Empty Property Business Rates Relief
The recent judgement in the case Makro Properties Ltd v Nuneaton and Bedworth Borough Council (2012) has been welcomed by Landlords of empty commercial property seeking ways to mitigate the liability of paying rates.
When a commercial property is vacant the liability for rates is the responsibility of the Landlord. Empty Property Business Rate Relief provides 100% relief from business rates during the first 3 months in which any office or retail premises are empty, or the first 6 months in which any warehouse or industrial premises are empty. After that period expires, rates will be charged even if the property remains vacant. If the property is then occupied again for more than 6 weeks and the occupation meets the requirements set out for “rateable occupation”, the clock is re-set and this triggers a further period of rates relief when that occupation ends.
Clarity on how that clock can be re-set has been provided by the High Court in Makro Properties Ltd v Nuneaton and Bedworth Borough Council (2012). Makro had a 14,000 sqft warehouse which they no longer required, and to avoid the empty rates relief period expiring stored 16 pallets of documents there occupying just 0.2% of the floor space for a 2 month period. The Council contested Makro’s claim for a further 6 month empty rate relief period starting after the 2 month period of occupation, but it was held by the High Court that this temporary storage of documents was actual occupation for the purposes of business rates liability, meeting the four tests (the occupation was actual; exclusive; beneficial and of sufficient quality or permanence), and hence Makro were entitled to a new empty rates relief period. The High Court acknowledged that the fact that the occupation was indented to secure another period of rate relief did not invalidate it and the occupation had met the requirements of the regulations.
Therefore Landlords now have further transparency on how to minimise their total rates liability when their properties are likely to stand empty for some time; a short period of occupation for 2 months (during which rates will have to be paid) which meets the “rateable occupation” requirements should be enough to give a further 3 or 6 month period of relief.