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Court judgment proves validity of business rate mitigation scheme for empty facilities

30 October 2019

After winning a case brought by the government relating to the National Non-Domestic Rates for vacant commercial and industrial facilities, solicitors claim this will bring certainty to commercial property owners.

Exemptions from liability for rates on empty facilities were withdrawn in 2008, leaving landlords and property owners having to pay business rates on non-income producing assets.

It has been proposed that this increased the number of empty facilities that have been demolished, with owners finding it more cost effective to rebuild, rather than renovate an existing property.

The exemption withdrawal also resulted in the creation of mitigation schemes, one of which was used by MB Vacant Property Solutions and the reason for the recent court action.

However, after the judge found in favour of the company and refused to allow the government to appeal on the basis that it had no reasonable prospect of success, the claim of the provision of certainty for commercial property owners and landlords was made.

Gorvins Solicitors, acting on behalf of MB Vacant Property Solutions, said the scheme in question involves the grant of a lease on unoccupied property to a special purpose vehicle (SPV) company, which then enters into a Members Voluntary Liquidation.

Although the SPV is liable for rates, it is exempt from payment due to being in liquidation, with the landlord entitled to cancel the lease on payment of a premium to the liquidator.

The aim of the exercise is to allow landlords to reinvest in the facility and return it to commercial use, at which point rates are then paid.

Concluding the recent case at the High Court in Manchester, the judge found that the scheme used by MB Vacant Property Solutions was transparent and legally valid.

It was further stated that it was not the responsibility of the court to decide whether the scheme was in the public interest or not.

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