How to reduce your exposure to Empty Property Rates?

Jerry Schurder FRICS FIRRVHead of Rating Gerald Eve LLP

June 2014

Since April 2008

• full rates paid for vacant premises after short rates free period

• 6 months for warehouses and factories

• 3 months for other properties

Empty Property Rates – avoidance and mitigation

No empty rates for

• listed buildings

• administration and liquidation

• RVs below £2,600 (£18,000 for 2010/11)

• land

• vacant due to ‘action taken by the Crown, local authority or a public authority with a view to prohibiting occupation or acquiring it’

• occupation prohibited

Empty Property Rates – avoidance and mitigation

If none of the exceptions apply

• Either – seek to delete or reduce Rateable Value assessment

Empty Property Rates – avoidance and mitigation

• Or – take action to reduce rates bill

Appeal to

Empty Property Rates – avoidance and mitigation

Can appeal at any time

Value based on – physical circumstances at appeal date

– rental values at 1 April 2008

Empty Property Rates – disrepair / obsolescence

Empty Property Rates – Incapable of beneficial occupation

• Assumption that is in a state of reasonable repair

• Unless uneconomic to repair

• Economic test as at 1 April 2008

• Key case to be heard by Court of Appeal

2 Harewood Place, London W1

• five floors vacant offices• owner tried to get RV deleted• after 18 months instructed Gerald Eve• identified McDonalds extended, cutting

off secondary fire escape• persuaded Council illegal to occupy• saved £330,000

Empty Property Rates Mitigation

Empty Property Rates Mitigation Intermittent occupation

• occupy for minimum of 6 weeks• on vacation obtain fresh 3 or 6

month rates free period• can repeat the procedure

What is occupation for rating purposes?

Four tests of rateable occupation

• must be actual occupation, and

• it must be beneficial, and

• it must be exclusive to the occupier, and

• not too transient

Empty Property Rates Mitigation Intermittent occupation

Makro Properties v Nuneaton & Bedworth BC 2012

• former cash and carry warehouse used for temporary storage

• 140,000 sq ft

• 16 pallets of documents

• 7 weeks from 25 November 2009

• pallets took up 0.2% of the building

Empty Property Rates Mitigation Intermittent occupation

Makro Properties v Nuneaton & Bedworth BC 2012

“ Insofar as that may be relevant I cannot accept the latter submission. It has been recognised for a considerable amount of time that ratepayers or potential ratepayers can and do organise their affairs as to avoid paying rates… It has often been emphasised that the court is not a court of morals, but of law.

If the outcome of this case is seen as unacceptable then it is for the legislature to determine whether further reform is needed. ”

Judge Jarman

Empty Property Rates Mitigation Intermittent occupation

Bluetooth broadcasting

“ the fact that the nature of their undertaking was such that, once they had identified the optimum location for their equipment, they did not need to ‘use’ more than a minute fraction of the area encompassed within the premises did not prevent their occupation being rateable occupation ”

Empty Property Rates Mitigation Intermittent occupation

Letting to a charity

• 80% mandatory relief (20% discretionary)

• letting to a charity only works if they occupy or intend to occupy it for charitable purposes (of that charity or that charity and others)

• if it is occupied, it must be wholly or mainly used for charitable purposes to qualify for relief

Empty Property Rates –Avoidance and mitigation

Letting to a charity for bluetooth marketing

Chester and West Cheshire Council v Public Safety Charitable Trust 2012

• landlord – Thameside Metropolitan Borough Council

• four storey offices in Chester

• PSCT installed 13 bluetooth transmitters

• Council granted mandatory and discretionary relief

• then received 60 similar applications from PSCT

• June 2011 – Council removed discretionary relief

• August 2011 – Council removed mandatory relief

Empty Property Rates –Avoidance and mitigation

Letting to a charity

Kenya Aid Programme– v –

Sheffield City Council

Empty Property Rates –Avoidance and mitigation

Letting to a charity

Kenya Aid Programme– v –

Sheffield City Council

Does ‘wholly or mainly’ relate to use made or floorspace utilised?

“ Correct to take into account the extent to which the premises were used ”

Empty Property Rates –Avoidance and mitigation

Letting to a charity for bluetooth occupation

“ it is reasonable to infer that Parliament intended that the substantial mandatory exemption from rates for a charity in occupation of a building should depend upon the charity actually making extensive use of the premises for charitable purposes, rather than leaving them mainly unused.”

Mr Justice SalesHigh Court in PSCT case

Empty Property Rates –Avoidance and mitigation

“ Newly built commercial property between 1 October 2013 and 30 September 2016 will be exempt from empty property rates for the first 18 months up to State Aid limits and subject to consultation. ”

Autumn Statement – December 2012

Empty Property Rates –Avoidance and mitigation

Empty Property Rates –Live in guardians

Empty Property Rates –Avoidance and mitigation

No empty property rates payable in respect of a property ‘whose owner is entitled to possession only in his capacity as the personal representative of a deceased person’

Unoccupied Property Regulations 2008

Contact details

Jerry Schurder FRICS FIRRVHead of Rating Gerald Eve LLP72 Welbeck StreetLondonW1G 0AY

jschurder@geraldeve.comTel. 020 7333 632407836 573750Twitter @JerrySchurder