Property guardianship schemes provide companies that specialise in the provision of “property guardians” with an income, individual guardians with living accommodation in return for payments that are lower than the market rent, and owners of premises that would otherwise sit empty until they can be redeveloped with a measure of protection against vandalism and squatting (since squatters who occupy residential accommodation commit criminal offences under section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012).
The question that arose in Ludgate House Ltd v Ricketts [2019] UKUT 278 (LC); [2019] PLSCS 188 was whether the presence of property guardians in a multi-storey office building in London, with a rateable value totalling nearly £4.2m, mitigated the landowner’s liability for business rates too. Or, to put it another way, was the property being used “wholly for the purposes of living accommodation” and, as a result, subject to council tax as opposed to business rates?
The test of liability for both forms of taxation is concerned with how premises are used – and not with how they are physically designed or configured. Furthermore, a property may be wholly used for a particular purpose, even though not all of it is so used. The building had been occupied by up to 46 property guardians for 22 months, before being demolished. But it had remained configured for office use and the company that provided the guardians did not obtain planning permission for residential use, or apply for a licence to operate a house in multiple occupation (even though it is a criminal offence to control such premises without a licence).
The Valuation Tribunal noted that large areas of the building had remained empty and concluded that it was liable to non-domestic rates because the landowner still controlled it and the guardians had occupied it on the landowner’s behalf. On appeal, the landowner drew the Upper Tribunal’s attention to other buildings that had been deleted from the rating list, or whose rateable values had been reduced to nominal amounts, thanks to the presence of property guardians. However, there was no precedent that valuation officers, or the Upper Tribunal, was bound to follow.
The occupation agreements with the individual guardians were described as licences. While in force, guardians were allowed to share the living space and communal facilities in the building, but were not granted exclusive possession or occupation of any part of it. The agreements also stated that the extent of the living space might vary from time to time. However, there would always be at least one room for each property guardian.
The Upper Tribunal accepted that the guardians had had exclusive occupation of their own rooms, which were kept locked, despite any overspill into communal areas. Consequently, there were distinct units of occupation, which were separate hereditaments. And, because there was no single occupier of the domestic and non-domestic space, the building was not a “composite” hereditament in mixed use (which could have been included in both the rating and council tax lists).
So the case turned on who was in paramount occupation of the premises. The Upper Tribunal noted that the guardians did not have any contractual relationship with, or provide any services to, the landowner and concluded that they were not in occupation on the landowner’s behalf. The guardians wanted somewhere to live and controlled their own individual rooms. Therefore, the landowner was not liable for non-domestic rates.
Allyson Colby, property law consultant
