Rates
1. What is rateable value?
Rateable value is an estimated annual rental value of a property at a designated valuation reference date, assuming that the property was then vacant and to let from year to year, on the basis that the tenant undertakes to pay all usual tenant’s rates and taxes, whilst the landlord undertakes to pay the Government rent, the costs of repairs and insurance and any other expenses necessary to maintain the tenement to a state to command that rent.
The landlord’s obligation to bear the “the costs of repairs and other expenses necessary to maintain the tenement in a state to command that rent” implies that ordinary disrepair is disregarded in ascertaining the rateable value. However, serious disrepair which cannot be remedied or can only be remedied at an uneconomic cost should be taken into account.
In assessing the rateable value, reference is made to other open market rents agreed at or around the date of valuation, for similar properties in the locality, with due adjustments to reflect any differences in size, location, facilities, standards of finish and management. Restrictions on sale or letting, such as those that apply to Home Ownership Scheme flats, and the financial status of the ratepayer, will not be taken into account.
The rateable values of all types of properties, including private and public housing, are assessed on the same basis. This provides a fair and uniform base on which to charge rates in accordance with the open market rental values of properties.
2. What is the purpose of designating a valuation reference date for rating purposes?
The purpose of designating a valuation reference date is to assess the rateable value by reference to the value as at a designated date known as the “relevant date”. General changes in value after the relevant date are not material, so any increase or reduction in value since that date would not affect the rateable values. In recent years, the relevant date has been fixed at 1 October for the Valuation List to take effect on 1 April in the following year. For the 2024-25 rateable values, the designated reference date is 1 October 2023.
3. What factors are considered when assessing the rateable values?
All factors which affect rental values of properties are considered, such as age, size, quality of finishes, location, transport facilities and amenities.
4. What are the methods of valuation normally employed to value properties for rating purposes?
The great majority of properties are valued by reference to rents (Rental Comparison Method). Where open market rental evidence exists for the subject property or similar properties, and that evidence conforms to the statutory definition of rateable value, or can be made to do so without substantial adjustments that its reliability is affected, a valuation based upon such evidence will always be the preferred method. In the absence of rental evidence, the Receipts and Expenditure Method or the Contractor’s Method may be considered.
5. How often do rates have to be paid?
Rates are payable quarterly in advance. Demands are usually sent out at the beginning of each quarter and are payable before the end of the first month of the quarter, i.e. January, April, July and October.
6. My property is subject to restrictions on sale and letting. Will any concessions be given due to these restrictions and my special financial status?
No concessions will be given in these situations. The rateable values of all types of properties, including private and public housing, are assessed on the same basis, disregarding any special concessions whether statutory or otherwise in the rent actually being paid. Similarly any restrictions on letting or sale to which you have agreed when you purchased the property will not affect the level of assessment either. Your special financial status which may affect your ability to pay rates is not to be taken into account in determining the level of rateable value.
7. My property is located in an area with poor services. Why do I have to pay the same overall percentage charge as areas with better services?
Rates are now part of general Government revenue and a source of funding for public services such as police, fire service, education, health and hygiene which everyone has access to in one way or another. If local services are poor, this may be reflected in the rents and hence the rateable value. However in the situation where there is no Government water supply the rates payable will be reduced by 15%, and where the Government water supply is unfiltered the reduction in rates payable will be 7.5%.
8. Why do owner-occupiers have to pay the same rates as for rented properties?
Rates are a tax on occupation and normally borne by the occupier. Thus whether you are an owner-occupier or a tenant, the basis for charging rates will be the same.
9. Why are rateable values of domestic units on higher floors higher than those on lower floors?
This is to reflect the market preference for higher floors. The rentals of properties generally tend to rise with the floor level of the unit. On the other hand, lower floors in a building suffer from street noise etc. and additional allowance is made for this.
10. What is the purpose of a revaluation?
The rateable values will be reviewed annually in the general revaluation so as to reflect more precisely changes in market rental values of properties. Rental levels for different types of properties and for properties in different locations change over time by varying amounts due to many factors, including economic, social and demographic changes. The purpose of a general revaluation of all properties is to redistribute the total rates liability fairly amongst ratepayers according to the prevailing rental levels of the properties they occupy. It is not intended to increase the rates revenue.
11. The layout of my property has been changed, which may involve splitting of a single unit into several units, or a combination of several units into a single unit, am I required to inform the Rating and Valuation Department of the change? If so, what information should I provide?
Since the property has undergone structural alteration, its rating/rent assessments in the Valuation List and/or Government Rent Roll have to be altered to reflect its latest physical situation. Hence, you have to inform this Department of the alteration so that this Department can assess the rateable values of the new unit(s) to replace the existing assessments in the Valuation List and/or Government Rent Roll. You should provide this Department with the following information :
- Address and assessment number of the property before alteration;
- A set of floor plan(s) of the new unit(s) with dimensions;
- Completion date of the alteration work;
- A copy of the tenancy agreement with lease particulars (if available), such as rent payable, lease duration and commencement date, rent free period, who (the landlord or the tenant) is responsible for paying rates and/or Government rent, management fee, air conditioning fee, etc; and
- Name and telephone number of the contact person.
12. My property has been split into several units. The Rating and Valuation Department has re-assessed the rateable values of the new units after the alteration. Why is the sum of the rateable values of the new units higher than the rateable value of the property before the alteration?
The rateable values of the altered units, which are smaller in size, have been assessed by reference to the rental level of similar properties in the vicinity. As the unit rents of smaller units are usually higher, the total rateable value of the new units will in most cases higher than the rateable value of the property before the alteration. In any event, the Department will re-assess the rateable values of any altered units based on the current physical conditions of the units and the rental evidence available for similar properties in the market. The rateable value of the original unit before the alteration will not be taken into account in the assessment. Hence the total rateable value of the units will normally not be the same before and after the alteration.
13. If rates are charged on an unauthorised structure, does this mean it has been authorised?
No, this is not the case. Rates are a tax on occupation, and any property which can be separately occupied is liable to assessment, regardless of whether or not the structure is authorised. The assessment to rates and/or payment of rates in respect of any premises with unauthorised structures does NOT imply that these structures have legal status, nor does it confer any legal sanction or authorisation to them.