Part 5: Domestic and Non Domestic Borderline
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
1.1 Since 1 April 1990 and the compilation of Rating Lists under the provisions contained in the Local Government Finance Act 1988 [LGFA 1988], rating has been a tax on non-domestic property. Domestic property not in rating may require banding for Council Tax (see Council Tax Manual PN 1 and 8).
1.2 The LGFA 1988 retained the pre-1990 definition of hereditament (s.64(1)), but also provided in s.64(8) that a hereditament is non-domestic if either:
“it consists entirely of property which is not domestic,”
or
“it is a composite hereditament.”
1.3 Composite hereditaments are those comprising both domestic and non-domestic parts and are defined in s.64(9) in the following way:
“(9) A hereditament is composite if part only of it consists of domestic property.”
2.1 Domestic Property S.66(1) LGFA
The basic definition of “Domestic Property” is provided in s.66(1) LGFA 1988:
“Subject to subsections (2) and (2B) below. Property is domestic if:
a) it is used wholly for the purposes of living accommodation,
b) it is a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property falling within paragraph (a) above,
c) it is a private garage which either has a floor area of 25 square metres or less or is used wholly or mainly for the accommodation of a private motor vehicle, or
d) it is private storage premises used wholly or mainly for the storage of articles of domestic use.”
2.2 Domestic Property - Special Rules
The definition of “Domestic Property” in s.66 LGFA 1988has been amended by a number of statutory instruments.
It provides a basic definition in S.66(1) and then gives special rules for:
a) Caravans - s.66(3)
b) Moorings - s.66(4)
c) Hotels - s.66(2A)
d) Short stay accommodation - s.66(2B & 2C)
e) Timeshares - s.66(2E)
f) Renewable Energy – s.66 (1A & 1B)
2.3 The Importance of “If “
The use of the conjunction “if “ at the beginning of s.66(1) indicates that in order for property to be ‘domestic’, one of the four conditions (a) to (d) must be satisfied and that the subsection is exhaustive in meaning - see Turner -v- Coleman (VO) (1992 RA 228).
2.4 The meaning of “Living Accommodation”
In Tully -v- Jorgensen (VO) (2003 RA 233), a case concerning the rateability of a room in a house used for office work, the President of the Lands said (at paragraph 17):
“The purposes of living accommodation are plainly not confined to the satisfaction of the basic bodily needs of the persons residing in the property. Recreation and leisure facilities, for instance, are provided as part of the living accommodation. If there is a separate room for such a purpose, a television room or a billiard room for instance, the house does not cease on that account to be used wholly for the purposes of living accommodation.”
Again in Lewis -v- Christchurch Borough Council (1996 RA 229), a case concerning beach huts (which were more akin to chalets) and an appeal by the Listing Officer as to whether they were correctly assessed to Council Tax, Jowatt J. stated:
“I note that the definition of domestic does not require that a hereditament is used for all the purposes which might be said to be the purposes of living accommodation. On the facts as found by the tribunal these beach huts were domestic since they were used wholly for the purposes of living accommodation. There are certainly in some of the beach huts bunk beds, but it does not follow that in order to be used for living accommodation a property has to be slept in. There are many other aspects of living than sleeping. The definition does not require that the property fulfils all the purposes which living accommodation might be called upon to meet.” …
2.5 “Wholly” - Living Accommodation
To be domestic, property has to be used wholly for the purposes of living accommodation. In this context, “property” means the whole or any part of a property, eg a room or part of a room. To be “domestic”, that part has to be used “wholly” for the purposes of living accommodation. A part which has a mixed use will not therefore be wholly domestic and will, in consequence, be non-domestic. This is consistent with the approach taken by Judge Marder in Evans -v- Suffolk County Council (1997 RA 120, at page 130):
“I agree further with Counsel for the Valuation Officer’s point that since all the property is used to a material extent for the provision of welfare services including such things as training and rehabilitation, the development of social skills, and a degree of nursing care, the property cannot be domestic and must therefore be non-domestic.”
The definition requires property to be “used” as living accommodation. The test is one of use rather than character or design. A part (or whole) of a property will be domestic if it is used wholly for the purposes of living accommodation notwithstanding it was designed or built for a non-domestic use, eg a shop used as a house. “Property” can include more than one hereditament see Head VO -v- LB of Tower Hamlets (2005 RA 177).
3.1 General
When considering whether a building is “domestic property” in accordance with s.66(1)(b) LGFA 1988, two tests must be fulfilled:
i) It must be “belonging to or enjoyed with” property which “is used wholly for the purposes of living accommodation”.
The phrase “belonging to or enjoyed with” is explained in paragraph 5 below.
It should be noted that the phrase “living accommodation” does not have a restrictive meaning and should be taken in a broad context to encompass leisure and hobby uses. Moreover, property can be used for the purposes of living accommodation without being a dwelling - see Section 2 above.
ii) The premises must be “a yard, garden, outhouse or other appurtenance”.
3.2 “Yard“
A “yard” is not defined in the legislation. However, the Concise Oxford Dictionary defines a “yard” as “Piece of enclosed ground, especially one surrounded by or attached to building(s) or used for some manufacturing or other purpose; garden of house”.
In this context the term ‘stable yard’ may spring to mind which, curiously, is not defined in the Dictionary. However, a “yard” must have the necessary concept of enclosure - of being surrounded by, or attached to, buildings and this is not always present with ‘stable yards’ and other areas.
In any event, a qualifying yard would require to be within the curtilage of the living accommodation. See dicta of Upjohn L J in Clymo (VO) v Shell-Mex and BP Limited CA (1963) 3 R&VR 471, at page 473 (see para 3.6 below).
3.3 “Garden“
Again, a “garden” is not defined in the legislation and should be given its ordinary meaning, “piece of ground devoted to growing flowers, fruit, or vegetables”.
In relation to ‘gardens’ which open to the public where access to the mansion, house or other associated living accommodation is restricted, the approach set out in Section 5a 1085 - Appendix 1: Gardens open to the public should be followed.
3.4 “Outhouse”
An “outhouse” is not defined in the legislation. However, it is considered to be:
an outbuilding or outside building adjoining a dwelling house, or within the curtilage of the domestic property.
It is, therefore, “belonging to or enjoyed with” that living accommodation. See Cadogan and Another v McGirk [CA 1996 EG 175].
The Concise Oxford Dictionary defines “outhouse” as a “house or building or shed belonging to main house and built near or against it; outdoor lavatory”. This implies subject matter which is ancillary to domestic property and therefore has a domestic purpose.
An outhouse must lie within the curtilage of the dwelling house and have a very close affinity with it - something connected with the domestic use of the living accommodation, eg a coal shed, cycle shed, garden store. In Martin & Others v Hewitt (VO) [2003 RA 275], at paragraph 10 on page 279, the President of the Lands Tribunal observed that an “outhouse” must have a “close physical relationship to the dwelling in question. But, whether an outhouse or not, it would still have to be an appurtenance to fall within the provision.”
3.5 “Other Appurtenance”
It is important to note that the statutory wording in s.66(1)(b) is not ‘or appurtenance’ but “or other appurtenance”.
The effect of the word “other” is to import the ejusdem generis rule - so that in considering whether premises can be considered to be an “other appurtenance”, it is not sufficient simply to consider the meaning of “appurtenance“. It is necessary also, to consider the meaning of “yard“, “garden” and “outhouse” and the genus (the family likeness, as it were) that they create.
Hence, in order to come within s.66(1)(b), premises that cannot be characterised, as a “yard, garden or outhouse” must be both:
- an “appurtenance” in the strict sense of the word - the Concise Oxford Dictionary definition is “belonging, appendage, accessory“. But note also the more technical definition derived from conveyancing practice before registration of proper title to land was introduced
and
- a member of that genus which can be extracted from the proceeding items in the list, ie “a yard, garden and outhouse”
Whether a building (or land) is properly described as an ‘appurtenance’ must always depend very much on the particular facts and circumstances of each case and it is not possible to try to lay down any precise test[s].
