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Valuation Tribunal for England (VTE) Determines Guardian Scheme Failed to Mitigate Non-domestic Rates

Mark Westmoreland Smith

Ludgate House was a large commercial office building on the Thames by Blackfriars Bridge. It has now been demolished and is being redeveloped.

Prior to demolition and whilst the plans for redevelopment were being finalised, the owners of the building employed a security services company to provide guardians. Guardians are short term licencees who would live in the building and were required to stay there at least 5 nights a week and report the presence of any person they suspected did not have permission to be in the building.

The purpose of the arrangement was both to protect the building and to mitigate non-domestic rates through the building’s residential occupation. Under the arrangement, the landowner expressly retained control, possession and management of the property.

The VTE held that the guardians were not in occupation for rating purposes. It was the landowner who had paramount occupation of the whole of the building.

The VTE considered whether the building – which was empty aside from the use by the Guardians for residential purposes – was used wholly for the purposes of living accommodation (part of the definition of domestic under section 66(1) of the Local Government Finance Act 1988). It concluded that it was not. Whilst the guardians themselves were occupying the building for residential purposes, it was clear that their collective occupation was in order to secure the building. Accordingly, the use was not wholly for the purposes of living accommodation.

As to valuation, the landowner had argued that the rebus sic standibus principle meant that the building had to be valued as an office with residents in occupation. The VTE rejected this and said that the rating hypothesis required the valuation to be done on the basis the building was vacant and to let and the guardians, consequently, fell to be disregarded for valuation purposes. The building was therefore valued as an office.

As a result, the guardian scheme in this case failed to mitigate non-domestic rates for the landowner.

Mark Westmoreland Smith acted for HMRC/ the Valuation Officer.