Last week's decision by the Companies Court to wind up the Public Safety Charitable Trust has again focused attention on deals between charities and property owners that take advantage of rates reliefs.
The PSCT was one of many charities with arrangements - sometimes including donations - struck with property owners to allow the charities to claim the 80 per cent business rates relief they are entitled to.
Such deals save the owners money, because they are liable for full rates on empty properties.
The PSCT was using more than 2,000 properties on this basis and had installed transmitters to send out public safety messages, claiming that this meant it was using the properties "wholly or mainly" for charitable purposes.
In May, the High Court ruled that the trust was not entitled to rates relief, leaving it with a multi-million pound bill that resulted in the winding-up order and raised questions for other charities thought to have taken tokenistic occupation of properties.
The Local Government Association has said it is aware of charities that have, for example, taken closed shops, covered the windows in posters and claimed occupation. Jenny Wigley, a specialist ratings lawyer from No 5 Chambers in London, says 10 other cases involving charities could come to court.
But has the case thrown any light on exactly how much of a premises must be used by a charity in order to qualify for rates relief? Wigley says the PSCT case makes it clear only that "in order to claim rates relief, you need extensive use that is substantially and in real terms for the public benefit".
Mark Williams (right), a partner at the Sussex law firm Gaby Hardwicke, says that any further detail remains in the hands of the courts. He says it would be useful if the courts adopted a similar rule of thumb to that used in the case of charity shops, where a charity is "wholly or mainly" occupying a shop if it uses 50 per cent of the floor space to sell donated goods, but he says there is no guarantee they will do so.
Williams also says there has been much more scrutiny recently of whether charities are using the whole of a property. "If you're a charity and you're offered the chance to occupy a four-storey office building, but you only need a floor, you'd now need to look at that very carefully," he says.
Meanwhile, another ratings case is awaiting settlement in the courts. A Sheffield charity, the Kenya Aid Programme, appealed to the High Court after it was found by a district judge not to be making sufficient use of two warehouses it used to store furniture. But the High Court ruled that the judge had taken several irrelevant factors into account, such as whether it needed both buildings, and returned the case to the magistrate's court.
"This shows that if a charity doesn't need to occupy all the space, but chooses to do so, that isn't relevant," says Wigley.
Mike Heiser, a finance policy adviser at the LGA, says that he does not expect councils to challenge charities that are doing legitimate work. "The Charity Commission has produced guidance on what you should do," he says. "If you follow that, you will probably be OK."
The commission guidance says charities should take professional advice and "ensure the property is genuinely required and is fit for purpose", but is not specific about what proportion of the space must be used.
It also says the commission has been made aware of more than 700 tenancy agreements involving charitable rates relief and has been examining whether the trustees involved have properly discharged their duties.