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The Court gives clear guidance on the use of “Makro” type business rates mitigation schemes designed to make use of empty premises rates relief periods.

Business rates and Council tax together make up local authorities’ largest source of income. The clear incentive on local authorities to maximise business rate recovery was increased when, in October 2015, the Government announced its intention to enable local government as a sector to retain all business rates raised locally. At the same time changes to imposition of liability for business rate on owners of empty commercial property have significantly increased the tax burden on commercial landlords. The resulting financial tension has, over recent years, resulted in a number of court decisions on the validity of various types of business rate mitigation schemes deployed by commercial landlords. However, on 16 March 2021, Mr Justice Kerr, sitting in the High Court, has given a very clear and helpful judgment that should go a long way to limiting claims and the legal and other professional costs associated with them.

High Court Guidance

In the case of R (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England) -v- Harlow District Council Kerr J found that the storage of a relatively small number of boxes in an otherwise empty building for six weeks at a time, before their removal, constituted rateable occupation. Therefore, the claimant was entitled to the subsequent three months’ relief from national non-domestic rates (“Rates”) after each six week period.

The practical implication to this is that Rates liability can effectively be mitigated for empty buildings by occupying an empty building for periods of at least six weeks at a time, which can be followed by three months of relief from Rates liability. The use of the building during the six week occupation period does not need to be extensive, so long as there is an intention to occupy, which there normally will be where this sort of mitigation scheme is employed.

Kerr J helpfully provides two annexes to his judgment: the first (Annex A) setting out what he considers to be the correct law in relation to when premises are considered to be occupied and the second (Annex B) providing a suggested protocol for determining disputes in this area.

There have been judgments handed down previously where comparatively minor occupation of an otherwise empty building for six or more weeks was sufficient to attract the subsequent Rates relief. The difference in this case is that Kerr J seeks, in providing the annexes, to stop those claims reaching court:

“If it is not followed, the parties resistant to it could find district judges or other courts disposed to impose costs sanctions against them.”

When does Rateable Occupation occur?

The four elements of rateable occupation were set out in the decision in JS Laing -v- Kingswood Area Assessment Committee. These are:

  1. There must be actual occupation;
  2. The occupation must be exclusive for the particular purposes of the possessor;
  3. The possession must be of some value or benefit to the possessor; and
  4. The possession must not be for too transient a period.

Kerr J’s Annex A is a useful summary of the main principles to consider when deciding whether premises are occupied and replicates and adds to these four tests.

Crucially, in this case Kerr J considers that the use of a small proportion of the property to store a small amount of the possessor’s goods is sufficient and it does not matter if the storage is “whimsical or eccentric”. Furthermore, he states that it does not matter if the possessor’s predominant or sole motive is mitigation of Rates liability.

Kerr J also confirmed an earlier decision that rateable occupation may be found where the possessor’s predominant or sole motive is mitigation of or exemption from Rates liability. That case also made it clear that the occupation can be by a third party paid to occupy for the express purpose of mitigating Rates liability.

A new protocol?

In Annex B, Kerr J sets out a proposed protocol to be followed by both the property owner/occupier and the ratings authority where a dispute arises over rateable occupation. The protocol includes the following steps:

  1. The parties should co-operate in making arrangements for inspection by the billing authority of the property and its contents. Given the occupation periods are short, we recommend that the offer to inspect is made at the same time as notifying the rating authority that the property has become occupied.
  2. An agreed list of the contents (of the property), with at least a generic description, should be produced and signed and dated by both parties covering the material times.
  3. The rate payer should not pay incorrect demands which do not account for relief periods.

The important point for claimants is that they may not recover the costs of recovering the overpaid Rates, even if successful.

Ultimately, the parties should co-operate as with any other pre-action protocol and if a rates demand is made which ignores a relief period rightfully due, the ratings authority should be challenged in writing. If the protocol is not followed, then the party not following it may be subject to costs sanctions.

In summary

The judgment makes clear that ‘cyclical occupation’ mitigation schemes are lawful and effective. Importantly it is a useful step towards ending protracted arguments with ratings authorities over what constitutes rateable occupation. Helpfully, for both parties, the PHE decision proposes a protocol to be followed by both parties leaving the magistrates court to impose costs sanctions where the protocol is not followed.

If you receive demands from a rating authority which do not take into account relief periods, this should be disputed with clear legal reasoning. Please contact Simon Freeman or James Dunster for more information and assistance in challenging incorrect demands.


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James Dunster


James is a Chartered Legal Executive in the Property Litigation team specialising in enfranchisement claims, business rates disputes, termination of residential tenancies and commercial landlord and tenant disputes including lease renewals (opposed and unopposed) and enforceability of covenants.
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