Business rates can be a significant liability for a business that owns vacant property. Under the rating legislation, when a property becomes vacant, the owner has only a three month grace period during which no rates are payable before liability for rates resumes. This period is extended to six months for industrial or warehousing property. The owners of listed buildings are given more favourable treatment. Here rates are suspended until the property is re-occupied.
Not surprisingly, owners will try to mitigate their rates liability for unoccupied property. In a recent case, the court has been generous in its interpretation of the relevant legislation. In Makro Self Service Wholesalers Ltd v Nuneaton & Bedworth BC, the court held that a business that used just 0.2% of the floor space of a large (140,000 sq ft) warehouse to store documents for a period of three months was entitled to a further six month grace period when the documents were removed. The storage of 16 pallets of documents was sufficient to constitute rateable occupation, triggering a new grace period for unoccupied property rates when that occupation ceased.
Using short-term occupation of vacant property to obtain the benefit of additional grace periods for empty rates has now been given judicial backing (although the property must be used for at least six weeks).
Not every rates saving scheme will work. To establish rateable occupation (and therefore to make sure that the unoccupied property relief will apply once the occupation ends), someone must actually use the property and have exclusive possession or occupation of it. There must also be some valuable benefit to the occupier from the arrangement and it must also have a sufficient quality of permanence to qualify as rateable occupation. However, provided that these four criteria are met, it is now clear that allowing short-term occupation of a vacant property is a legitimate means by which a property owner can reduce its liability for unoccupied property rates.