Success for Jenny Wigley in High Court rating win for Gloucester City Council: No Rates Exemption for Property in Disrepair

Wed, 16 Jul 2014

The High Court has ruled that an owner of empty property is not entitled to a “prohibited by law” exemption from unoccupied property rates sought on the basis that occupation would inevitably result in breaches of Health and Safety legislation.  This case is the first time for more than twenty years that the “prohibited by law” exemption has been considered by the higher Courts and provides useful analysis of the decisions in Westminster City Council v. Regent Lion Properties Ltd [1990] RA 121, CA and Tower Hamlets LBC v. St Katharine-by-the Tower Ltd [1982] RA 261.

Pall Mall (London) Ltd had applied to Gloucester City Council (represented by Jenny Wigley) for an exemption from unoccupied property rates on the basis that two of their buildings were in severe disrepair, arguing that if occupied in their present state they would be in breach of duties under the Health and Safety at Work Act 1974 and related Regulations.  There was evidence from a surveyor that the buildings lacked standard facilities, were in a poor state of repair due, in part, to vandalism and that occupation of the buildings as offices would be contrary to health and safety legislation. 

Pall Mall’s argument was that such a situation fell under the “prohibited by law” exemption under regulation 4(c) of the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008, namely that an owner is not liable for unoccupied rates on a property if he is “prohibited by law” from occupying it or allowing it to be occupied.

If successful, the decision could have led to many more property owners relying on the poor condition of their property as the basis of a claim for an exemption from empty property rates, and could have likely led to a significant loss of revenue by local authorities.

Pall Mall’s application was refused by the Council who then brought enforcement proceedings in the Magistrates’ Court for unpaid rates amounting to more than £350,000.  The Council’s case was upheld by a District Judge and a liability order was made against Pall Mall for the unpaid rates.

Lord Justice Pitchford and Mrs Justice Nicola Davies, sitting as a Divisional Court, dismissed Pall Mall’s appeal against the District Judge’s decision.  The Court accepted the Council’s argument that the exemption is narrow and requires either a clear prohibition against occupation by a statutory provision or a prohibition notice that expressly or by necessary implication prohibits occupation.

Lord Justice Pitchford commented:

“It seems to me, however, that Parliament, when granting the exemption in regulation 4(c) and its predecessors, will not have intended that owners should establish an exemption merely by inactivity resulting in the dilapidation of the building, except in cases of necessity. Regulation 4(a) provides the owner with exemption from unoccupied rates for a period of 3 months and regulation 4(b) with an exemption for 6 months. It seems to me highly improbable that Parliament intended that the building owner should be exempted from unoccupied rates altogether in consequence its own failure to carry out necessary maintenance and repair unless expressly or by necessary implication (as in Tower Hamlets and Regent Lion Properties Ltd) occupation was prohibited by law.

In my judgment, it is not enough for the owner to establish that if he occupies the property or allows it to be occupied for a particular purpose he will render himself liable to prosecution under the health and safety legislation. At no time has the law prevented him from entering the premises in order to restore them. He must show that the law prohibits occupation, either because, as in Tower Hamlets, the law says he must not occupy in the circumstances as they currently prevail, or, as in Regent Lion Properties Ltd, that the necessary effect of a prohibition or enforcement notice is to prohibit him from occupation. The health and safety legislation does not prohibit occupation and, in my judgment, the risk of breach of the legislation if the premises were, without more, occupied does not suffice to exempt the owner.”

This decision will be of assistance to rating authorities who are suffering the economic consequences of the difficulties in collecting unoccupied rates.  Owners of properties in a severe state of repair will find it increasingly hard to avoid liability for rates unless they are able to secure an alteration in the rating list from the valuation officer, either by reduction in rateable value due to the economic costs of repair or by removal of the entry in the list altogether on the basis that the property is not capable of beneficial occupation.

The decision in Pall Mall Investments (London) Limited v. Gloucester City Council [2014] EWHC 2247 (Admin) Div can be viewed here.  

Please click here to view Jenny Wigley's CV.

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