In a market where there is a new growth industry of “professional occupiers,” being a company who occupy premises with the sole intention of mitigating the liability of property owners who are subject to non-domestic rates, it is not surprising the question of what amounts to ‘occupation’ for the purpose of determining rateable occupation has arisen again.
In a recent landmark case, R(Principled Offsite Logistics Limited) v Trafford Council 2018, the High Court reviewed the principles laid down in Makro Properties Ltd v Nuneaton & Bedworth BC 2012 and other case law, to determine if storage for the purposes of rates mitigation could be enough to establish rateable occupation. The question arose as to whether occupation for its own sake, without a separate purpose, other than the intention of rates mitigation, could be found to satisfy the criteria for rateable occupation laid down in John Laing & Sons Ltd v Kingswood Area Assessment Committee 1948.
In R(Principled Offsite Logistics Limited) v Trafford Council 2018, leases of vacant commercial properties were granted to the tenant. Goods were stored in the properties for a period of at least 43 days and, on vacation of the property, empty rates relief of three or six months was triggered. The tenant, as professional occupier, would then charge a fee based upon the level of rates successfully saved by the landlord.
The argument hinged on the interpretation of ‘beneficial occupation’. Trafford Council argued occupation for its own sake, could not amount to occupation in fact and law. Trafford Council considered there was no value to the occupation when the storage of goods within the property was a secondary objective to the objective of triggering a rates-free period at the expiry of the occupation.
The Hon Justice Kerr, construed the words ‘occupation’ and ‘occupy’ in the ordinary context of the English language and accordingly found that the beneficial occupation test could be satisfied where the value to the occupier was indeed the occupation itself. There is no need for any financial or other benefit to be received by the tenant. The Hon Justice Kerr made it clear that the court is a court of law and not of morals and such decision must therefore be made upon a morally neutral basis on the application of the law to the facts.
It is clear from caselaw to date, that the outcome of each case will very much depend on the facts of each case. Occupation which may be thought insignificant, may be deemed adequate to satisfy the meaning of beneficial occupation, provided there is a genuine intention to occupy. The intention to occupy, together with benefit to the occupier, even if such benefit is minimal, may amount to rateable occupation capable of triggering a fresh rate-free period once such occupation ends.
This decision will be a relief to owners of empty properties who seek short term lettings to mitigate their rates liability. However, local authorities are becoming more persistent in their pursuit of uncovering rates mitigation schemes as they become more dependent upon the funds generated from non-domestic rates that they collect. This is therefore not likely to be the last we hear on the controversial topic of rates mitigation.
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