However, it should be noted that for a building to be correctly considered as an ‘appurtenance’ it must be subsidiary to the principal property. Indeed, one helpful view is that “the concept envisaged is that of principal and accessory“- see Debenhams v Westminster City Council (1987) 1 All ER 51. Thus the concept has more to do with subservience to the domestic property falling within the meaning of Section 66(1)(a).
One also needs to bear in mind the ejusdem generis rule, so the “other appurtenance” must be in the same genus as the proceeding words, ie a yard, a garden, outhouse.
So, in the context of s.66 LGFA 1988, the word ‘appurtenance’ carries a narrow and generally restrictive meaning rather than a broad one - a point further amplified in the decided cases described below.
3.6 Relevant Case Law
When considering whether a building can be properly described as an ‘appurtenance’, it is important to have regard to the leading judgment in Clymo (VO) v Shell-Mex and BP Limited CA (1963) 3 R&VR 471. Although this decision was in respect of s.22(1)(a) (as amended) of the Rating and Valuation Act 1925, it is considered highly unlikely that any Court would hold that a different interpretation should be given to the meaning of the word “appurtenance” in s.66(1)(b) of the LGFA 1988.
The meaning which Parliament intended to be given to the word ‘appurtenance’ within s.66(1)(b) LGFA 1988 is its ordinary conveyancing meaning - a meaning which was more common when land was conveyed by express words of grant than by reference to title numbers under the present land registration scheme. In Trim v Sturminster Rural District Council (1938) 2KB 508, Slessor L J observed at page 515 (cited with the approval of Upjohn L J in Clymo, at page 473 - first column):
“In the definition to which I have referred certain specific matters are mentioned, that is to say, any yard, garden and outhouses, and then follows the word “appurtenances”.
That word has had applied to it, through a long series of cases mostly dealing with the meaning of the words in demises, a certain limited meaning, and it is now beyond question that, broadly speaking, nothing will pass, under a demise, by the word “appurtenances” which would not equally pass under a conveyance of the principal subject matter without the addition of the word, that isto say, as pointed out in the earlier case of Bryan v Wetherhead, that the word “appurtenances” will pass the house, the orchard, yard, curtilage and gardens, but not the land.
*That view, as far as I understand the authorities, has never been departed from, except in certain cases it has been held that the word “appurtenances” may be competent to pass incorporeal hereditaments. Certainly no case has been cited to us in which the word “appurtenance” has ever been extended to include land, as meaning a corporeal hereditament, which does not fall within the curtilage of the yard of the house itself, that is, not within the parcel of the demise of the house.” *(NB The emphasis has been added.)
Although the case concerned enfranchisement under the Leasehold Reform Act 1967, further guidance on this point comes from Methuen-Campbell v Walters [QB525 (1979) 1 All ER 606, 621F] and see also a brief report in Estates Gazette 1978 Vol 247, p899. The statutory provisions entitled the tenant to seek a grant of enfranchisement for “the house and premises” held on a long lease. The issue in the case was whether a paddock that was included in the lease (some 38m from the rear wall of the house) was part of the ‘premises’. The court held that it was not, since it was not an appurtenance. Goff LJ reviewed the authorities on the meaning of appurtenance, and he quoted with approval the passage from Slesser LJ’s judgment in Trim v Sturminster RDC (1938) 2KB 508. It did, he said, confine ‘appurtenances’ to the curtilage of a house and he said [at 537QB]:
“So in the end, in my judgment, the crux of the problem becomes: Is this within the curtilage?
The word ‘curtilage’ is defined in the Shorter Oxford English Dictionary, 3rd Ed (1973) as ‘A small court, yard, or piece of ground attached to a dwelling house and forming one enclosure with it.’ Note 7 in Stroud’s Judicial Dictionary, 4th ed. (1971), p 663 suggests that it may be wider than that. We have looked at some of the cases cited in Stroud, but I do not think they afford us any assistance. What is within the curtilage is a question of fact in each case, and for myself I cannot feel that this comparatively extensive piece of pasture ought to be so regarded, particularly where, as here, it was clearly divided off physically from the house and garden right from the start and certainly at all material times.”
Roskill LJ and Buckley LJ concurred at pages 540 and 541-2 respectively.
3.7 The Conveyancing Approach
In order for a building to be regarded as an “appurtenance” it must pass in a conveyance of the principle subject matter (the dwelling house, flat, etc.) without being specifically mentioned in that conveyance.
Thus, if it is contended that Building A is appurtenant to Building B, then if the conveyance were expressed to convey “All that Building B” (with no further wording added), the Courts would hold that Building A was also conveyed and was an appurtenance to Building B. In relation to registered land the ‘Parcels Clause’ (ie the words which describe the demised premises attached to the registration certificate) will provide a similar indication.
This approach was mildly criticised in the Upper Tribunal decision of Andrew Corkish (Valuation Officer) v Fiona Bigwood. The UT seemingly considered this approach of little practical use given modern conveyancing practice:
“40. While a Victorian conveyancer might immediately have appreciated what would or would not be taken to be included with a house even though it was not expressly mentioned in a lease or conveyance, the explanation leaves something to be desired in the twenty-first century when modern conveyancing practice includes digital mapping and compulsory land registration. In Methuen-Campbell v Walters Roskill LJ suggested at 539E that the meaning of “appurtenances” depended on the context in which it appeared. The general concept is clear enough, namely that an appurtenance is something which is so closely associated with the principal subject matter of a lease or conveyance, physically and functionally, that it can be regarded as “part and parcel” of it, so that a reference to the principal subject would be understood as including the appurtenance. That general concept is illustrated by three decisions of the Court of Appeal.”
3.8 The Importance of Curtilage
Whilst a building which passes under a silent conveyance is ipso facto (by that very fact) an ‘appurtenance’, if it also lies within the curtilage of the main demise, ie the dwelling house, this will be a further supportive factor that it is an ‘appurtenance’ and assist in answering the ‘conveyancing’ question.
This may be explained by consideration of the relatively contemporary expression of what it means to be “within the curtilage” of a house which was set out in the judgement of Buckley L J in Methuen-Campbell v Walters (1979) QB525, 543, viz:
“In my judgement, for one corporeal hereditament to fall within the curtilage of another, the former must be so intimately associated with the latter as to lead to the conclusion that the former in truth forms part and parcel of the latter. There can be very few houses indeed that we do not have associated with them at least some few square yards of land, constituting a yard or basement area or passageway or something of the kind, owned and enjoyed with a house, which on a reasonable view could only be regarded as part of the messuage and such small pieces of land would be held to fall within the curtilage of the messuage. This may extend to ancillary buildings, structures or areas such as outhouses, a garage, a driveway, a garden and so forth. How far it is appropriate to regard this identity as part of one messuage or parcel of land as extending must depend upon the character and the circumstances of the item under consideration.”
In Methuen-Campbell, the meaning of ‘appurtenance’ was held on authority to be synonymous with ‘curtilage’. Though the words ‘appurtenance’ and ‘curtilage’ are separate legal terms, as a general rule it is considered there will be a common relationship between appurtenance and curtilage and this approach will apply in the vast majority of cases. A messuage is a dwelling with outbuildings and land assigned to its use.
