Member Article

The High Court has held that a tenant's short-term storage of documents using just 0.2% of a warehouse's floor space enabled the owner to successfully claim a period of rates relief once the property became vacant again.

Under current legislation empty retail property enjoys 100% rates relief for a three month continuous period. Industrial and warehouse property enjoys the same relief for a six month continuous period.

If a property is re-occupied for six weeks or more - and that occupation amounts to 'rateable occupation' - then the owner can claim further rates relief for the qualifying period once the property becomes vacant again.

In Makro Properties Ltd v Nuneaton and Bedworth Borough Council [2012] a warehouse was owned by Makro Properties Limited (MPL). A group company, Makro Self Service Wholesalers Limited (MSSWL), vacated and cleared the property of its cash and carry business before its lease ended. Five months later MPL permitted MSSWL to store documentation in the warehouse.

The arrangement was designed to provide evidence of actual occupation for a six week period to enable MPL to take advantage of the subsequent six month period of rates relief. The documents were stored in pallets which took up only 0.2% of the floor space of the premises.

In the initial case brought by the council, the District Judge did not accept that rateable occupation had been shown and held that MPL was liable to pay empty rates once the initial six month period expired. MPL appealed.

The appeal was allowed and the decision turned on whether or not

- there has been actual occupational pssessions
- the occupation had been beneficial
- the beneficial occupation was enjoyed by MSSWL not MPL - i.e. establishing that there had been a letting that could give rise to a further period of relief

First, the court held that when considering whether there had been the necessary occupational possession, use of the premises and intention must be considered together. If there is clear evidence or inference of an intention to occupy then this, taken together with use - no matter how slight that use might be - can be sufficient to amount to occupation.

In this instance, the fact that MSSWL intended to occupy the premises in order to incur a rates liability was itself an intention to occupy. The 'use' of the premises was to store documents which had to be kept for legal reasons. This use could not be said to be insignificant, even though the actual floor space involved was small.

Secondly, with regard to whether or not the occupation of the premises was beneficial, the court held that the storage of documents which MSSWL were legally required to retain was of practical benefit.

Thirdly, the court found that it was MSSWL who enjoyed the beneficial occupation, not MPL. The court had to take account of the degree of control exercised by MPL as owner.

It decided that MPL did not exercise any control over what sort of occupation took place in what part of the warehouse, nor did MPL interfere with MSSWL's enjoyment of the warehouse to store the documentation. MPL's only concern was that there should be some occupation sufficient for rating purposes for six weeks.

The court held that MSSWL's occupation amounted to rateable occupation. Therefore, on vacating the warehouse MPL could claim another six month period of rates relief.

In the current economic climate this is a welcome decision for landlords looking for ways to maximise empty rates relief.

 

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