Lawbite: Revaluation of rateable values for business properties and statutory compensation

Overview

The Valuation Office Agency has revised its rateable values for all business properties and all other non-domestic properties in England and Wales, with the new rates to take effect on and from 1 April 2026.

Whilst a key feature of rateable values is that they are used by local councils to calculate business rates, it should be remembered that these rates are also used when calculating the statutory compensation payable to a tenant under the Landlord and Tenant Act 1954 (1954 Act).

Rateable values and statutory compensation under the 1954 Act

Statutory compensation may be payable to tenants whose right to renew their tenancy is opposed by its landlord on certain grounds under the 1954 Act. These grounds (frequently referred to as “no fault” grounds) are set out in paragraphs (e), (f) and (g) of s.30(1) of the 1954 Act and essentially come to play where:

• the tenant has sublet part of the property and the landlord wishes to relet the whole,
• the landlord intends to demolish or reconstruct the property, or,
• the landlord intends to occupy the property for its own purposes

The ”no fault” grounds are often used in conjunction with other grounds that do not attract statutory compensation, in the hope that a landlord can succeed in opposing a lease renewal without having to pay compensation.

Where statutory compensation is payable, however, the sum itself is reached by applying a multiplier (one or two, depending on the length of time the tenant, or its predecessor, has been in the property) to the rateable value. A higher rateable value will inevitably lead to higher compensation sums being payable.

The imminent changes are important as it is the rateable value in force on the date of service of certain notices under the 1954 Act which is to be applied when calculating statutory compensation. In particular the date of service of a landlord’s s.25 notice opposing a new tenancy, or a landlord’s counternotice to a tenants s.26 request for a new tenancy. Timing is therefore key.

Where the landlord’s notice or counternotice has already been served then the rateable value has already been established (i.e. it is the one in force at the date of service).

Where landlords and tenants are thinking of serving notices under the 1954 Act they will need to consider whether or not the revision to the rateable value has an effect on their overall strategy.

Tenant considerations

A tenant can influence which rateable value list is used to calculate compensation. This is because it is the service of their s.26 request which starts the two months clock running for the landlord to serve its counternotice.

As such, if no s.25 notice or s.26 request has already been served, tenants will need to consider whether it would be of advantage to serve a s.26 request soonest or wait until the 1 April 2026 has passed before they do so. This will only truly be an issue where the tenant knows, or believes that it is likely, that the landlord will be opposing the grant of a new tenancy on one of the grounds which attracts compensation.

The tenant will want to secure the maximum amount of compensation. Key to the tenant’s assessment is whether the rateable value for the property in question is decreasing or increasing as of the 1 April 2026:

• where it is decreasing, a tenant will want to serve its s.26 request as soon as possible in the hope that its landlord will file a counternotice before the 1 April 2026 therefore securing the current rateable value for the purpose of calculating statutory compensation;
• where it is increasing, a tenant will want to hold off from serving its s.26 request until after 1 April 2026 – such that any counternotice will also be served after 1 April 2026. The new rateable value list will then be used when calculating any statutory compensation. The tenant can only hope that the landlord does not serve a s.25 notice before the 1 April 2026!

Landlord considerations

Where no s.25 notice or s.26 request has already been served, landlords will need to consider whether it will be of advantage to it to serve a s.25 notice opposing a new tenancy soonest or wait until the 1 April 2026 have passed before they do so. Equally if a s.26 request has already been served, and the two month period to respond straddles the 1 April 2026 date, then landlords will need to consider whether to serve their counternotice before or after 1 April 2026. Again, this will only be an issue where a landlord is proposing to oppose the grant of a new tenancy to the tenant on one or more of the grounds that could leave it liable for payment of statutory compensation to the tenant.

The landlord will want to pay the minimum amount of statutory compensation possible. As such, key to the landlord’s decision is whether the rateable value for the property in question is decreasing or increasing as of the 1 April 2026:

• where it is decreasing, a landlord will want to wait until after 1 April 2026 to serve a s.25 notice or its counternotice to any s.26 request served by the tenant. This would secure the new rateable values for the purpose of calculating statutory compensation;
• where it is increasing, a landlord will want to serve its s.25 notice or counternotice to s.26 request before 1 April 2026. This would mean that the current rateable values are used when calculating any statutory compensation. 

What next?

The imminent change is likely to be only one of the many factors to influence a landlord or tenant’s strategy where it comes to lease renewal. It should, however, be a key consideration where a landlord is planning to oppose the grant of a new tenancy on a ground that attracts statutory compensation (i.e. one or more of the grounds set out in paragraphs (e), (f) and (g) of s.30(1) of the 1954 Act).

Those affected will want to see how the rateable values are changing, remembering of course that they can increase or decrease as a result of the revaluation.

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