With the new rating revaluation of business and other non-domestic properties coming into force in April the Government has been considering improving the present appeals system. Dennis Mabey looks at its proposals.
Under the much-maligned (but now much lamented) General Rate Act 1967 there were no statutory time-limits on the making of proposals for alteration of the valuation list. A ratepayer or any other “aggrieved” person, including a rating authority, could make a proposal at any time.
Restrictions were fiscal. Any ratepayer making a proposal within the first six months of a new list had the right to withhold half of any increase in rate liability until the proposal was settled. He was not estopped from making a proposal later in the first year, or subsequently, but the effective date of any alteration of the list was limited to the beginning of the rate year in which the proposal was made, although RAs did have a discretionary power to refund overpayments in other years.
Similarly, any alteration consequent upon a proposal by the valuation officer, to increase or reduce the assessment, was effective only within the rate year such proposal was served upon the occupier.
The question may be posed, was there any real practical (as opposed to ideological) reason why this system had to be so radically changed? But changed it was by the Local Government Finance Act 1988 and attendant secondary legislation – originally the Non-Domestic Rating (Alteration of lists and Appeals) Regulations 1990, but now principally contained in the [same title] 1993 Regulations which came into force on April 1 1993 (and recently amended by 1994 regulations).
To accompany the 1990 revaluation, these regulations imposed a time-limit of six months on the making of proposals against the rateable value in a variety of circumstances. Initially a ratepayer (or other “interested person”) or a “relevant authority” was permitted to make a proposal only within the first six months of the new rating list (RL) , and the withholding provisions of the 1967 Act were replaced by a right to receive interest on excess rates paid when the proposal was finally settled.
After the first six months, a proposal may now be made only where the person or authority is of the opinion that by reason of a “material change of circumstances” (MCC) or a decision of the valuation tribunal (VT) or Lands Tribunal (LT) or other court, the RV is wrong. Such a proposal must be made within six months of the day when the change took place or the decision given.
There is also an exception to this prohibition for a new ratepayer (normally a change of occupier). Such person may make a proposal within six months of becoming the ratepayer provided no earlier proposal in respect of the same hereditament and arising from the same facts has already been determined by the VT or LT. This right is not precluded by the withdrawal or settlement out of court of such earlier proposal.
Where the VO alters the RL an interested person may make a proposal to restore or further alter the list entry, but he may do so only within six months of service of the VO notice of alteration or, if there is no such notice, the date when the list is altered.
In the event of any proposal not being withdrawn or otherwise settled within six months, the VO is required to refer the “disagreement” as an appeal by the proposer to the relevant VT.
So what gave rise to this re-write of the rules in 1990? In the consultation paper (CP) the Government states that the six-month limit on initial proposals was introduced in 1990 to enable it to judge the full extent of the challenge to the new list at an early stage, and to assist VOs and VTs to establish levels of value as soon as possible: that it was also intended to provide stability in the rate yield (bearing in mind that the rate changed from a local RA rate to a national rate – the UBR) by preventing repeated appeals on the same property without good reason, or other vexatious appeals: likewise the six-month limit for making later proposals was for consistency and to ensure they were made close to the circumstances giving rise to them.
Let it be said also that at the time there was the threat that, if proposals were not restricted in this manner, we would be in danger of losing (again) quinquennial revaluations because of pressures on VOs. Although there was probably no choice in the matter, and since the profession was determined that businesses in England and Wales should not again suffer the consequences of abandoned revaluations, this threat was sufficiently persuasive for general acquiescence in such an unwelcome restriction of appeal rights.
It is therefore illuminating to read the Government’s comments in the CP on the perceived problems in the operation of this six-month limit over the past 4 1/2 years, that: (a) it has failed to control the timing of proposals; (b) it conflicts with the VO’s duty to maintain an accurate list, and (c) that the restriction cannot always be enforced.
Looking at these three factors more closely, it is contended that the fact that nearly 750,000 proposals will have been made after the first six months does not, of itself, show the failure of the restriction. Many of such later proposals will reflect changes of circumstances, but (the CP adds) it may also be that other rules themselves allow what are, in essence, out-of-time challenges to the list.
It implies that, even on out-of-time proposals, the VO will inspect the property in accordance with his duty and correct the value if it is wrong. How many VOs actually do this? The usual response is a standard rebuffing letter stating “the proposal is not valid”.
When making a proposal against a notification of list alteration there is no restriction on the ratepayer’s right to challenge the value basis: but the VO (or tribunal) has still to be persuaded and if the basis is wrong it would be inequitable if the ratepayer was denied this right on a perfectly legitimate proposal.
