Where a charity is held liable for business rates, councils should pay close attention to the legal structure of the charity, as this will affect the procedural requirements as to service of documents as part of the billing and liability order process, as well as any subsequent enforcement proceedings.

Choosing the correct bill payer

When billing a charity for business rates, the first step will always be to identify the nature of the entity you are dealing with, and in particular whether the charity is incorporated or unincorporated. Searches of the Charities Commission website and Companies House will disclose the nature of the entity under which the charity has been established.

Where a charity is incorporated (usually as a company limited by guarantee, although there are other less common forms such as community interest companies and community benefit societies) then the charity will have its own separate legal personality distinct from the individuals behind the charity. The individuals behind the charity (in the case of a company, the directors) will usually be entitled to rely on the limited liability afforded to such entities, meaning that they will not face personal liability for the charity’s debts. As such, the charity itself should be named as the liable party, and liability orders may only be sought and enforced against the charity.

Conversely, where a charity is unincorporated (such as an unincorporated association or an unincorporated charitable trust), the charity itself has no separate legal identity. In this case, whilst the business rates will be incurred in the name of the charity, the individuals behind the charity (the members of the unincorporated association or the trustees of the trust) can be pursued in respect of the liability.

In this case, the Council can simply seek liability orders in the name of the charity. From a strategic point of view however, and for the sake of clarity, it will usually be the best option to seek liability orders in the name of the charity as well as each of the individuals, as joint bill payers. In either case, if liability orders are obtained, the Council will have the option of seeking to enforce against any one of the various parties, or all of them at the same time. This will maximise the prospects of a successful recovery.

Service of Notices

The correct manner of serving documents such as bills and summonses in connection with liability order proceedings will differ depending on the nature of the entity. The Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 provide that there are two options for effecting service of notices given under those regulations.

Firstly, where the notice relates to a hereditament which is a place of business of the bill payer, it may be sent to the place of business. Therefore, if the bill payer is actually running a business from the hereditament, notices may be sent there. Beware charities seeking empty relief, as service on the hereditament may be in doubt.

Secondly, service may be effected by any manner allowed under section 233 of the Local Government Act 1972. That section provides that notices may be served by being left at or posted to the bill payer’s “proper address”. Where the bill payer is a body corporate, a notice may also be served on the secretary or clerk of that body.

The term “proper address” is defined as the last known address of that person, except that in the case of a body corporate (or its secretary or clerk), it shall be the address of the registered or principal office of that body. It is also permissible to serve documents on any other address which the bill payer has specified as an address at which he will accept documents.

As such, where a liable party is a registered company or other incorporated body, the best option will be to effect service at the registered office. Where a charity is an unincorporated trust, service should be effected on the charity’s last known address, which will usually be the address listed on the charity commission website. If individual trustees are named as joint bill payers, service should be effected at the individuals’ last known addresses. A trace will be necessary if these addresses are not publically available.

Enforcement

The nature of the liable party will also impact on the available enforcement options, and the manner in which any document must be served in the course of enforcement proceedings.

Where the liable party is an unincorporated association, enforcement proceedings cannot be taken directly against it (as it lacks its own separate legal personality), and recovery will be sought from the relevant individuals. Bankruptcy proceedings can be pursued against individuals in appropriate cases, by way of service of statutory demands, and, if necessary, bankruptcy petitions. It does not matter where service is effected, but usually, both documents must be personally served, by handing the document to the individual.

Where the liable party is a company, it is open to pursue winding up proceedings against it. It is not necessary to serve any statutory demand, but any winding up petition must be served personally by leaving it at the company’s registered office.