Colbert said that the art of taxation lay in so plucking the goose as to get the most feathers with the least hissing. A recent decision of the Valuation Tribunal in relation to consulting rooms is a timely reminder of how medical practitioners can tackle the problem of high commercial rates — saving money now and often long into the future.
What are rates?
Rates originated in the 19th Century when all properties, with limited exceptions, were given a value based on the annual letting value, and this value was used to calculate the rate or tax payable by the occupier of each property. The burden of paying rates has narrowed in recent decades, with rates on domestic property being abolished in 1977, and rates on agricultural land and buildings being discontinued in 1982. Nevertheless, those who hold commercial property (which includes most, if not all, medical practitioners) are visited each year with a substantial bill for a tax, which, while it can vary substantially from one local authority area to another, is usually substantial.
Who is liable to pay?
The occupier on the date on which the rate is made by the local authority is primarily liable for the full year’s rates, although a subsequent occupier may be held liable in certain circumstances. Typically, rates are made when the local authority holds its annual budget meeting in the early part of the year and then advertises the rate proposed for its functional area.
If a property is empty, the owner or person ‘entitled to occupy’ is still liable for payment of the rates, although he or she may qualify for reimbursement of amounts paid, subject to satisfying certain specified criteria.
How are rates calculated?
All properties are given a rateable valuation (the Net Annual Value or ‘NAV’) by the Commissioner of Valuation in the Valuation Office. The Valuation Office is an independent body and bases the rateable valuation on the open market rental value of the property at a specified valuation date.
Rates are then calculated by multiplying the rateable valuation of one’s property by the multiplier determined by the local authority (the annual rate on valuation or ‘ARV’).
The point of attack
This very crude overview illustrates an important dynamic. While submissions can be made to a local authority that its ARV is too high, the main point of attack for an aggrieved ratepayer is the NAV set by the Commissioner of Valuation — particularly where the value is being fixed at a date that no longer corresponds to current values. For example, in respect of Dún Laoghaire-Rathdown’s recent revaluation, the valuation date for determining the NAV was September 30, 2005, shortly before the present collapse in both capital and rental values commenced.
Challenging a valuation — Part one
Ratepayers can request a revaluation of their premises if a material change of circumstances has occurred since the last valuation. Arguably, present economic circumstances represent just such circumstances. Where a request is received, a valuer, called a ‘Revision Officer’, will contact the person in question to arrange an appointment to inspect the property to be valued.
After inspecting the property, the Revision Officer will typically send a draft certificate to the occupier. This document contains the proposed new valuation for the property and other details.
Inertia in the face of the draft certificate can rob ratepayers of an important opportunity to drive their rates bill down. If the ratepayer is unhappy with the valuation proposed in the draft certificate, a submission must be made in writing to the Revision Officer within 28 days of the issue of the draft certificate.
If the premises being valued are substantial, or if there is an opportunity for medical practitioners to group together, the entire process can be put in the hands of a valuer to make detailed, professional submissions. However, there is no barrier to the general practitioner in modest premises choosing to take up the cudgels him- or herself or retaining a solicitor to deal with matters on their behalf. Either way, interacting with the Revision Officer at this early stage holds out the prospect of significantly reducing the valuation set out in the draft certificate.
After considering any submissions and making any reduction, the revision officer will send out a final valuation certificate.
Challenging a valuation — Part two
On receiving the final valuation certificate, the medical practitioner has a second opportunity to challenge the value being attributed to his or her property. By submitting the appropriate form and paying the applicable fee within 40 days from the date of issue of the final valuation certificate, an appeal can be lodged against the valuation.
The form and details of the fee can be obtained from, and are lodged with, the Valuation Office (www.valoff.ie).
On receipt of the appeal, the Commissioner of Valuation will consider the matter and make a decision within six months of its receipt.
The Valuation Office is also the avenue to take if the disputed valuation is one which was not carried out at the request of the ratepayer, but rather was part of a general revaluation carried out on the initiative of the local authority itself. This happens regularly under Part V of the Valuation Act, 2001. As noted above, Dún Laoghaire-Rathdown has recently completed such a revaluation. Waterford City and County Councils have recently commenced the process of revaluing commercial property within their functional areas.
Challenging a valuation — Part three
The Valuation Tribunal (www.valuation-trib.ie) is an independent body set up to settle disputed valuations between the Valuation Office, ratepayers and/or local authorities. It is another route that medical practitioners can explore if dissatisfied with the ruling of the Commissioner of Valuation. All appeals to the Tribunal are again in writing and are lodged, together with the lodging fee, within 28 days of the issue of the decision of the Commissioner of Valuation being appealed.
A practical example
Recently, the Valuation Tribunal delivered its decision in the appeal brought by a cardiologist in relation to his consulting rooms in Dublin. This arose from a proposed valuation of €39,000, which had been issued by Dún Laoghaire-Rathdown County Council in respect of these consulting rooms.
The consultant moved quickly. This firm was instructed and Mr Benedict Ó Floinn, BL, who acts for both local authorities and private clients in valuation matters, was engaged.
The history given by the Valuation Tribunal is instructive of how appeals in this type of case may proceed. Following submissions, the initial valuation of the consulting rooms was reduced from €39,000 to €29,300. An appeal was lodged with the Commissioner of Valuation, but the valuation of €29,300 stood. The final appeal was then lodged with the Valuation Tribunal in June 2011.
The hearing of the appeal before the Tribunal was unusual in that it proceeded without the benefit of an expert valuer, the appellant consultant taking the stand himself and giving evidence about comparable consulting rooms elsewhere.
It was striking that the evidence given in reply to the consultant’s case by the valuation officer did not include current rental evidence, which is the norm, but relied on a variety of local agreements.
Evidence was also given of uncontested valuations in similar properties — in other words, the absence of ‘hissing’ by the occupiers of other properties was relied upon to oppose the appeal rather than an objective valuation as such!
While the Tribunal was of the view that it is appropriate to value property at a premium where consulting rooms are in a building exclusively devoted to medical consulting and are close to a hospital, it was nevertheless of the view that the valuation of the consulting rooms should be reduced further to €24,420.
In other words, at the conclusion of the process of appeals, the valuation of €39,000 proposed at the outset had been reduced by 40 per cent.
There are undoubted advantages to ratepayers investigating whether their rates bill can be moderated as a matter of right, rather than simply grace and favour. As noted above, opportunities exist for medical practitioners to group together and thereby to marshall significant resources to retain expert valuers and full representation, at modest cost to each individual.
Even where such opportunities do not exist or are not availed of, individuals can invoke the process of appeals and ensure that costs are kept to a minimum by streamlining their submissions. Whatever approach is adopted, passivity in the face of rateable valuations is rarely the best course. Remember to hiss!
- Peter Dempsey is a solicitor with Dempsey Solicitors in The Capel Building, Mary’s Abbey, Dublin 7 and specialises in rating disputes as well as in general practice.