London Borough of Southwark v Ludgate House Ltd & Anor

Rateable occupation requires actual occupation which is exclusive for the occupier’s particular purposes, beneficial and sufficiently permanent. Where several persons may occupy premises, the parties’ contractual rights, purposes and control must be examined to identify the rateable occupier.

Sole use of a room, including possession of a key, does not establish exclusive occupation. Contractual control may be decisive even where the controlling party seldom exercises its rights. A retained right to require an occupant to move rooms is strongly inconsistent with exclusive occupation. Property guardians occupying under such arrangements may therefore leave the building owner in rateable occupation of the whole building.

The owner of an office building engaged a property-guardianship company to protect the vacant premises pending redevelopment. Individual guardians lived in allocated, lockable rooms under licences which denied them exclusive possession and permitted the company to relocate them.

The Valuation Tribunal for England held that the owner remained in paramount occupation of the building as one hereditament. The Upper Tribunal reversed that decision in [2019] UKUT 278 (LC), holding that the guardians’ rooms were separate hereditaments in their rateable occupation. The billing authority appealed.

The central issue was whether the contractual arrangements and occupation on the ground gave the guardians exclusive rateable occupation of their individual rooms, or left the owner in rateable occupation of the building as a whole.

1. Appeal allowed. The Upper Tribunal had misappreciated the legal effect of the contractual arrangements. The guardians were not in rateable occupation of their individual rooms. The owner had not surrendered possession and retained general contractual control of the building.

2. Rateable occupation requires actual occupation which is exclusive for the possessor’s particular purposes, beneficial and not too transient. Where there are rival occupiers, the tribunal must examine their respective rights and purposes. The form or label of an agreement is not decisive, but its substantive rights and obligations are essential to identifying the true nature of the occupation.

3. The guardians’ residential purpose and the owner’s security purpose were complementary and mutually reinforcing. The guardians’ presence enabled the property-guardianship company to perform the services for which the owner had contracted. The Upper Tribunal therefore erred by considering only the guardians’ residential purpose and discounting the purposes of the owner and the guardianship company.

4. Sole use of a room was not equivalent to exclusive occupation. A key to an individual room had no decisive legal significance, as lodgers and hotel guests may have keys without obtaining exclusive possession. The licences repeatedly denied exclusive occupation, permitted shared occupation and authorised relocation. They were not alleged to be shams.

5. Contractual control was sufficient. The Upper Tribunal erred by concentrating on whether retained rights had actually been exercised. The relevant inquiry included the effect those rights would have if exercised. A right to require a guardian to leave one room and move to another, while the licence continued, substantially interfered with exclusive enjoyment of the first room.

6. The service-occupier, caretaker and lodger authorities provided relevant analogies. Their application was not confined to relationships of employment. The decisive question remained the true nature of the occupation.

7. The authority’s alternative illegality ground, concerning an allegedly unlicensed house in multiple occupation, no longer arose and was unsuitable for determination. The court also declined to address two unpressed issues in the respondent’s notice. McCombe and Baker LJJ agreed with Lewison LJ.

• Court of Appeal (Civil Division): Allowed the billing authority’s appeal in [2020] EWCA Civ 1637. It held that the guardians were not in rateable occupation of their individual rooms.
• Upper Tribunal (Lands Chamber): In [2019] UKUT 278 (LC), reversed the Valuation Tribunal and held that the individual rooms were separate hereditaments occupied by the guardians. This required the building to be removed from the rating list.
• Valuation Tribunal for England: Held that the owner remained in paramount occupation of the whole building as a single hereditament.