Commercial property blog: Empty rates but not empty rooms4th July 2013

One (and I should stress one) of the problems facing our high streets is punitive business rates. Retailers bemoan a rates regime that is not set for evaluation until 2017. They argue that rates can be higher than rents in some places. With the economy still stuck in the slow lane, business rates are a tax on retailers and, most importantly, a tax on jobs. Thus, a lot has been said. Even less done. Rates charged on empty properties are even more worrying. However, Landlords can take comfort from the decision in Sunderland City Council v Stirling Investment Properties (Sunderland).

Sunderland involved a 1500 sq m unit used for the purpose of industrial warehousing. The council was responsible for the collection of business rates on empty premises. The respondent in this case began to use the premises for the purpose of marketing and avertising. They installed a blue tooth box in a corner of the premises. The central issue is:

Did the presence of the blue tooth box amount to rateable occupation such that the Landlord was able to claim relief from empty property rates?

It had been argued that the purpose of occupying the warehouse was for warehousing. The respondent did not satisfy this purpose and thus only used the unit for the purpose of finding the most suitable location for their blue tooth apparatus. Mr Justice Wilkie disagreed and held that ‘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. Although the rent paid by them was nominal, the outgoings, in terms of their accepting liability for rates, were not. This reflects the value, or potential value, to them of the lease and their occupation of the premises.’

As such, the landlord was able to claim relief from rates charged on empty premises. What does this mean for landlords? It means that even seemingly minimal use of a premises does not matter. What is more important is the value that the tenant derives from being able to use that space. This case is surely welcome news for landlords who fear having to foot a hefty empty rates bill on top of their other outgoings. This case is a feather in the landlord’s cap in the ever changing relationship between landlord and tenant.

About the author

James Norton is a paralegal at a top 100 firm and an aspiring lawyer with a passion for commercial property law. He writes a regular blog on the latest legal (and other) developments in commercial property law at: http://proplawyer.blogspot.co.uk/