In an important decision for owners of empty properties, the High Court has ruled that storage of goods amounts to beneficial occupation for the purposes of mitigating rates liability.
Business rates are a substantial burden on businesses and property owners have long been implementing schemes to 'mitigate' rates by triggering 'empty rates relief'. Business rates are not payable in respect of vacant properties for a period of three months after they become empty. For certain industrial properties the exemption period is extended to six months.
The scheme implemented by Principled Offsite Logistics Limited, is to take leases from owners of vacant commercial properties. Principled stores goods in the properties for at least six weeks, which triggers 'empty rates relief' at the end of the lease. The landlords make rates savings and pass some of this back to Principled. Trafford Council had refused to recognise Principled's occupation and grant rates relief, so Principled launched a judicial review.
In order for occupation to be rateable, there must be 'beneficial occupation'. There has been growing confusion over what amounts to 'beneficial occupation'. This is an important decision because the judge recognised that there was a lack of clarity arising from previous court decisions and that a clear decision needed to be made.
The judge was invited to review the well-known decision in Makro Properties Ltd v Nuneaton & Bedworth BC  (a case where the High Court found that storage of paperwork by an occupier using 0.2% of the floor space in a 140,000 square foot warehouse amounted to 'rateable occupation' entitling the owner to empty rates relief) and a number of other previous authorities relating to rates mitigation.
The judge interpreted the words 'occupy' and 'occupation' by reference to their ordinary English meaning, and found that the beneficial occupation test could be satisfied where the benefit to the occupier was the occupation itself and that there is no requirement for some other business purpose to the occupation, stating:
"I cannot see any good reason why, if ethics and morality are excluded from the discussion, the thing of value to the possessor should not be the occupation itself ... "
It is clear that an intention to occupy for reward is sufficient, notwithstanding that the benefit may be to avoid the payment of a tax. If this is wrong, it is for Parliament to legislate otherwise.