In Secretary of State for the Environment, Transport and the Regions v Skerritts of Nottingham [CA 2000 JPL], a case concerning a listed building enforcement notice served on a stable block within the grounds of the Grimsdyke Hotel, Harrow Weald. This was a substantial listed Grade II building and the contravention concerned 19 unauthorised windows installed in the stable block. The appeal turned on whether the stable block, which was not separately listed, was within the curtilage of the hotel. In his judgement, Robert Walker LJ, although expressing the view that Dyer v Dorset County Council [1989] 1 QB 346 was correctly decided, continued:
“But in my respectful view this court [Dyer] went further than it was necessary to go in expressing the view that the curtilage of a building must always be small, or that the notion of smallness is inherent in the expression. No piece of land can ever be within the curtilage of more than one building, and if houses are built to a density of twenty or more to an acre the curtilage of each will obviously be extremely restricted. But Nourse LJ recognised that in the case of what the now-moribund Settled Land Act 1925 refers to as a ‘principal mansion house’ - which is what Grimsdyke was built as - the stables and other outbuildings are likely to be included within its curtilage. I also respectfully doubt whether the expression ‘curtilage’ can usefully be called a term of art. That phrase describes an expression which is used by persons skilled in some particular profession, art or science, and which the practitioners clearly understand even if the uninitiated do not. This case demonstrates that not even lawyers can have a precise idea of what ‘curtilage’ means. It is, as this court said in Dyer, a question of fact and degree.” (NB The emphasis has been added.)
In Martin & Others -v- Hewitt (VO) [2003 RA 275], at page 284, the President of the Lands Tribunal, Mr George Bartlett QC, considered whether certain boathouses on the shores of Lake Windermere could be considered to be ‘appurtenances’ for the purposes of s.66(1)(b). In doing so he reviewed a considerable body of authority relating to the meaning of the word and concluded (at paragraphs 20 and 21) that appurtenance was not intended to encompass land or buildings lying outside the curtilage of the property and stated:
“In all the statutory contexts that fell to be considered in these cases, therefore, “appurtenance” was held to be confined to the curtilage of the building in question.”
In Martin, the Lands Tribunal found that the boathouses were not within the curtilage, a finding which was fatal to the ratepayer’s case.
In Head VO -v- London Borough of Tower Hamlets [2005 RA 177], at page 183, the President of the Lands Tribunal succinctly makes this point (at paragraph 22):
“It is unnecessary for me in this decision to review again the cases that deal with the meaning of “appurtenance”. I accept Mr Mould’s [Counsel for the Valuation Officer] submission that in this statutory context it embraces property that will pass with the principal subject matter of a conveyance without the need for express mention and is confined to the curtilage of the building in question.” [NB The emphasis has been added.]
Again in[Winchester City Council v Hancock (VO) 2006 RA 265], at pages 275-276, the Lands Tribunal (His Hon Judge Mole QC and N J Rose FRICS) decided as follows:
“23. In our judgment the short but decisive answer to Mr Scrafton’s submission is that, as a matter of fact and degree, we do not find that either sewage treatment works falls within the curtilage of any of the dwellings that it serves. It may well be true that the “right to use” the sewage treatment works would pass on a conveyance. However, even if it were useful to talk of such an incorporeal right as being “within the curtilage” of the dwelling it serves, which we doubt, that is nothing to the point. It is the physical hereditament comprising the sewage treatment works that must be within the curtilage of the dwelling (or dwellings), if it is to be appurtenant to it (or them).
24. We find that the dwellings in St Andrew’s Green are, as the maps and photographs show, modest semi-detached houses, on their own plots, surrounded by their own gardens with their boundaries marked with hedges and fences. Each one stands in its own curtilage. The freehold of six of these dwellings has been sold by the appellant. However, it does not seem to us that it matters whether the houses are held by virtue of individual freeholds or are occupied under a tenancy from one landlord, in the circumstances of these dwellings. A house on its own plot with its own boundaries will be very likely to have its own curtilage although it is held on a tenancy from the same landlord as the houses on either side of it. Even though the sewage treatment works at St Andrew’s Green appears to adjoin the curtilage of number 1 St Andrew’s Green, and thus a continuous red line could be drawn around both of them, they are not in the same curtilage, any more than number 1 St Andrew’s Green is in the same curtilage as number 2 St Andrew’s Green, which it also adjoins.
25. The factual situation at Southbrook Lane, Micheldever, is even more hopeless, so far as the appellant’s case is concerned. The sewage treatment works there serves 58 dwellings in two distinct areas of housing, both of which are well away from the sewage treatment works itself. The 58 individual dwellings are detached, semi-detached and terraced and (with the possible exception of some of the terraced houses) all appear to have their own curtilages. The works does not lie within the curtilage of any dwelling or group of dwellings it serves.”
All these cases, and the Winchester decision in particular, demonstrate that term “appurtenance” in s.66(1)(b) has a restricted meaning. This fine nuance is succinctly expressed by His Honour Judge Huskinson in the Lands Tribunal decision Allen (VO) v Mansfield DC and Bassetlaw DC[2008 RA 338], at page 350:
“26. It is necessary if a DHS [District Heating System] is to constitute domestic property that the DHS constitutes an appurtenance belonging to or enjoyed with property falling within section 66(1)(a) – i.e. an appurtenance belonging to or enjoyed with property which is used wholly for the purposes of living accommodation. I accept that for a DHS to be an appurtenance of such property the DHS must be contained within the curtilage of such property, see paragraph 14 above. The question of whether a DHS falls within such a curtilage will be a matter of fact and degree in every case.”
In the Upper Tribunal decision of The Collection Management (Limited) v David Jackson (Valuation Officer), Her Honour Judge Alice Robinson reviewed a number of the above mentioned cases and decided a group of houses can have both their own individual curtilage and a collective shared curtilage, dependent on the facts:
“42. On the facts of this case the question as to whether the concierge room lies within the curtilage of the 15 houses collectively admits of only one answer, as the VO recognised. Physically The Collection is a coherent whole bounded by the walls of the houses on one side, the walls of the communal gardens on the other side, at the northern end the walls of the gardens and access gates to Boundary Road and at the southern end by the walls of house number 15 and the gates to Bolton Road. Within this physical boundary lie land and facilities which wholly serve the residential accommodation including centralised utility services for the provision of water, air cooling and foul drainage. The concierge room lies entirely within the physical boundary I have identified being surrounded by house number 15 and adjacent to the access ramp within the gates to Bolton Road. It is a small room, subservient in size terms to the residential accommodation and its use, to put it neutrally for the present, relates to the residential accommodation. Moreover, on any transfer of the freehold of The Collection, it would pass without mention with the rest of the land and buildings as indeed it did on transfer to the Appellants in 2010. The concierge room is undoubtedly within the curtilage of the 15 houses collectively.”
The Upper Tribunal in the decision of Andrew Corkish (Valuation Officer) v Fiona Bigwood, cast some doubt on the importance of curtilage at paragraph 53 below:
53. It was submitted by Mr Singh that the words appurtenance and curtilage were synonymous. We doubt that is justified, and in any event as the statute refers to “appurtenance” it is neither necessary nor desirable to substitute a different expression, even if the two are synonymous. Both Methuen-Campbell and Trim were concerned with areas of undeveloped land, rather than land on which buildings had been constructed. In neither case was the issue whether two buildings occupied together were such that one was an appurtenance of the other, but was rather whether a paddock or yard occupied with a house or buildings was an appurtenance of the house or buildings. As the passage from Shepherd’s Touchstone cited by Slesser LJ in Trim illustrates, the curtilage of a house generally refers to yards or other unbuilt areas in proximity to the house (although it is not uncommon to refer to a structure being “within the curtilage” of a listed building).
It appears the UT members may have interpreted ‘appurtenance and curtilage being synonymous’, as them meaning the same thing. The members commented in the next sentence that it is not necessary to substitute the word appurtenance with a different expression. However it should be considered that Mr Singh used ‘synonymous’ to mean “closely associated with”, suggesting that appurtenance should be closely associated with curtilage. Therefore for something to be an appurtenance it should very likely be within the curtilage of the primary property. This understanding comes from Roskill LJ comments in
Methuen-Campbell v Walters (1979) QB525, 543:
“It is at this point that one does get some assistance from the cases. It seems to be clear that the cases show that the courts have never yet, even when treating ‘appurtenance’ as apt to cover a corporeal hereditament, gone as far as construing the word as including land which does not itself fall within the curtilage of the house in question; like Goff LJ, I think it would be impossible to decide the case in favour of the tenant without ignoring the decision of this court in Trim v Sturminster Rural District Council. Goff LJ has read the relevant passage from the judgement of Slesser LJ and I shall not repeat it; but I would draw attention to the fact that that passage was expressly approved by Upjohn LJ giving the judgement of the court in the Clymo case, to which reference has already been made. Both decisions are binding on this court. They can only be departed from or distinguished if in the particular context the word ‘appurtenances’ can be given an even wider meaning than that which those cases show may be given to it. It seems to me that in the context of s 2(3) of the 1967 Act it is impossible to give any wider meaning to the word than to treat it, as Slesser LJ did, as in effect synonymous with the curtilage of the house.”
