Who Is Liable For Empty Rates – Landlord Or Tenant?

Image: Ricardo Gomez Angel/ripato/Unsplash
Image: Ricardo Gomez Angel/ripato/Unsplash

Aidan Thomas, Associate Solicitor, and Alex Worthington, Barrister and Associate Director, at Greenhalgh Kerr have successfully recovered Business Rates on behalf of a Local Authority, in a case involving the interaction between rating and insolvency law.

The Dispute

The case concerned unpaid rates for an empty unit within a shopping centre. The property owner denied liability, relying on a lease it had previously granted.  The tenant however claimed that it had served a notice to quit and thereby ended its lease early.  The landlord and the tenant therefore each asserted that the other should be liable.

Finding itself in the middle of the two parties, the Council turned to Greenhalgh Kerr to assist it in determining who should properly be liable.

Prior to the relevant period, the tenant had entered into (and subsequently exited) a Company Voluntary Arrangement.  The lease did not permit the tenant to terminate by serving a notice to quit.  Rather, the tenant asserted that the terms of its CVA allowed it to end its lease early.  In reliance on the terms of the CVA, it had served a notice to quit, and duly vacated the property.

We advised the Council that the lease was validly granted and (if it remained operative) had the effect of making the tenant the owner for the purpose of sections 65(1) and 45 of the Local Government Finance Act 1988 when the property was empty.  However, we advised the Council that it was open to maintain liability with the tenant even after it had vacated, as the notice to quit had not validly terminated the lease.  We further advised that the post-CVA rates remained recoverable.

The Proceedings

The matter proceeded to contested liability order proceedings in the Magistrates’ Court

We assisted the Council in preparing an initial witness statement, evidencing that the Council had complied with its statutory billing obligations.  We also filed a statement of case detailing the basis on which the Council asserted that the notice to quit had not ended the lease.  We cited existing authorities in which the Courts had examined the relationship between CVAs and leases, and noted that:

  • Although a CVA can include terms affecting a lease, this is limited to alteration of the creditor/debtor relationship between the landlord and tenant.
  • A CVA is not capable of altering property rights, namely the relationship of landlord and tenant.
  • A right of termination is a property right.
  • The fact that the landlord had not challenged the CVA did not give the CVA an effect in the law of real property that it was otherwise incapable of having.
  • The lease could not be treated as surrendered by operation of common law, as the landlord had done nothing to affirm the notice to quit, or act inconsistently with the continuation of the lease after the tenant vacated.


In the face of the Council’s evidence and legal arguments, the tenant sought to enter into settlement discussions. 

An initial offer of payment was rejected and we noted the tenant was in breach of the directions, having failed to file any witness statement evidence, such that the Council would ask the Court to determine the matter based on its evidence alone.  An improved offer was swiftly received from the tenant, to make full payment of the rates, plus an agreed sum in respect of the Council’s legal costs.

Our in-depth knowledge of the interaction between rating and insolvency law enabled us to obtain a full recovery of the rates, whilst minimising the costs incurred by the Council and avoiding the necessity of a contested hearing.

Further information

If you would like further information regarding the case, or require assistance with considering the validity of a lease, or representation in any proceedings before the Magistrates’ Court, please do not hesitate to contact Aidan Thomas (Aidan.Thomas@greenhalghkerr.com) or Alex Worthington (Alex.Worthington@greenhalghkerr.com).

Greenhalgh Kerr
Olympic House, Beecham Court,
Smithy Brook Rd,
Wigan WN3 6PR

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+44 (0)333 200 5200

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