If the restriction is unenforceable this could be said to flow partly from the limited rights of a new occupier, but it does so mainly from the rule that ratepayers need only be “of the opinion” that an MCC or VT decision affects the value of their property in order to qualify for the right to make a proposal.
The definition of a “material change of circumstances” is sufficiently wide to encompass virtually all physical matters affecting the state, enjoyment, or type of occupation of the property, or the state of the locality, or matters physically manifest there, or the use/occupation of other premises.
Clearly, therefore, no VO is in a position to gainsay a ratepayer’s opinion that something has occurred to change the value of his property: any dispute will go to the matter of value, not to the validity of the proposal.
The proposals
With the advent of another revaluation in 1995, the Government has taken the opportunity to carry out a review of all non-domestic rating matters, including another look at the appeal procedures. For this, and for the decision to consult, it is to be commended, but whether we like what we find is another matter.
It has formed the view that, despite arguments against the first six months rule on the grounds of unfairness to ratepayers (particularly the small business man) who, for whatever reason, may miss the deadline, it would be to the ratepayers’ benefit, and the management of the appeals system, if ratepayers continued to have some incentive to decide early in the life of the list whether to appeal: but that financial incentives are not a suitable or practicable alternative to time-limits as a means of influencing behaviour.
Except to the extent that it may (at least in some areas) enable the authorities to process appeals earlier than would otherwise be the case, it is difficult to see how ratepayers can benefit from a time embargo. But, of course, that is what this is all about – speeding up the process of appeal determinations and too bad if the ratepayer should miss out on the deadline and does not know what other remedies are available to him!
For these (and probably other esoteric) reasons the Government is not prepared to revert to the pre-1990 rules. For one fleeting moment it did consider the option of no time-limits for proposals: but in the summer heatwave the thought soon flew out of the open window and floated away down Marsham Street!
It will be seen that, at present, there is a common time period of six months in all matters concerning the making of proposals and their transmission as appeals and it is the variation of this common time element that forms the main plank in the following proposed changes set out in the CP :
(1) To shorten the initial unrestricted period at the start of the list from six months to three months.
This, of course, is the complete antithesis to the idea of abolishing time-limits and arises from an analysis which purports to show that the existence of time-limits “provides a powerful psychological incentive for ratepayers to act quickly”. It is claimed that ratepayers’ agents will want to avoid being last in the queue, since if other ratepayers and agents are submitting appeals in accordance with deadlines, VOs and VTs will be able to start settling the tone of the list, and agents who submit proposals later may find it more difficult to argue their case for lower values. Such a theory will be regarded by most agents as being as hypothetical as is the rating “tenant”!
Three months is much too short an initial period for ratepayers with large portfolios to give time for proper consideration to the merits of an appeal – and for most rating surveyors to advise their clients and receive instructions – and if this highly controversial change is legislated, there will be an even greater overloading of the system than with a six-month limit.
(2) If this (three-month) option is agreed, the VO would inform occupiers directly of their new RVs in the draft RL in January 1995.
This proposal is intended to alleviate the above problems associated with such a tight deadline by indicating to ratepayers in broad terms the implications for their rate bills. It is an absolute pre-requisite of any reduction in the six-month limit, as is the need for the draft list to be made availbale for purchase by rating surveyors – preferably in micro-fiche format. The notification will not, of course, explain any effect of phasing, but it is a positive move to help ratepayers and, as is the Scottish practice, should be introduced whether or not the three-month initial period is adopted.
(3) Ratepayers making proposals on MCC or VT decision grounds to be required to explain on the proposal form the manner in which, in their opinion, the MCC or VT decision affects the value of their property: But time restrictions on such proposals to be removed.
The proposal to remove time restrictions is to be applauded and there can be no real objection to the proposed requirement to explain how it is considered that the grounds apply. This change is clearly intended to counter the spurious “cowboy proposals” currently flooding VOs and VTs.
Presumably there is no intention to change the “opinion” status mentioned above, nor to re-introduce the “relevant VT” requirement in the 1990 Regulations but rightly deleted in 1993.
What is still missing, however, is a right to make a proposal when appeals going to the root of “tone” are settled other than by a VT or LT decision (as frequently happens, eg in a shopping street or centre) and, for whatever reason, some ratepayers have not made proposals within the time-limit. Except for time-consuming and costly judicial review proceedings, they are entirely in the hands of the VO to carry out his duty to correct the list.