In Corkish the UT went on to use terms such as “intimately associated” and “part and parcel” to describe the relationship between the stable block and indoor arena with Bourne Hill House. The UT decided the stable block and the indoor arena were other appurtenances.
Based on the facts of the case it was certainly arguable that the stable block and indoor arena were within the curtilage of the house. It is not considered that this decision should cause a change of practice for VO’s when attempting to identify the curtilage of the domestic property. However it is important to note that there may be no precise answer and it will depend on the facts of each case. The appendix to this section gives guidance to assist with trying to identify the curtilage of a domestic property.
3.9 How to determine the extent of the domestic curtilage
In some cases this may be easy to determine from the facts on the ground and, in this respect, HH Judge Huskinson gives some clear illustrations in his decision in Allen, eg separation of the subject property under consideration from the unit[s] of living of accommodation by “public highways or footpaths” or by residential units of living accommodation or property and the unit wholly used for the purposes of living accommodation having an “enclosed gardens” that does not enfold the subject, such as a farmhouse with enclosed garden separated from a stable block. See appendix.
4.1 In the case of a ‘yard, garden, outhouse or other appurtenance’
For property to fall within the definition of a “yard, garden, outhouse or other appurtenance”, s.66 (1)(b) requires that it meets a further test, namely “belonging to or enjoyed with living accommodation”.
4.2 In the case of **a private garage or private storage premises**
In contrast, it is not necessary for a “private garage” or “private storage premises” envisaged under s.66 (1)(c) and (d) to “belong to’” or “be enjoyed with” property used wholly for the purposes of living accommodation in order to qualify as “domestic property”. Indeed, the fact that a “private garage” or “private storage premises” are detached from and/or situated some distance from a dwelling house is not relevant. See** Andrews (VO) -v- Lumb **[1993 RA 124].
4.3 “Belonging to“
In Martin & Others v Hewitt (VO, the President of the Lands Tribunal observed that:
“While “enjoyed with” would imply considerations related to occupation, “belonging to” is apt to embrace considerations of ownership.”
Thus the meaning of the phrase “belonging to” in s.66(1)(b) is synonymous with ownership and the primary test in respect of ‘appurtenance’ should be interpreted as property that would pass in a conveyance of the principle property (the dwelling house, maisonette, flat, etc.) without further mention. Bar some exceptional cases, property “belonging to” a dwelling house will lie within its curtilage.
4.4 “Enjoyed with”
In order to meet the “belonging to” or “enjoyed with” tests, the appurtenance must not only have a close affinity with the ‘domestic property’ by “belonging to” and meeting the criteria in 4.5 above, but also, it must be used, as part of the resident’s enjoyment of the occupation of the living accommodation. In this latter respect, the origin of the word ‘domestic’ from the Latin word for home, domus is particularly relevant. The expression “enjoyed with” must necessarily involve some commonality of use with the living accommodation. This means that a non-domestic use taking place within the appurtenance, such as an outbuilding converted to an office or consulting room, would be rateable provided the use was more than de minimis - see para 8 (including end of day provisions) below.
4.5 An appurtenance or a community facility? - Question of fact and degree
Occupiers of flats or houses in a single development may enjoy the right to use, in common with their neighbours, premises on the development, eg laundry rooms, common rooms or a swimming pool. Whether such premises are ‘appurtenances’ “belonging to or enjoyed with” the various dwellings is a question of fact and degree in each case. To come within the definition there should be some clear indication that the premises are provided and used as a facility for a group of properties so that the occupiers have the right (eg given in their respective leases), or would regard themselves as having some proprietary right, in the premises.
4.6 Holiday chalet within the curtilage of a dwelling
A chalet situated within the curtilage of a dwelling and let for holiday accommodation would neither be “belonging to” nor “enjoyed with” the dwelling and would be rateable if available for letting for more than 140 days a year - See RM Section 5a - 480 holiday accommodation (self-catering).
4.7 The relevance of “Or” in the regulations
Having analysed the phrases “belonging to” and”enjoyed with” in s.66(1)(b), the word “or” that connects them also requires consideration.
Superficially, it might seem that it is only necessary to establish that either “belonging to” or “enjoyed with” applies.
However, an easier [and rather more obvious] explanation is that “belonging to or enjoyed with” should properly be read as ‘belonging to or, as the case may be, enjoyed with’. This is a perfectly acceptable approach. If “belonging to” is appropriate to some of the items in the list which it qualifies but not others, and “enjoyed with” is the appropriate concept for those others, it explains why the provision is worded the way it is. In short, “belonging to or enjoyed with” can be taken to mean either “belonging to” or “enjoyed with”, as appropriate to the subject under discussion, be it “yard, garden, outhouse or other appurtenance”.
4.8 Stables
Stables and other equestrian facilities may be regarded as “domestic property” providing they meet the following tests, namely:
i) They qualify as an “other appurtenance” – See paragraphs 4.5 - 4.16 (above)
and
ii) They are “enjoyed with” the living accommodation.
See also Council Tax Manual – PN 8: Domestic Borderline, para 6.
The “other appurtenance” considerations will generally exclude stables and other equestrian facilities located outside the domestic curtilage of a dwelling house from qualifying as “domestic property”. This means that only stables within the domestic curtilage, which are used in relation to the resident’s enjoyment of the living accommodation, will qualify. Stables and equestrian facilities used as part of a business, eg livery, riding school; or used professionally/semi professionally for show jumping, eventing, polo, etc., will not qualify as domestic appurtenances and will be rateable either as separate hereditaments or as part of a composite hereditament.
See also:
Stables & Loose Boxes – RM Section 5a - 1006 and the relevant Revaluation Practice Note
Riding Schools & Livery Yards – RM Section 5a 995 and the relevant Revaluation PN
Racing Stables / Racing Yards - RM 5a - 996 and the relevant Revaluation PN
Stud Farms - RM 5a - 1005 and the relevant Revaluation Practice Note
As an aside, stables will only be exempt as agricultural buildings under paragraph 5(1)(a) of Schedule 5 to LGFA 1988 if they are occupied by horses used solely for farming the land (eg plough horses) or destined specifically for human consumption. See RM Section 2 Part 6 Part D Ag Exemptions.
5.1 Introduction
Although the terms “private garage” and “private storage premises” are not specifically defined in s.66 LGFA 88, it is clear from the wording used that some statutory requirements need to be satisfied in each instance.
Private Garages - s.66(1)(c)
5.2 Definition of a Private Garage
The definition of a “private garage” in s.66(1)(c) is as follows:
“(c) it is a private garagewhich either has a floor area of 25 square metres or less or is used wholly or mainly for the accommodation of a private motor vehicle …”
Thus there are two ‘limbs’ within this definition. Either the private garage has:
(i) a floor area of 25 square metres or less (the first limb)
Or, if the floor area exceeds 25 square metres, it is:
(ii) used wholly or mainly for the accommodation of a private motor vehicle (the second limb).
5.3 The Tests
Hence the tests that need to be satisfied for each ‘limb’ are as follows:
- For the ‘first limb’:
Can the property be regarded as a ‘private garage’?
Is the floor area less than 25 m2 ?
In the alternative –
- For the ‘second limb’:
Can the property be regarded as a “private garage”?
Does the floor area exceed 25 m2 ?
