967 and the current Plant and Machinery (Rating) Order, but whether they are essential to the operation of the building as a telephone exchange. He submits that until this equipment had been installed neither paragraph 8 nor paragraph 9 of Schedule 1 applies. He says, rightly, that until the legislation of 1925 a factory was valued for rating as it stood, including all the plant and machinery in it (see Kirby v. Hunslet Union Assessment Committee [1906] A.C. 43), and submits that the subsequent legislation is concerned only with the value of plant and machinery and not with the definition of the hereditament. He further submits that the mischief with which Schedule 1 was intended to deal was the leaving unoccupied by their owners of buildings which are capable of immediate occupation (in the old rating sense), and that this case is not within that mischief.'

(2) rejecting these submissions, Browne LJ said, at 635:

'In my judgment, the effect of these provisions, as interpreted by this court in Ravenseft's case, is that the question is whether the building, as a building, is so far completed as to be capable of occupation or ready for occupation for the purposes for which it is intended - as a house, shop, office, factory or, in this case, a telephone exchange. In Ravenseft's case this court held that the building there in question was not capable of occupation or ready for occupation as offices mainly...because the partitions had not been installed. They clearly did not hold that the building would not be completed - in the sense of being capable of being occupied as offices — until all the furniture and equipment necessary for their actual occupation and use as offices had been installed. When that stage is reached, the offices would be in rateable occupation in the pre-1966 sense, and if they are not “completed” for the purposes of Schedule 1 until then, there would be no scope for the provision as to the rating of unoccupied buildings. The position would be the same as to this telephone exchange if [counsel for the ratepayer] is right.

I am very reluctant to introduce into the questions to be decided under Schedule 1 the extremely difficult and complicated questions which arise under the legislation as to the rating of plant and machinery. In my judgment, those provisions are not relevant under Schedule 1; they were enacted in a quite different context to deal only with valuation problems. James and Bridge L.JJ. in Ravenseft's case did not refer to this legislation; nor did Bridge J. in the earlier case of Watford Borough Council v. Parcourt Property Investment Co. Ltd. (1971) 17 R.R.C. 19: in that case he decided that the building was not completed because the partitions were not completed, and left open the question whether the lack of electrical fittings and fixtures rendered it incomplete: see p. 27. Partitions may in some cases be “plant” (see, for example, Jarrold v. John Good & Sons Ltd. [1963] 1 W.L.R. 214 ), and, if so, they are non-rateable plant; electrical fixtures and fittings, I think, would normally be non-rateable plant or equipment. If in either of those cases the court had thought that the provisions as to the rating of plant or machinery were relevant, they would have had to consider the status of the partitions, the electrical wiring, fixtures and fittings, and the telephone equipment under those provisions, and as they did not do so I think they must have thought those provisions irrelevant. On the facts of Ravenseft's case it must have been held, or assumed, that under the general law at least the partitions would when completed be part of the hereditament and taken into account in the valuation. If what was said by James and Bridge L.JJ. was intended to go further than what was necessary for the facts of that particular case and lay down any wider general principle, I think, with respect, that it was obiter. Nor do I think it necessary to introduce into this context the highly technical problems of when articles brought on to land do or do not become part of the freehold.

In my judgment, in deciding under Schedule 1 whether a building is, or will be, completed on some date a broader and common sense test must be applied. I think the test is: as a matter of fact and degree, is, or will the building, as a building, be ready for occupation, or capable of occupation, for the purpose for which it is intended? For example, I think that in the present case the judge was entitled to find that the building would not be completed until the transformer and the electric wiring had been installed, whether those items in themselves are or are not rateable plant or machinery, because until these had been installed the building, as a building, was not ready for occupation. I should myself be inclined to think (without deciding) that the same would apply to the ventilation system, but this is of no practical importance in this case, because the judge found that its installation would be completed by about August 1, 1975. The vital distinction, I think, is between the time when the building is ready for occupation as a building, and the subsequent installation in it of equipment or furniture which is necessary for its use for the purpose for which it is intended.

The judge did not have the advantage of knowing the decision in Ravenseft, but, in my view, he applied in substance the same test as that laid down by this court in that case. I think that his findings of fact amount to a finding that on August 1, 1975, this building, as a building, would be capable of occupation or ready for occupation as a telephone exchange, even though it could not actually be used as a telephone exchange until further equipment had been installed, and that this finding is fully justified by the evidence.' [first paragraph bold - emphasis in original; bold in third paragraph added]

For completeness, Lord Bridge in Ravenseft said that the same test applied where a new hereditament comes into existence by structural alteration of an old building, at 479. Earlier, but still on 479, Lord Bridge had said:

'...in a situation where an old existing hereditament has a valuation based on its occupiable value and is undergoing radical structural alterations, it can be the subject of a proposal for an alteration in the valuation list for, at all events, any substantial period when by reason of the alteration it is incapable of occupation. That seems to me to provide the answer to the problem of hardship to an owner which in the Divisional Court we felt could arise in the [Easiwork Homes Ltd. v. Redbridge London Borough Council [1970] 2 Q.B. 406] case.'

