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Huge News About Rates on Empty Commercial Properties Found on the Dark Web

Posted on May 17, 2021. by NTI

You get the feeling that had the case about which you are to read been centred around Kensington Borough Council, or somewhere near to Harrogate or Stratford-Upon-Avon, we would have all heard and been talking about the issue where Property Alliance Group and Hurstwood Properties were being sued over local levies they claimed were owed on empty properties. However, as it all took place in Rossendale and Wigan the NTI newsroom had to access information about it on the dark web.

As it happens the House of Lords decision passed almost everyone by, despite this being a leading case brought by two councils against developers over a business rates avoidance scheme. Our glorious profession loves nothing more than to chat about such things, not least because the Supreme Court's decision has far-reaching implications for the owners of empty high street shops. 

The story goes: two companies had entered into schemes where special purpose vehicle companies took short leases of the properties and became liable for tax. However, no taxes were paid because the corporate vehicles were either dissolved, or put into Liquidation. As everyone in our sector knows, owners of most unoccupied commercial properties start paying business rates after a three-month grace period, but there is an exception where the owner is a company in Liquidation. Smart, eh?

The Supreme Court ruled that it would allow the local authorities’ case to proceed to full trial and said there was an arguable case that the original owners remained liable for the rates. The two developers, presumably gulping deeply, argued the case could never succeed and should be struck out. Fat chance, argued local authority counsel, but made it sound smarter than that, to justify their hourly bill of £900.

If we still have your attention you will almost certainly have twigged that this is a fairly significant case, given how busy we have all been emptying shops of businesses in the past 15 months. These do not qualify for the business rates holiday, even if the departing tenant was a retail or leisure business.

The ruling has implications for dozens of other lawsuits by local authorities. The two councils were chosen as a test case out of 55 similar lawsuits with a value of around £10 million, filed in the Liverpool District Registry of the High Court. Also Wigan and Rossendale are breathtaking in the spring and there is a lovely Airbnb at Appley Bridge on the banks of the river Douglas just outside Wigan where counsel stayed.

Lord Michael Briggs handed down the ruling, for that is what their Lordships do. He said: “The whole purpose of the schemes was to avoid payment of the empty rate, rather than to transfer the responsibility for its payment. Apart from rates avoidance, the schemes had no separate business purpose of any kind.” What will this do for the twin principles of 'possession' and 'occupation? We in the NTI newsroom think it is too early to say. But, 'a lot', seems to be the ready view. 

Property Alliance said it had won a number of legal points. It joined mass rallies of others who are urging the Government to reform the rates system for empty properties, adding: “We are naturally disappointed that the court did not agree with our position. But we remain confident that once the full facts and evidence are placed before the court they will find in our favour.”

We bet they were 'naturally disappointed' by the legal bill that came attached to the ruling, as well ... and we can't say we share their optimism.

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