Who pays the rates?

The defendants, registered owners of unoccupied commercial property, had incorporated SPVs, and granted leases of the properties to them. Under the scheme, each SPV became the “owner” of the property for the purpose of rates liability.

The SPV, which had no assets and no real world purpose, was then placed into MVL. Relying on the “administrative inertia” of the liquidators, the defendants were relieved from paying the rates until the lease was disclaimed. The process could then start again.

The claimant local authorities claimed the unpaid rates on the basis that:

  1. The leases to the SPVs, were ineffective in making the SPV the “owner” and the rates liability should lie with the defendants; or
  2. The separate legal personality of the SPV should be ignored, effectively piercing the corporate veil.

The defendants argued that the properties were exempt as the “owner” tenants being in liquidation.

The High Court and Court of Appeal considered these arguments before the matter was referred to the Supreme Court.

The Supreme Court confirmed the Court of Appeal’s decision that there are no grounds for piercing the corporate veil.  The leases were valid leases; there was no attempt to evade liability. However, the Supreme Court agreed that, while there was an abuse in the use of the liquidation process, it was not necessary to pierce the veil. The leases were ineffective to make the SPV’s the “owners” of the properties. On the facts, the registered owners retained entitlement to possession throughout, with the result that the registered owners (the defendants) remained liable for the rates.

Hurstwood Properties (A) Ltd v Rossendale Borough Council [2021] UKSC 16

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