We are pleased to report that in the first trial involving the Room for Faith Limited / Local Faith Limited mitigation scheme we obtained a liability order for a local authority for non-payment of NNDR against the owner of a hereditament who had instructed Verity Commercial Services Limited (“Verity”) to implement the scheme on its behalf. The Council was also awarded its costs of the proceedings.

Background

The property was previously used as a bank but became vacant at some point in 2022. The owner instructed Verity as managing agents of the hereditament to attempt to mitigate its liability for NNDR by entering a scheme.

Verity specialise in business rates mitigation. To implement the scheme their staff incorporated two companies; Room for Faith Limited (“RFFL”) incorporated in England and Local Faith Limited (“LFL”) incorporated in Hong Kong.

On 7 October 2022 a lease was granted by the owner to RFFL and on the same date a sub-lease was granted to LFL.

The Council refused to accept that either LFL or RFFL were liable for payment of the NNDR falling due and issued a summons on 13 June 2023 against the owner. Verity, acting as agent for the owner, instructed solicitors to act on the owner’s behalf. The solicitors for Verity indicated an intention to dispute the liability and Greenhalgh Kerr were instructed to act on behalf of the Council.

Trial

The case went to trial on 1 and 2 May 2024. Alex Worthington, Greenhalgh Kerr’s in-house barrister, represented the Council and the owner was represented by Nicholas Trompeter KC, who acted for Hurstwood Properties Limited in the Hurstwood case.

The disputed issues were as follows:

1. Was the hereditament rateably occupied by LFL on any day during the Relevant Period?
2. What is the test for ownership? If there are multiple tests, which test ought to be applied in this case?
3. Having identified the test was LFL the owner on any day during the Relevant Period?

Judgment

At trial the judge found there was no actual occupation of the hereditament by LFL, that the hereditament was unoccupied and as a result liability fell to the owner. 

As to the test for ownership the judge considered the Judgment in Hurstwood. The judge found that the decision in Hurstwood means that in all cases a purposive approach must be taken in considering who is “entitled to possession” and in his written judgment, handed down at a hearing on 5 September 2024, he stated that,

“…in many cases this will require only a cursory examination. It will, in those cases, be clear that the person who as a matter of the law of real property has the legal right to actual physical possession, will also have a real and practical ability either to occupy the property or put someone else in occupation. If that is not clear then this may require further examination.”

The judge found that;

“there was no evidence that LFL was anything beyond a company upon which a legal right to occupy was conferred for no other purpose than the avoidance of liability to rates. There is no evidence upon which I can conclude that LFL had the real or practical ability to occupy the property or put someone into occupation of it.

I find that the real and practical ability to occupy the property or put someone else into occupation remained with the Company [the owner] throughout the relevant period.”

Tony Sykes, Business Rates Manager at City Of Bradford Metropolitan District Council

“Rates avoidance costs the public purse millions of pounds a year. Bradford City Council will always challenge these types of schemes when it has grounds to do so. Greenhalgh Kerr are experts in this field and achieved a significant victory for the Council in this case.”

Our Team Is Available To Help

We are aware the Room for Faith / Local Faith Limited scheme is being deployed throughout the country and is developing. The decision in this case may assist local authorities seeking to challenge the scheme but each case will turn on its own facts. Our client has agreed to share the written judgment with other local authorities. Requests for copies may be made by email to stephen.crossley@greenhalghkerr.com

Stephen Crossley

* Since the publication of the article, we have been informed by the newly instructed solicitors for A&P68 Limited that it intends to appeal against the decision by way of case stated.