How to reduce your exposure to Empty Property Rates?

Jerry Schurder FRICS FIRRV Head of Rating Gerald Eve LLP October 2013

Since April 2008

• full rates paid for vacant premises after short rates free period

• 6 months for warehouses and factories

• 3 months for other properties

Empty Property Rates – avoidance and mitigation

No empty rates for

• listed buildings

• administration and liquidation

• RVs below £2,600 (£18,000 for 2010/11)

• land

• vacant due to ‘action taken by the Crown, local authority or a

public authority with a view to prohibiting occupation or

acquiring it’

• occupation prohibited

Empty Property Rates – avoidance and mitigation

If none of the exceptions apply

• Either – seek to delete or reduce Rateable Value assessment

Empty Property Rates – avoidance and mitigation

• Or – take action to reduce rates bill

Appeal to

Empty Property Rates – avoidance and mitigation

Can appeal at any time

Value based on – physical circumstances at appeal date

– rental values at 1 April 2008

Empty Property Rates – disrepair / obsolescence

Empty Property Rates – Incapable of beneficial occupation

• Assumption that is

in a state of

reasonable repair

• Unless

uneconomic to

repair

• Economic test as

at 1 April 2008

2 Harewood Place, London W1 • five floors vacant offices

• owner tried to get RV deleted

• after 18 months instructed Gerald Eve

• identified McDonalds extended, cutting off secondary fire escape

• persuaded Council illegal to occupy

• saved £330,000

Empty Property Rates Mitigation

Empty Property Rates Mitigation Intermittent occupation

• occupy for minimum of 6 weeks

• on vacation obtain fresh 3 or 6 month rates free period

• can repeat the procedure

What is occupation for rating purposes?

Four tests of rateable occupation

• must be actual occupation, and

• it must be beneficial, and

• it must be exclusive to the occupier, and

• not too transient

Empty Property Rates Mitigation Intermittent occupation

Makro Properties v Nuneaton & Bedworth BC 2012

• former cash and carry warehouse used for temporary storage

• 140,000 sq ft

• 16 pallets of documents

• 7 weeks from 25 November 2009

• pallets took up 0.2% of the building

Empty Property Rates Mitigation Intermittent occupation

Makro Properties v Nuneaton & Bedworth BC 2012

“ Insofar as that may be relevant I cannot accept the latter submission.

It has been recognised for a considerable amount of time that ratepayers

or potential ratepayers can and do organise their affairs as to avoid paying

rates… It has often been emphasised that the court is not a court of

morals, but of law.

If the outcome of this case is seen as unacceptable then it is for the

legislature to determine whether further reform is needed. ”

Judge Jarman

Empty Property Rates Mitigation Intermittent occupation

Bluetooth broadcasting

“ the fact that the nature of their

undertaking was such that, once

they had identified the optimum

location for their equipment, they

did not need to ‘use’ more than a

minute fraction of the area

encompassed within the

premises did not prevent their

occupation being rateable

occupation ”

Empty Property Rates Mitigation Intermittent occupation

Letting to a charity

• 80% mandatory relief (20% discretionary)

• letting to a charity only works if they occupy or intend to occupy it for

charitable purposes (of that charity or that charity and others)

• if it is occupied, it must be wholly or mainly used for charitable

purposes to qualify for relief

Empty Property Rates – Avoidance and mitigation

Letting to a charity for bluetooth marketing

Chester and West Cheshire Council v

Public Safety Charitable Trust 2012

• landlord – Thameside Metropolitan Borough Council

• four storey offices in Chester

• PSCT installed 13 bluetooth transmitters

• Council granted mandatory and discretionary relief

• then received 60 similar applications from PSCT

• June 2011 – Council removed discretionary relief

• August 2011 – Council removed mandatory relief

Empty Property Rates – Avoidance and mitigation

Letting to a charity

Kenya Aid Programme

– v –

Sheffield City Council

Empty Property Rates – Avoidance and mitigation

Letting to a charity

Kenya Aid Programme

– v –

Sheffield City Council

Does ‘wholly or mainly’

relate to use made or

floorspace utilised?

“ Correct to take into

account the extent to

which the premises

were used ”

Empty Property Rates – Avoidance and mitigation

Letting to a charity for bluetooth occupation

“ it is reasonable to infer that Parliament intended that the substantial

mandatory exemption from rates for a charity in occupation of a

building should depend upon the charity actually making extensive

use of the premises for charitable purposes, rather than leaving them

mainly unused.”

Mr Justice Sales

High Court in PSCT case

Empty Property Rates – Avoidance and mitigation

“ Newly built commercial property between

1 October 2013 and 30 September 2016

will be exempt from empty property rates

for the first 18 months up to State Aid

limits and subject to consultation. ”

Autumn Statement – December 2012

Empty Property Rates – Avoidance and mitigation

Empty Property Rates – Live in guardians

Empty Property Rates – Avoidance and mitigation

No empty property rates

payable in respect of a property

‘whose owner is entitled to

possession only in his capacity

as the personal representative

of a deceased person’

Unoccupied Property

Regulations 2008

Contact details

Jerry Schurder FRICS FIRRV Head of Rating Gerald Eve LLP 72 Welbeck Street London W1G 0AY

jschurder@geraldeve.com Tel. 020 7333 6324 07836 573750