The case of Schroder Exempt Property Unit Trust v Birmingham City Council [2014] EWHC 2207 (Admin) examines the liability of a freehold reversioner (i.e. owner of the hereditament) for payment of business rates after disclaimer of a lease of the property.
The Schroder Exempt Property Unit Trust (“SEPUT”) was the freehold owner of property in Birmingham. The property was subject to a lease, originally granted to Woodward Foodservice Limited (WFL), but subsequently assigned to WF Group Limited. The assignee had gone into liquidation, and its liquidator had disclaimed the lease. The effect of the disclaimer had been to determine the lease. However, since the landlord had not repossessed the property following the disclaimer, the former tenant, WFL, remained liable to it under the terms of an authorised guarantee agreement given on assignment of the lease. SEPUT was therefore seeking to argue that the lease had not been determined for all purposes, so that liability for business rates did not automatically revert to it as freehold reversioner.
The court was not convinced. The disclaimer had ended the lease; it had accelerated the landlord’s reversion; it had given to SEPUT the right to immediate possession. That this was the case was made clear by the House of Lords in Hindcastle Limited v Barbara Attenborough Limited [1997] AC 70. Whilst the Insolvency Act 1986 provided that the effect of disclaimer did not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person, it nevertheless ended the lease. The reversioner was therefore the person who became responsible for payment of business rates.