Claiming Empty Property Relief – a tale of two halves

Blog | Commercial Property

Share This

An important case, The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], has brought some much needed clarity to the claiming of empty property relief on empty property - an area of contention for both landlords, businesses and the councils who benefit from the income.  Harsh words too from the presiding judge.

For many years, landlords have looked at ways of mitigating their exposure to business rates on empty properties. One way of doing this is to have a short-term occupation of the property for a period of at least six weeks, allowing the landlord to take advantage of empty property relief for a period of three or six months.

Over the years there have been a number of ways that landlords and businesses have sought to do this – from pop up businesses to storing documents, installing blue tooth servers transmitting marketing messages and even snail farms (the latter was unsuccessful).

Over time, business rates mitigation has become a business in itself and there are companies who work with landlords and portfolio managers, and when managed and implemented properly on a rolling basis, significant savings can be made.

Reduced income for councils

But, the councils do not like this and understandably so from their perspective. Business rates is a form of income for councils, who get to keep a percentage of the business rates they collect. They do not like giving reliefs and therefore many make it hard for landlords to claim.

To be eligible for empty property relief, the council must be satisfied that the property has been occupied for a period of at least six weeks. Rateable occupation is generally understood as meaning that there must be:

  1. Actual occupation (i.e. physical occupation);

  2. Exclusive occupation;

  3. Some value or benefit of the occupation to the possessor; and

  4. Possession for not too transient a period.
    (John Laing & Sons Ltd v Kingswood Area Assessment Committee [1949] 1 KB 344)

Over time, cases such as Makro Properties Ltd v Nuneaton & Bedford BC [2012] and Sunderland City Council v Stirling Investment Properties LLP [2013] (where Shakespeare Martineau LLP acted for the successful landlord at first instance and on appeal) have made it very clear that the bar for actual occupation is low. For example, in the Stirling case, a small blue tooth server installed in a large warehouse was found to be sufficient for the court to find that the whole of the property was occupied.

The biggest and consistent battle for landlords and tenants is over what amounts to beneficial occupation. Different councils have different interpretations of the rule and case law. Often what is acceptable to one council is deemed insufficient for another. Unfortunately, unless one of the parties is willing to back down, it comes down to a court to make a final ruling.

A process open to abuse?

There is evidence though, that councils abuse this position too. Going to court costs and even if successful, recovering all costs is rare, and the time incurred going through the process will never be recovered. There is also the inherent risk in litigation. For councils, however, the major costs and risks come a lot later. To obtain a liability order against a landlord for non-payment of a business rates bill (due to a dispute over empty property relief), the council only has to submit a list of all alleged debtors to the Magistrates’ Court, who will issue court summonses. The landlord then has to attend court to dispute the making of a Liability Order.

If the court can see that there is merit in the dispute, the matter will go forth to a trial. Unlike with the commercial courts, there is no requirement for the council to set out its case until after the summons hearing. There is also no court fee for the council to pay. Some councils, somewhat questionably, force parties to attend court to dispute the order of a Liability Order without having previously given proper consideration to their case.

The case of The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], however, provides useful guidance.

The judge in this case had some harsh words for difficult “business rates mitigation hunting” councils and set down some directions on how these disputes should be dealt with.

Importantly, the Judge confirmed that:

What counts as beneficial occupation of a commercial property?

The case of The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], however, provides useful guidance.

The judge in this case had some harsh words for difficult “business rates mitigation hunting” councils and set down some directions on how these disputes should be dealt with.

Importantly, the Judge confirmed that:

  1. The bar for beneficial occupation is not high. Actual use of the property, even minimal use, combined with an intention to occupy is sufficient for occupation. The use does not need to be substantial, and can be “whimsical or eccentric”.

  2. More importantly, occupation for the purpose of rates mitigation is beneficial occupation, regardless of any view held by a council over the morality of such a business.

The judge also provided a useful summary at Annex A of the judgment on when a property should be considered occupied, as well as a proposed protocol for resolution of these sort of disputes at Annex B. Annex B in particular, stressed that the council’s should provide written reasons for its conclusions and, if it remains in dispute, landlords should not pay the disputed amount.

Despite the judge finishing his judgment by saying that he hoped that “further challenges of this kind in “rates exemption hunting” cases will be few and far between” it is apparent that this message has not reached many councils, and we are still seeing the same arguments over and over. For now, the argument continues.

If you are in dispute with a council in over your liability for business rates, please contact Ben Humphreys at Shakespeare Martineau LLP, who has extensive experience in this area.

Get In Contact

Ben has a broad range of experience across all areas of commercial litigation, including breach of contract claims, professional negligence recovering large commercial debts, business protection claims and applications for injunctive relief.

Real Estate & Planning

We pride ourselves on our free-thinking ideas. Our comprehensive end-to-end service and the repeat business we have, coupled with our reputation in the field, speaks volumes.

