Advice on business lease

[rob roberts]

Would appreciate any advice on this. My wife has a shop. When she moved premises, taking over a unit adjacent to the one she already had, with the same landlord, a clause was inserted in the lease that any reduction in business rates she managed to achieve by applying for a revaluation, would be split 50/50 with the landlord.
She managed to obtain a reduction of £750 on the rateable value. aaprox decrease of £250 in rates payable.

The block of properties was subsequently sold, and the new landlord appointed a new property manager.
From the 1st of April 2017 the Government adjusted the threshold for when rates became payable , meaning that the rates payable became zero.
The new property management company is now claiming that 50% of what has been saved by the Government threshold being increased is due to be passed on to them and the landlords,and after countless emails between themselves and my wife, they have now submitted an invoice for £2,400, backdated to when they took over (March 2017) as the rates originally payable before those latest alignments, was £4,800. They are also claiming that this sum should be added to the annual rent, currently £8,500 increasing to £10,900 for the remaining term of the lease. This is in additon to the agreed increases within the lease

The actual clause in the lease states, word for word :" In the event at any time during the contractual term, the business rates payable in respect of the property, shall be reduced as a result of a change in the valuation roll, then the tenant shall pay to the landlord on demand, a sum equal to 50% of the value of any saving, being the reduction in the total amount payable, in respect of the business rates, in respect of the property."
My wife is quite happy to pay the difference in the saving she has managed to obtain by lobbying the valuation office, but feels that the saving that has been made by the Government's increase in threshold does not apply to the clause, and as such is unfair. The Management Company are also threatening legal action if this amount is not paid.

|By their own admission this Clause is ambiguous, and the fact that the previous Property Managers, in correspondence with my wife, made it clear that any additonal rent would be based purely on any saving she obtained via the Valuation Office, seems to go unheeded with the new people.
Opinions please?
Thanks in advance.

 

[kulture]

Go see a solicitor.
I seem to remember this being asked before. I feel that the wording is not at all ambiguous. The

the business rates payable in respect of the property, shall be reduced as a result of a change in the valuation roll

says it explicitly. The valuation roll has NOT been reduced. The tenant happens to be given a 100% reduction off the charge. If you look at the actual rates bill it will clearly state the valuation, the rates payable AND the discount. The lease calculation is based on the valuation value on the roll, not any discount. So I think you have a strong case to tell them NO.

 

[Supercoach]

Quite why you would agree to share any reduction in the first place is beyond me as all it does is increase the landlord's profits.
You need to take specialist advice and perhaps send a pm to @rach88 on the forum but I believe you have a strong case based on the actual wording of the rates bill.

 

[rob roberts]

My wife agreed to that clause being put in by the original landlord as she negotiated a good deal on the rental the landlord was really helpful in getting the property redecorated and improved, and she had always had an excellent relationship with them in her previous property.
It's only since the property changed hands that a problem arose. The new landlords appointed a new property management company who have from day one been trying to ramp up payments for all six shops in the block.
My wife has taken legal advice on this throughout, and her solicitor is pretty certain she is in the right, but this property manager is like a broken record. Our solicitor wrote to him detailing it all, but his response was that our solicitor was wrong, and he had consulted his solicitor who agreed with him. The property manager forwarded the email from his solicitor, which was a two line response to him. Interestingly he only quoted half of the wording in the clause to his solicitor, missing out the wording that didn't suit him!

 

[Supercoach]

My wife agreed to that clause being put in by the original landlord as she negotiated a good deal on the rental the landlord was really helpful in getting the property redecorated and improved, and she had always had an excellent relationship with them in her previous property.

I still don't see why - it's illogical.

My wife has taken legal advice on this throughout, and her solicitor is pretty certain she is in the right, but this property manager is like a broken record.

You have your answer!
Sometimes managing agents are charged with getting more aggressive by the landlord and the agents show how good they are by doing so.
Your advice is you no need to pay so stick to your guns and refuse to. You will only find out how serious the other side are if/when they actually take legal action but this is the point that any bluffing by them runs out because it starts to incur costs for the landlord.

 

[kulture]

I would stick with the advice from your solicitor and tell them NO. If they keep on tell them to stop harassing you. Either they go to court or they don't. In court it is up to the judge, but on the face of it you have a good case.

 

[rach88]

Was the 2017 rateable value always under the new small business rates relief threshold (£12,000), even before your wife lobbied the valuation office?

If so I cannot see how the managing agents have any case whatsoever at least in respect of the 2017/18 rates year onwards. The business rates payable in respect of the property have not been reduced as a result of a change in the valuation roll. They have been reduced purely due to a change in government policy in respect of small business rates relief.

Even if her negotiations with the valuation office had achieved a saving for 2017/18 e.g. she had managed to get the RV reduced from £12,500 to £11,750 then I would argue that the appropriate calculation for the purposes of the lease is the difference between what would otherwise have paid in 2017/18 (very little) versus what she is now paying (£0). Her rates bill from last year is irrelevant to working out the saving for this year.

As an aside, I do not think it would be appropriate to describe the revaluation which took place on 1 April 2017 as "a change in the valuation roll". At each revaluation a fresh "list" (or roll) is prepared. But this is somewhat irrelevant as it sounds as if the RV both before and after the revaluation was under £12k and therefore eligible for 100% small business rates relief under the new rules.

 

[rob roberts]

Hi Rach, the RV when my wife lobbied the vaulation office was £12,250. She managed to get that reduced to £11,750, and the April revaluation reduced it to £11,500.

 

[rach88]

When did she achieve the first reduction to £11,750? If it was this year, are you sure that her 2017 RV was not also altered downwards at the same time? Sometimes they do this especially if the reduction was due to them updating the physical facts about the property such as the floor area.

I am wondering whether the managing agents are under the misconception that the £12,000 threshold is an all or nothing limit for small business rates relief when in fact it is on a stepped basis from 100% at £12k to 0% at £15k. If it were an 'all or nothing' thing, and your wife had managed to reduce her 2017 RV under the threshold, then I could see why the agents might think they had a case (though they would be wrong)

Anyway if you wanted to PM me more info I'd be happy to advise further.