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Commercial Premises
| 01 November 2019

Paying Council Tax rather than Business Rates on Commercial Premises

In the recent decision of Ludgate House Ltd v. Ricketts [2019] UKUT 278 (LC), the Upper Tribunal, determined, that Council Tax could be payable in respect of a commercial property, where property guardians were utilised whilst the property was empty.

The particular property had a square footage of 173,633ft.², and had previously been used by a national newspaper. The rateable value of the property in 2010 was in excess of £4 million.

The property had been unoccupied since 2015, and therefore for 2 years, the owner of the property had allowed property guardians to live in the property. Property gardens are private individuals, who reside in the vacant commercial property.

They occupy the property pursuant to a contractual licence, to prevent them from becoming tenants under an Assured Shorthold Tenancy; and indeed all of the property guardians are granted separate licences, which conferred on them a right to occupy an area designated as available for occupation and to share it with others granted the same right. As no exclusive occupation was provided, this should ensure that they remained as licensees.

There are however very extensive obligations on the part of the licensees, as they are required to challenge any intruders to the property, as part of their property guardianship.

In considering whether or not business rates should apply, the Upper Tribunal considered the circumstances of the lettings, and held that:

1. The property guardians had been in actual occupation, and not in occupation on the part of the appellant;

2. That their occupation had been for the purpose of providing themselves with somewhere to live and had been exclusive as no other person was entitled to use individual rooms allocated to each of them for the same of for any other purpose;

3. The occupation of the individual rooms was obviously of benefit to the licensees; and

4. The occupation was not transient as it had endured for a period of 22 months.

The Upper Tribunal therefore concluded that the rateable occupation was by the property guardians, and as the rooms were wholly for the purpose of living accommodation, liability was for Council Tax. Business rates therefore no longer applied.

The effect this case has is that other individuals with commercial properties, which potentially are looking to be vacant for a lengthy period of time, can utilise property guardians, for the purpose of maintaining the building, preventing squatters from taking up occupation; but more importantly potentially for avoiding the need to pay business rates. This is a very fact specific case, and would not work in every instance, but could be a method to consider in removing rates liability for any long term vacant premises.

Should you have any further queries in relation to the above matter, or indeed in relation to business premises generally, you should not hesitate to contact Lorraine Lancaster of this firm's Real Estate Litigation Department, llancaster@paulrobinson.co.uk or Wendy Cole of this firm's Commercial Conveyancing Department, wcole@paulrobinson.co.uk.

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