This post was written by Jo Carter and Siobhan Hayes.
The controversy over the unfair and anachronistic business rates system is constantly in the main stream press at the moment and today saw the BBC report on the expected announcement of a freeze to rates rises to be announced by the Chancellor in the Autumn Statement. One of the business rates issues making the legal news this year continues to be the way property owners have tried to reduce their empty rates bills. We thought an update might be helpful.
Short Term Lets – Potentially useful over this Christmas trading period as occupation for more than six weeks means that when the property next becomes unoccupied, a further rate-free period of three months (six months for industrial or warehouse properties) will apply. As a result, mitigation schemes involving the grant of leases to tenants willing to store items in premises for short periods (but no less than six weeks) have become common. See our previous posting about the Makro Properties Ltd v Nuneaton and Bedworth Borough Council case which worked despite minimal occupation by the business during its short term letting.
- For a while mitigation schemes using charities relief from payment were popular. These work on the basis that ratepayers for properties used wholly or mainly for charitable purposes are entitled to 80% mandatory relief and can claim an extra 20% discretionary relief. We have seen a wide range of leases and licences used.
- The Charity Commission got concerned about the number of charities taking on lease liabilities and tying in rates relief with charitable donations and warned trustees to consider their liabilities. Landowners do need to be cautious if they decide to let to a charity as part of such an arrangement especially if the charity then fails to make any real use of the premises as more than minimal use is required for the 80% relief.
- This year we had two cases in the High Court on the subject (Kenya Aid Programme v Sheffield City Council and Public Safety Charitable Trust v South Cambridgeshire District Council) which both held that it was correct to take into account the extent to which the premises were used by the charity in determining whether the relief was available.
- Last year we saw a decision about a charity’s empty property and we expected the same issue would come up again this year but so far it hasn’t. In the Preston City Council v Oyston Angel Charity case it was decided that where a charity is not in occupation it can claim zero rating if it appears that when the property is re-occupied it will be used (wholly or mainly) for charitable purposes. It does not have to be the same property owning charity’s use to qualify for the zero rating. That may help some investors holding empty buildings but many of the existing leases to charities that we have seen are unlikely to enable the charity with the empty property to succeed on their current terms.
New Commercial Development and Refurbishments-
Last year, the government announced that it would provide an 18 month exemption from empty property rates for new commercial development completed after 1 October 2013 and before 30 September 2016. This move has been widely welcomed as far as it goes. What it does not do is cover buildings undergoing refurbishment which is a major shortcoming for property owners. Refurbished buildings are not always being taken out of the rating list (as being unfit for beneficial occupation) making the refurbishment a costly exercise for property owners. We are aware of various appeals on refurbishment cases but read this week in the Estates Gazette how much of a backlog there is..
What next? –
- We expect there will be further cases about charitable use of properties.
- We hope we will see the outcome of the appeals about how far a building needs to be stripped out to be incapable of occupation.
- Since one of the observable impacts of the 2008 empty property rating regime was an increase in the demolition of empty properties (including those owned by local authorities) and given all the current uncertainty we expect that will continue to be a valid option for many owners.
- Business rates will stay in the news but we doubt they will be radically overhauled as so many want but we would be delighted to be wrong about this!