167: Who pays the business rates for ATMs?
The Cardtronics Europe Ltd and others v Sykes case has helped to illustrate how ATM leases are treated for rates purposes. There are approximately 70,000 cash machines in the UK so it is wise to consider how their occupation affects rates due.
Cardtronics has more than 16,000 ATMs located inside small supermarkets and corner shops. The case relates to the rating of a site where an ATM is located at a supermarket, shop or petrol station and is run by a third party rather than the owner of the shop premises where it’s located.
The Valuation Office Agency (VOA) had imposed separate rates assessments on the site of both internal and external ATMs, having concluded they were separate land interests. In most cases, there was no reduction in the rates attributable to the main shop premises and this resulted in higher rates bills, expected to be around £4,000 per ATM.
Cardtronics and other supermarkets disagreed, and argued ATM sites should be assessed together with shop premises as a whole. They appealed against the VOA’s decision and sought a refund of £500 million paid for rates.
The Court of Appeal held that sites for ATMS shouldn’t be assessed separately for business rates. It did recognise that the actual presence of an ATM should be taken into account and recognised where there are fixed ATMs, the sites were sufficiently self-contained to form separate land interests. Despite this, it held supermarkets remained in paramount occupation and there should be no separate assessment.
The VOA have appealed the decision further which will delay refunds due to supermarkets and retail operators, adding further stress to retailers.
Other considerations for ATM leases
Typically businesses hold leases of the premises from which they operate, rather than being the freeholder. An ATM is often operated by a third party with no connection to the store holder. As a result, there are a number of considerations relevant to both leasehold shop owners and their landlord when the store owner is seeking to install an ATM.
- alienation – the storeholder’s lease is likely to prohibit or limit group sharing and/or parting with possession. A storeholder’s lease would most likely contain prohibitions on underletting either in whole or part;
- use – a storeholder’s lease should allow A1 and ancillary uses to cover use of the ATM;
- alterations – a right to install the ATM should be included in a storeholder’s lease and it is likely a landlord’s licence for works outside the demise will be required;
- break right – the freeholder is likely to require lift and shift wording for the ATM in the event of redevelopment. A rolling landlord break right should therefore be expected;
- yielding up – it should be considered who will be responsible for removing the ATM and paying for the cost of doing so; and
- hours of use – the ATM provider will want to ensure the ATM is accessible (which may not be the case out of hours if it is located in a shopping centre).