What exactly constitutes ‘occupation’ of a commercial property? The High Court has provided a definitive answer to that question in a ruling which will ease the path to obtaining business rates exemptions in respect of unoccupied premises.
The case concerned a public health body which purchased a large office building to serve as its future national headquarters. On advice, the body moved about 30 crates of documents into the building for two periods of six weeks. Its liability or otherwise to more than £2.5 million in non-domestic rates hinged on whether the property could be viewed as having been occupied during those periods.
The local authority for the area argued that the installation of the crates fell short of actual occupation and merely gave a semblance of occupation. The presence of the crates, the contents of which were alleged to be obsolete and ripe for disposal, was said to be too trifling to establish the body’s intention to occupy the premises.
Ruling on the dispute, the Court noted that, under rating rules, it is possible to reduce non-domestic rates liability for a property by occupying it for a period of six weeks, then leaving it empty for three months in a cyclical pattern. The effect of such arrangements is that the property is subject to rates during the six-week periods of occupation and effectively exempt during the three-month periods of vacancy. The total rates liability for such a property is reduced to about one third of what it would be if the property were left empty for the same period.
Resolving the occupation issue in the body’s favour, the Court noted that it was quite open about its rates mitigation motive in shifting the crates in and out of the property. It did not seek to convey an impression that differed from reality and was not intent on creating merely a semblance of occupation. The minor issue concerning the utility of the crates’ contents was immaterial.
The Court noted that there is no requirement that use of property must be substantial in order to constitute occupation. Minimal, eccentric, even whimsical uses, like the storage of empty pizza boxes, may be sufficient to establish occupation. The storage of the crates was of some value or benefit to the body and served a purpose that went beyond upkeep or development of the property itself.
Only one possible conclusion, the Court ruled, could be drawn from the presence of the crates – that the body was in occupation of the premises during the two six-week periods. In taking the opposite view, the council had erred in law. The council was on that basis ordered to repay to the body £2.5 million in non-domestic rates that it had previously remitted under protest.
The Court observed that, unless a possessor of commercial property misunderstands the law or takes a wrong step, it is in a position to benefit by occupying and vacating the property at times of its choosing. There was nothing surprising or disturbing about that conclusion, which flowed from the established principle that the Court is not an arbiter of morals, but of law.