Our Thoughts

All the latest thoughts and insights from our team

NFT’s as legacy gifts

6 Jul

For the individual

NFT’s as legacy gifts

NFTs or non-fungible assets have become the latest buzzword in the new age of […]

Read article Right Arrow

Long COVID and disability discrimination

4 Jul

Corporate & Commercial

Long COVID and disability discrimination

The employment tribunal has determined that an employee was disabled for the purposes of […]

Read article Right Arrow

SHMA® On Demand

All the latest on-demand content

Agriculture: diversifying or leasing your land to create habitat banks

6 Jul

Peter Snodgrass, Partner & Head of Agriculture

Agriculture: diversifying or leasing your land to create habitat banks

We know that biodiversity net gains provide a significant opportunity for landowners to diversify […]

Register Right Arrow

Teachers’ Pension Scheme – strategic issues independent schools need to think about

20 Jul

Esther Maxwell, Legal Director | Emma Glazzard, Solicitor

Teachers’ Pension Scheme – strategic issues independent schools need to think about

Webinar Teachers’ Pension Scheme – strategic issues independent schools need to think about In […]

Register Right Arrow

Guides & Advice

Your summer guide to recovery and resilience in COVID-19

Your updated summer guide to recovery and resilience

As the UK takes its first steps to ease the current national restrictions and looks forward to an increase in economic activity and recovery it is vital that businesses are prepared in every aspect.

To support businesses and people navigate their way out of the last year and the current national restrictions, unlock their potential and drive for a brighter future, we have updated our guide to recovery and resilience.

From financial considerations, employees, leadership and premises, to supply chain implications, health and safety and protecting your private wealth, our guide highlights what organisations and individuals should consider when moving from survival to recovery to thrive.

Financial considerations

Whether a large corporate with a highly structured board, an SME or an owner-managed business, the financial viability of a business is key to its future success.   However, as the thoughts turn to the roadmap out of lockdown once again, and what the future may look like, businesses that have got through the last year should consider a range of measures to enable them to cope with what is likely be a recession for some industry sectors of the UK. Prudent business owners will be well aware of the predictions and while there will be a bounce back it may take some time for confidence and stability to return from customers and suppliers.

Your employees

Managing a workforce of any size can have its challenges, let alone one that is recovering from a global crisis. Many businesses will have furloughed employees or made the difficult decision to make a number of their workforce redundant. For those businesses that haven’t, it’s highly likely they will still face having to make difficult choices, albeit further down the line.

The knock-on effects of the COVID-19 outbreak have changed the way employers engage with and effectively manage, their employees. The processes, policies and guidelines that worked previously may no longer be fit for purpose for your business, or for your workforce, in the new working landscape. With the rollout of the COVID vaccine facilitating the gradual return of employees back into the physical workplace, this in itself will bring a host of new opportunities and challenges.

Buildings, workspaces and leases

As the world and economy move forward out of lockdown, owners and investors of real estate as well as occupying tenants will have to consider the adjustments they now need to make whilst the restrictions around social distancing continue.
They will need to find new ways of working and inevitably different ways to use their space over the coming months and, at the same time, consider how to manage the cost of premises in these changed circumstances.

Suppliers and supply chain

Many businesses have struggled to comply with their contractual obligations as a result of the COVID-19 pandemic and may have been forced to rethink their supply chains. A focus in recent years on minimising costs, reducing inventories and maximising asset utilisation has often resulted in a reduced ability to cope with disruption. Whilst the impact of the COVID-19 pandemic is unprecedented in modern times, disruption to the global economy is an increasing risk, whether due to political events such as Brexit, US-China trade tensions, or climate change.

Private wealth, family businesses and family

The effects of COVID-19 will undoubtedly have a huge impact on our economy for years to come, with many businesses collapsing under the strain and the level of unemployment set to rise significantly. However, what is less widely reported on is the effect it is having and will continue to have, on families and personal wealth. We’ve already seen that the pandemic has led to an increase in people looking at how they may pass on their wealth to the next generation –and even more so for those that own family businesses.

Compliance – Health and safety

Employers have clear duties under existing health and safety legislation. Obligations to comply with health and safety at work, and to manage and control workplace risks, includes protecting workers and others from the risk of COVID-19 infection in the workplace. That duty is to do everything “reasonably practicable” to manage these risks. The onus of demonstrating that everything reasonably practicable has been done falls to the employer. The best way to demonstrate compliance with the law is usually to follow government and industry-led guidance wherever possible.

Leadership

Strong leadership is a cocktail of authenticity, collaboration, passion, compassion, and a great deal of bravery. We all know the best results occur when we are pushed out of our comfort zones and the ingredients are shaken up, and COVID-19 has done exactly that. With government guidance signalling the UK’s route out of current national restrictions, the time for positive leadership is now. It’s time to take control of what we can and create an environment with enough certainty where people can feel safe enough to flourish centre stage.

