General Rate Act 1967, Schedule 1 — Rating of unoccupied property — Dispute as to date from which rating authority could properly charge the unoccupied property rate on the appellants in respect of two floors of a building — The building as a whole was deemed to be completed in 1974, but appellants contended that the two floors only became a separate hereditament when they were leased to the appellants with effect from June 24 1975 — It was therefore argued that the rate liability did not arise until three months from that date — Held, rejecting this argument, that the date of separation in the valuation list was not the test — As part of the whole building the two floors had been unoccupied for more than three months before June 24 1975, when the lease began, and it followed that the appellants were liable to pay the unoccupied property rate from that date — Appeal from decision of Brown J dismissed
This was an
appeal from a decision of Brown J, holding that the appellants had been
properly charged with the unoccupied property rate under the General Rate Act
1967, section 17 and Schedule 1, in respect of the fourth and fifth floors of
Chancel House, Neasden, in the London Borough of Brent, as from June 24 1975,
the date when the lease to the appellants of these floors commenced.
C S Lewsley
(instructed by P W Moore, of legal staff of Ladbroke Group) appeared on behalf
of the appellants; Viscount Colville of Culross (instructed by K B Betts, Town
Clerk, Brent) represented the respondent rating authority.
Giving
judgment, WALLER LJ said: This is an appeal against a decision of Brown J given
on July 25 1979, when he held that the appellants were properly rated as owners
of the 4th and 5th floors of a building known as Chancel House, Neasden Lane in
the London Borough of Brent.
The facts were
that Chancel House was a new building which was nearing completion in 1974.
Notices were served by the rating authority and it was not disputed before us
that the building was deemed to be completed (within the meaning of paragraph 7
of Schedule 1 to the General Rate Act 1967) on November 15 1974. The
appropriate completion notices had been served separately in relation to each
of the six floors of the building.
By a lease
dated May 23 1975 the appellants became tenants of the 4th and 5th floors for a
term of 25 years from June 24 1975. The respondent rating authority had passed
a resolution in 1968 empowering themselves to rate unoccupied property.
Furthermore in 1974 they had passed another resolution empowering themselves to
rate unoccupied property at 100 per cent of the proper rate. Accordingly, it
being accepted that the building was deemed to be completed on November 15
1974, the rating authority was empowered to charge rates if the building
remained unoccupied after three months from that date. After being informed
that the two floors had been let, the rating authority demanded rates from June
24. The appellants denied liability for the period before they went into
occupation on September 1 1975.
The relevant
provisions are contained in the General Rate Act 1967.
Paragraph 7 of
Schedule 1 provides:
Completion
of newly erected or altered buildings. 7. For the
purposes of paragraph 1 of this Schedule, a newly erected building which is not
occupied on the date determined under the subsequent provisions of this
Schedule as the date on which the erection of the building is completed shall
be deemed to become unoccupied on that date.
Paragraph 8
lays down the procedure and provides:
8. — ‘(1)
Where a rating authority are of opinion — (a) that the erection of a building
within their area has been completed; or . . . and that the building is, or
when completed will be, comprised in a relevant hereditament, the authority may
serve on the owner of the building a notice (hereafter in this paragraph
referred to as ‘a completion notice’) stating that the erection of the building
is to be treated for the purposes of this Schedule as completed on the date of
service of the notice or on such later date as may be specified by the notice.’
Paragraph 1(1)
provides:
Liability
to be rated in respect of certain unoccupied property. 1. — (1) Where, in the case of any rating area in which, by virtue
of a resolution under section 17 of this Act, this Schedule is in operation,
any relevant hereditament in that area is unoccupied for a continuous period
exceeding three months, the owner shall, subject to the provisions of this
Schedule, be rated in respect of that hereditament for any relevant period of
vacancy; and the provisions of this Act shall apply accordingly as if the
hereditament were occupied during that relevant period of vacancy by the owner.
The definition
of ‘hereditament’ is in section 115 and is as follows:
‘hereditament’
means property which is or may become liable to a rate, being a unit of such
property which is, or would fall to be, shown as a separate item in the
valuation list.
By paragraph
15 of Schedule 1 ‘relevant hereditament’ means ‘any hereditament consisting of,
or of part of, . . . office, factory, . . . or other building whatsoever. . .
.’
Mr Lewsley
submits that the top two floors of Chancel House became a separate hereditament
from June 23 1975 and that paragraph 1(1) of Schedule 1 would start to apply on
that date. In other
unoccupied for a continuous period exceeding three months from that date, and
that only after the three-month date would the hereditament be rated and he
submits that anything that had happened before that date is irrelevant because
there was no separate hereditament.
On the other
hand Lord Colville submits that in the case of a newly erected building a
completion notice relates at the same time to the whole as well as to each
individual part of the building with the result that the three-month nil rate
could only occur once. The corollary to Mr Lewsley’s argument would be that
whenever a fresh part of the building was let not only that part but the part
remaining unoccupied in the hands of the owner would be a new hereditament and
would be entitled to three months of unoccupation before being chargeable with
the unoccupied rate. It would be surprising if this were the intention of
Parliament and therefore one must examine the phrases carefully to see their
exact meaning.
Paragraph 7 of
the Schedule does not mention hereditament, it is ‘the building‘ which
is deemed to become unoccupied. The building may consist of one hereditament or
many. The valuation list may divide the building into several hereditaments or
not divide it at all as in this case up to the time of the lease to the
appellants. In this case more than three months had passed since the specified
date. Although the two floors of the building had been unoccupied for more than
three months, were they entitled to another three months from the beginning of
their lease?
