Landlord liable for empty rates on disclaimer by tenant’s liquidator

Landlord liable for empty rates on disclaimer by tenant’s liquidator

birminghamIs a property owner liable for business rates where a lease is disclaimed but the tenant’s obligations have been guaranteed? The High Court decided that it was.

Original news

Schroder Exempt Property and another v Birmingham City Council [2014] EWHC 2207 (Admin)

Schroder Exempt Property and another (SEP) were freehold owners of the property. On 5 June 2006, they granted a 10 year lease of the Property to Woodward Foodservice Limited (WFL), the tenant’s obligations being guaranteed by W F Group Holdings Limited (GHL).

The lease required the tenant to pay all outgoings, including rent on 23 July 2008, with SEP’s consent, WFL assigned the lease to W F Group Limited (GL) and WFL entered into an authorised guarantee agreement, in terms of which WFL’s liability was expressly stated not to be affected by any disclaimer of the liability of GL under the lease. GHL and GL went into liquidation, and the liquidator disclaimed all interest in the Property under the Insolvency Act 1986, s 178 (IA 1986).

SEP continued to call on WFL as guarantor under the terms of the authorised guarantee agreement to make good the default of GL and WFL had made payments of the sums demanded. Birmingham City Council (BCC) made rate demands of SEP for the period after the disclaimer. Those were not honoured and BCC was granted a liability order in the sum of approximately £590,000. SEP appealed by way of stated case.

The court had to decide whether:

  •  SEP had been entitled to immediate possession of the whole property
  • as such, whether the court in the first instance had been correct to find that SEP were the owners within the meaning of the Local Government Finance Act 1988, ss 45(1)(b) and 65(1) (LGFA 1988)

What is the law in this area?

LGFA 1988, ss 43(1) and 45(1)

Local rates were levied on an occupier for occupied premises. Where there are no actual occupiers,

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About the author:

Melissa Moore is a dual qualified in England and Wales and South African lawyer and has 14 years’ experience in property practice in England. She has worked in local government and been a partner at a regional law firm and most recently an associate director at Berwin Leighton Paisner which she joined in 2005. Melissa has wide experience in all areas of property law and specializes in commercial real estate development. She has experience in a number of sectors including hotel, leisure, offices, investment, industrial, motorway service stations and funding. She has worked on large scale strategic developments and government funding initiatives, town centre regeneration schemes and private mixed use developments both for public sector and private developers and investment funds. In 2013 she was ranked by Legal 500 as recommended for local government work.