Even before the Pandemic, a walk through the average town centre was rather bleak. Online shopping had reduced many to a parade of charity or pound shops. The pandemic did for office space what Amazon had done to Debenhams. For the owner of commercial properties, voids present several problems. Firstly, a lack of rental income. Secondly exposure to liability for non-domestic rates. Finally, the costs of securing empty sites from trespassers. In recent years, one increasingly popular solution has been the use of property guardianship schemes. Typically there are three elements to these schemes:
The owner contracts with a third-party for property guardians to occupy the property.
The guardians pay the third-party rent, which is then shared with the owner.
The third-party applies to remove the proper- ty from the rating list and argues that as the property is now used for residential purposes it should now be subject to the significantly cheaper council tax regime. The attraction for the property guardians is they get somewhere cheap to live - often the properties let under these schemes are centrally located at rents that can be ½ of the rent that would usually be paid for such a location. The benefit for the property owner is they receive an income and avoid rates liability.
Two recent cases have highlighted the dangers for property owners of such schemes. In the Ludgate House (2023) litigation, a landowner of a large office in Central London sought to avoid an annual non-domestic rates bill of several million by using a property guardian scheme. Once the guardians went into occupation an application was made to remove the property from the rating regime and into the council tax regime. If this scheme had been effective, the owner would have saved millions. However, to avoid the risk of giving
THE LEGAL CORNER MAGAZINE | ISSUE 005 SEPTEMBER '23 | PLANNING, OWNERSHIP & THE ENVIRONMENT HB 18
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