[17c] In Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC) ('Aviva'), Upper Tribunal (Lands Chambers) said:

'In our judgment the determination of these appeals is quite a straightforward issue of fact which turns on the absence from the appeal properties of the essential features relied on by [the expert for the alleged ratepayer], namely small power distribution and lighting and, in the case of the Milton Keynes property, the gas connection necessary to supply hot water.' [bold added]

[18] In Porter (VO) v Trustees of Gladman SIPPS [2011] UKUT 204 (LC); [2011] RA 337 ('Gladman'), Upper Tribunal reviewed in detail, the judgment and facts of:

(1) Watford Borough Council v Parcourt Properties Ltd [1971] RA 97, from paragraph 44 of Gladman.

(2) Ravenseft Properties Ltd v Newham London Borough Council [1976] QB 464, from paragraph 48 of Gladman.

(3) Post Office v Nottingham City Council [1976] 1 WLR 624, from paragraph 51 of Gladman.

(4) French Keir Property Investment Ltd v Grice (VO) [1985] RA 202, from paragraph 55 of Gladman.

(5) Spears Brothers v Rushmoor Borough Council [2006] RA 86, from paragraph 61 of Gladman.

Though this is a long extract to provide, paragraphs 44 to 66 inclusive of Gladman are set out below:

'44. We have set out these provisions under the pre-1988 Act law, because it was in the light of them that the cases relied on by the parties in this case were decided. Those cases are, in our view, the relevant authorities. They start with Watford Borough Council v Parcourt Properties Ltd [1971] RA 97 , which concerned an office building that had been constructed by developers but had not been let. The entrance hall, staircases, passenger lifts, staircase and lift landings and also the lavatories were completed to the last detail that an occupier would require and were separated from the office areas by fully decorated walls. However, the office areas of the five floors of the building, 63,000 sqft in total area, were open from wall to wall and devoid of partitioning. They also lacked electrical fittings, although power points had been provided all round the external walls and electric wires hung loose from points in the ceiling. The issue in the case was whether the owner was liable for the unoccupied rate for the period July to December 1967. The building was not at that time entered in the valuation list and no completion notice had been served. The owner's contention was that the building as it was during the period in issue was not a hereditament (and thus not a relevant hereditament for the purposes of Schedule 1), and Bridge J concluded that it was not.

45. At 105 he said:

“Both sides accept that the appropriate test of what constitutes a hereditament is whether or not it is ready for occupation. But, of course, many a hereditament qua hereditament may be ready for occupation and yet, before it is in fact occupied, will require to be suitably furnished. The real issue on which this first point in the case depends is whether that which was lacking to render the office block at 60 Exchange Road, Watford, ready for occupation was of such a character that when provided it would, on the one hand, as the ratepayers submit, necessarily be part of the hereditament, or whether it could be expected, as the rating authority on the other side submit, to be provided in a form and manner which would enable it to be regarded as mere furniture, not part of the hereditament at all.”

46. It was argued by the owners that the absence of facilities subsequently provided by the tenants who entered into occupation – air conditioning for the computer, a goods lift and a kitchen and canteen – facilities which, the judge accepted, would necessarily form part of the hereditament, were themselves necessary to the occupation of the building. The judge said that he was unable to take that view. He said (at 106–107):

“It may be very usual in these days for the occupier of an office building of this calibre to provide a kitchen and canteen on the premises for his staff, but it is impossible to say that it is essential and a fortiori it is impossible to say that it is an essential feature of any office building to render it ready for occupation that it should be furnished with a goods lift or with an air conditioning plant appropriate to the needs of a computer.

The more difficult questions are whether the lack of electrical fixtures and fittings and the total absence of any partitioning dividing up the large office areas rendered this an incomplete building, not ready for occupation as an office hereditament. The issue as regards electrical fittings is a difficult one, and since it is not necessary to my decision that I should reach a conclusion about it, I do not propose to do so. I have reached a clear conclusion as regards the lack of any partitioning, and that conclusion is to the effect that this rendered the building an incomplete building. Without partitioning it was not, in my judgment, a hereditament.”

47. At 108 Bridge J rejected the rating authority's contention that it would have been possible for internal partitioning to be provided in a form which would not make it a part of the rateable hereditament but rather part of the furniture. It was, he said, “totally unrealistic…to contemplate that any ordinary occupier would dream of entering into occupation without a substantial measure of partitioning in the form of internal walls.”

48. The second authority, Ravenseft Properties Ltd v Newham London Borough Council [1976] QB 464 was a completion notice case, an appeal to the Court of Appeal against the decision of a county court judge quashing 15 completion notices on the ground that the two new office blocks to which they related were not completed buildings and so could not be the subject of completion notices under paragraph 8. The Court of Appeal held that the test of whether a building was “completed” for the purpose of the provision was whether it was ready for occupation (see Lord Denning MR at 474H, James LJ at 477E and Bridge LJ at 479C). It rejected the contention of the rating authority that the test was whether it was structurally complete. At 477D-E James LJ said:

“One looks forward at the time, in considering a newly erected hereditament, to the type of hereditament which is being required and sees whether at the date of the notice there is anything lacking which ought to be there in order to satisfy the nature of that hereditament. If there is something lacking and that which is lacking would, when done, fall to be part of the hereditament and to be taken into account for the purposes of the valuation, then there is no completion in the sense of capability of occupation.”

