Property guardianship schemes provide companies that run them with an income, individual guardians with living accommodation at cheaper rates than market rents, and owners of empty premises with a measure of protection against vandalism and squatting. The question that arose in Southwark London Borough Council v Ludgate House Ltd [2020] EWCA Civ 1637; [2020] PLSCS 221 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.
The occupation agreements with the individual guardians were described as licences. Guardians were allowed to share the living space and communal facilities, but their agreements stated that they would not have exclusive possession or occupation of any part of the building and that the extent of the living space might vary from time to time. However, there would always be at least one room for each guardian.
The Upper Tribunal explained that liability for business rates depends on how premises are used, and not on their physical design or configuration. Furthermore, a property may be wholly used for a particular purpose, even though not all of it is so used. It accepted that the guardians had had exclusive occupation of their own rooms, which were kept locked, despite any overspill into communal areas. The guardians wanted somewhere to live and did not have any contractual relationship with, or provide any services to, the landowner. And, because they were not in occupation on the landowner’s behalf, the tribunal ruled in favour of the landowner.
The Court of Appeal has overturned the decision. It compared property guardians with service occupiers and also with lodgers, who are not in rateable occupation even if they have a key to the individual room that they occupy (and to the front door as well), and took the view that the tribunal had erred. It had placed too much emphasis on the guardians’ motives and had overlooked the fact that the purposes of all those involved were complementary and mutually reinforcing.
Lord Justice Lewison, who spoke for the court, explained that sole use is not necessarily the same as exclusive use. The landowner had not given up possession of any part of the property. Its agreement with the company that operated the guardianship scheme made that clear. On the contrary, the agreement asserted that the landowner retained possession and control and forbade the guardianship company from occupying the property. And no one had suggested that that agreement was a sham.
The property was occupied for a common purpose, which directly benefited the landowner and/or the company that operated the guardianship scheme. Neither had parted with possession, or occupation. So the case did not turn on who was in “paramount occupation” – which was the question that the tribunal had addressed. The decisive factor in establishing who was in rateable occupation of the building turned on who exercised “general control” over it.
The tribunal had wrongly confined itself to the actual exercise of rights, rather than assessing their effect, if exercised, and although it had disparaged the right to require individual guardians to relocate as a “draftsman’s device”, the right had actually been exercised on occasions. A lack of constant interference in the day to day running of a business does not equate to lack of control. So the tribunal’s ruling that the guardians were in rateable occupation of their individual rooms (which was based on its view of the effect of the contractual arrangements with the guardians) was incorrect.
Allyson Colby, property law consultant
