Property Guardian Schemes and liability for non-domestic rates
The Vice-President of the Valuation Tribunal has handed down her decision in the above case. The tribunal had to consider the impact of a Property Guardian scheme on the owner’s liability for non-domestic rates.
Ludgate House was a commercial office building in respect of which planning permission had been granted to demolish and redevelop the site and which was owned by Ludgate House Limited (LHL). By March 2015 the building had been vacated and was empty. LHL entered into an arrangement with a security firm VPS for the provision of security services at the building part of which included property guardians living in the building for security purposes.
This was the first known decision where there had been any significant challenge to Property Guardian schemes successfully being used to mitigate against the payment of non-domestic rate by reason of Guardians residential occupation of buildings.
The Parties Positions
LHL submitted that the arrangements were such that the building was wholly occupied for residential purposes and so subject to Council Tax rather than non-domestic rates OR that the areas occupied by Guardians were used wholly for domestic purposes.
The Valuation Office had originally been persuaded that the building had been occupied by the Guardians for living accommodation but later restored the building to the non-domestic list save for two floors on the basis that this was the overall space that could be said to be required by Guardians within the building for residential purposes.
Russell Stone appeared for the London Borough of Southwark and submitted that in fact the whole building should have been a single hereditament subject to, and included in the 2010 valuation list and wholly subject to non-domestic rating.
On the facts of this case including the specific contractual arrangements between LHL and VPS and VPS and the Guardians in occupation, the vastness of the building and how the spacer was occupied the Tribunal found that the true position was that the Guardians were in occupation on behalf of the owner and that the owners occupation of the building was paramount. As VPS were specifically engaged to provide security services and neither they nor the Guardians were not granted possession of any part of the building.
This meant that LHL remained in occupation of the whole building which remained a single hereditament and the agreements all made it clear that their presence was to provide a security function and the provision of living accommodation to the Guardians was an additional object and no part of the building was in use wholly as living accommodation.
Given this the building was not and could not be said to be wholly in use for domestic purposes and was therefore a non-domestic hereditament subject to the non-domestic rating regime.
In reaching this conclusion the Tribunal commented that her decision was ‘on all fours’ with the submissions put forward by the London Borough of Southwark and wholly accepted their submissions.
Although the tribunal stressed that this case turns on its own particular facts, it seems that in the future there is likely to be much more careful and greater scrutiny of Property Guardian schemes and whether they do in fact mitigate against liability for non-domestic rates, particularly in large office blocks such as that under consideration in this case, where the building remained liable for non-domestic rates.
Russell Stone appeared before the Tribunal and was instructed by Felix Rechtman of London Borough of Southwark Legal Services.
Craig Barlow had also previously been instructed in the case.
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