Ludgate House Limited v Andrew Ricketts (Valuation Officer) & Anor

For rating purposes, a hereditament must be valued according to its physical state and mode or category of occupation at the material day. A temporary property-guardian scheme did not change an office building into premises restricted to property-guardian use. The building was a composite hereditament because rooms used wholly as living accommodation were domestic property, although the building remained a single hereditament in the rateable occupation of its owner. The hypothetical tenant could take account of the temporary nature of the scheme and the contractual rights to terminate or consolidate it. Regulation 14(7) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 did not apply where the alteration created a new single hereditament rather than increasing the rateable value of the same hereditament.

The appeal arose from six consolidated appeals concerning Ludgate House, a former office building occupied temporarily by property guardians pending redevelopment. The Valuation Tribunal for England treated the building as a single hereditament, found it wholly non-domestic, and determined that the relevant alteration took effect on 1 July 2015.

The Upper Tribunal’s earlier decision found separate hereditaments, but the Court of Appeal reversed that conclusion in [2020] EWCA Civ 1637 and remitted the remaining issues. The present hearing concerned the valuation approach, the rateable value, and the effective date of the alteration.

1. Hereditament and domestic property. The Court of Appeal had settled that Ludgate House was a single hereditament in LHL’s rateable occupation. That did not determine whether particular rooms were domestic property. The rooms occupied by guardians were used wholly for living accommodation within section 66(1)(a) of the Local Government and Finance Act 1988. The building was therefore a composite hereditament, not wholly non-domestic.
2. Reality principle and mode or category of occupation. Under paragraph 2 of Schedule 6 to the 1988 Act, the valuation had to reflect the building’s physical state and mode or category of occupation at 1 July 2015. Its mode or category was use as an office building subject to a temporary property-guardian scheme. It was not confined to use solely for property guardianship. The scheme’s temporary nature, the limited number of guardians then present, and the contractual rights to terminate or relocate them were part of the relevant reality.
3. Hypothetical valuation. The hypothetical tenant was to be assumed to take the building as an office building subject to the temporary scheme, with only four guardians licensed and occupying rooms on the material day. The tenant could terminate the scheme or consolidate the guardians’ occupation. The valuation evidence meant that the rateable value could not be reduced below the VO’s figure of £3,390,000.
4. Effective date. Following Lamb & Shirley Ltd v Bliss [2001] EWCA Civ 562, regulation 14(7) did not apply. Before the VON1 alteration there was no single hereditament whose rateable value had been increased. The alteration therefore took effect under regulation 14(2)(a)(iii) on 1 July 2015, not on 24 May 2017. The human-rights and purposive-construction arguments did not alter that conclusion.
5. Disposition. The VON1 alteration stood, took effect from 1 July 2015, and the rateable value remained £3,390,000. The appeal was dismissed so far as it remained outstanding after the Court of Appeal’s decision.

• Valuation Tribunal for England: dismissed or partly dismissed the relevant appeals and treated Ludgate House as a single, wholly non-domestic hereditament effective from 1 July 2015.
• Upper Tribunal (Lands Chamber): the earlier decision, [2019] UKUT 278 (LC), found separate hereditaments and allowed the appeal on that issue.
• Court of Appeal: allowed Southwark’s appeal in [2020] EWCA Civ 1637, held that Ludgate House was a single hereditament, and remitted the remaining issues.
• Upper Tribunal (Lands Chamber): determined the remitted issues and dismissed the outstanding appeal.