In a recent case the High Court held that where a company used a tiny percentage of a property for storage, this amounted to rateable occupation, triggering a new period of empty rates relief.
The decision confirms that landlords may enter into lettings of six weeks or more to trigger a fresh period of empty rates liability, even where the landlord’s intention is to trigger a period of relief.
Landlords must ensure that any occupation satisfies the definition of rateable occupation set out by the courts.
When does empty rates relief apply to non domestic properties?
In order to trigger a fresh period of relief, there must be rateable occupation of the property which means:
End of the lease
In the Makro case, the landlord owned a warehouse property and let it to a group company. On expiry of the lease the tenant vacated but then stored pallets of paperwork at the property for a period of over six weeks, five months later. The total area used comprised around 0.2% of the property.
The magistrates’ court ordered the landlord to pay rates for this six week period on the grounds that:
Rateable occupation test satisfied
The High Court disagreed and held that there was rateable occupation of the property as follows:
Watch this space
For now, landlords have the certainty of being able to enter into short term lettings (provided that the rateable occupation test is met) in order to trigger further period of rates relief. The High Court made it clear that its job was not to act as a moral watchdog, that it is a legitimate practice for companies to seek to minimise their tax liabilities; and if Parliament does not like this, then its recourse is to implement legislation to close the loophole. Landlords will need to wait and see if that is how Parliament responds.
For further information please contact:
Thekla Fellas, Partner, Fladgate LLP (firstname.lastname@example.org)
Alison Mould, Partner, Fladgate LLP (email@example.com)
Jonathan Hibberts, Partner, Fladgate LLP (firstname.lastname@example.org)