High Court – BFC Development LLP v Comptroller of Property Tax – [2012] SGHC 237

3 February 2013

Property Tax — Refund on unoccupied buildings

The taxpayer owned two tower blocks at Marina Bay Financial Centre and had, prior to the Temporary Occupation Permit (“TOP”) dates of each block, already found parties committed to leasing various units of these tower blocks. Under the lease agreements, the tenants were granted legal possession of the units upon issuance of the TOPs and also given a rent-free period for the units to be fitted out for occupation (“fitting-out period”) before the commencement of the leases.

The units were assessed for property tax which was duly paid. The taxpayer later claimed vacancy refunds for the units for the rent-free fitting-out period of the respective leases. These claims were made pursuant to s 8(1) of the Property Tax Act which provides for a refund of property tax where the property is “unoccupied” for an unbroken period of at least 30 days or a calendar month.

The refund claims were initially allowed, but later withdrawn by the Comptroller explaining that refunds were not due as the units were “occupied” and that the rent-free fitting-out periods did not qualify for refunds as the tenants were already in “possession” of the properties. The taxpayer consequently applied for a mandatory order and a declaration that it was entitled to such refunds over the rent-free period.

The meaning of “unoccupied” in s 8(1) of the Act was at the crux of the dispute and the specific issue to be resolved was whether a property could be said to be “unoccupied” for the purposes of s 8 of the Act where a tenant had commenced work to fit out the property before actually moving in.

The key word “unoccupied” is not defined in the Act and so legislative intent was examined.

Based on the purposive approach, the Judge noted that Parliament’s intention, when reintroducing the refund provisions by way of the Property Tax (Amendment) Ordinance 1963, was clearly to alleviate the financial burden on property owners who have failed to obtain tenants for their properties despite having expended reasonable efforts to let out their properties at a fair rental. The requirement in s 8(4)(b) of the Act that the property owner must establish that he has made “every reasonable effort to obtain a tenant” rests on the premise that no tenant has yet been found by the property owner claiming a refund under s 8. This was clearly absent in the taxpayer’s case where a tenant had already been found and had been given the permission to take possession of the units and commence fitting-out works before moving in. It was also noted that the non-collection of rent (a commercial decision taken willingly by the landlord) was a separate matter from the inability to secure a tenant (and therefore having no rental income) and it was clearly the latter which Parliament was concerned with.

The judge agreed with the respondent’s justification of the meaning of “occupation”, citing Lee Wah Bank Ltd v The Commissioner of Federal Capital of Kuala Lumpur (1962) 28 MLJ 23 which equated “occupation” with “possession” ie that there must be sufficient control over a property for the property to be occupied. He also agreed with the respondent’s submission that “possession” should be the touchstone, such that the taxpayer’s tenants must for all intents and purposes be taken to be occupying the units from the time they take possession at the start of the fitting-out periods. The judge added that the right to occupy is equated with occupation even if the tenants had not factually shifted into the units and the fact that certain restrictions were imposed during the fitting-out periods did not detract from the reality that the tenants were in possession of their units and had the right to occupy (ie move into the units) even though they chose not to do so temporarily, be it for fitting-out the units or other specific reasons.

The taxpayer’s application was accordingly dismissed. In summary, it was held that

• on a purposive reading of the statutory provisions, the units cannot be said to be unoccupied or vacant within the meaning of s 8 of the Act during the fitting-out periods, and
• given that the refund in s 8(1) is “subject to” s 8(4), and s 8(4) states clearly that no refund shall be allowed unless ALL four conditions listed in s 8(4)(a) to (d) are satisfied, even if the units were deemed unoccupied or vacant, the taxpayer could not have fulfilled the requirement in s 8(4)(b), which only becomes relevant where no tenant has been obtained.

The above judgement was delivered on 28 November 2012.