The Non-Domestic Rating (Unoccupied Property) (England) Regulations exempt properties whose owners are “prohibited by law” from occupying them, or allowing them to be occupied, from liability for business rates. The issue that arose in Pall Mall Investments (London) Ltd v Gloucester City Council [2014] EWHC 2247 (Admin); [2014] PLSCS 205 was whether a property owner can avoid liability for business rates on the ground that its premises had become so dilapidated and were in such bad condition that it would be unlawful for anyone to occupy them.
The buildings in question had been used as offices. They were constructed in the 1960s or 1970s and had fallen into disuse. They had been vandalised, and one of the buildings had become damp and mouldy, but the structural fabric remained intact. The company sought exemption from business rates on the ground that it would be in breach of its responsibilities under the Health and Safety Work etc Act 1974 if it were to occupy, or allow the buildings to be occupied, for office use.
The case turned on the interpretation of the term “prohibited by law”. The company relied on the fact that it would be committing an offence under section 33 of the 1974 Act if it were to fail to discharge its duties, or to contravene health and safety regulations. It argued that occupation whose practical consequence is the commission of a criminal offence is, by implication, occupation prohibited by law, and claimed that health and safety legislation had the effect of prohibiting occupation of the premises.
The court asked itself whether anything less than a statutory or common law prohibition against occupation would suffice to exempt premises from business rates – and decided that the starkness of the term “prohibited by law” indicated that the phrase must be interpreted strictly. Consequently, the court ruled that it was not enough for a landowner to establish that it might be prosecuted under health and safety legislation if it were to occupy premises or to allow them to be occupied for a particular purpose.
A landowner must show that the law prohibits occupation, either because the law states that it must not occupy its premises in certain specified circumstances or because the necessary effect of a prohibition or enforcement notice is to prohibit occupation. The health and safety legislation does not prohibit occupation. Consequently, the risk of contravening the 1974 Act will not, of itself, suffice to exempt a landowner from business rates.
The court went further. It ruled that the legislation does not prevent a landowner from putting property back into repair, or from requiring its tenant to do so, and contrasted the position of a landowner who occupies premises to repair them with that of a landowner who uses them as a workplace. Occupying premises to repair them would not of itself constitute a criminal offence, but using them as a workplace, or disobeying a 1974 Act notice whose effect was to prohibit occupation, would be a different matter.
Allyson Colby is a property law consultant