It is “used wholly or mainly for … “ [ … the accommodation of a private motor vehicle]?
Is a “private motor vehicle” accommodated therein?
5.4 “Private Garage” not used for commercial or business purposes
The word “private” in the definition should be read as distinguishing the subject matter from a garage used for commercial or business purposes.
However, there is no definitive answer as to what a “private garage” should look like. Garages come with a variety of different characteristics, including all shapes and sizes, this can lead all too easily to the creation of the false proposition that ‘as this building is used for the accommodation of a private motor vehicle, it is therefore a private garage and accordingly is exempt under LGFA 1988 Section 66(1)(c)’.
This proposition should not be accepted and cannot be correct.
The proposition is impermissible because it attempts to substitute a single test for the various tests implicit in s.66(1) and explained in paragraph 3.3 (above).
5.5 A ‘garage’ in the ordinary sense of the word
The preferred view is that, if on looking at the property one cannot come to the conclusion to describe the building as a ‘garage’ in the ordinary sense of the word, then it cannot be a “private garage” within the meaning of s.66(1)(c). This view is fully in accordance with the approach favoured by Atkinson J in Barnet & Block -v- National Parcels Insurance Company Ltd (1942 1 All ER221). Having reviewed the definitions in leading dictionaries, the learned Judge stated that he was inclined to think that the ordinary man in the street does not regard a garage as denoting some sort of a building; how far he would go the learned judge did not know. He applied the test suggested by Counsel for the insured, who said:
“… a garage is a place where one can get reasonable protection and shelter for a car.”
5.6 Property not capable of being described as a ‘garage’
VO’s must be satisfied that, when looking at the property, it can be properly described as a ‘garage’ - and if not satisfied on that point, then it should be found that the property is not a ‘private garage’ within the meaning of the provision. In cases of difficulty, initial advice should be sought from the Technical Adviser, who will consult with CEO Local Taxation in appropriate cases.
5.7 The First Limb - “25m^2^ or less”
Providing its area is 25m2 or less, a private garage will qualify as domestic property under the first limb, whatever the type of vehicle it houses.
5.8 The Second Limb - premises over 25m^2^ - “Used wholly or mainly”
Once the over 25m2 size requirement is satisfied, the “wholly or mainly” test should be interpreted in a spatial context. It is a question of fact as to whether a “private garage” is used “wholly” for the qualifying purpose. The word “mainly” should be interpreted as ‘for the most part’. However, that is not to say that a “private garage” capable of housing 20 cars, but used to house just 3, with the remaining space entirely un-utilised, would not pass the “wholly or mainly” test. However, it is necessary in these circumstances to consider the main purpose for which the premises are being used and whether the premises are actually in use as a ‘Private Garage’ as opposed to avoiding vacancy.
It should be noted that in Andrews (VO) -v- Lumb (1993 RA 124), the LT President, HH Judge Marder QC, dismissed the ratepayer’s claim under s.66(1)(c) because the accommodation of a bus was no more than incidental to the main use of the premises, which were also used for the storage of a collection of transport memorabilia.
In any case of doubt, the matter should be referred to the Technical Adviser.
5.9 “The accommodation of a private motor vehicle”
In this context, the word “private” should be read as contrasting with ‘commercial’. However, the expression “a private motor vehicle”, should not be treated as being anything more than the sum of its parts, so that something which is ‘private’ (in the normal sense), and which is a ‘vehicle’, which is powered by a ‘motor’, is to be viewed as a “private motor vehicle” for the purposes of this legislation.
It follows, therefore, that where the garage houses an obviously commercial vehicle, such as a taxi, van or lorry, it should be treated as non-domestic and rated.
Moreover, the words “a private motor vehicle” can be taken to mean the plural as well as in the singular. Indeed, the reference to a garage with an area of 25m2 (which area is large enough to house two cars) would suggest that the legislation was never intended to apply to just a single vehicle.
5.10 Qualification as a ‘private motor vehicle’
The expression “a private motor vehicle” needs to be construed within the wider provisions of s.66 LGFA 1988, the purpose of which is to indicate what property shall be treated as “Domestic Property” and what property shall not. The word ‘domestic’ is derived from the Latin word ‘domus’, which means ‘home’, and this needs to be borne in mind when interpreting this part of the legislation. Hence obvious examples that would not qualify as “private motor vehicles” are boats (generally housed in boathouses); aeroplanes, helicopters or micro-light aircraft (all of which are accommodated in hangars) and military armoured vehicles. Also, vehicles, which are hired, out or used for photographic and film work will not meet these provisions.
5.11 Garages used as repair workshops
Additionally, it is considered that garages which operate as ‘workshops’ and undertake a large amount of repair work, overhaul and maintenance would not be “used wholly or mainly for the accommodation of a private motor vehicle”. This is a factor that should be carefully considered when dealing with premises used to house contemporary and classic car collections. Similarly, a view needs to be taken on whether the main purpose of the premises is for the accommodation of a contemporary and classic car collection, rather than a “private motor vehicle” associated with the domestic use of the associated living accommodation. In many cases the latter use will be incidental to the former. In cases of difficulty, the Technical Adviser should be consulted.
Again, it follows that where a building comprising a garage exceeding 25 m2 is being used for some purpose other than for garaging a private motor vehicle, for example, as a workshop, for paint spraying or as a commercial store, it should be treated as non-domestic and rated.
5.12 The Tests - s.66(1)(d)
The essential tests to be met are:
i) Whether or not the building can be regarded as ‘private storage premises’
ii) Whether it is “used wholly or mainly…” [… for the accommodation of articles of domestic use]
iii) Whether articles of domestic use are accommodated within it.
5.13 “Private Storage Premises”
What “private storage premises” comprise is not defined in LGFA 1988. The word “private” in the definition should be read as distinguishing the subject matter from storage premises used for commercial or business purposes. In s.19(6) General Rate Act 1967, “private storage premises” were defined as “a hereditament which is used wholly in connection with a dwelling house or dwelling houses and wholly or mainly for the storage of articles of domestic use (including bicycles and similar vehicles) belonging to persons residing there “. The wording of the provision was revised and amended in s.66(1)(d), with the notable omission of the words “bicycles and similar vehicles”, but the strong link with the accommodation of articles used wholly or mainly with the actual living accommodation remains.
5.14 “wholly or mainly”
In so far as a building is used as “private storage premises”, it has to be used “wholly or mainly” for the storage of articles of domestic use in connection with a dwelling house (ie living accommodation). The criteria in relation to the “wholly or mainly” test is similar to that applied to premises used to accommodate a private motor vehicle - see para 5.9 above.
5.15 Recreational items stored in a beach hut
In Alford -v- Thompson (VO) (unreported), a case concerning a beach hut (Beach Hut 4, Hordle Cliff, Lymington, Hampshire), the LT Member, Mr P H Clarke FRICS, found as a matter of fact that swim-wear, deck chairs, cutlery, etc were not articles of domestic use, but articles of recreational use in connection with the enjoyment of the beach. Moreover, the beach hut was a sui generis use. Its use in this case had been agreed as ‘private’, but these were not “private storage premises”, because the words “wholly or mainly” connoted storage for its own sake and did not include storage as an adjunct of the recreational use of the beach hut in connection with the beach.
The LT Member concluded that the crucial part of s.66(1)(d) was that, in so far as the beach hut was used for storage, it would have had to be used “wholly or mainly for the storage of articles of domestic use”. The evidence showed that any articles stored in the beach hut were ‘wholly or mainly’ for use in connection with the enjoyment of the recreational use of the beach hut and the beach.
5.16 ‘Domus’ the Latin word for home
In deciding whether any articles stored in a “private storage premises” are “articles of domestic use” it should be again noted that the word ‘domestic’ is derived from the Latin word ‘domus’, which means ‘home’.