We are here to help

The team here at Shakespeare Martineau remain committed to supporting our clients and our communities throughout these challenging times, with

the depth of experience, collaborative ethos and the creative know-how to lead positively to the future.  We are able to offer advice and solutions on a range of subjects for life and business - from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes to issues affecting family businesses, personal wealth planning and family law. Do contact us on 03300 240 333

 

SHMA® ON DEMAND

Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

How can Higher Education Institutions prevent COVID-19 insurance claims?

14 Sep

Ravinder Johal, Partner
How can Higher Education Institutions prevent COVID-19 insurance claims?

In this webinar, our partner Rav Johal will look into how higher education institutions […]

Alternatives to Redundancy

30 Sep

Michael Hibbs, Partner
Alternatives to Redundancy

As many companies face serious cash flow issues following Covid disruption, how do you […]

Redundancies – How to Apply Best Practice

16 Sep

Jon Heuvel, Partner
Redundancies – How to Apply Best Practice

Sadly, few businesses will have escaped the impact of coronavirus on their bottom line, […]

What happens after Furlough? – Live Q & A

13 Aug

,
What happens after Furlough? – Live Q & A

In this webinar, we look at the following and also answer some of the […]

Our thoughts

All the latest views and insights on current topics.

A return to “hybrid working”? – What would this mean for staff wellbeing?

2 Feb

Employment

A return to “hybrid working”? – What would this mean for staff wellbeing?

The Government had previously re-introduced a number of measures to tackle the outbreak of […]

Read article Right Arrow

Compulsory vaccination for care home staff

18 Oct

Corporate & Commercial

Compulsory vaccination for care home staff

The Health and Social Care Act 2008 (Regulated Activities) (Amendment) (Coronavirus) Regulations 2021 will […]

Read article Right Arrow

Preparing for the COVID-19 vaccination

1 Sep

Employment

Preparing for the COVID-19 vaccination

Read article Right Arrow

Enhancing the hybrid working experience with home workspace loans

17 Aug

Future working

Enhancing the hybrid working experience with home workspace loans

Read article Right Arrow

Home workspace loans 

16 Jul

Coronavirus

Home workspace loans 

Read article Right Arrow

Guide to Commercial Landlord and Tenant Dispute Resolution

15 Jul

Rent Dispute - Landlords

Guide to Commercial Landlord and Tenant Dispute Resolution

Read article Right Arrow

What will working arrangements look like in a post-pandemic future?

21 Jun

Corporate & Commercial

What will working arrangements look like in a post-pandemic future?

Read article Right Arrow

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

Plans have been announced by the Government to abolish the section 21 procedure. Landlords will be familiar with this process, often labelled as the ‘no fault’ eviction.

The section 21 process seeks to avoid conflict and costs by providing a tenant with a notice allowing two months to vacate a property. Often, this notice is followed by a quicker paper-based application for possession as opposed to a lengthy process whereby a hearing is usually necessary. A section 21 notice allows landlords to recover their property without having to provide a reason for doing so, making it the preferred method for many.

The National Landlords Association (NLA) has launched a campaign which seeks to inform the public (and the Government) of the anticipated negative result that revoking the section 21 procedure would have on the private rental sector. A survey carried out by the NLA revealed that of 3,000 landlords, 11 percent had relied on the section 21 procedure over the previous five years and only seven percent had used the section 8 ‘fault’ procedure. Furthermore, when a landlord had sought an eviction due to a fault with the tenant, 44 percent had preferred the section 21 procedure.

Landlords are clearly losing confidence in the rental property market with changes being introduced by the Homes (Fitness for Human Habilitation) Act 2018 and the Tenant Fees Act 2019, as well as further changes anticipated from the removal of the section 21 procedure. Many private landlords are even considering downsizing their rental portfolio at a time when rental properties are in demand.

What about protection for landlords?

The section 21 procedure has always provided a ‘back up’ for landlords and often overcomes the difficulties of the section 8 process. Landlords are often advised to proceed with serving both notices.

Removing the section 21 procedure may cause amends to the section 8 route. The grounds set out in schedule 2 of the Housing Act 1988 are predicted to be expanded, allowing landlords to recover possession for other reasons, such as if the landlord wishes to occupy the property themselves or if the property is to be sold. There are also proposals to speed up the section 8 process which would be a welcome change to the private rental sector.

However, the proposals are very much in their infancy and further updates from the Government are expected.

For more information about our real estate team, follow here.

Taking place in the Azerbaijani capital this week, the Summit will bring together international leaders and high-level representatives from politics, business, government and academia to discuss the ideas that are shaping the world.

The theme of this year’s event, ‘Building a Shared Future’, is an issue of global importance and pivotal to the economic growth, productivity and resilience of global economies.

During the two-day conference, speakers will reflect on many of today’s major global challenges, ranging from transportation and connectivity to energy security.

Mohammed said: “Having the opportunity to speak alongside some of the most distinguished experts from across the EU is a huge privilege. The purpose of this conference is to provide a platform from which industry leaders and business representatives alike can learn how shared creativity, experience and ingenuity can help to build a shared future. Our economies all share major challenges and I look forward to discussing how building better connections can benefit everyone.”