EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2014] CSIH 32
Lady Paton Lord Drummond Young Lord McGhie	XA16/13 OPINION OF THE COURT delivered by LADY PATON in the appeal under section 82(4) of the Local Government Finance Act 1982 by CITY OF EDINBURGH COUNCIL Appellant; against a decision of the Lothian Valuation Appeal Committee dated 12 December 2012 (52 Craiglockhart Gardens, Edinburgh) _______________

For the Appellant: G Clarke, QC; City of Edinburgh Council

For the Respondent: Non-participating party

9 April 2014

Council tax: dwellinghouse intended for redevelopment

[1] On 9 March 2007, Mr Miller purchased an unoccupied and unfurnished dwellinghouse at 52 Craiglockhart Gardens, Edinburgh. His intention was to extend and develop the property. As he explained in a letter dated 26 April 2007 (number 3 in the schedule of evidence):

"I have recently purchased a property at 52 Craiglockhart Gardens, Edinburgh ... I wish to arrange for a site visit by your assessor as quickly as possible, as this property is uninhabitable and has been stripped back to only bricks and mortar. It has no water supply, electricity, gas or telephone, roof or floors, chimney stacks, kitchen demolished and I seek relief whilst reconstruction continues and also for the new extension of building."

[2] On 29 May 2007 a visit was made to the house. The property was found to be "uninhabitable due to major construction works which include steel girders etc" (number 4 in the schedule).

[3] On 20 December 2007 Mr Miller applied for a building warrant for an extension. He continued to seek discounts and/or exemption from council tax as the house was uninhabitable. Works were delayed for various reasons, including the carrying out of a bat survey, the obtaining of planning permission, and the involvement of Historic Scotland.

[4] By handwritten entries in a pro forma form "Council tax - review of discount entitlement" issued on 25 September 2008 (number 6 in the schedule) it was explained that:

"Property vacant awaiting planning permission for re-development".

On 11 November 2008 a building warrant for the extension was granted.

[5] By letter dated 9 March 2011 (number 7 in the schedule) Mr Miller explained that:

" ... there is still no habitation certificate and we did not receive building warrant to commence any works until 11/11/08 (which was the first date I could start any works). The roof was then removed and re-slated all floors removed re wet & dry rot which took until April to complete before any internal works started."

[6] On 12 July 2011, an environmental health officer visited 52 Craiglockhart Gardens and reported to Mr Miller by letter dated 20 July 2011 as follows:

"Following a complaint to this department a habitability inspection visit was carried out at the address above on 12/07/2011.

The property was found to be unfit for human habitation at the time of the visit due to the extensive renovation work underway at the property, leaving the property without basic facilities and in need of structural repair."

[7] Following that visit, no statutory notice prohibiting occupation was served upon Mr Miller (number 14 in the schedule). Mr Miller continued to seek exemption from council tax as the house was uninhabitable.

[8] By letters dated 16 February, 29 August, 10 September 2012 Mr Miller's solicitor, Mr Leonard Thomson, corresponded with the appellant seeking discounts and an appeal against the imposition of council tax (numbers 9, 12, and 16 in the schedule).

[9] On 12 December 2012, at a hearing before the Lothian Valuation Appeal Committee (LVAC), no evidence was led of any works done, and no completion certificates were produced. Mr Miller's solicitor argued that, in the absence of completion certificates, section 21(5) of the Building (Scotland) Act 2003 had the effect that anyone occupying or using the house was guilty of an offence. Accordingly occupation of the house was prohibited by law, and as a result paragraph 7(a) of schedule 1 to the Council Tax (Exempt Dwellings) (Scotland) Order 1997 was engaged. It followed that the house was exempt from council tax.

[10] The LVAC accepted that argument, and ruled that 52 Craiglockhart Gardens was exempt from council tax under paragraph 7(a) from 20 December 2007 (the date when Mr Miller submitted his application for a building warrant). The appellant appealed to the Court of Session under section 82(4) of the Local Government Finance Act 1982. The appeal was intimated to Mr Miller and to the LVAC. The question of law for the opinion of the court is in the following terms:

"Did the committee err in law by holding that section 21(5) of The Building (Scotland) Act 2003 engaged paragraph 7(a) of schedule 1 [to] The Council Tax (Exempt Dwellings) (Scotland) Order 1997/728 and that accordingly the respondent's property at 52 Craiglockhart Gardens, Edinburgh was an exempt dwelling and not one in respect of which council tax is payable?"

There was no appearance for Mr Miller or the LVAC at the appeal hearing.

Relevant legislation

(a) Offence to occupy a house being constructed or converted

[11] The Building (Scotland) Act 2003 provides inter alia:

"21. Occupation or use without completion certificates

(1) This section applies to a building which is being ... constructed or converted ... (a) by virtue of a building warrant ... if the condition specified in subsection (2) is satisfied.

(2) That condition is that no completion certificate has been accepted in respect of the construction or conversion under section 18(1).

(3) On an application made to the verifier -

... the verifier may grant permission for the temporary occupation or use of the building during such period as is specified in the permission ...

(5) Any person who occupies or uses a building to which this section applies (other than solely for the purpose of its construction or conversion) -

(a) knowing that no completion certificate has been accepted under section 18(1) in respect of the construction or conversion ...

is guilty of an offence unless the occupation or use is authorised by a permission granted under subsection (3)."

(b) Liability to council tax

[12] Local Government Finance Act 1992

"70. - Council tax in respect of dwellings

(1) In respect of the financial year 1993-94 and each subsequent financial year, each local authority in Scotland shall impose a tax which -

(a) shall be known as the council tax of the council which set it; and

(b) shall be payable in respect of dwellings situated in that authority's area ...

