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Empty Properties Charity Refused Business Rates Relief

warehouseIn a test case decision which draws a clear distinction between the ‘occupation’ and ‘use’ of commercial property, the High Court has ruled that a charity which leased empty buildings nationwide at peppercorn rents, installing broadband boxes within them to transmit public safety messages to the public, was not entitled to relief from non-domestic rates.

The Public Safety Charitable Trust (PSCT) often paid only £1 in rent annually in respect of offices and warehouses measuring thousands of square metres. The charity was in return paid substantial ‘reverse premiums’ by landlords so that both could jointly benefit from the 80% reduction in non-domestic rates granted to charities by section 43(6) of the Local Government Finance Act 1988 (LGFA).

However, the whole basis of PSCT’s novel operating method was undermined when the court ruled that the installation of small domestic broadband boxes in often very large commercial premises was insufficient to meet the requirement of the act that premises must be used ‘wholly or mainly for charitable purposes’ to qualify for relief from non-domestic rates.

The decision leaves the charity open to very substantial retrospective rates demands and was a significant victory for local authorities who viewed PSCT’s methods as a serious drain on the public purse. It also represented a blow to landlords for whom PSCT’s approach represented a convenient means of minimising rates liabilities on buildings left empty by the recession whilst benefitting a charity.

Magistrates had reached conflicting views on the correct interpretation of section 43(6). Resolving that issue in favour of local authorities, the court noted that PSCT’s broadband boxes – which are used to provide free internet access and to transmit messages to passers-by – only take up tiny proportions of the floor space of buildings in which they are installed.

The court noted the distinction between the concepts of ‘occupation’ within the LGFA, in particular in section 43(1), and ‘use’ within section 43(6). Rates were payable by those who are ‘in occupation of all or part of’ a hereditament and section 43(1) made it clear that persons can be liable for rates if they do not occupy the whole of a hereditament and leave part of it empty.

The court acknowledged that a building may fairly be described as being wholly or mainly used as an office even if it is not constantly crammed with desks and people working. However, it rejected PSCT’s plea that the installation and maintenance of the charity’s broadband transmitters should be viewed as ‘the entire or only relevant use’ of premises that were otherwise entirely empty.