Business Rates – A Landlord’s Liability?
section 65(1) of the Local Government Finance Act 1988 the “person
entitled to possession of the property” is liable to pay business rates,
is entitled to possession when a tenant company goes into liquidation
and leaves the property, but leaves behind a guarantor entitled to
possess the property?
In a recent High Court case a tenant company went into liquidation, the liquidator subsequently disclaimed the lease and the property was left unoccupied. The local authority demanded that the landlord pay the business rates for the period after the lease was disclaimed, which the landlord refused on the grounds that it did not physically occupy the property, and furthermore that the tenant’s guarantor was now entitled to possession of the property.
The High Court ruled in favour of the local authority, holding that once the liquidator had disclaimed the lease the lease ceased to exist, so the landlord was entitled to immediate possession of the property. The High Court also rejected the landlord’s argument that the guarantor was directly liable for the rates as the guarantor had not exercised its right to possess the property.
Although this is unwelcome news for landlords faced with bills for unpaid rates, such landlords may be able to recover this liability from any guarantors depending on the terms of any guarantee agreement. The same issue does not arise on an administration as administrators cannot disclaim leases and are also exempt from business rates if they are not in occupation.