5.17 Boats stored in a boathouse not articles of domestic use
In Martin & Others –v- Hewitt (VO) [2003 RA 275], the President of the Lands Tribunal, Mr George Bartlett QC, provided this assistance at para 26 on page 286:
“I have no difficulty in accepting that use of a house for the recreational purposes of the occupier is likely to fall within the concept of the use of the house as living accommodation. Furthermore the storage of personal articles in the house would not prevent the storerooms from constituting part of the living accommodation. In consequence the storage elsewhere of things that could be used for recreation at the house would, in my judgment, be the storage of articles of domestic use. It also seems to me that in general the storage at the house of articles used for recreation away from the house would be within the concept. That would not be, however, because they were themselves articles of domestic use but because the storage of them as a normal incident to the use of the house as domestic premises would not deprive the house of its nature as living accommodation under paragraph (a), while their storage in an outhouse would not mean that the outhouse was not enjoyed with the house itself under paragraph (b). I do, however, have difficulty in seeing that the storage in premises quite separate from the house of things to be used for recreation away from the house could constitute the storage of articles of domestic use. It is possible that the different wording of the legislation in Scotland justifies a wider meaning being given to “articles of domestic use” than in section 66(1)(d), but I doubt whether this is the case. I do not, however, feel constrained to apply the dicta in Walker v Lothian on which Mr Scrafton relies. In my judgment the boats in the boathouses in the present cases, as articles stored for use on the lake and not in or about the dwelling houses, are not articles of domestic use, and paragraph (d) is accordingly not satisfied ……”
5.18 Comparison with Scottish Rating Law
It should be noted that regulation 3(1)(b) of the Abolition of Domestic Rates (Domestic and Part Residential Subjects) (Scotland) Regulations 1987 differs from the provisions contained in s.66 in two crucial respects.
Firstly, it requires “private storage premises” to be ancillary to and used wholly in connection with a dwelling.
Secondly, by way of illustration, the definition includes the phrase, “cycles and other similar vehicles” - see paragraph 3.15 above.
Therefore it would be incorrect to attempt to rely on Scottish Rating Law, and the cases decided under it (for example Walker -v- Lothian Assessor [1990 RA 283] and Hamilton -v- Lothian Regional Assessor [1993 RA 133]) when trying to decide what are “private storage premises” within the provisions of s.66(1)(d). As explained in paragraph 3.19 (above), the President of the Lands Tribunal did not apply the dicta in Walker -v- Lothian Assessor when deciding the Martin case.
6.1 Legal Definition
A composite hereditament is a hereditament which has both domestic and non-domestic property within it, Local Government Finance Act 1988 s64(9):
“(9) A hereditament is composite if part only of it consists of domestic property.”
The LGFA 1988 in s42(2) provides that both wholly non-domestic and composite properties are rateable:
“(2)For each day on which a hereditament is shown in the local list, it must also show whether the hereditament—
(a) consists entirely of property which is not domestic, or
(b) is a composite hereditament.”
Property is defined as being domestic “if it is used wholly for the purposes of living accommodation…….” (s66(1)(a)). To be a composite there must be domestic use, for example, the mere fact that part of a hereditament is set out as a flat will not make it composite if it is not actually used as living accommodation but instead is used for the storage of stock or some other non domestic use. It is important to capture that the property is composite on the Central Database by changing the part domestic indicator, in maintain assessments to Y.
In deciding whether a hereditament is composite it is necessary to consider whether any use (either domestic or non-domestic) is de minimus. If it is, it should be left out of account in determining whether property is domestic or non-domestic (what constitutes de minimus is covered in para 8 below).
6.2 Valuation and the concept of Notionality
Composites are to be valued in accordance with paragraph 2(1A) of Schedule 6:
“The rateable value of a composite hereditament none of which is exempt from local non-domestic rating shall be taken to be an amount equal to the rent which, assuming such a letting of the hereditament as is required to be assumed for the purposes of sub-paragraph 2(1) above, would reasonably be attributable to the non-domestic use of property.”
Whether a hereditament constitutes a ‘composite hereditament’ depends on the actual use made of it. To be composite a part has to actually be domestic (or, if unused, it appears it will be domestic when next in use).
Because of the difficulty in monitoring changes to the extent of the actual domestic use of a composite and the variations between properties, the legislation sets out a special valuation assumption for composites based on a notional distribution of uses. This requires that the property should be valued “vacant and to let” having regard to its present physical state, but ignoring any distribution of domestic and non-domestic uses which are clearly out of conformity with the prevailing pattern for accommodation in that locality.
This approach follows from the RV definition for composite hereditaments (see para 2 above) ie what is required is an apportionment of the rental value of the whole hereditament to what ‘would reasonably be attributable to the non-domestic use of property’.
In the first place, ‘notionality’ requires that the VO should stand in the shoes of the hypothetical tenant and seek to determine the reasonable expectation of the hypothetical tenant’s occupation of the unit in question. For example, should the ratepayer have an abnormally large family which requires the occupation of accommodation for domestic purposes which is clearly non-domestic, the view would be taken that, vacant and to let, some part of the living accommodation should be treated as non-domestic.
There will be instances where a clearly discernible pattern is evident (for example, a parade of shops with living accommodation when most units are being occupied in one particular way), and there will be other circumstances where no such pattern can be observed. Where there is no obvious pattern, VOs are likely to follow actual patterns of occupation to a greater extent, but the notional approach to the valuation of composite property, which accords with the usual “vacant and to let” rule, will allow the resolution of disputes at the margins where, for example, a ratepayer seeks to argue a quite unreasonable occupation for domestic purposes simply to minimise the non-domestic property to be included in the valuation for rating. The part treated as domestic will need to be banded for Council Tax purposes.
See CTM:PN2 The Valuation of Composite Hereditaments for Council Tax
6.3 Application of the “notional” approach
It is appreciated that a wide variety of different circumstances exist where the notional approach will be applied and it is impossible to prescribe rules in every case. VOs should take a common sense approach to this difficult category of property.
Examples
To clarify the various issues concerned, take the example of a terrace of shops, all with living accommodation on upper floors.
Shop Number 1 is wholly occupied for non-domestic purposes, the upper two floors being used for storage purposes. It is entirely non-domestic, and should be wholly valued and entered in the rating list as “Shop and premises”.
Shop Number 2 is occupied, as are many of the other shops in the parade, as a non-domestic unit on the ground floor (including some storage accommodation) and for living purposes on the upper floors. Valued vacant and to let, its actual occupation accords with its expected notional occupation, and only the ground floor would be assessed, the entry in the list being “Shop and premises (COMP)”.
Shop Number 3 is a non-conforming occupation, in that the living accommodation on the two upper floors is wholly used for domestic purposes, as is the store room at the rear of the ground floor shop. No structural alterations have been made and, vacant and to let, it would be most unlikely that the hypothetical tenant would want to occupy the property in the way that it is actually being occupied. This is where the notional test comes into application, and the property should be assessed and described as for Shop Number 2.
Shop Number 4 is like Shop Number 3, except that a structural alteration has been made to the ground floor storage accommodation so that it is no longer physically capable of occupation for non-domestic use. This is a case where physical actuality has to override any question of notionality. The property to be valued as non-domestic will be merely the front ground floor part.
Shop Number 5 is a variant on Shop Number 1. Here it is the non-domestic accommodation which overspills into the upper floors, but there is still some living accommodation. This comprises a bed-sitter, on the top floor with access through the non-domestic part. Everything else is in non-domestic use, through the remainder of the 2 floors of living accommodation are equally capable of domestic use, were the premises vacant and to let. This, too, should be valued on a notional basis, and the assessment should accord with that for Shop Number 2.
Shop Number 6 is wholly occupied for domestic purposes. It is not rateable, being neither wholly non-domestic, nor composite.
Once the unit to be valued has been determined - whether it is the actual non-domestic part or the notional part - it is necessary to ascribe a rateable value to that accommodation. The LGFA 1988 provides in Schedule 6(2)(1B) that the RV shall be such amount of the rental value, on the statutory assumptions for RV, for the whole hereditament as ‘would reasonably be attributable to the non-domestic use of property.’ This wording is used to indicate that regard may properly be had to facilities which exist within the hereditament, but which are shared with the domestic part. For example, if the toilet accommodation is shared with the living space, its existence may be taken into account.
