Empty Property Business Rates Relief – Intermittent Occupancy Schemes – Makro Properties Limited v Nuneaton & Bedworth Borough Council

13-08-2012 09:50

Empty Property Business Rates 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.

A further period of 100% relief from business rates (again for either 3 months or 6 months) can be claimed once the initial relief has expired if the property is re-occupied by a tenant or licensee for six weeks or more, providing that such occupation meets the requirements set out for “rateable occupation”.    There is no statutory limit on the number of times that the above can apply, and so in principle, the number of times that six week long re-occupation can be used to enable further relief to be claimed.  

Unsurprisingly a number of intermittent occupancy schemes (i.e. schemes involving occupancy of previously empty properties for the qualifying six week period after which the property is again empty) have developed as a way of taking maximum advantage of the available relief.

The principal issue in ensuring that any scheme of the sort described above is effective is to ensure that the test for “rateable occupation” is met.  That test requires that any intermittent occupation must be more than transient, exclusive, of value (or benefit) and actual (each term having case law behind it).

 The latest occupancy arrangement of this sort to be tested is that in Makro Properties Limited v Nuneaton & Bedworth Borough Council [2012] EWHC 2250, where Makro Self Service Wholesalers Ltd (‘Makro Self Service’) had, by arrangement with its former landlord, Makro Properties Ltd (‘Makro Properties’), used a small part of an otherwise empty warehouse (approximately 0.2% of the total floor space) to store pallets of documents.  It was intended that after this arrangement came to an end the former landlord would be able to claim a further six-month exemption from business rates.

Nuneaton & Bedworth Borough Council were successful in the Magistrates’ court in arguing that the use of the warehouse by Makro Self Service did not amount to rateable occupation.  In particular the Council relied upon the fact that the area of the warehouse used was only a small proportion of the whole (which it said should not amount to actual occupation of the warehouse), and that there was no ‘benefit’ to Makro Self Service in the required sense.  

Makro Properties (as the party seeking rates relief) successfully appealed against the decision of the Magistrates’ court.    In the High Court it was held:

On actual occupation – that it was necessary to look at both intention and use of the property.  The intention, in the case of Makro Self Service was to incur (as an occupier) a liability to pay business rates (during the period of occupation) which would enable Makro Properties to claim relief after that occupation came to an end.  That must have meant that Makro Self Service intended to occupy the property, and the court did not need to take its analysis further than that.  The use of the property, in the case of Makro Self Service was to store documents which for legal reasons were required to be retained, and such a use could not be said to be insignificant, even if the actual space occupied was small.

On benefit – that the storage of documents which Makro Self Service was legally required to retain was of practical benefit to Makro Self Service.  That was the case even if that storage could have been found elsewhere.

Finally the Court considered whether in fact Makro Self Service should be considered to have occupied the property or whether Makro Properties was in occupation.  On this point the court was satisfied that because Makro Properties did not (i) exercise any control over the nature of Makro Self Service’s occupation, (ii) exercise any control over which area(s) within the warehouse Makro Self Service used, or (iii) interfere with Makro Self Service’s use of the warehouse, Makro Self Service should properly be considered to have been in occupation.

Whilst any scheme of this sort needs to be very carefully thought through, in particular to ensure that the “rateable occupation” requirements are met in the given circumstances, they do offer, at least at the moment, an opportunity to owners of commercial properties hit hard by the restriction on empty property rates relief.

If you would like any further information on this topic, please contact John-Paul Martin.

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