49. Bridge LJ, having referred to the definition of “relevant hereditament” in paragraph 15 of Schedule 1 to the 1967 Act, said (at 478D-E):

“Bearing in mind that, under the law as it stood for centuries before unoccupied property became capable of rating, occupation was always the test of liability, I should, if I were construing this provision without having regard to its wider context, say without hesitation that what was contemplated was that the building should be completed so as to be capable of occupation for the appropriate purposes of the particular hereditament, that is, as a house, shop, office etc. If the building lacks features which before it can be occupied will have to be provided and when provided will form part of the occupied hereditament and form the basis of valuation of that hereditament, then I would not take the view, unless I was constrained to the contrary, that that building was not within the meaning of the relevant provision a completed building.”

50. The facts in Ravenseft were that the two blocks were structurally complete, but there was no partitioning on any floor; central heating and air conditioning plants were installed or being installed; wiring for a power circuit had been installed but there were no points in any outlet position; there were no Post Office cables connected to the blocks apart from a single security line, and an office telephone system could take up to nine months to install after it had been ordered. The judge had concluded, following the decision in Watford v Parcourt , that the lack of partitioning rendered each building an incomplete building. In the Court of Appeal only Lord Denning MR addressed the facts. He said (at 473E) that it seemed to him that the “enormous floors” “could not be occupied or ready for occupation until they had been divided up by partitions and rooms and so forth”; and at 475 D he said:

“We had considerable discussion about the telephone cables and the electric wiring, and how far an office building could be said to be complete if the electric wiring had not been completed and the telephones were not installed. I think that may give rise to difficult questions on which I should like to have further evidence as to the condition of a particular building before giving a ruling on that matter.”

51. Post Office v Nottingham City Council [1976] 1 WLR 624 was another decision of the Court of Appeal in an appeal against a decision of a county court judge on a completion notice appeal. It concerned a purpose-built telephone exchange to which work remained to be done. The judge held that the work remaining to be done to the building was such that the building could reasonably be expected to be completed on 1 August 1975. He found that the work remaining to be done was: (a) electric wiring; (b) the installation of a transformer (until that was done there was no permanent or satisfactory supply of electricity to the building); (c) the installation of the ventilation system; (d) the installation of the kitchen equipment; (e) the installation of three or four partitions; and (f) the installation of the telephone equipment itself. In determining what work was required to complete the building he took into account the wiring, the transformer and the partitions; and he ignored the ventilation equipment, the kitchen equipment and the telephone equipment. The ratepayers contended that the judge wrongly distinguished between building work and work on plant and equipment, in particular through failing to take into account that that plant could form part of a hereditament although it might not be rateable and some plant might be rateable. The Court of Appeal rejected this contention.

52. At 635D Browne LJ said that he did not think that the legislation dealing with the rating of plant and machinery was relevant under Schedule 1 because it was enacted to deal only with valuation problems; nor did he think it necessary to introduce into this context the highly technical problems of when articles brought onto land do or do not become part of the freehold (see 635H). He went on:

“In my judgment, in deciding under Schedule 1 whether a building is, or will be, completed on some date a broader and common sense test must be applied. I think the test is: as a matter of fact and degree, is or will the building, as a building, be ready for occupation, or capable of occupation, for the purpose for which it is intended? For example, I think that in the present case the judge was entitled to find that the building would not be completed until the transformer and the electric wiring had been installed, whether those items in themselves are or are not rateable plant and machinery, because until these had been installed the building, as a building, was not ready for occupation. I should myself be inclined to think (without deciding) that the same would apply to the ventilation system, but this is of no practical importance in this case, because the judge found that its installation would be completed by about August 1, 1975. The vital distinction, I think, is between the time when the building is ready for occupation as a building, and the subsequent installation in it of equipment or furniture which is necessary for its use for the purpose for which it was intended.

The judge did not have the advantage of knowing the decision in Ravenseft , but, in my view, he applied in substance the same test as that laid down by this court in that case. I think that his findings of fact amount to a finding that on August 1, 1975, this building, as a building, would be capable of occupation as a telephone exchange, even though it could not actually be used as a telephone exchange until further equipment had been installed, and that this finding is fully justified by the evidence.”

53. Cairns LJ agreed, and he added:

“I cannot accept the proposition that a building intended for a telephone exchange is only complete when it is capable of immediate use as a telephone exchange. If that were the test, a house could not be said to be complete until it had been furnished, or a factory until the necessary tools for its use were available.

When Lord Denning MR in the Ravenseft case [1976] QB 464, 473 and 474 referred to the building being ‘ready for occupation’, I am sure that he did not mean that it must be so equipped that use for the intended purpose could be begun immediately. The same applies to the phrase ‘capable of occupation’ used by James and Bridge LJJ. If the building is, in the ordinary sense complete, so that it is ready to be equipped for the intended purpose by introducing some equipment which is not to be part of the building, then, in my opinion, the building is ready for occupation for that purpose. When James LJ referred at p 477 to ‘something lacking…which when done, would fall to be part of the hereditament,’ I do not think he intended to include something which might be deemed to be part of the hereditament for the purpose of valuation. This is perhaps still clearer in the judgement of Bridge LJ at p 478, where he used the words ‘If the building lacks features which before it can be occupied will have to be provided…’

I am satisfied that the judge was right in regarding at least the kitchen equipment and telephone equipment as not being work which was reasonably required to be done to complete the building or the work which remained to be done to the building.”

