Business rates and Property Guardian Companies, a startling decision?
As part of property guardian companies general marketing, most highlight the financial saving of business rates to building owners, but a recent decision in the Valuation Tribunal may overturn this advertised benefit.
The matter related to ‘Ludgate House’, a purpose-built, 9-storey office building. Major redevelopment was planned and in June 2015, the building owner entered into an agreement with a property guardian company, to arrange security by way of placing property guardians into the property, until the redevelopment commenced.
As property guardians were in occupation, the building’s status became temporarily residential for rating purposes, and the building owner successfully applied to have the property removed from the non-domestic rates register. However, in 2017 Southwark Council disputed the building was domestic leading to the following decision in the Valuation Tribunal.
The crucial question considered by the Tribunal was whether the building, in whole or in part, was used ‘wholly for the purposes of living accommodation.’
The Tribunal considered the various contracts between the parties and determined that the purpose of the guardian’s occupation was to provide a security function and the living accommodation was an additional factor to achieve that purpose.
After considering all the facts, the Tribunal decided that based on the scale of the building; the nature of the agreements; and the placement of guardians, the occupation was ‘unnatural’ in a domestic context and so could not be temporarily residential. The property was, therefore, subject to non-domestic rates. These would be backdated to 2015.
The Tribunal made it clear that the decision, in this case, was based on consideration of all facts and it is not a precedent moving forward. Building owners may be challenged when applying to remove a property from the non-domestic rates register when property guardians are used, and previous removal may be reconsidered. This decision is an anomaly considering the number of applications made over the years.
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