This may not be so easy to achieve as the CP seems to envisage. VOs are not renowned for initiating such corrections without requests to do so. Most will then take appropriate action, but regrettably there is the odd (fortunately rare) VO who, for no reason other than sheer obduracy, will not do so within a reasonable time. If this causes financial embarrassment to the ratepayer, the quickest and most effective remedy is a complaint to the VOA chief executive.
Time is frequently of the essence in these cases because, if circumstances affecting a property change before the VO alters the list, he will be unable to reflect the situation before that change occurred. If the original list entry is wrong and the ratepayer does not realise this until it is too late under the present rules, it is arguable that he should have some other remedy.
This could take the form of allowing him to make a proposal on the same grounds as if there had been a tribunal decision. This would not offend the principle of no out-of-time challenge to the tone of list and, since value is money and money is “physical”, such a proposal could be legitimate under the “physically manifest” provisions in the MCC definition. But in order to avoid even further delay VOs would need to be “advised” to accept proposals of this nature.
(4) To keep the six-month period in which proposals can be made following a change of occupier.
The above comments apply equally to this situation. However, the CP does accept that a new occupier will be disadvantaged in so far as he will not have received prior notification of the RV (although he may be aware of it from his “inquiries” before leasing or purchasing the property). The Government therefore proposes to keep the present limit of six months.
(5) To make no change to the material day rules.
The rules for determining RV require the VO to look at the circumstances either (in the case of the original list entry) at the date it was compiled, or (subsequently) at the date of the proposal, or, if there is no proposal, the date of his alteration of the list. There would seem to be no reason to review these rules.
(6) To reduce the period in which proposals can be made following a VO alteration to the list from six months to three months.
Bearing in mind that pre-1990 a ratepayer had only 28 days in which to “object” to a VO alteration (albeit he could still make a proposal with a different effective date), six months was always on the generous side and, except that this proposal will also change the common time period previously mentioned, if the initial time limit is reduced to three months it would be logical to do the same in respect of VO notices of alteration.
(7) To retain the current procedure for the transmission of proposals to VTs, but reduce the time period to three months.
Since it is a fact that, for one reason or another, only a relatively small percentage of proposals are considered by VOs for possible early resolution within the present time-period of six months, the proposed reduction to three months will make little difference to the numbers transmitted, but it will possibly enable VTs to hasten the listings for hearing. Whether that has any dramatic effect on actual settlements at an earlier stage remains to be seen. Because of the increased time pressures both on VOs and agents, it could actually mean an increase in applications for postponements of hearings.
It is an interesting feature of the post-1990 picture that VOs are far more reluctant to well-found proposals because under internal procedures it is said to be “easier” to process agreements.
The CP clearly indicates that the Government has turned its back on any suggestion of direct reference of proposals to VTs instead of to VOs as at present.
(8) To reduce the statutory time allowed for the VO to notify authorities of list alterations after compilation from six weeks to four weeks.
It has always been a bone of contention that six weeks is too long for agreed changes to be notified to billing authorities (BA), and since it would now seem that the VOA has the facility to update its schedules more frequently, reduction of the period to four weeks is to be welcomed.
(9) When a proposal is settled, the VO to be under a duty to serve notice of the list alteration on the current ratepayer (and on any person with an appeal on the property outstanding) on or before the date on which he notifies the relevant BA.
This change is also to be welcomed and it is noted that the CP implies that the ratepayer could normally expect to be notified at the same time as the alteration is made.
Conclusions
As was to be expected, there is some good and some bad news in the consultation paper, a study of which throws up a recurring double theme which appears to have influenced Government thinking.
The first is that priority must be given to establishing the tone of the list (no quarrel with that), but that this must be maintained at all costs almost regardless as to equity for ratepayers who may have just cause for challenging it. This is demonstrated in the time-limits applied to proposals which may affect the tone, but not to those unlikely to do so.
The second is the consuming concern with the VO’s duty to maintain an accurate list under section 41 of the 1988 Act, as if this were something new. A VO has always had such a duty, but this did not create any conflict pre-1990 in relation to effective dates for ratepayer (or VO) proposals as either the start of the rate year or the date of the proposal, whichever was appropriate.
Speed does not necessarily equal improvement and the CP gives the impression of being more concerned with the former – for the sake of “the system” – rather than the latter: for the benefit of he who foots the bill, namely the ratepayer. Could it be that by adopting a financial incentive system the Government could rethink its effective date policy in a far more liberal manner than has been the case hitherto, thereby achieving both objectives?
Responses to the DOE consultation paper are required by October 14.
Dennis Mabey BSc FRICS(dip rating) IRRV, a past-president of the Rating Surveyors’ Association, is now a freelance rating consultant.