Where a landlord forfeits its lease, subject to any available relief or exemption, the landlord is liable to business rates in respect of the premises.

Empty premises business rates exemption will provide time-limited relief to a landlord who has re-entered premises. However, a landlord should be cautious of exercising its right to forfeit a lease in cases where it does not have another tenant "waiting in the wings".

The ratepayer

Business rates are paid by occupiers and, in certain circumstances, owners of premises.

Where a person is in "rateable occupation" of a hereditament (a unit of real estate), that person is liable to business rates. For occupation to be "rateable occupation" it must have four elements:

  • it must be actual;
  • it must be exclusive;
  • it must be beneficial; and
  • there must be permanence.

With regards to the first element, case law has established that mere legal occupation is not sufficient to be capable of being rateable; there must be actual occupation.

Since the 1960s, rating authorities have possessed the power to rate the owner of unoccupied premises. For these purposes, the "owner" of a hereditament is the person entitled to possession of it. Accordingly, notwithstanding that a landlord may not be in "rateable occupation" of premises, if the landlord has legal occupation of the premises then the landlord is nevertheless liable to business rates as an owner of unoccupied premises.


There are various reliefs and exemptions from business rates.

  • An owner of unoccupied premises is currently (until the end of the financial year ending 31 March 2010) exempt from business rates where the premises have a rateable value of less than £15,000.
  • Empty non-domestic premises of any value are exempt from business rates for a period of three months (six months in the case of industrial premises). It should be noted that, for these purposes, any period where premises are unoccupied would run concurrently where there is a change of owner. In addition, following a period of no occupation, a period of occupation for at least six weeks would be required to "refresh" the availability of the exemption.
  • A company in administration is not liable to business rates in respect of empty premises. However, an administrator is nevertheless liable to business rates where premises are being used, such as where a company in administration continues to trade from premises.


While a landlord may have a legal right to forfeit a lease held by a tenant, a landlord should be cautious of exercising that right until it has a replacement tenant lined-up or is confident that a new tenant can be found within three months. Prematurely exercising a forfeiture right may leave a landlord liable to business rates in respect of premises even where the landlord has no use for the premises other than to seek re-letting.