6.3.1 Ludgate House - a consolidated approach
In the Upper Tribunal decision of Ludgate House Limited v Andrew Ricketts (VO) & London Borough of Southwark LC-2018-000302 the Tribunal considered how an office building occupied by property guardians should be valued. The office building was a composite at the material day, although it was not occupied as offices and was mostly vacant. There was a small domestic occupation by four property guardians on the material day, in different parts of the building. This later increased beyond the proposed thirty-two to forty-six guardians. The Tribunal decided that the hypothetical tenant had two options, either to terminate the contracts with the property guardians or to consolidate the occupation of the guardians into a particular part or parts of the building. The two options reflected the reality of the contractual licences which allowed the guardians to occupy the building. The Tribunal decided that the property should be valued as a composite hereditament, reflecting the domestic occupation, with the guardians consolidated in one area of the building. See Paragraph 141. of the decision below:
\“141. Given this position, we cannot see that it is right either to assume occupation by 32 property guardians on the Material Day or to assume distribution of the property guardians around the Building. It seems to us that the correct assumption is that the hypothetical tenant is taking the Building as an office building, but subject to use as a temporary property guardianship scheme, with only four guardians having been granted licences. The hypothetical tenant has the same rights as existed in reality to terminate the scheme or to consolidate the occupation of the property guardians into a particular part or parts of the Building, in order to make the most efficient use of space within the Building. It follows that it would be a matter for the hypothetical tenant to decide whether to continue with the scheme and, if so, to decide how many property guardians should be permitted to occupy the Building, and in which locations.\” “
The Upper Tribunal judgement indicates that the hypothetical tenant can consolidate the domestic part to provide for the most efficient use of the composite hereditament.
6.4 Appropriate Charge Band
The Charge Band of the “domestic property” which forms part of a composite hereditament will be arrived at in accordance with Regulation 7 of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 SI 550 1992 and the principles approved by the Court of Appeal in Atkinson v. Lord (LO)CA(1997 RA 413) - see CT Manual Practice Note 2 para. 6.
6.5 Composite Hereditaments: Holiday Accommodation
Holiday accommodation ranges from beach huts to purpose-built hotels. Some properties are occupied all year round for business purposes (ie the provision of short-term accommodation on a commercial basis), and some for only part of the year. Some have a fluctuating use, where the balance between domestic and non-domestic changes during the course of the year in other cases the balance will remain static. Some will be occupied as entirely non-domestic property, some as composite property.
Where holiday accommodation is composite the principles concerned are exactly the same as for other classes of composites. First, it is necessary to identify whether or not the property is composite; second, the property to be valued as non-domestic may not necessarily be that actually used for non-domestic purposes but instead is the notional use as described in 4. above.
6.6 Hotels, Boarding Houses and Bed and Breakfast Accommodation
Section 66(2) LGFA 1988 specifies that
“(2) Property is not domestic property if it is wholly or mainly used in the course of a business for the provision of short-stay accommodation, that is to say accommodation:-”
a) which is provided for short periods to individuals whose sole or main residence is elsewhere, and
b) which is not self-contained self-catering accommodation provided commercially.”
This provision was specifically intended to ensure hotel accommodation constituted non-domestic property.
Where staff reside on the premises, (eg the hotel manager’s flat) or where it is known that there are permanent guests who have no main residence elsewhere, the accommodation which those persons occupy is domestic and the hereditament will be composite.
To avoid the need to alter the entry whenever permanent guests change rooms (for example, occupying better rooms in the winter than in the summer) it will be appropriate to take a fairly broad-brush approach to the apportionment of the residential accommodation for such permanent occupiers (for example, an allowance based on the number of bedrooms that might be so occupied from year to year).
Section 66(2) LGFA 1988 also applies to boarding houses and bed and breakfast accommodation. However S66(2) is subject to S66(2A) which provides that short stay accommodation will not be rateable if:
i. The proprietor intends to make short stay accommodation available in the coming year for no more than six persons at any one time AND
ii. The proprietor intends to have his/her sole or main residence in the hereditament AND
iii. The use for short stay accommodation is secondary or incidental to its use for domestic purposes.
This limitation applies as from 1 April 1991.
See RM 5:125 ‘Boarding Houses, Guest Houses and Bed and Breakfast Accommodation’ for guidance on the “Six Person” Test and on the valuation of seasonal property.
6.7 Disused Living Accommodation in Composite Hereditaments
S66(5) LGFA 1988 provides:
‘Property not in use is domestic if it appears that when next in use it will be domestic’.’
S66(5) applies to composite hereditaments as well as wholly domestic ones. It follows that a hereditament may be composite even though there is no present actual domestic use providing it appears that part of it will be domestic when next in use.
In many cases where part of a composite is vacant it will be a straightforward matter to determine its next likely use and whether that part is therefore domestic or non-domestic. In other cases, particularly where there is little demand for such parts, eg upper floors over shops, either for domestic or non-domestic purposes, deciding what is the next likely use may be more difficult. For example, a shop may be in use but over it there are unused rooms which have the characteristics of domestic accommodation - old fireplaces still present, kitchen fittings and perhaps a bathroom with its plumbing still intact. Indeed, such upper parts may have been disused for a number of years.
The test of whether a hereditament is composite is one of use, not the physical characteristics of the property. The obvious example is a shop used wholly for living accommodation. No matter how unattractive or unsuited this use of the property may seem, it will be domestic property for the period it is so used. Accordingly, when considering the application s.66(5) in the circumstances mentioned, VOs should not have regard solely to the physical characteristics of the unused accommodation. There is a need to consider what future pattern of use might be expected, for the property will be treated as domestic if it appears that when next in use it will be domestic.
For example, in a locality where it is generally found that accommodation within a hereditament which is constructed or adapted for use for domestic purposes is used as such, it will be appropriate to treat a shop hereditament with unused living accommodation as composite. Where, however, the general pattern is that upper parts of shops are either left empty or, if used, are only used for non-domestic purposes, it is much more difficult to make a satisfactory case for maintaining that when next in use disused property will be domestic; in such cases the property should not be entered in the list as composite. The valuation of the hereditament will have to include an appropriate amount for the upper parts, bearing in mind that the value may be merely nominal, either because of demand, obsolescence or state of repair.
Where the situation is unclear and if having regard to the facts then before the VO, it is considered reasonable, then the hereditament should be entered into the list as composite. In making this judgement, VOs may find it helpful to consider whether or not the state of repair etc. render the empty parts fit for human habitation. See also CTM:PN8 para 4.14 Borderline properties, vacant living accommodation over shops or pubs.
7.1 ‘when next in use’
S.66(5) LGFA 1988 provides:
“Property not in use is domestic if it appears that when next in use it will be domestic.”
Thus, an unused hereditament can be wholly domestic providing it appears that it will be domestic when next in use. For example it will normally be expected that a house or flat when not currently occupied will next be used as living accommodation and therefore will be treated as domestic and banded for Council Tax. Equally it will be expected that most business and commercial hereditaments will be used for non-domestic purposes when next in use and will remain classed as non-domestic.
7.2 ‘Property’ not ‘Hereditament’
The word used in the definition is “property” and not ‘hereditament’. Part of a hereditament can be domestic and part non-domestic and this will mean it is a composite hereditament (ie a hereditament where part only is domestic). A composite hereditament can also be one where the only current use is non-domestic but part is unused and it is expected when next in use that part will be domestic. Also “property” can include more than one hereditament - see Head VO -v- LB of Tower Hamlets [RA 2005] 177].
7.3 Whether wholly or partly domestic?
When considering the assessment of any hereditament, it is essential to decide whether it is wholly or partly domestic, as this will also determine whether it should be assessed for rating either as a wholly non-domestic or composite hereditament. This will include considering whether any vacant part has the appearance that, when next in use, it will be domestic property.