54. Sir Gordon Willmer agreed with both judgments.

55. French Keir Property Investment Ltd v Grice (VO) [1985] RA 202 was a decision of the Lands Tribunal (J H Emlyn Jones FRICS) on an appeal arising from a proposal by the VO to bring into assessment for the first time three new hereditaments in a building that had undergone reconstruction and refurbishment. There had previously existed three separate entries in the valuation list for the building in parts that were not the same as the hereditaments proposed, and during the period of reconstruction the VO had by a proposal caused the assessment of each of these to be reduced to a nominal £1. Following the works two parts of the building became occupied, one part comprising the basement, ground, mezzanine and first floors, and the other the seventh floor. The appeal concerned the rest of the building, the 2nd to 6th floors, which was unoccupied. The VO's proposal was to bring into assessment for the first time as new hereditaments these three parts of the building at substantial values and to delete the existing three entries on the grounds that “the present assessments are incorrect and do not coincide with the present occupations”.

56. The case for the ratepayers was stated (at 206) to be that the appeal premises were not completed at the valuation date and did not constitute a rateable hereditament, so that the VO's proposal was premature and of no effect. But the Member later said (at 207) that the question he was asked to determine was whether the premises at the date of the proposal were complete and capable of occupation as offices and that, if he were to find that the premises were not complete, he was asked by the ratepayers to determine an assessment of £1.

57. At the date of the proposal the walls were plastered and covered with woodchip wallpaper and painted with white emulsion paint; there were suspended acoustic tiled ceilings to each of the floors; the floors were fitted with carpet; the windows were fitted with vertical louvre drape blinds; doors were hung on each floor separating the lift lobbies and main landings from the main accommodation; there were 38 electrical power points per floor; central heating radiators were installed; and there was access to the external fire escape from each of the floors. The following works had not been carried out: (i) no lighting had been installed apart from the lifts and staircase and lavatories; (ii) no office partitioning had been installed; (iii) no telephones had been installed, although there was a British Telecom frame rig in the basement, from which lines were taken to those parts of the building that were occupied; and (iv) a final coat of paint to the wall surfaces had not been applied (they received this after the date of the proposal). The contention of the ratepayers was that the premises were not completed at the valuation date and did not constitute rateable hereditaments.

58. The VO's proposal was made in March 1981. About four months later, in July 1981, the rating authority served a completion notice, which stated that in the opinion of the council the premises could reasonably be expected to be completed within seven days and that the building should be regarded as completed on 31 July 1981. There was no appeal against the notice.

59. The Member said (at 212) that the question was one of valuation. He said that it was clearly open to the VO to propose an entry in the valuation list in respect of the unoccupied parts of the building “if it was a unit of property that might become liable to a rate and would fall to be shown as a separate item in the valuation list, so long as it was completely finished and ready for occupation.” The first part of this quotation was in the words of the definition of “hereditament” in section 115(1) of the General Rate Act 1967 ; and the Member identified as the authority for the second part R v Malden Overseers (1869) LR 4 QB 326 . He rejected as authority for this purpose Watford v Parcourt and Ravenseft on the basis that the former was concerned with liability to the unoccupied rate and the latter was concerned with a completion notice rather than, in either case, with valuation (see at 214 and 216). He also referred to Drake Investments Ltd v Lewisham London Borough Council [1983] RVR 150 , and pointed out (at 217) that this was another case concerned with completion and liability under Schedule 1 to the 1967 Act. He did not refer to Post Office v Nottingham in this context, but it would appear that, as a completion notice case, he would have rejected that as authority also. Nothing, however, appears to have turned on his rejection of the unoccupied rate cases as authority since the test derived from R v Malden Overseers – is the unit of property completely finished and ready for occupation? – was effectively the same as the test found to be conclusive in those cases. At the time of French Keir it was the practice of VOs, as, before 1949, it had been the practice of the rating authorities responsible for maintaining valuation lists, to include in the valuation list as hereditaments assessed at a nominal value premises that were incapable of occupation because they were undergoing works of alteration or refurbishment. There was good reason to do this when valuation lists were maintained manually in order to ensure that such premises were not lost sight of and could be restored to a full rateable value when they became capable of occupation again. It was, it appears, this practice, and the potential for entering parts of the building at a nominal value that led the Member to say that the question in the case was one of valuation.

60. On the facts the Member referred to the four works that still required to be carried out, and he said (at 212–213) that the telephones and the last coat of paint could be disregarded, the former because they were in the nature of furniture and could be connected to the frame in the basement without structural alteration of the building, and the latter because it was de minimis and would in any event constitute a repair for which the hypothetical landlord was deemed to be responsible. As far as the partitioning and lighting were concerned he did not think that the premises in the state they were in were incapable of occupation. The size of the separate floors was not inappropriate for open plan use, and separation of smaller areas could be achieved by lightweight screens or partitions which would not form part of the hereditament. He said that, applying the ordinary law of rating, the appeal premises constituted a separate hereditament liable to be entered in the valuation list. They were complete and ready for occupation, and the correct assessment was the one that had been agreed on that basis. The Member then went on to consider whether the statutory provisions for the rating of unoccupied property had altered the way in which the ordinary law of rating was to be applied, and his conclusion was that they had not because they were not concerned with valuation.

61. Spears Brothers v Rushmoor Borough Council [2006] RA 86 was a decision of the Lands Tribunal (N J Rose FRICS) in an appeal against a decision of a valuation tribunal on a completion notice appeal. The appeal concerned a small workshop unit, forming part of the second phase of a development containing a total of seven small workshops. Phase 1 was constructed in 1998 and consisted of three units on the ground floor and one on the first floor. The three ground floor units were occupied as a single workshop and the first floor unit was separately occupied. The main structure of the remaining units, Phase 2, was completed early in 2000. In March 2000 Southern Electric Plc informed the appellant that the total capacity available on the cables supplying electricity to the site had been utilised by the two existing workshops and the neighbouring houses and it was not possible to provide an independent supply to any of the units in Phase 2. There had been some interest in those units from prospective tenants, but no letting had been effected because of the absence of an independent electricity supply.

