In the recent case of Makro Properties Limited v Nuneaton & Bedworth Borough Council [2012] EWHC 2250 (Admin), the High Court held that empty rates mitigation schemes are lawful. The Court found that the storage of paperwork by an occupier in just 0.2% of the floor space in a 140,000 square foot warehouse was sufficient to amount to “rateable occupation” so as to entitle the owner to empty rates relief upon vacation by the occupier.


On 1 April 2008 The Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008/386 (“the Regulations”) came into force. The Regulations provide that full rates must be paid on an empty property after a brief period of exemption has passed (three months for offices or retail units and six months for industrial units). However, where a period of “rateable occupation” of at least six weeks has taken place after the expiry of the exemption period this will trigger a new six month rate-free period. Numerous rates mitigation schemes are on offer to landowners to take advantage of this provision.


Makro Properties Limited (“Makro”) had been the tenant of an industrial property for the purposes of a cash and carry business until 1 June 2009 when the property was cleared and vacated. On 31 December 2009 Makro surrendered its lease. Makro, however, agreed with its former landlord to store pallets of paperwork (which it was bound by law to keep) in the property between 25 November 2009 and 12 January 2010. Between 12 January 2010 and 23 July 2010 the Premises were empty. On 23 July 2010 some 40 pallets of Makro’s paperwork were delivered to the Premises and stored there.

The landlord sought to argue that the storage of paperwork amounted to rateable occupation which triggered an exemption from rates in accordance with the Regulations. The District Judge sitting at Rugby and Leamington Magistrates’ Court decided that this was not the case as:

(i) the use of such a small part of the building was insufficient to qualify for rates relief; and

(ii) the purpose of the use was of no commercial benefit to the parties other than the avoidance of liability for rates.

The landlord appealed to the High Court.

The Decision

His Honour Judge Jarman QC in the High Court disagreed with the first instance Judge, concluding that Makro’s use of 0.2% of the floor space did amount to rateable occupation. This was on the basis of the following four essential characteristics:

(i) there must be actual occupation;

(ii) the occupation must be exclusive for the particular purpose of the occupier (this is a question of fact which will depend on the level of control the occupier has over the property in order to use if for a particular purpose);

(iii) the occupation must be of some benefit or value to the occupier; and

(iv) the occupation must not be too transient a period of time

The Court concluded that:

  • The storage of 16 pallets of documents which Makro were required by law to store could not be said to be “trifling” and, therefore, there was actual occupation by Makro

  • The occupation was of value to Makro because Makro was bound by law to store the documentation somewhere;

  • The fact that the outcome meant that a rates mitigation scheme thereby succeeded was irrelevant. The Judge stated that it had been recognised for some time that ratepayers can organise their affairs to avoid paying rates and that if the outcome was unacceptable it was for the legislature to determine whether reform of the law was needed.

What next?

The decision will give landlords the benefit of knowing that they can legitimately take part in rates mitigation schemes as long as they can show that the occupation is genuinely for the benefit of the ratepayer. The Judge was swayed by the fact that the storage of the documentation by Makro was required by law.

The decision comes hot on the heels of the Government’s announcement that it will review the legislation. Julian Sturdy MP, a vocal opponent of the current empty rates legislation, has been tasked by Government with forming a working group to propose changes.

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