Empty rates

In today’s difficult economic climate, commercial landlords unable to rent their property not only have to deal with a lack of rental income, they also have to bear the cost of business rates levied on their unoccupied premises.

Although legislation does provide landowners of empty properties with a three month exemption period (six months for industrial properties), in the current climate, many landlords still struggle to secure a new tenant in this timeframe, resulting in being forced to pay the rates following the end of the exemption period.

One ray of light is that following occupation for a minimum of six weeks, the premises once again qualify for another exemption period, and there appears to be no limit on how many times this can be done. Nevertheless, finding a tenant whose occupation meets the required principles for occupation can be difficult. The long established principles for rateable occupation are that the occupation must (a) be actual occupation (b) be exclusive/paramount for the purposes of the occupier (c) be of benefit/value to the occupier, and (d) not be for too temporary a period.

However, a new High Court ruling has given landlords some hope. In Makro Properties Limited and Another v Nuneaton and Bedworth Borough Council [2012], Makro, as licensee, stored pallets of documents for more than six weeks in what amounted to 0.2% of the property. They then applied for a further six month rate free period. The Council refused the application and argued that, according to the facts, this did not amount to actual occupation, and thus made Makro liable for the payment of rates. However, the Court held that occupation of even just 0.2% of the property was sufficient to qualify as “occupation” and thus qualify for a further exemption from business rates.

The key to this decision lies in that the arrangement met all the criteria for rateable occupation, particularly as Makro genuinely benefited by the occupation as it had a legal requirement to store the documents. The fact that Makro’s intention was to deliberately make use of a further exemption period from rates was deemed irrelevant.

Overall, the issue of empty rates is a hot topic given the current economic climate, with a Government working group formed to evaluate the situation. While it is hoped that legislative changes will be forth coming, in the meantime, the Makro Properties decision provides some options for relief for landlords.

For further advice, please contact Stephen Brower by emailing .

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