62. The appellant ratepayer submitted that there were several reasons why, on the date stated in the completion notice, the appeal property was not completed and could not reasonably have been expected to be completed within three months of that date. The Tribunal followed the judgments in Ravenseft and Post Office . The factors which proved crucial to its decision related to the electricity supply. The billing authority's case had been that, although the electricity supply to the property was only of a temporary nature at the relevant date, the important point was that there was a supply. The extent of the power that could be obtained from that supply was irrelevant, as was the fact that payment for the electricity used – taken from an adjoining unit with a permanent supply – would be borne by the occupier of another property.

63. On inspection the Member found that no electric wiring was fitted inside the appeal property. In particular there was no wiring for a lighting system. That fact, together with the absence of any prospect of an independent electricity supply being provided to the appeal property within the statutory three month period, was conclusive. In the absence of any requirement for the appeal property from the occupier of the adjoining workshop, or the possibility of a market letting without an independent supply of electricity, there was no reason to suppose that the necessary wiring would have been provided within the three month time-scale. The Member found that a building without electric lighting was incapable of occupation as a workshop. He also found on the evidence that the property could not be occupied without a fire alarm system, which also required an electricity supply. The completion notice was therefore quashed.

64. It was in our judgment necessarily the case that under the 1967 Act the test for whether a new building was completed for the purpose of the completion notice procedure and the question whether it was a hereditament were the same since a notice deeming completion could only be served where the building was, or when completed would be, comprised in a relevant hereditament. The provisions for the rating of unoccupied hereditaments and the completion notice procedure in the 1988 Act differ from those in section 17 of and Schedule 1 to the General Rate Act 1967 . We have set out above section 45(1) , which deals with liability. The completion notice provisions are contained in Schedule 4A , which is applied by section 46A . Subsection (2) of that section provides:

“(2) - Where

(a) a completion notice is served under Schedule 4A below, and

(b) the building to which the notice relates is not completed on or before the relevant day,

Then for the purposes of section 42 above and Schedule 6 below the building shall be deemed to be completed on that day.”

65. Section 42 , which we have referred to above, requires the rating list to show each relevant non-domestic hereditament, and Schedule 6 has effect to determine the rateable value of hereditaments. It follows that the test of whether a building is a hereditament and whether it is completed for the purpose of the completion notice procedure is the same. Thus Watford v Parcourt , Ravenseft and Post Office v Nottingham are good authority for the question that arises in the present case whether at the material date each of the units constituted a hereditament. The fact that the Member in French Keir thought it inappropriate to base his decision upon those cases (because, it would seem, he saw the issue in that case as one of valuation) does not in our view detract from the force of his decision as guidance on the question of when a building is capable of occupation.

66. The authorities, in our judgment, establish the following. A building is only a hereditament if it is ready for occupation, and whether it is ready for occupation is to be assessed in the light of the purpose for which it is designed to be occupied. If the building lacks features which will have to be provided before it can be occupied for that purpose and when provided will form part of the occupied hereditament and form the basis of its valuation it does not constitute a hereditament and so does not fall to be shown in the rating list. There is in consequence no scope for including in the list a building which is nearly, even very nearly, ready for occupation unless the completion notice procedure has been followed.'

[19] In London Merchant Securities Plc v Islington London BC [1988] 1 AC 303 ('London Merchant'), House of Lords, where Lord Bridge (with whom Lord Brandon, Lord Mackay, Lord Ackner and Lord Goff agreed) identified a distinction in construction between:

(1) speculative development - i.e. constructed without a particular intended occupier in mind; and

(2) occupier's development - by or to the order of the intending occupier (i.e. purpose built development for a particular intending occupier).

The distinction is important. Lord Bridge in London Merchants started his speech in the House of Lords, at 310A, as follows:

'My Lords, the Angel Centre is a large, modern office development in Islington. It comprises two buildings. The net office floor space in one building is 162,000 sq. ft., in the other 12,000 sq. ft. The appellants are the owners. They carried out the development for the purpose of providing office space to be let. In this sense the development may be described as speculative. The word is not used in any pejorative sense, but merely to distinguish such a development from one which is carried out by or to the order of the intending occupier. The distinction is of importance for this reason. In the case of an occupier's development, as I will call it, the building can be planned and executed as a single operation because the detailed requirements of the occupier as to how the building shall be fitted out are known in advance. In the case of a speculative development, however, of shops, offices and perhaps some other categories of building, the building operation will commonly be carried out in two phases. The developer will provide the main structure of the building complete with necessary services in the first phase. But the addition of many features which, when they are provided, will certainly form part of the building, as distinct from mere furnishings, will be postponed to a second phase in order that they may be designed to meet the requirements of the eventual occupier or occupiers. The most obvious example of this two phase process is a speculative development which comprises at ground floor level a row of small shops. On completion of the first phase these will be empty shells with boarded fronts. All the shop fronts and fittings will be provided in the second phase to suit the various requirements of the individual shopkeeper tenants. The same two phase process appears now to be commonly adopted in the speculative development of modern office buildings.'

