This is ‘round 3’ in the long-running dispute between the London Borough of Southwark and Ludgate House Ltd, the owner of a now-demolished commercial building, in respect of the owner’s liability for Non Domestic Rates.
We have covered the hearings in the Valuation Tribunal and Upper Tribunal previously.
It may be recalled that the Upper Tribunal (reversing the findings of the Valuation Tribunal) found that, in respect of four of the Guardian occupiers, they were: (i) in actual occupation of their respective rooms and (ii) their occupation was (from their perspective) exclusively for the purpose of providing themselves with somewhere to live. This was clearly (iii) to their benefit and, given the 22 month period of their occupation, (iv) not ‘transient’. Accordingly the guardians use of the hereditament was ‘paramount’ and that use was ‘domestic’.
In deciding the question of whose use was ‘paramount’, the UT found that “it is immaterial whether the title to occupy is attributable to a lease, a licence, or an easement. Nor does it depend on the subjective intention of the parties to the licences, or LHL. The legal rights of occupation conferred on the licensees are a relevant consideration, but more important is the manner in which the arrangements were operated in practice, and the quality of the occupation actually enjoyed by the licensees.”
It was not argued in this case that the occupiers were ‘tenants’ (rather than licensees) and it is clear that the test applied by the UT to determine whether the Guardians’ occupation was ‘paramount’ was not the same as it would apply to the question of whether their occupation was, in law, a tenancy not a licence.
The Court of Appeal, however, reversed the decision of the UT and, in doing so, have made it clear that these two questions are, in effect, one and the same. That is to say, in order fall outside the Non Domestic Rates system, there must be residential occupation with ‘exclusive possession’ – one of the key hallmarks of a tenancy.
This point is made quite explicitly by Lewison LJ at paragraph 80: “The question was whether the terms of the licence were inconsistent with exclusive occupation by the guardians. As the lodger cases show, sole use is not necessarily the same as exclusive use. The terms of the licence proclaim several times that a guardian is not being granted exclusive occupation of any part of the building. The UT’s decision did not, in my judgment, address this point at all. The UT made no finding that, in that respect, the agreement was a sham. If, as Blackburn J held, the test is whether a guardian would be entitled to maintain an action for trespass, it seems to me to be clear that the terms of the licence did not give them exclusive possession, which is the necessary foundation for an action in trespass.”
It would appear, therefore, that where a commercial building is occupied by Guardians under a number of licences, it is very unlikely that the Non Domestic Rates regime will not apply.
The test for whether a Guardian agreement creates a licence or a tenancy was recently reviewed by the High Court in Camelot Guardian Management Ltd v Khoo (2018) EWHC 2296 (QB) (see our earlier article) and there appears now to be a coherent set of criteria in respect of the questions of both tenure and rates.
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