In my opinion
the date of separation in the valuation list is not the test. ‘Hereditament’ is
‘property which is . . . or would fall to be shown as a separate item in
the valuation list’. On the specified date these two floors comprised a unit of
property which ‘would fall to be’ shown as a separate item.
Although the
case of Camden London Borough Council v Post Office [1977] 1 WLR
892 does not directly cover the present facts the judgment of Bridge LJ is
helpful in its general approach. In the last sentence of his judgment on p 899
he says:
The procedure
under paragraphs 7 and 8 having fixed the date when the whole of it was deemed
to become unoccupied, the owner, as defined in this Schedule, of any
hereditament carved out of that entire building was liable to pay the
unoccupied rate from the appropriate date.
In that case
both the completion date and the appropriate date occurred after the date of
the commencement of the tenancy. Paragraph 7 of Schedule 1 defines the date
when the building is deemed to become unoccupied. And paragraph 8(1) indicates
that the rating authority has to be of opinion that the building ‘is or when
completed will be comprised in a relevant hereditament’. The judgment in the Camden
case indicates that ‘the relevant hereditament’ will also include any
hereditament carved out of the entire building.
In my opinion
the building referred to in paragraph 8 includes the hereditament of the whole
building as well as any separate hereditaments carved out of that whole
building. In this case the top two floors comprised a unit of property which
would fall to be shown as a separate item. It follows that in paragraph 1 ‘the
relevant hereditament’, although only leased on a date after the date of
completion, nevertheless has been unoccupied from the date of completion. The
hereditament referred to in paragraph 1 is a unit of property which is or would
fall to be shown as a separate item in the valuation list. The fact that it was
not shown as a separate item up to the date of the commencement of the lease
does not affect the matter because it must be included in the relevant
hereditament in paragraph 8 which, as I have already said, must be deemed to
include any hereditaments carved out of the whole. The same consequence would
follow with relation to the remainder of the building. It would comprise one or
more units of property which would fall to be shown as separate items.
It follows
that in my opinion, therefore, the date of completion is the date when the
hereditament including the whole building was deemed to be completed and the
date when any separate hereditaments which were afterwards carved out of that
whole building became unoccupied would be the same date.
I would
dismiss this appeal.
WATKINS LJ
agreed.
Also agreeing
that the appeal should be dismissed GRIFFITHS LJ said: Ladbrokes submit that
the top two floors of the office building cannot be at one and the same time a
part of one hereditament, namely the entire office building, and also a
separate hereditament, namely the top two floors. Until the lease of the top
two floors to Ladbrokes it was proposed to rate the entire building as one
hereditament, but when the two top floors were let to Ladbrokes they became a
separate hereditament for rating purposes. So it is submitted there was no
hereditament comprising the top two floors until it was created by the lease to
Ladbrokes on June 24 1975, and therefore there was no hereditament upon which
Schedule 1, paragraph 1, could bite until June 24 1975. Therefore Ladbrokes say
they are not liable for rates until that hereditament has been
unoccupied for three months, namely September 23 1975, or until they entered
into occupation of it.
I confess that
I was for a time beguiled by this argument. But on reflection I am convinced
that it cannot be correct, for it leads to a result that goes far to frustrate
the power to rate unoccupied property. In this case we are concerned with a
newly constructed building, but the position would be no different in the case
of an existing building. Suppose that a large office block had been leased for
occupation to one large company, let us say ICI, and accordingly was rated as a
single hereditament. At the end of their lease, ICI decide to move elsewhere
and the whole office block becomes empty. The owner of the block will become
liable for an unoccupied rate on the whole building after three months. A month
later he lets the top floor of the building as offices to a small company.
Apply the appellants’ argument; the top floor becomes a separate hereditament upon
which no unoccupied rates are payable for another three months and it follows
that the rest of the building becomes a different hereditament which is also
exempt from the unoccupied rate for a further three months. So the owner can
keep postponing his liability for the unoccupied rate by successive lettings of
small parts of the building, for each time he lets a part capable of being a
separate hereditament it alters the hereditament remaining in the hands of the
owner.
Because the
problem is identical whether considering a newly constructed or an existing
building I do not myself find any assistance to its solution in the provisions
of Schedule 1, which deal with the date upon which a newly erected building is
deemed to become unoccupied. Save only this, that they do show that Parliament
was alert to one stratagem that a building owner might employ to avoid paying
an unoccupied rate by deliberately delaying the completion of his building and
it is a pointer to the conclusion that Parliament could not have intended the
alternative stratagem of successive lettings to achieve the same objective.
I think the
clue to the problem is to be found in the appreciation of the fact that the
term ‘hereditament’ in rating law is a term of are used to identify a property that
has two attributes: (1) that it is rateable and (2) that it is or can be shown
as a separate unit in the valuation list (see section 115). The property does
not gain or lose any physical attribute or change in any way by calling it a
hereditament; the term hereditament is a legal shorthand used to denote the
fact that that property is or will be separately rated. With this in mind I
turn to Schedule 1, paragraph 1, and bearing in mind the definition of
‘hereditament’ in section 115 and the definition of ‘relevant hereditament’ in
Schedule 1, paragraph 15, I read for ‘any relevant hereditament’ ‘any property
consisting of an office liable to be rated and shown in the valuation list as a
separate item’ and I find that where such a property is unoccupied for a
continuous period exceeding three months it becomes liable to an unoccupied
rate. The definition covers the top two floors of this building, they had been
unoccupied for more than three months before June 24 1975 and it follows that
Ladbrokes are liable to pay the unoccupied rate upon them from that date.
Accordingly I
would dismiss this appeal.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was refused.
