The Court of Session has today dealt the struggling retail sector a major blow in a landmark business rates appeal case.
The case, which has been ongoing on for three years, centred on the ability of ratepayers (i.e. the retailers) to appeal to have lower rates bills when circumstances changed and their properties’ rental values fell. The case was run by a mix of national and local Scottish retailers including Schuh, Superdrug, Thornton’s and Greaves Sports.
Brian Rogan, head of Rating and Taxation in Scotland for CBRE, said: “Rates bills are generally revalued every five years but ratepayers are allowed to appeal in between revaluations when there is a ‘material change of circumstances’.
“Retailers in many high streets across Scotland have seen their property’s rental values fall by up to 50% since the peak of the market in 2007 due to the recession, causing changes in consumer trends and the success of out of town developments.”
The court has ruled that falls in rental values in town centres caused by changes in the economy or caused by massive out of town centres are not covered by the definition of ‘material change of circumstance’ in rating law. The Court was asked to look at statements made by parliament which the retailers suggested meant that the definition of ‘material change of circumstances’ was purposely amended by the Conservative Government in 1984 to allow economic changes to lead to reduced rates bills for ratepayers.
The court however has disregarded this motion and placed a restricted interpretation on the definition of what constitutes a ‘material change of circumstances’.
The decision follows a Scottish Government announcement that the next revaluation of commercial properties is to be postponed to 2017 (from 2015). Recent statistical information from the IPD suggested that this delay will hurt the Scottish retail sector hardest.
Brian Rogan continued: “The Lands Valuation Appeal Court has dealt Scotland’s high streets a killer blow with this decision. This is actually a double whammy for the retail sector in Scotland as ratepayers are now unable to have their rates bills changed to reflect local circumstances until the next revaluation in 2017. The Scottish system is now far more restrictive than its English counterpart. It is an undoubted stumbling block for the hopes of regenerating Scotland’s high streets. The decision comes hard on the heels of the decision to postpone the next revaluation, which as the recent figures from the IPD have shown will hurt Scotland’s retail sector the hardest.
“If the Scottish Government wants to help Scotland’s high streets they should alter the legislation to counter this decision or reinstate the 2015 revaluation.”
