Shynar Zhylzhaxynova v Jo Moore (Valuation Officer)

For rating purposes, the primary test for identifying a hereditament is geographical. A single territorial unit may nevertheless be divided where severable parts are used for materially different purposes. Physical separateness is not conclusive if the parts remain legally and practically integrated.

Where a subordinate occupier lacks exclusive possession and control, and the head lessee can require it to leave, the head lessee remains in paramount occupation and is rateable for the whole. The terms of the relevant lease or licence are central to that assessment. The approach in Woolway (VO) v Mazars LLP [2013] UKSC 53 was applied.

This was an appeal from the Valuation Tribunal for England concerning the 2017 rating list assessment of Unit 1, Slater Court, Peterborough. The appellant contended that the warehouse and mezzanine office were two hereditaments occupied by two separate companies.

Quality and Price Limited held the ten-year lease of the whole Unit and occupied the office. QNP Toys Ltd used the warehouse under an informal arrangement with Quality and Price Limited. The companies were separately incorporated and operated distinct businesses, but shared ownership and management, access arrangements, utilities and security systems.

The central questions were whether the warehouse and office were physically and functionally separate, and whether QNP Toys’ occupation displaced Quality and Price Limited’s rateable occupation.

1. Appeal dismissed. The Unit was one hereditament, and Quality and Price Limited was in rateable occupation of the whole.
2. The primary test for identifying a hereditament is geographical. The Unit was let as a single unit and was designed as one property. The office and warehouse were not self-contained, although they could potentially have been separated with structural, utility, security and legal changes. The geographical test therefore pointed to one hereditament, without being conclusive by itself.
3. QNP Toys was in actual occupation of the warehouse and its occupation was capable of being rateable occupation. The requirements are actual occupation, occupation exclusive for the possessor’s purposes, benefit to the possessor and non-transience. Exclusive occupation in that sense does not prevent another person from occupying the property for different purposes.
4. For the separate question of paramount occupation, literal exclusive possession was material. QNP Toys had no right to exclude Quality and Price Limited, no contractual rights over the warehouse and no security of tenure. Quality and Price Limited could require it to leave at any time.
5. The relevant legal rights and degree of control had to be assessed by reference to the lease and the parties’ arrangements. Separate leases were not necessarily essential, but, without them, QNP Toys would need to have factual exclusive possession. It did not. The shared access, utility meters, alarm controls, storage and contractual obligations also demonstrated that the premises were not self-contained.
6. The formal conclusion was that the Unit was physically a single whole and that Quality and Price Limited remained in paramount occupation. The appeal was dismissed.

• Upper Tribunal (Lands Chamber): appeal from the Valuation Tribunal for England dismissed. The Tribunal held that the Unit was one hereditament and that Quality and Price Limited remained in paramount occupation.