Where warehouse and office premises are not each self-contained and are let as one premises the geographical test points to the premises being one hereditament, not two, for non-domestic rating purposes.
The Upper Tribunal (Lands Chamber) has considered this issue, dismissing an appeal in Zhylzhaxynova v Moore (VO) [2024] UKUT 204 (LC).
The case concerned a semi-detached unit at 1 Slater Court, on the Eagle Business Park in Peterborough comprising a warehouse surrounding an office on a mezzanine floor. The appellant argued that the premises comprised two hereditaments from which she ran two completely independent businesses – QPL and QNP Toys – of which she was director and sole or majority shareholder. QPL was engaged in the design, manufacture and marketing of kitchen equipment; QNP imported and sold children’s toys. Both companies were relatively new and trying to grow their businesses.
QPL held a 10-year lease of the unit granted in 2021. The lease included obligations not to assign, underlet or share possession or occupation of the lease or the whole or part of the property. The appellant claimed that QNP paid QPL for its occupation of the unit. The valuation officer’s case was that the unit was a single hereditament with QPL as lessee in rateable occupation of the whole.
Whether a property is one hereditament or more is determined by applying the geographical and functional tests set out in Woolway (VO) v Mazars LLP [2013] UKSC 53.
The Tribunal found that while in practical terms the appellant ran two businesses from the unit, the legal position was different. QPL was lessee of the unit and therefore in rateable occupation. Its lease prevented it sharing occupation or parting with possession. QNP was in occupation of the warehouse where it stored its stock but it had neither exclusive possession nor any rights over the warehouse. It was simply a licensee of QPL.
While the office and warehouse could be made self-contained, they were not currently. Both areas could be accessed from reception. The occupier of the office had to access the warehouse to attend to the utility meters and control panel for the alarm system, to access the kitchen and a cupboard for storing personal belongings and to comply with its covenants to maintain and decorate the property under the lease: there was a connecting door for that purpose.
Consequently, the unit was physically a single whole not two self-contained parts and QPL was in occupation of the whole.
Louise Clark is a property law consultant and mediator