[20] In Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC) ('Aviva'), Upper Tribunal (Lands Chambers) further described the Reading Approach 3 units, at paragraphs 10 to 15:

'10. Unit A has a net internal floor area of 1,339.20m2, comprising 1,193m2 warehouse and 146.20m2 first floor ancillary office space. It has been occupied since February 2011 by EM4, a distribution company, who installed lighting, some power points for charging forklift trucks, and a works office to the warehouse area and enclosed the undercroft to form a showroom office with suspended ceiling, inset fluorescent lighting and small power. These works were completed before the building was occupied. No further alterations have been made subsequently and the unit remains without heating in the warehouse or partitioning in the first floor offices.

11. Unit A was first shown in the 2005 rating list at RV £119,000 with effect from 1 April 2005 based on an underlying value of £88 per m2.

12. Unit B has a net internal floor area of 606.80m2, comprising 544.90m2 warehouse and 61.90m2 first floor ancillary office space. It was vacant at the material day but has been occupied since March 2010 by Fforest Timber Engineering Ltd (“Fforest”) which took a 10 year lease with a break option after 5 years and a two year concessionary rent period. As was explained in a witness statement of Mr Ian Davies, one of its directors, Fforest had originally been searching for an office near Reading, but found that the market at the time was such that, for the same rent they would pay for a suitable office, they were able to acquire Unit B with the necessary office area (61.9m2) and 544.9m2 of warehouse space in addition. Fforest decided to lease Unit B and intended to use the warehouse –– which in their eyes was effectively rent free –– when the business had grown sufficiently to require it. Mrs Whitby had visited the unit and spoken to Mr Moore of Fforest on 6 August 2010, who told her they had no plans to install any further amenities in the short term, but may do so in future if the warehouse area came to be used for manufacturing. He did not think lighting was yet needed as the warehouse was used only for storage. Mrs Whitby made a further visit on 30 April 2012, by which time a power point had been installed in the tea point area of the warehouse and a single fluorescent strip light in the undercroft area. No further alterations have been made and the unit remained without heating or further power distribution in the warehouse and without office partitioning.

13. Unit B was first shown in the 2005 rating list at RV £61,000 with effect from 1 April 2005 based on an underlying value of £100 per m2.

14. Unit G has a net internal floor area of 2,371.90m2, comprising 2,166.60m2 warehouse and 205.30m2 first floor ancillary office space. It has been occupied since May 2012. The current occupier installed lighting and small power to the warehouse area, and erected partitions in the first floor offices.

15. Unit G was first shown in the 2005 rating list at RV £209,000 with effect from 1 April 2005 based on an underlying value of £88 per m2.'

[21a] Lord Bridge in London Merchant Securities Plc v Islington London BC [1988] 1 AC 303 ('London Merchant'), in House of Lords held, in essence and in analogous circumstances, that a speculative developer could leave buildings at a development stage just short of completion apart from the customary work, and that in such a condition/state, those buildings would not be hereditaments and could stand empty indefinitely without attracting the unoccupied rate (315B to E).

Note:

(1) concepts of 'speculative development' and 'occupier's development'; these are distinct. To quote the start of Lord Bridge's speech in London Merchant:

'My Lords, the Angel Centre is a large, modern office development in Islington. It comprises two buildings. The net office floor space in one building is 162,000 sq. ft., in the other 12,000 sq. ft. The appellants are the owners. They carried out the development for the purpose of providing office space to be let. In this sense the development may be described as speculative. The word is not used in any pejorative sense, but merely to distinguish such a development from one which is carried out by or to the order of the intending occupier. The distinction is of importance for this reason. In the case of an occupier's development, as I will call it, the building can be planned and executed as a single operation because the detailed requirements of the occupier as to how the building shall be fitted out are known in advance. In the case of a speculative development, however, of shops, offices and perhaps some other categories of building, the building operation will commonly be carried out in two phases. The developer will provide the main structure of the building complete with necessary services in the first phase. But the addition of many features which, when they are provided, will certainly form part of the building,as distinct from mere furnishings, will be postponed to a second phase in order that they may be designed to meet the requirements of the eventual occupier or occupiers. The most obvious example of this two phase process is a speculative development which comprises at ground floor level a row of small shops. On completion of the first phase these will be empty shells with boarded fronts. All the shop fronts and fittings will be provided in the second phase to suit the various requirements of the individual shopkeeper tenants. The same two phase process appears now to be commonly adopted in the speculative development of modern office buildings.'

For instance, in Post Office v Nottingham City Council [1976] RA 49, the relevant building was 'purpose-built' (at 628)(i.e. occupier's development), whereas in Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC) and the subject warehouses, 3 were 'speculatively built' (paragraph 1) and 1 was purpose-built (paragraph 16).

(2) 'Customary work' is:

'What kind of work is customarily done to a building of the type with which I am concerned after substantial completion?" Given the common practice of speculative development in two phases of shop and office buildings which I have earlier described, I apprehend that the answer to this question will not normally be in dispute,  or, if in dispute, difficult to determine. In the case of a shop, the customary work will be the installation of the shop front and shop fittings. In the case of this office building there seems to have been no dispute that the customary work embraced no more and no less than what was described as the fitting out work.' (314D)

[21b] In Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC), Upper Tribunal (Lands Chambers) at paragraph 26 said:

'Where a billing authority omits to serve a completion notice, and a building remains unoccupied, it is a question of fact whether the building is completed to the point at which it has become a hereditament and capable of being included in the rating list. The authorities which indicate the proper approach to that question were reviewed by the Tribunal in Porter (VO) v Trustees of Gladman SIPPS [2011] RA 337.'