72. - Dwellings chargeable to council tax

(1) Council tax shall be payable in respect of any dwelling which is not an exempt dwelling ...

(6) In this Part -

"chargeable dwelling" means any dwelling in respect of which council tax is payable;

"exempt dwelling" means any dwelling of a class prescribed by an order made by the Secretary of State.

(7) For the purposes of subsection (6) above, a class of dwelling may be prescribed by reference to -

... (b) the fact that dwellings are unoccupied or are occupied for prescribed purposes or are occupied or owned by persons of prescribed descriptions ..."

(c) Exemption from council tax

[13] The Council Tax (Exempt Dwellings) (Scotland) Order 1997 (SI 1997/728), as amended by The Council Tax (Exempt Dwellings) (Scotland) Amendment (No 2) Order 1999 (SSI 1999/140) and The Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2012 (SSI 2012/339), provides inter alia as follows:

"Exempt dwellings

3. The classes of dwelling specified in Schedule 1 to this Order are prescribed as exempt dwellings for the purposes of section 72(6) of the Act.

Schedule 1

EXEMPT DWELLINGS

Dwellings under repair

2. An unoccupied dwelling -

(a) which -

(i) is undergoing or has undergone (since the last occupation day) major repair work to render it habitable; or

(ii) is undergoing or has undergone (since the last occupation day) structural alteration;

(b) in respect of which no more than 12 months have elapsed since the last occupation day; and

(c) in respect of which no more than 6 months have elapsed since the major repair work or structural alteration in question was substantially completed ...

Empty dwellings

4. A dwelling -

(a) which is both unoccupied and unfurnished; and

(b) in respect of which less than 6 months have elapsed since the end of the last period of 3 months or more throughout which it was continually occupied ...

Dwellings empty under statute

7. A dwelling -

(a) the occupation of which is prohibited by law ..."

Discussion and decision

[14] At the outset, we accept senior counsel's submission that liability for council tax does not require a person to be living in, or able to live in, a property. We also accept that the exemptions from council tax can be found in schedule 1 to The Council Tax (Exempt Dwellings) (Scotland) Order 1997 (SI 1997/728) as amended.

Possible exemption because occupation "prohibited by law": In relation to the submission based upon section 21(5) of the Building (Scotland) Act 2003, it is arguable that section 21 has no application in the present case. As is set out in the appellant's submission to the LVAC dated 24 October 2012, the works authorised by the building warrant have not been registered as having "commenced" (paragraph 6.8 of the submission). The Building Standards department have not received a "Start of Works" notice, and do not consider works to have commenced. No evidence was led at the LVAC hearing to demonstrate that work on the construction of the extension (all that is covered by the building warrant) had started.

[15] However even if section 21 were considered to be applicable in the present case, it is our opinion that the words "occupied" and "occupation" may refer to "residential occupation" of a dwellinghouse, but that is not their only meaning. Words such as "occupied" and "occupation" must be construed in their context. Thus for example a dwellinghouse may be occupied for the purpose of its construction or conversion (see section 21(5) of the Building (Scotland) Act 2003, quoted in paragraph [11] above). Depending upon the circumstances and context, there may be other possible constructions of the words "occupied" and "occupation" (cf section 72(7)(b) of the Local Government Finance Act 1972, providing that a class of dwelling may be prescribed by reference to the fact that dwellings are "occupied for prescribed purposes" - i.e. purposes which may or may not be residential living).

[16] In the present case, it is our view that, if section 21 is considered applicable in the circumstances, 52 Craiglockhart Gardens has been occupied by Mr Miller during the relevant periods "for the purpose of its construction or conversion" (cf section 21(5) of the 2003 Act). Thus even if the house has been de facto unfit for human habitation, it has been lawfully occupied for the purpose of its construction or conversion without any contravention of section 21(5). Accordingly paragraph 7(a) of schedule 1 to the 1997 Order is not engaged on this basis.

[17] Possible exemption because of "major repair work" or "structural alteration": We note that the council tax legislation expressly provides time-limited exemptions from that tax where a house is undergoing major repair work or structural alteration such that no-one is currently living there (paragraphs 2 and 4 of Schedule 1 to the 1997 Order, quoted in paragraph [13] above). When Parliament has expressly provided a finite period of exemption from council tax in such circumstances, it seems to us that that exemption must be the only exemption claimable, and paragraph 7(a) of schedule 1 to the 1997 Order is, in the circumstances of this case, not engaged. We agree with paragraph 3 of the appellant's note of argument, which is in the following terms:

"Were the committee's decision to be correct in their interpretation of the Order, these time-limits [in paragraphs 2 and 4 of schedule 1] could be avoided, and liability to council tax suspended indefinitely, by failing to obtain completion certificates. Such an interpretation would thus defeat the intention of Parliament in setting time limits, and so should be avoided."

We also agree with the second paragraph of ground (3) of the appellant's grounds of appeal, namely:

"In any event, such an interpretation would provide a means to avoid paying council tax by obtaining a building warrant over all of or part of a house and then not finishing works or not obtaining a completion certificate."

[18] Thus the exemptions available in respect of 52 Craiglockhart Gardens would be paragraphs 2 and 4 of schedule 1 to the 1997 Order, although there may be a difficulty for Mr Miller in that respect, as explained in sections 3 and 7 of the appellant's submission to the LVAC. Finally, Mr Miller may be eligible for certain discounts, referred to in the memoranda, correspondence, and legislation reproduced in numbers 4, 5, 8, 10, and 25 in the schedule of evidence).

Conclusion

[19] In the result, we answer the question of law for the opinion of the court in the affirmative; allow the appeal; and quash the decision of the LVAC.