The High Court has ruled that occupation of only a tiny fraction of an otherwise empty commercial property is sufficient to trigger a fresh period of empty rate relief, even where the purpose of the occupation is primarily to avoid liability for rates.


Following the removal of the 50 percent empty rate relief in 2008, full rates are payable for empty commercial properties once a brief period of exemption has expired (three months for offices and shops, six months for industrial or storage premises). With high rates of tenant insolvency and retail vacancy rates running at over 14 percent, liability for empty rates is a major concern for landlords. Allowing a charity to occupy the premises rent-free is a popular solution, with some landlords even offering to pay the 20 percent rates for which the charity is liable. In some cases there has been doubt as to whether the charity is genuinely in occupation, but generally such arrangements are effective.

Intermittent Occupation

The recent case involved what has been called the “intermittent occupation strategy”. It relies on the fact that under the rating regulations a period of rateable occupation of at least six weeks triggers a fresh rates-free period. So liability for rates can be significantly reduced by using the property for periods of at least six weeks when each three or six month rates-free period ends. The recent case has confirmed that this scheme works and that only a small part of the building needs to be occupied.

Facts of the Case

The case, decided by the High Court at the end of June, related to a cash and carry warehouse in Coventry which Makro Properties Ltd leased to Makro Self Service Wholesalers Ltd. When the business closed, the building was cleared and the lease was surrendered in June 2009. In November 2009 the former tenant moved 16 pallets of documents into the warehouse, taking up only 0.2 percent of the total floor space of 140,000 sq ft, and then removed them a little over six weeks later, allowing the owner to claim a further six months rates free. The local authority did not accept that this amounted to rateable occupation. The district judge agreed, deciding that use of such a small part of the building was de minimis (too small to take account of) and was of no commercial benefit to the companies except to avoid liability for rates. However, Makro’s appeal to the High Court succeeded.

Rateable Occupation

The court referred to the four essential elements of rateable occupation: there must be actual occupation or possession, it must be exclusive to the purposes of the occupier, of value or benefit to the occupier, and not too transient. All those elements were present in this case. Although the use was only slight, it was sufficient because the intention was actually to occupy the property and so trigger a fresh rates free period, not just to give an appearance of occupation. Storage of the documents was of value to Makro because they were invoices and other papers which it had a legal obligation to retain. The court decided that it made no difference that the occupation was a deliberate scheme to avoid paying rates; ratepayers are entitled to go into and out of occupation for that purpose.

Consequences of the Decision

The previous doubt as to whether the intermittent occupation strategy works are now resolved and ratepayers will be able to use it with confidence. However, it will be necessary to ensure that the occupation is genuinely of value to the occupier so that it amounts to rateable occupation. So, for example, just putting bags of rubbish in the property would not be good enough, it would have to be items which would otherwise have to be stored elsewhere. Also, it must be remembered that the scheme only reduces and does not completely remove liability for rates, as rates will be payable during the intermittent periods of occupation.

Source: Makro Properties Ltd v Nuneaton and Bedworth Borough Council [2012] PLSCS 150.