7.4 Further advice on composite property
In most cases, when a hereditament is vacant, it will be a straightforward matter to determine whether it is domestic or non-domestic. In other cases, particularly where only part of a hereditament is vacant, deciding what is the next likely use may be more difficult.
7.5 Appearance not ‘intention’
A typical example is accommodation over a shop, originally built as living accommodation, but now disused for some years having also at times been used for storage. In this case, the test is one of ‘appearance’ rather than the ‘intention’ of the particular owner at the time. Thus, should it appear from the property itself that the next use will be domestic, then it should be considered domestic, and vice versa.. But there are further nuances, as explained below.
7.6 To whom must it appear?
The statutory test is to have regard to the ‘use’ to which it appears **the property will be put when **next in use. In order to meet this test, it must appear to the Valuation Officer that when next in use the property will be ‘domestic’ or, on appeal, it must appear so to a valuation tribunal or, on further appeal to the Lands Tribunal.
7.7 When must it appear to the VO?
Non-domestic rates are a daily tax (see s.42(2) LGFA 1988) and the rating list can be altered from day to day. Strictly, then, the issue should be addressed in respect of each and every passing day. Thus, when a day is found when it appears to the VO that the next use of the property will be a domestic one, then on that day the property is “domestic property” and this should be reflected in the relevant Non-Domestic Rating and Valuation List entries from that date, as appropriate.
7.8 Apply to the property in its existing state
The test should be applied to the property broadly in its existing state. In deciding whether the property has the appearance that when next in use it will be domestic property, its present capability for domestic or non-domestic use should be considered. If extensive works of conversion are required then it will not be presently capable of the alternative use, eg a disused office block with planning permission for conversion to flats is, until converted, not readily capable of being occupied as living accommodation. Moreover, its next use will be as a building site during conversion works rather than in domestic use.
8.1 ‘wholly used’
To qualify as “domestic”, property is required by s.66(1)(a) LGFA 1988 to be “used wholly for the purposes of living accommodation”. Thus any non-domestic use makes the property potentially rateable and, as liability accrues in respect of each day, in theory, any substantial non-domestic use in any one day could be rated. In practice a de minimis test should be applied to qualify the expression “used wholly”.
No specific definition has been included in s.66 (or elsewhere) as to what comprises de minimis use, except in relation to property which is wholly or mainly used in the course of a business for the provision of short-stay accommodation (see RM Section 5a - 125.)
8.2 Extent of use for non-domestic purposes
Statements about the degree of non-domestic use that might be permissible before rateability is triggered were made during the Parliamentary and consultative processes leading up to the LGFA 1988 and these guidelines should be used. During the House of Lords Report Stage of the Local Government Finance Bill, on 4 July 1988, Lord Caithness said:
“Where the use of domestic property for a non-domestic purpose does not materially detract from the domestic use, that should not result in that property being rated“.
In the Consultation Paper, “Proposed Amendments to the Boundary between Domestic and Non-Domestic Property”, issued in December 1988 the issue of Minor Non-Domestic Use was considered in paragraph 4.2. Concerning the point at which the level of non-domestic use would become material and therefore liable to be rated, the suggested guidelines were:-
“The question of whether the use of a domestic property for non-domestic purposes is material is to be decided having regard in each case to:
The effect of the extent and frequency of the non-domestic use, and
Any modifications made to the property to accommodation that use”.
8.3 Non Domestic Rateable value
Combining those statements, non-domestic use of part of a dwelling should only be considered to be rateable when it occurs within the curtilage of, or when it belongs to or is enjoyed with, a domestic property, when that use materially affects the enjoyment of the residence as a residence, having regard to the extent and amount of use, and taking account of any structural changes that have been made to the property to facilitate that use.
8.4 The ‘end of the day’ provision
Additionally s.67(4) provides that:
“A hereditament is relevant, non-domestic, composite, unoccupied or wholly or partly occupied on a particular day if (and only if) it is relevant, non-domestic, composite, unoccupied or wholly or partly occupied (as the case may be) immediately before the day ends”.
S.67(5) continues:
“For the purpose of deciding the extent (if any) to which a hereditament consists of domestic property on a particular day ….. the state of affairs existing immediately before the day ends shall be treated as having existed throughout the day”.
However, in arriving at this determination, the particular state of affairs existing immediately before the day ends is not the sole criterion and a wider view should be taken, as was explained in Tully -v- Jorgensen (VO) [2004 RA 233]. In Tully, the President of the Lands Tribunal, Mr George Bartlett QC said at paragraph 19:
“Liability to the non-domestic rate under section 43(1) is a daily liability that arises where the ratepayer is in occupation on a particular day. But for him to be rateable his occupation must possess the ingredients of rateable occupation, including that of permanence: see Ryde on Rating paragraph B[214]-[224]. Similarly, where section 67(5) refers to the state of affairs existing immediately before the day ends it is not requiring that attention be confined to the particular activities being carried on at a precise moment in time. What has to be considered is the use of the property with all its features and all that section 67(5) does is to identify the material time by reference to which any change in the use of the property is to be related.”
This may be applied in practice by taking, for example, the instance where a living room in domestic property is used in the mornings only for the transaction of a small amount of PO business as a community post office.
Weighing up the scale of non-domestic use of the property together with all its physical features, the room is not set aside for the non-domestic business and is furnished for domestic purposes with no structural adaptations. Any advertising is of a minimal nature. In such a case an assessment should not be raised.
10.1 Short Stay Holiday Accommodation
During 2022 both the English and Welsh governments amended Section 66 of the LGFA 1988 in respect of Short Stay accommodation, via two statutory instruments. The SI for England is here 2022 No 2017 and the SI for Wales is here 2022 No 563 (W129). The impact of two SI’s on how we treat short stay accommodation is covered below.
England
Up to 31 March 2023
In England, property will no longer be domestic if there is an intention for the whole building or self-contained part to be available for letting commercially, as self-catering accommodation, for short periods totaling 140 days or more. (Section 66(2B) of the LGFA 1988).
From 1 April 2023
In England, self-catering accommodation will be domestic (and so assessed for CT purposes) unless:
1) it is available for letting commercially for 140 days or more in the preceding year, and
2) must have been let for at least 70 days in that year. Where the self-catering property consists of more than one self-contained part within a building or in close proximity on a site and operated as a single business, then the time so let must amount to at least 70 days for each self-contained part (please note there are no averaging provisions) and
3) there must be an intention to continue making it available for at least 140 days in the following year.
Wales
Up to 31 March 2023
For self-catering properties in Wales, properties will be domestic unless the property has been:
1) available to let commercially for 140 days or more in the preceding year and
2) must have been let for at least 70 days in that year. Where the self-catering property consists of more than one self-contained part within a building or in close proximity on a site and operated as a single business, then the time so let must amount to at least 70 days on average for each self-contained part. And
3) there must be an intention to continue making it available for at least 140 days in the following year.
From 1 April 2023
In Wales, self-catering accommodation will be domestic unless:
1) the property has been available for letting commercially for 252 days or more in the preceding year and
2) must have been let for at least 182 days in that year. Where the self-catering property consists of more than one self-contained part within a building or in close proximity on a site and operated as a single business, then the time so let must amount to at least 182 days on average for each self-contained part, and
3) there must be an intention to continue making it available for at least 252 days in the following year.
Difficulty can arise in the interpretation of the phrase “available for letting”. The Lands Tribunal in Godfrey v Simm (VO) [2000] EWLands RA_15_1999decided that there shall be an intention to achieve 140 days of actual lettings during the year in question, before the property can be treated as non-domestic.
Further guidance on Self catering accommodation is given in the Rating Manual S 480 Holiday accommodation (self catering)
See RM Section5a – 125 for Guesthouses and Bread and Breakfast Accommodation, and 1070 for Timeshare Complexes.