[22] In official Valuation Office Agency Rating Manual contains, section 2, part 3, which is entitled 'Unoccupied new and altered buildings and completion notices' and paragraph 2, which is entitled 'New buildings without a completion notice'. In there, there is:

(1) paragraphs 2.11 and 2.12:

'A useful test is - ‘will this item be part of the hereditament when provided?’ If it is, then, unless the unit is occupied (and that occupation in effect creates a hereditament), the unit is not complete until it is provided.

This might appear to be a paradox but the test recognises that factual occupation of a building can give rise to a rateable hereditament, whereas the same building left short of ‘completion’ within the [Gladman] context and unoccupied may not be a hereditament in law unless there is a suitably occupied comparator in the locality.' [bold added]

(2) earlier, paragraph 2.7, in a summary about Aviva Investors Property Developments Ltd v Whitby (Valuation Officer) Mills (Valuation Officer) [2013] UKUT 0430 (LC):

'It seems it is necessary to decide how a particular building would typically be completed to be used in the manner for which it was designed. If it is not fully finished to that standard then it will not be ready to be included in a rating list unless a completion notice has been served or it is, in fact, occupied

[23] Interestingly, there does not seem to have been the legislative imperative to prevent business rates avoidance by taking an existing building and stripping it back to its shell and core. In other words, removing Essential Qualifying Features - such that the building/property returns to a condition/state where it is not capable of beneficial occupation. By way of example, see Jackson (Valuation Officer) v Canary Wharf Ltd [2019] UKUT 136 (LC); [2019] RA 411, involving a strip out of an office - the offices being the top 3 floors to One Canada Square, the famous/iconic tower at the centre of Canary Wharf in London. The strip out work was described as follows:

'The works were carried out ... involved the removal of raised flooring, suspended ceilings, partition walls, and mechanical and electrical services, at a cost of £740,254. Additional expenditure of £42,852 was incurred in stripping out the common parts of the three floors, comprising lift lobbies and wc's. As part of the work, new fire-detection systems and sprinklers were installed. The opportunity was also taken to introduce an element of future-proofing, in the form of a new riser which was added to the core to accommodate any additional mechanical or electrical infrastructure that might be required in the future.' (paragraph 11)

The Upper Tribunal in Jackson said, at paragraph 12:

'...the appeal property was fully stripped out to a concrete shell and was incapable of beneficial occupation as an office.'

Seemingly, the/a billing authority could not utilise the Completion Notice Procedure here because there would not be a 'new building' (Schedule 4A, paragraph 1(1) and paragraph 1(2)). The author is not aware of any other procedure.

[24]  It might be helpful to: (a) set out here section 46A of the 1988 Act, which is entitled 'Unoccupied hereditaments: new buildings'; and (b) provide the Completion Notice Procedure provisions from Schedule 4A in a footnote

(1) Section 46A of the 1988 Act provides:

'(1) Schedule 4A below (which makes provision with respect to the determination of a day as the completion day in relation to a new building) shall have effect.

(2) Where

(a) a completion notice is served under Schedule 4A below, and

(b) the building to which the notice relates is not completed on or before the relevant day,

then for the purposes of section 42 above and Schedule 6 below the building shall be deemed to be completed on that day.

(3) For the purposes of subsection (2) above the relevant day in relation to a completion notice is-

(a) where an appeal against the notice is brought under paragraph 4 of Schedule 4A below, the day stated in the notice, and

(b) where no appeal against the notice is brought under that paragraph, the day determined under that Schedule as the completion day in relation to the building to which the notice relates.

(4) Where-

(a) a day is determined under Schedule 4A below as the completion day in relation to a new building, and

(b) the building is not occupied on that day,

it shall be deemed for the purposes of section 45 above to become unoccupied on that day.

(5) Where-

(a) a day is determined under Schedule 4A below as the completion day in relation to a new building, and

(b) the building is one produced by the structural alteration of an existing building,

the hereditament which comprised the existing building shall be deemed for the purposes of section 45 above to have ceased to exist, and to have been omitted from the list, on that day.

(a) “building” includes part of a building, and

(b) references to a new building include references to

(i) a building produced by the structural alteration of an existing building where the existing building is comprised in a hereditament which, by virtue of the alteration, becomes, or becomes part of, a different hereditament or different hereditaments;

(ii) a building situated in England which a hereditament shown in a list comprises or includes, or which a hereditament that was previously shown (but is no longer shown) in a list comprised or included, and that has been subject to alterations;

(iii) part of a building situated in England and added to an existing building which a hereditament shown in a list comprises or includes or which a hereditament that was previously shown (but is no longer shown) in a list comprised or included.'

Section 46A of the Local Government Finance Act 1988 contains references to section 42 and schedule 6 of the Local Government Finance Act 1988.

(a) Section 42 of the Local Government Finance Act 1988 is entitled 'Contents of local lists'; and

(b) Schedule 6 of the Local Government Finance Act 1988 is entitled 'Non-domestic rating: valuation' and paragraph 1 states 'This Schedule has effect to determine the rateable value of non-domestic hereditaments for the purposes of this Part.'

(2) In Local Government Finance Act 1988, Schedule 4A is entitled 'Non-domestic rating: new building (completion days).

