The Court of Appeal’s recent ruling to overturn Principled Offsite Logistics (POLL) v Trafford Council effectively ending the widely used "box shifting" empty rates mitigation scheme has sent shockwaves through the commercial property sector.
By ruling that occupying vacant buildings for no purpose other than to trigger a fresh period of Empty Property Relief (EPR) does not constitute statutory occupation, the court has closed an approach estimated to have saved landlords hundreds of millions of pounds. Predictably, the decision has immediate consequences for property owners, asset managers, and scheme providers alike.
The Immediate Fallout: Closing the Door on Mitigation
Empty rates have long been an unmitigated burden on property owners. When a tenant departs, a landlord is hit with a double blow: the loss of rental income and an immediate tax liability after an initial three-month exemption (or six months for industrial assets) which in many cases has been “used” by the outgoing tenant.
For years, schemes like POLL’s provided a legal mechanism to reset the clock. By granting a short lease and placing boxes in a unit for a prescribed period, landlords could legally claim a fresh exemption cycle. Yesterday’s Court of Appeal decision effectively strips that tool away.
Since the ruling, there has been immense noise across the market. Landlords and advisors are scrambling to figure out what comes next, evaluating alternative mitigation strategies, and assessing exposure. The focus has swiftly shifted to how property owners can avoid crippling liabilities on empty space moving forward.
Why Are Landlords Forced to Mitigate?
While the legal battle focused on statutory definitions of "occupation," the widespread obsession over what happens next misses the fundamental issue.
The real question we should be asking isn't how landlords can mitigate empty rates - it is why they feel forced to do so in the first place.
Business rates on empty properties are fundamentally punitive, onerous, and have been for far too long:
Unrealistic Exemption Windows:
The standard three-month relief period is drastically out of touch with modern leasing timelines. In today's market, finding a suitable tenant, negotiating lease terms, securing planning, or completing fit-outs takes significantly longer than 90 days and in many cases as we readjust to changing occupational landscapes, many years.
Taxing Non-Income Producing Assets:
Empty property rates penalise owners for market conditions outside their control. Taxing an asset at 100% of its occupied rate when it is generating zero revenue disincentivises investment and places unnecessary financial strain on real estate businesses.
A System Driven by Avoidance:
When a tax regime becomes so punishing that an entire cottage industry emerges simply to help taxpayers survive it, the problem lies with the policy, not the taxpayers.
Where Do We Go From Here?
The end of box shifting removes one of the market's most prominent mitigation avenues, leaving landlords with fewer choices and higher holding costs for vacant assets.
While the court noted that other forms of mitigation with genuine commercial or practical purpose (such as short-term storage of genuine value) remain distinct, the legal line has shifted significantly. Landlords must now carefully review their vacant holdings and mitigation arrangements with specialist advisors to ensure compliance in light of the Rossendale and POLL precedents….there is also the prospect of appeal which will not be resolved quickly causing many months if not years of on-going uncertainty for all parties.
Ultimately, closing legal loopholes without addressing the underlying driver only papers over the cracks. Until central government commits to meaningful reform of Empty Property Relief - aligning tax policy with the reality of commercial leasing - empty rates will remain a massive constraint on the UK property market.
