Who Pays Business Rates: Tenant or Landlord?

A business rates bill arrives, the lease is full of legal wording, and the obvious question is: who pays business rates – tenant or landlord? For most occupied commercial properties in England and Wales, the occupier is liable. But that answer is only the starting point. Your lease, the way the premises are used and whether the property is vacant can all change who receives the bill and who ultimately carries the cost.

Getting this right matters. Business rates are a substantial fixed overhead for shops, offices, warehouses, factories, pubs and professional premises. If you are paying them, you also need to be sure the Rateable Value behind the bill is fair. There is no sense accepting an inflated charge simply because the bill has your business name on it.

Who pays business rates: tenant or landlord?

The local council generally bills the person or company in rateable occupation of a commercial property. In straightforward terms, that is usually the tenant running their business from the premises. If you lease a shop and trade from it, or occupy an office under a commercial lease, you will normally be responsible for the business rates as well as the rent and service charge.

However, the legal liability for rates and the financial arrangement in a lease are not always identical. A lease may say that the landlord pays rates and recovers the cost through an all-inclusive rent. This is more common in serviced offices, managed workspaces, short-term lets and some smaller commercial arrangements. It may feel like the landlord is paying, but the cost could still be built into the rent you pay each month.

The key point is that private wording between landlord and tenant does not necessarily decide who the council pursues. The council considers who is in rateable occupation. A well-drafted lease should make clear who must pay, how any rates contribution is calculated and what happens if the building or unit becomes empty.

When a tenant is normally liable

A tenant is usually liable where they have exclusive possession of a clearly defined commercial unit and are actively using it for business purposes. This includes a retailer occupying a high street unit, a dental practice in its own premises, or a manufacturer using a factory under a lease.

The tenant’s name should be shown on the rates account, but do not assume the bill is correct just because it has arrived. Check the property description, the dates of liability and the Rateable Value. A previous occupier, a split or merged unit, or a change in use can all create errors worth challenging.

When a landlord may be liable

A landlord will commonly be liable during a vacant period, once a tenant has properly vacated and the lease no longer leaves them in occupation. Empty property rates can be a nasty surprise for property owners. Many commercial properties receive only a short exemption period before full business rates become payable, although the precise rules and exemptions vary by property type and circumstances.

Landlords can also be liable for common areas or parts of a building they retain and control. In a multi-let office block, for example, individual tenants may pay rates on their suites while the landlord is responsible for other rateable areas or vacant units.

If a landlord grants an all-inclusive licence rather than a conventional lease, they may remain the rateable occupier. This is particularly relevant in shared workspaces. The arrangement must be examined carefully because labels alone do not settle liability. What matters is who has practical control and beneficial occupation of the space.

Your lease can shift the cost, not always the liability

Before signing a commercial lease, look beyond the headline rent. The business rates clause should state whether the tenant pays the rates directly, reimburses the landlord, or receives an inclusive rent. It should also deal with reassessments, backdated adjustments and refunds.

This is crucial where a Rateable Value is later reduced. If you have paid the rates directly, a council refund will generally come to you. Where the landlord has collected rates through the rent or service charge, the lease wording may determine how any rebate is handled. Ask the question before agreeing terms, not after a successful appeal has created a dispute.

Existing tenants should also check for break clauses, rent review provisions and dilapidations obligations. If you leave a property but retain possession while repairs are carried out, or if keys and control have not been properly handed back, there can be uncertainty over the date your rates liability ends. Keep written evidence of surrender, vacant possession and any agreement with the landlord.

What happens in shared premises?

Shared occupation is where assumptions can become expensive. A business may occupy one room in a larger building, share reception facilities, or trade from a unit that has been physically divided. The Valuation Office Agency, known as the VOA, may assess the whole building, separate suites or a combination of spaces depending on the facts.

For tenants, this can mean receiving a bill for a property description that does not reflect what they actually occupy. For landlords, it can mean a vacant area remains on the rating list even though the rest of the building is let. Neither situation should be ignored.

A change to internal layout, access, repairs, shared facilities or the extent of a tenancy can affect the correct assessment. Businesses operating from older offices, converted retail space, industrial estates and mixed-use sites should take particular care. Small discrepancies in area or valuation assumptions can have a meaningful impact on annual costs.

Paying the bill does not mean the bill is right

Whether you are the tenant or landlord, business rates are calculated using the property’s Rateable Value and the relevant multiplier, subject to any reliefs that apply. The council collects the charge, but the VOA is responsible for the valuation. That distinction matters when you believe a bill is too high.

A Rateable Value can be wrong for many reasons. The VOA’s records may overstate the floor area, use an inappropriate rental tone, overlook poor access or layout, or fail to reflect factors affecting the property’s use and value. Local market evidence is often central to whether an assessment stands up.

Do not wait for a rent review or renewal to look at it. If your rates are a pressure on cash flow, investigate the valuation now. A successful challenge may reduce future liabilities and, where the circumstances and effective dates allow, lead to a rebate for historic overpayments. Outcomes depend on the facts, the evidence and the applicable rules, so no credible adviser should promise a saving before reviewing the case.

A practical check for tenants and landlords

Start by comparing the council bill with the property you actually occupy or control. Check the liable party, address, description, effective date, Rateable Value and any relief shown. Then read the business rates clause in the lease alongside invoices for rent and service charges.

If anything does not add up, gather the lease, plans, photographs, previous bills and details of changes to the property or surrounding area. This gives a rating specialist the evidence needed to assess whether the valuation and liability position deserve closer attention.

For busy occupiers, this is exactly where expert support earns its keep. Your Local Business Rates Saver can carry out a free initial eligibility review before qualified RICS or IRRV surveyors investigate the valuation evidence and manage the appeal process. You stay focused on running the business while specialists handle the technical work.

Do not let uncertainty over a lease clause, an empty unit or a confusing rates bill turn into another cost you simply absorb. Check who is liable, check what you are paying for, and give your Rateable Value the scrutiny it deserves.