The impact of the Valuation Tribunal decision of Ludgate House Limited v Southwark on Property Guardians.

In this article we will look at the ramifications of the recent Valuation Tribunal decision of Ludgate House Limited v Southwark. In particular we will try to answer the following questions:

 

• What is the effect of this decision?
• Does the decision leave room for a different outcome based on different agreements?
• Does the decision mean that, absent any contractual provision to the contrary, the liability to pay NDR remains with the owners and does not pass to Guardian Providers?

 

THE FACTS OF THE CASE

 

Ludgate House was a commercial building in the London Borough of Southwark. It was originally split into two separate commercial units. At some point planning permission was obtained to demolish the entire site and redevelop it. By June 2015 the building was empty.

 

The landlord, Ludgate House Limited (‘LHL’), entered into an agreement with VPS Limited (‘VPS’) to provide security by (among other things) placing guardians at the property.

 

There were a number of applications made to the Valuation Officer between September 2015 and September 2017 in respect of 2 issues: (i) whether the entire building ought to be listed as a single entry in the list, and (ii) whether the building ought to have been treated as exempt from NDR as it was occupied by the guardians for residential use.

 

The upshot of the decision is that the occupation by guardians, in this particular case, did not render the building exempt from NDR.

 

In coming to this conclusion, the Tribunal made a number of findings of fact:

• Ludgate House was a large, nine-storey, office building, mostly open-plan;
• Over all some 40-50 guardians were used to secure the building;
• The contract expressly provided that LHL retained control, possession and management of Ludgate House;
• The contract expressly provided that the purpose of the guardian service was to secure the premises and protect against trespassers and damage;
• The contract expressly provided that VPS were not agents of LHL;
• The provision of ‘domestic’ appliances was temporary;
• The guardians occupied under licences which required them to sleep at the property and to challenge any persons who they suspected did not have a right to be there;
• The licences were granted by VPS who, expressly, had no right to grant exclusive possession;
• Significant parts of the building remained un-occupied and off-limits to the guardians;
• No guardian had exclusive occupation of any part of the building.

 

THE DECISION

 

Non-Domestic Rates

 

Section 64 of the Local Government Finance Act 1988 provides that a building will be non-domestic if (either entirely or partly) it is not used for domestic purposes. ‘Domestic’ is defined as “wholly for the purposes of living accommodation”.

 

In Wimborne District Council v Brayne Construction Company Limited [1985]RA 234, the court held that occupation could have more than one purpose and that any one of them could determine ‘rateable occupation’. In this case, one (if not the main) purpose of occupation was to provide security services.

 

The tribunal found that ‘wholly’ does not synonymous with ‘solely’.

 

Applying the law to the facts as found, the Tribunal concluded that “I am not satisfied that Ludgate House (or any part of it) was used wholly for the purposes of living accommodation. Consequently, Ludgate House cannot fall to be a domestic hereditament…”

 

Rateable Occupation

 

In its decision on the issue of rateable occupation, the Tribunal referred to a number of authorities. In John Laing & Son Ltd v Kingswood Area Assessment Committee [1949] 1 KB 344the court stated that there are four factors in determining rateable occupation –

“Firstly, there must be actual occupation; secondly that it must be exclusive for the particular purpose of the possessor; thirdly, that the possession must be of some value or benefit to the possessor and fourthly, the possession must not be for too transient a period.”

 

In City of Westminster v Southern Railway[1936] AC 5 the court summarised it that there was a general principle that if the owner of the hereditament retains general control over the occupied parts then he will be in rateable occupation, whereas if he retains no control, he is not.

 

Applying these authorities to the facts, the Tribunal concluded: “The true position is that the guardians are in occupation on behalf of LHL. The question is one of fact and it is clear to me, with regard to the position and rights of the parties, that the occupation of LHL is paramount. VPS are specifically engaged to provide security services, and grant licences in order to do that, but are not given possession or occupation of the premises, and the guardians are not granted exclusive occupation of any part, nor is the extent of areas which may be occupied clearly defined. As such LHL are in possession of the whole building.”

 

IMPLICATIONS FOR GUARDIAN PROVIDERS

 

This is a decision of the Valuation Tribunal – a first-tier tribunal – and therefore not a decision which is binding on any other tribunal or court. However, this decision will undoubtedly be disseminated amongst Valuation Officers and the logic of it applied in similar situations.

 

The Tribunal also makes clear at paragraph 14 that this case “turns very much on its particular facts which require close examination of the contractual arrangements and physical circumstances in question.”

 

That having been said, a number of the relevant facts are likely to be found to be present in many guardian situations. In particular those listed at 4, 6, 7, 8, 10 above.

 

Does the decision leave room for a different outcome based on different agreements

 

Despite a number of indication in the decision that the size and nature of the building was a determining factor, it seems that the actual determining factor was that the guardians did not simply live at the property, they were obliged to keep it secure – indeed that is fundamental to being a ‘guardian’.

 

In light of this case it is difficult to envisage how an arrangement by which a number of unrelated individuals are accommodated in a former commercial building by virtue of a series of licences under the rubric of ‘guardians’ could be certain to avoid being categorised as not wholly domestic.

 

Does the decision point to a conclusion that, absent any contractual provision to the contrary, the liability to pay NDR remains with the owners and does not pass to the Guardian Provider;

 

This issue is very much one which is dependant on the specific facts of each case. As the legal analysis shows, it is a question of what degree of control (if any) is retained by the owners under whatever agreement is made between the owners and the Guardian Provider (and there will inevitably be some agreement as to that).

 

It is notable in the Ludgate case that there was an explicit term stating that LHL retained control, possession and management of Ludgate House. It is hard to know exactly what the details of the arrangement were, however, because it is said that VPS granted the licences to the Guardians and that they were not acting as agents for LHL – so it must be presumed that they had some intermediate licence but one without any power of management or control.