Commercial to residential conversion - business rates!

[Tosh]

Well - here we go. Just over six months into our project and first encounter with CC and VOA. Here's the story:

 

We bought our site in Nov 17. It was advertised as a building with PP in place to convert to residential. At no point during the conveyancing process were we informed that business rates were payable and at no point did my solicitor mention anything. About 2 months ago we received a bill from the CC for empty premises commercial rates. I said to them that we had started development as defined under their T&CPA and therefore initiated the conversion to residential per the planning permission therefore it was unlawful to use it as commercial. They said all buildings must be rated either domestic or non-domestic. I said how can that be when you're building a new property or converting a building - you don't start paying council tax until you occupy it? They said they'd put the demand on hold until the VOA had assessed it. Well the rep came out today and said the building could still be used. I said how can that be since this was a construction site under H&S law. The building itself has been stripped of electric, there's scaffolding up inside it, the only reason it's still up is because we are retaining the frame, various ancillary buildings are/have been demolished, there's 30T of stone on the yard, there're trenches for electric/drainage all over the shop. Who the hell is going to occupy the site, even if they could?

 

Anyone else had similar problems?

[Ferdinand]

What is the rateable value under Business Rates?

 

You will start paying Council Tax before you occupy it, unless you have carefully strategised ?.

 

F

Edited June 21, 2018 by Ferdinand

[Hecateh]

18 minutes ago, Ferdinand said:

darefull6

 

huh???

 

[newhome]

5 minutes ago, Hecateh said:

 

huh???

 

 

Carefully i imagine  

[Temp]

I don't think there is a legal definition of habitable but google found..

 

https://legal-dictionary.thefreedictionary.com/habitable

habitable

adj. referring to a residence that is safe and can be occupied in reasonable comfort. Although standards vary by region, the premises should be closed in against the weather, provide running water, access to decent toilets and bathing facilities, heating, and electricity. Particularly in multi-dwelling buildings freedom from noxious smells, noise and garbage are included in the standard. This can become important in landlord-tenant disputes or government actions to force a landlord to make the premises livable (abatement of deficiencies). Example: if the roof begins to leak, the water goes off, the electricity shorts out, or the toilet breaks, in most states the landlord has a duty to make repairs when requested or the tenant may order the repairs and deduct the cost from the rent.

 

https://www.legislation.gov.uk/ukpga/1957/56/part/II/crossheading/definition-of-standard-of-fitness/enacted?view=plain

 

Housing Act 1957

 

4 Matters to be taken into account in determining whether a house is unfit

 

(1)In determining for any of the purposes of this Act whether a house is unfit for human habitation, regard shall be had to its condition in respect of the following matters, that is to say—

(a)repair;

(b)stability;



(c)freedom from damp ;



(d)natural lighting;



(e)ventilation;



(f)water supply;



(g)drainage and sanitary conveniences ;



(h)facilities for storage, preparation and cooking of food and for the disposal of waste water ;

and the house shall be deemed to be unfit for human habitation if and only if it is so far defective in one or more of the said matters that it is not reasonably suitable for occupation in that condition.

 

[Ferdinand]

28 minutes ago, Hecateh said:

 

huh???

 

 

#£&(7(*5£#%/;’j Apple auto-typo not-keyboards.

 

iPad came from Sydney, so it thinks it is upside down.

 

Indeed, carefully.

Edited June 21, 2018 by Ferdinand

[Tennentslager]

If it's the same as Scotland you need the assessor to move from rates to council tax register. Up here there is a form for that you complete online. However the assessor can take a long time to process this (we have been told up to two years) meanwhile you have to pay because the Council have a duty to collect the revenue and can't do nowt until the independent assessor makes a decision to change use. Use the assessor complaints process maybe..?

 

[Hecateh]

5 minutes ago, Ferdinand said:

 

#£&(7(*5£#%/;’j Apple auto-typo not-keyboards.

 

iPad came from Sydney, so it thinks it is upside down.

 

Indeed, carefully.

 

iPad - says it all 

[PeterW]

Ok

 

For a commercial premises they need to decide what it is for rateable value. 

 

Firstly read this :

Empty properties

You don’t have to pay business rates on empty buildings for 3 months. After this time, most businesses must pay full business rates.

Some properties can get extended empty property relief:

industrial premises (for example warehouses) are exempt for a further 3 months

listed buildings - until they’re reoccupied

buildings with a rateable value under £2,900 - until they’re reoccupied

properties owned by charities - only if the property’s next use will be mostly for charitable purposes

community amateur sports clubs buildings - only if the next use will be mostly as a sports club

Contact your local council to let them know when your property becomes vacant.

 

Then read this

 

Small business rate relief

You can get small business rate relief if:

your property’s rateable value is less than £15,000

your business only uses one property - you may still be able to get relief if you use more

Contact your local council to apply for small business rate relief.

 

And finally check this :

 

https://www.gov.uk/correct-your-business-rates

 

Chances are the building is below most / all of those thresholds and you just apply for small business relief and crack on ... 

 

[Mr Punter]

I have not had any issues with this. Is it Permitted Development for Office to Residential where you have prior approval?  If so, send a copy of the Prior Approval to the Valuation Office and request that the building is removed from the rating list.

[Tosh]

Thanks all.

 

My take on this, rightly or wrongly, is this....

 

The property has full planning permission for change of use from commercial to residential so my investigation was based around when that change of use actually takes effect. From the Town and Country Planning Act it says a change of use commences once development starts. So then I looked up the definition of development as seen by the TCPA. It states that:

In order to lawfully commence development it is necessary to satisfy the legal requirements in section 56(4) of the Town and Country Planning Act 1990. This says that “development is taken to be begun on the earliest date on which a material operation is carried out”.  A material operation is defined in the Act and can include any works of construction, demolition, digging foundations, laying out or constructing a road and a material change in the use of the land.

 

Given that I've been undertaking demolition, landscaping, making access points etc it would appear that the change of use has taken effect and therefore it is now a residential property.

 

Will I have to pay council tax on the property whilst we're converting it? BTW we're not living on site however I guess we could be classed as occupying it? My thoughts though are at least the council tax would be less than the business rates as I would imagine we'd be on the lowest banding until we finished the house and then be re-banded?

 

Thoughts??

 

 

[newhome]

I noticed that you said that the property has been abandoned for 10 years. Has the previous owner been paying business rates on it during that time? 

 

There are several threads that discuss when a dwelling is deemed complete for Council tax purposes including the 2 below. These do not have the complication of a commercial to residential conversion however. 

 

 

 

Personally I would try the advice @Mr Punter gives above and cite that as you have permission to convert to residential you wish to remove it from the rating list. Then as the house is not habitable it does not meet the criteria for council tax at this point. 

 

I also found this legal case that makes interesting reading if they are determined that you must pay business rates. 

 

https://www.bsdr.com/publication/business-rates-redevelopment/

 

If they insist that you must pay Council tax most LAs provide an exemption of circa 12 months if a property is undergoing major works so worth checking the LA website to see what your LA offers. 

 

As others have found you may have to fight a bit. 

 

 

[Tosh]

Thanks @newhome. I agree - argue to take it off the ratings list seems the most logical approach. I also read the case law article and is my Plan B if the fight gets messy but hopefully council will see sense

 

Interesting piece about when council tax is due so will keep that up my sleeve.

 

Thanks for all the advice everyone.