New rates system on the way

[Published in the Sunday Business Post 09.09.12]

Dublin business owners are likely to face new commercial rates from Dublin City Council following a revaluation process to be carried out the Valuation Office, the State’s property valuation agency, with new rates being effective from January 2014.

It will be the first time that a full General Revaluation of commercial rates has been carried out in about 100 years in Dublin and over 25,000 properties will be revalued.

Rates are levied on commercial properties including shops, offices, industrial buildings and land, on an annual basis by local authorities to secure revenue for the provision of services such as street cleaning, lighting and refuse collection.

The purpose of a revaluation is to bring more equity, fairness and transparency into the Dublin City Council rating system and to bring it up to date to reflect recent changes in property rental values.

While there may be some trepidation among business owners as to what the new revaluation will mean for them, they can be assured that the process will be carried out in a fair and transparent manner with Proposed Valuation Certificates due to be issued during October and November this year.

According to the Society of Chartered Surveyors Ireland/IPD Commercial Property Index rents have declined by approximately 60 per cent from the peak. However, the reduction in rents won’t necessarily result in a reduction in commercial rates. In fact, it may result in an increase in rate bills for some business owners, depending on the particular type, location and physical characteristics of each property. In other cases, there may be a reduction in the rates liability which will be good news for some business owners.

Understandably, business owners are likely to be frustrated by cases where their commercial rates liability has increased, despite the fact that other costs to their business have decreased. Indeed, in an era where Ireland needs to demonstrate competitiveness and support entrepreneurship and employment, keeping costs down is a necessity.

Furthermore, it is likely that the revaluation will put further rates pressure on retailers in prime retail zones who are already experiencing challenging economic conditions, compounded by further falls in retail sales volume according to the latest CSO figures.

However, the rateable valuation process is set out in the Valuation Act 2001 and does make the system more transparent for business owners.

Ratepayers should be aware that they can make representations to the Valuation Office with regard to their rates liabilities but must make them within 28 days of the issue of their Proposed Valuation Certificate. Representations can be made directly or by an experienced and qualified rating professional who can provide independent advice and impartial representations to the Valuation Office.

The revaluation process is part of Dublin City Council’s rebalancing of rates, which amount to approximately €300m in income for the local authority.

It should be stated that the revaluation is essentially to be a ‘revenue-neutral’ exercise for Dublin City Council and will not result in an additional level of income for the Council than was previously collected.

A revaluation is essentially the production of an up-to-date Valuation List of all commercial and industrial property, within a local authority area, by reference to property rental values at a specified valuation date. Revaluation takes account of the relative changes in rental value between properties over time, and is the statutory means whereby all rateable valuations within a Local Authority are reassessed so that all ratepayers pay a fair share of the commercial rates income to be raised for the Local Authority.

The commercial rate liability is calculated by multiplying the rateable valuation, i.e. the current market rent on April 7th 2011 by a multiplier, to be decided by the Local Authority. This multiplier for Dublin City under the revaluation is not yet known and while rents have undoubtedly declined since peak, it is likely that the rebalancing of rates liability between property types and the revised basis of assessment will impact on businesses, although it is too early to tell how significant that impact will be.

Business owners across the capital will receive their new Proposed Valuation Certificates during October and November 2012, which will determine their commercial rates liability for 2014 and have 28 days to submit a challenge if they are dissatisfied with their valuation.

The revaluation timeline is likely to be as follows:

1. October-November 2012: Each ratepayer will receive a Proposed Valuation Certificate detailing the proposed new rateable valuation
2. A ratepayer has 28 days from issue of the Proposed Valuation Certificate to make representations to the Valuation Office. These representations will be dealt with during 2012 & 2013
3. Final Valuation certificates will be issued at the end of 2013 and if the ratepayer is still dissatisfied with the rateable valuation, he or she may appeal to the Valuation Tribunal within 28 days following issue of the Final Valuation Certificate.
4. All final rateable valuations will be effective from 1st January 2014

It is essential to all ratepayers in the City that the revaluation is carried out in a fair, efficient and effective manner to this end, it is important that the Valuation Office has the necessary resources to complete what is likely to be a highly challenging task which will involve revaluing over 25,000 units, something which has not previously been done to such a large scale.

A further aspect is the fact that collection of rates is likely to become an issue in a commercial environment where many businesses are struggling for survival. However, a fair balancing of liability is essential along with the necessity that each ratepayer pays their appropriate liability and compliant businesses are not left subsidising others who can’t pay or won’t pay.

The SCSI has produced an independent guide on Revaluation and General Rates Assessment which outlines the rating and representation process for business owners in further detail and is available to download for free on their website

Rory Lavelle is Chairman of the Valuation Professional Group of the Society of Chartered Surveyors Ireland