The decision of the Upper Tribunal (Lands Chamber) in Ludgate House Ltd v Ricketts (VO) and London Borough of Southwark (2019) UKUT 0278 (LC), concerned the occupation of a vacant office building by property guardians, installed by the owner of the building.
The case related to a former office building, known as Ludgate House, which was situated on Blackfriars Road, close to Blackfriars Bridge. The building became vacant in 2015, pending redevelopment, and the building owner entered into an arrangement with a property guardians company, known as VPS UK Ltd, to install property guardians in the building, with a view to providing security against squatters and to mitigating empty rate liability. VPS installed a number of guardians, initially four, and later rising to more than forty. The guardians occupied space in the building under licences that, expressly, excluded any security of tenure, but entitled each Guardian to a private room and to share space in the rest of the building with other guardians.
In 2015 the Valuation Officer inspected the building and concluded that it was in residential occupation. Following this, he deleted the non-domestic rating list entries for the building and made separate entries for each floor in the Council Tax valuation list. In 2017 the billing authority, London Borough of Southwark, made proposals to enter the property back into the non-domestic rating list. Independently of this, the Valuation Officer deleted the Council Tax valuation list entries that he had made in 2015, and re-entered the property into the non-domestic rating list, with retrospective effect back to 2015. The Valuation Officer’s notice treated the property as a “composite” hereditament in the non-domestic rating list, that is to say one which is partly domestic and partly non-domestic.
The building owner appealed against the Valuation Officer’s notice. The owner’s appeal was heard by the Valuation Tribunal for England which concluded that the building was entirely in non-domestic use and that the property guardians should, properly, be regarded as providing security for the building owner, rather than as residential occupants of domestic property. The building owner appealed to the Upper Tribunal against the decision of the Valuation Tribunal for England.
Before the Upper Tribunal, the building owner contended that the occupations by the four guardians in place at the relevant material day were domestic, and that each occupation represented a separate domestic hereditament. The respondents, the Valuation Officer and the London Borough of Southwark, submitted that the building was not used for domestic purposes and that the building owner was in paramount control of the whole building which represented a single non-domestic hereditament.
The Tribunal concluded that each of the rooms occupied by the four property guardians in place at the relevant day was capable of representing a separate hereditament by virtue of satisfying the tests set out by the Supreme Court in Woolway (VO) v Mazars (2015). The Tribunal was also satisfied that, in respect of the occupation of those rooms, each of the respective guardians satisfied the tests of rateable occupation and was, therefore, the rateable occupier of the room concerned. Having found this, the Upper Tribunal concluded that the building could not be described as a single non-domestic hereditament, whether composite or otherwise, and that the Valuation Officer’s 2017 notices could not be supported. The Tribunal ordered that the rating list should be restored to its position before the Valuation Officer’s 2017 notices and that the rating list entries created by those notices should be deleted.
The Tribunal’s decision is an important one for building owners looking to mitigate empty rate liability is by installing property guardians. It is clear from the decision that each case will fall to be considered on its own individual facts and that no general rule as to the effectiveness, or otherwise, of property guardians has been established by this decision. But, what is clear, is that the Tribunal considered that the relevant test for domestic occupation was the one set out in the legislation and relates to the “use” of the property concerned, rather than the way in which the property is designed or configured. Those implementing property guardians’ schemes will also wish to consider carefully the Tribunal’s comments regarding “Houses in Multiple Occupation” (HMOs).
The case also raised a number of other significant issues, regarding the valuation of composite hereditaments, and the backdating of rating list entries. But, given the determination made by the Upper Tribunal in respect of the initial issue of identification of the hereditaments concerned, the Tribunal’s decision did not have to deal with these points, which will be left, possibly to be pursued in other cases.