Judgment Could Have Significant Implication For Empty Property Owners

By David Shirt

A High Court judgment in a case relating to the use of a business rates mitigation scheme could have far-reaching implications for property owners of empty premises, says a leading Manchester-based real estate specialist at Irwin Mitchell.

The decision by Mr Justice Sales on 14 May 2013 in the case involving the Public Safety Charitable Trust (PSCT) and Milton Keynes Council, concerns a widely used scheme promoted by the PSCT.

The scheme involves the PSCT taking a lease of commercial premises and installing transmitters to provide free Wi-Fi access and also to broadcast crime prevention and public safety messages via Bluetooth technology. The size of the transmitter installed by the PSCT being similar in size to a domestic broadband box.

The PSCT, as a registered charity, would then apply for the mandatory 80% rates relief afforded to charitable bodies in accordance with the Local Government Finance Act 1988. In return the PSCT would receive a fee from the property owner which would be less than the costs of the business rates that the property owner would have been liable for but for the lease therefore creating a saving to the property owner.

The potential saving to property owners of such schemes was estimated by the Taxpayers’ Alliance to be in the region of £1.1 billion during 2012/2013.

In his decision, Mr Justice Sales found that it was “reasonable to infer that Parliament intended that the substantial mandatory exemption from rates...should depend upon the charity actually making extensive use of the premises for charitable purposes...rather than leaving them mainly unused”.

As a result Mr Justice Sales found that the PSCT’s use of the premises was not “wholly or mainly” for charitable purposes and therefore that the PSCT was not entitled to the mandatory rates relief given to charitable bodies.

Christopher Perrin, a Manchester-based real estate specialist at Irwin Mitchell in Manchester, said: “The decision follows another recent case involving the Kenya Aid Programme and Sheffield City Council and focussed on the legal test of whether the premises were “wholly or mainly used for charitable purposes” by the PSCT.

“The decision handed down by Mr Justice Sales will have far-reaching implications. It will no doubt please the Government, but be of great concern to property owners faced with large bills for premises which are not occupied.”