Empty Property Rates Relief

Two recent cases have nudged the law on business rates for empty commercial properties slightly in favour of the owner, but it is still a difficult area, writes commercial property solicitor, Iain Robinson of Slee Blackwell Solicitors.

By way of background, owners of empty commercial property get a relief period of three months (office or retail premises) or six months (industrial buildings and warehouses) before they have to start paying rates for the property to the council. Another relief period is available as soon as the property has been occupied for more than six weeks. Charity premises are zero-rated as long as they are used for charitable purposes, so charities do not have to pay rates on them. Premises that are empty but are going to be used for charitable purposes also get that zero-rating.

In the first case, an owner of a warehouse in Coventry used the first six months’ relief, and then ‘occupied’ the (very large) warehouse for six weeks by storing (very few) palettes of documents there. The owner claimed another six months of rates relief. Rates were nearly £20,000pcm, so it goes without saying that the council did not like it.

The court agreed with the warehouse owner. It considered that, as the use was intransient, exclusive, actual and beneficial, it was genuine occupation and the rates relief applied. However, the court made it clear that it anticipated Parliament changing the rules as a result, so empty premises owners will have to move swiftly. Their options are either to find a short-term occupier of the whole building, or to occupy themselves, perhaps by moving a small (even very small!) part of an existing business into the empty premises.

The second case concerned an empty building in Preston, Lancashire licensed to a charity. The charity left the building empty, so it was not using the premises for charitable purposes. Surely it did not get relief?

Actually, it did. Since its licence said it could only occupy the building for charitable purposes or sub-licence parts of the building to other charities to do the same, it was able to argue that the building was going to be used for charitable purposes. The magistrates agreed and the zero-rating applied.

Two words of caution, though; not only is Parliament likely to change this rule too, but anyone looking to set up a cosy arrangement with a friendly charity might well find the court pronounces the deal a sham and sets it aside. Worse, the charity may find itself in trouble with the Charity Commissioners. In almost all circumstances we would advise owners and charities against this sort of arrangement.

Owners of empty property looking for legal advice on sale, lease, licence or indeed maximising rates reliefs can contact Iain Robinson for FREE initial legal advice on 0808 139 1606 or email him at iain.robinson@sleeblackwell.co.uk