With the abolition of empty property rates reliefs, building owners often consider ways of reducing the impact of empty property rates on their business. The effectiveness of one these schemes was questioned in Kenya Aid Programme v Sheffield City Council [2013] EWHC 54 (Admin).

In this case, the landlord of vacant warehouse premises agreed a letting of two warehouses at a peppercorn rent to a charity who used the premises for the storage of furniture. A charity in rateable occupation of premises used wholly or mainly for charitable purposes is entitled to an 80% rebate on its rates liability but the relief is not available if the premises are used for fundraising purposes. Under the arrangement, the landlord agreed to indemnify the charity against the 20% residual rates liability and to make additional charitable contributions to the tenant. The effect of the scheme was therefore to reduce the landlord’s rates liability by 80%.

Sheffield City Council has challenged the effectiveness of this scheme. Although the High Court held that the charity was in rateable occupation of the whole of each warehouse and used each warehouse ‘wholly or mainly’ for charitable purposes, the Council argued that the premises were also being used for fundraising purposes because of the arrangements with the landlord to indemnify the rates liability and to make additional contributions. The High Court agreed that this issue needed to be considered by the district judge to determine if the non-qualifying use (fundraising) eliminated the right to a discount because the fundraising use was extensive enough to prevent the ‘charitable’ use from being the main use. If the district judge decides that there was a sufficient element of fundraising to remove the right to the 80% discount, then one means of avoiding empty property rates liability by letting to a charity will have been blocked.