Paragraph 1:

'(1) If it comes to the notice of a billing authority that the work remaining to be done on a new building in its area is such that the building can reasonably be expected to be completed within 3 months, the authority shall serve a notice under this paragraph on the owner of the building as soon as is reasonably practicable unless the valuation officer otherwise directs in writing.

(2) If it comes to the notice of a billing authority that a new building in its areas has been completed, the authority may serve a notice under this paragraph on the owner of the building unless the valuation officer otherwise directs in writing.

(3) A billing authority may withdraw a notice under this paragraph by serving on the owner of the building to which the notice relates a subsequent notice under this paragraph.

(4) Where an appeal under paragraph 4 below has been brought against a notice under this paragraph, the power conferred by sub-paragraph (3) above shall only be exercisable with the consent in writing of the owner of the building to which the notice relates.

(5) The power conferred by sub-paragraph (3) above shall cease to be exercisable in relation to a notice under this paragraph once a day has been determined under this Schedule as the completion day in relation to the building to which the notice relates.

(6) In this Schedule “completion notice” means a notice under this paragraph.'

Paragraph 2:

'(1) A completion notice shall specify the building to which it relates and state the day which the authority proposes as the completion day in relation to the building.

(2) Where at the time a completion notice is served it appears to the authority that the building to which the notice relates is not completed, the authority shall propose as the completion day such day, not later than 3 months from and including the day on which the notice is served, as the authority considers is a day by which the building can reasonably be expected to be completed.

(3) Where at the time a completion notice is served it appears to the authority that the building to which the notice relates is completed, the authority shall propose as the completion day the day on which the notice is served.'

Paragraph 3:

'(1) If the person on whom a completion notice is served agrees in writing with the authority by whom the notice is served that a day specified by the agreement shall be the completion day in relation to the building, that day shall be the completion day in relation to it.

(2) Where such an agreement as is mentioned in sub-paragraph (1) above is made, the completion notice relating to the building shall be deemed to have been withdrawn.'

Paragraph 4:

'(1) A person on whom a completion notice is served may appeal to a valuation tribunal against the notice on the ground that the building to which the notice relates has not been or, as the case may be, cannot reasonably be expected to be completed by the day stated in the notice.

(2) Where a person appeals against a completion notice and the appeal is not withdrawn or dismissed, the completion day shall be such day as the tribunal shall determine.

(3) In this paragraph “valuation tribunal” means–

(a) in relation to England: the Valuation Tribunal for England;

(b) in relation to Wales: a valuation tribunal established under paragraph 1 of Schedule 11.'

Paragraph 5:

'Where a completion notice is not withdrawn and no appeal under paragraph 4 above is brought against the notice or any appeal under that paragraph is dismissed or withdrawn, the day stated in the notice shall be the completion day in relation to the building.'

Paragraph 6:

'(1) Where an appeal under paragraph 4 above is brought against a completion notice, then in relation to any day on which the appeal is pending section 45 above shall apply by virtue of section 46A(4) above as if the day stated in the notice had been determined under this Schedule as the completion day in relation to the building to which the notice relates.

(2) The Secretary of State may make regulations providing for the making of financial adjustments where sub-paragraph (1) applies but the day stated in the completion notice is not actually determined as the completion day in relation to the building to which the notice relates.

(3) Regulations under sub-paragraph (2) above may include -

(a) provision requiring payments or repayments to be made, with or without interest; and

(c) provision as to the recovery (by deduction or otherwise) of sums due.

(4) For the purpose of deciding, for the purposes of this paragraph, whether an appeal is pending on a particular day, the state of affairs existing immediately before the day ends shall be treated as having existing throughout the day.'

Paragraph 7:

'(1) A billing authority shall supply to the valuation officer a copy of any completion notice served by it.

(2) If a billing authority withdraws a completion notice, it shall inform the valuation officer of that fact.

(3) A billing authority shall supply the valuation officer with details of any agreement to which it is a party and by virtue of which a completion day is determined under this Schedule in relation to a building.'

Paragraph 8:

'Without prejudice to any other mode of service, a completion notice may be served on a person-

(a) by sending it in a prepaid registered letter, or by the recorded delivery service, addressed to that person at his usual or last known place of abode or, in a case where an address for service has been given by that person, at that address;

(b) in the case of an incorporated company or body, by delivering it to the secretary or clerk of the company or body at their registered or principal office or sending it in a prepaid registered letter or by the recorded delivery service addressed to the secretary or clerk of the company or body at that office; or

(c) where the name or address of that person cannot be ascertained after reasonable inquiry, by addressing it to him by the description of “owner” of the building (describing it) to which the notice relates and by affixing it to some conspicuous part of the building.'

Paragraph 9:

'(1) This paragraph applies in the case of a building to which work remains to be done which is customarily done to a building of the type in question after the building has been substantially completed.

(2) It shall be assumed for the purposes of this Schedule that the building has been or can reasonably be expected to be completed at the end of such period beginning with the date of its completion apart from the work as is reasonably required for carrying out the work.'

Paragraph 10:

'(1) Section 46A(6) applies for the purposes of this Schedule.

(2) In this Schedule-

“completion notice” has the meaning given by paragraph 1(6) above; “owner” , in relation to a building, means the person entitled to possession of the building;

references to the valuation officer, in relation to a [billing authority] 2 , are references to the valuation officer for the authority.'