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Rateable value and opposed lease renewals - A tenant's claim for statutory compensation under the Landlord and Tenant Act 1954

on Wednesday, 11 October 2023.

Businesses and the CBI are calling for Chancellor Jeremy Hunt to freeze the business rates multiplier which will be announced in the Autumn Statement this November.

The different multipliers

In order to calculate business rates the Council multiplies the rateable value of a business property by a 'multiplier' to determine how much a business must pay. There is a multiplier set by the Government for the whole of England which will be applicable unless the business is entitled to claim relief. The current standard multiplier is 51.20p.

This multiplier is not to be confused with the multiplier used when calculating statutory compensation due to a tenant in an opposed lease renewal under the Landlord and Tenant Act 1954 (the Act). This calculation is also dependent on a multiplier, but this is a different multiplier applied to rateable values.

When is compensation payable?

If a commercial lease is not contracted out of the Act, a tenant will generally enjoy security of tenure. This means that business tenants can remain in occupation at the end of their fixed term on the same terms as the existing tenancy and can usually call for a new lease to be granted. A landlord can only oppose the grant of a new lease if it can establish a statutory ground of opposition.

There are a total of seven grounds available. Three of these seven grounds are 'no-fault' grounds and briefly described as:

  • uneconomic subletting
  • redevelopment
  • property required for landlord's own use

As these are 'no-fault' grounds, ie the landlord is opposing renewal through no fault of the tenant, if the landlord's opposition to a new lease is successful the tenant will be entitled to compensation from the landlord pursuant to section 37 of the Act.

The amount of compensation payable to the tenant is based upon the rateable value of the premises. This rateable value is determined by the VOA's valuation and is either:

  • the basic sum: a multiplier of one times the rateable value of the premises
  • the enhanced rate: a multiplier of two times the rateable value of the premises (if the tenant or any predecessor with the same business has been in occupation for 14 years or more)

Revaluation by the Valuation Office Agency

The revaluation of business rates is carried out regularly by the Valuation Office Agency (VOA) and the most recent full revaluation was conducted on 1 April 2023. At revaluation, the VOA updates the rateable value of business properties to reflect changes in the property market.

It is expected that the next full revaluation will not occur for some time but landlords should be aware when revaluation is anticipated if they intend to oppose renewal on no- fault grounds. If at all possible, the notice opposing renewal should be served prior to the revaluation if an increase is expected as it is the rateable value at the time the notice is served that is relevant.

As such, while tenants in particular will be anxious to know whether business rates will be rising, landlords opposing the renewal of leases should carefully monitor re-valuations of rateable values.

If you would like to know more about security of tenure under the Act and how this may impact a tenancy of yours, please contact Laura Seaman, in our Property Litigation team on 01923 919 314, or complete the form below.

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