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The decision of the Valuation Tribunal for England (VTE) in Ludgate House Limited v Ricketts (VO) and London Borough of Southwark (2018) will be of significance to owners of vacant commercial buildings who have installed live-in guardians to provide security to their properties. The case concerned Ludgate House in Southwark, south London; a large office building constructed in the 1980’s but which, by March 2015, had become vacant and has now been demolished to form part of the Bankside Gardens redevelopment.
Prior to becoming vacant, Ludgate House was entered in the non-domestic rating list as two office hereditaments. When the building became vacant the owner entered into an arrangement with a security company to provide live-in guardians. The owner made proposals to delete the two office hereditaments from the rating list on the basis that the property was now domestic. The Valuation Officer (VO) inspected the property and deleted the two entries from the non-domestic rating list. The billing authority, London Borough of Southwark also carried out an inspection and made proposals to restore the previous non-domestic rating list entries. The VO then altered the rating list again to restore Ludgate House to the non-domestic rating list but this time as a “composite” hereditament – that is to say part domestic and part non-domestic. The owner appealed against these alterations seeking either to re-delete the rating list entries or, in the alternative, to reduce them to a nominal value, on the basis that Ludgate House was domestic. These appeals were consolidated and heard by the VTE.
There were four questions for determination by the VTE. Firstly, who was in rateable occupation and what was the hereditament? Secondly, was the property non-domestic, domestic, or composite? Thirdly, if any part of it was non-domestic, what was the correct rateable value? And fourthly, what was the correct effective date for any rating list alteration?
The VTE found that, whilst the guardians were physically present, their occupation was heavily restricted and was under the control of, and on behalf of, the owner of the building, Ludgate House Limited (LHL). The VTE determined that “LHL, not the guardians, was in fact in paramount occupation of the whole of Ludgate House as a single hereditament”. The VTE also found that, although the security company was not an agent for the purposes of the contractual relations, that did not mean that LHL could avoid the actuality of being in control of the premises.
On the question of domestic or non-domestic use, the VTE was “not satisfied that Ludgate House (or any part of it) was used wholly for the purposes of living accommodation”. The consequence of this was that the whole of the property should not be a domestic hereditament. A further consequence was that it should not, properly be treated as a composite hereditament but, because the 2010 Rating List is now closed, it falls to be valued that way.
The third question was that of valuation and, in this respect, the VTE determined that “on the material day Ludgate House was, in my finding, an office. It falls that it must therefore be valued as such”. The VTE also agreed with the primary argument presented by the billing authority that the building was all non-domestic, but that because of restrictions to effective date of list alterations, the VO’s valuation as a composite hereditament, which was RV £3,390,000 must be adopted.
The final question was that of the effective date of the list alteration. The VTE did not accept the contention of the owner that the rating list alteration could not have retrospective effect, noting that the alteration in this case was the creation of a new entry as a composite hereditament, and that such a new entry could have retrospective effect. As a matter of fact, the VTE found that the circumstances giving rise to this alteration first occurred on 1st July 2015, and this should be the effective date of the new rating list entry.
This is an important decision for the owners of vacant properties who wish to secure those properties by using live-in guardians, and important to for the Valuation Office Agency which is responsible for maintaining both Non-Domestic Rating Lists and Council Tax Valuation Lists. As this is a developing area of the law, it would be surprising if the building owner were not to appeal against this decision. This may not be the last word in the matter.
