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Empty Rates Liability

5th September, 2012

Back in 2007, the last Government changed the empty property rates regime with a view to increasing competitiveness, efficiency and fairness. As a result regulations were brought into force in 2008 which reduced empty property rates relief for commercial properties (including shops and offices) to only three months after the property becomes empty. Previously, relief at 50% was previously enjoyed after that initial three month period. Industrial properties (including factories and warehouses) saw relief reduced from a permanent exemption to just six months after becoming vacant. Certain other exemptions from paying rates whilst a property is empty exist for properties such as those with a low rateable value for or listed buildings.

Restriction of this relief has been unpopular adding to the “perfect storm” of property owners’ woes. There are many calls for this legislation to be reviewed which the Government looks set to do.

In the meantime, property owners are devising rates savings scheme. One has been tested in the courts recently and found – on its own facts – to be effective as an “intermittent occupation strategy”.

The High Court recently decided that cash & carry Makro’s use of 0.2% of a 140,000sq ft warehouse for a six week period constituted rateable occupation. This allowed Makro to claim a six month unoccupied rates grace period following removal of the pallets stored at the property, which saved the company just over £117,000 for the period.

Makro stored just 16 pallets in the 140,000 sq ft warehouse during November 2009 to January 2010, which the local authority argued was not a sufficient level of occupation in order to qualify for the exemption under the de-minimis ruling. The High Court disagreed as the 16 pallets contained documents which were required to be stored by law and granted the further exemption period.

This provided a welcome boost to Landlord’s who are struggling to offload empty properties and find tenants. On the facts of this case, as long as a property is occupied for 6 weeks and full rates are paid, immediately following this period the property will qualify for a 3 or 6 month exemption period. There was no reference to the number of times a property could qualify for this exemption.

Another decision found that the Public Safety Charitable Trust’s use of 12 small WI-FI transmitters on a window ledge in a vacant office block with maintenance visits by its contractors was sufficient rateable occupation. As the Trust is a charity, it can claim 80% charitable trust relief.

If you require any further information on anything discussed in this article please contact Emma McGlinchey, Commercial Property Partner on 01244 405567 or [email protected]

 

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