Empty Rates - Sting in the Tail

08/09/2008

The recently introduced Empty Premises Tax has provoked widespread condemnation throughout the property industry and this mantle is now being taken up by a number of government ministers and backbench MPs including Dennis Skinner. Organisations representing businesses are also lobbying hard to have changes made.

“The introduction of this legislation, whereby owners of commercial property now have to pay full business rates after a relatively short period of time when a property is vacant as opposed to the previous arrangements where landlords of many properties paid either reduced or no rates, could not have come at a worst time” says Mark Bunting, director of property consultants Aitchison Raffety. “It coincided with the downturn in the economy and the prospects of tenants going out of business and vacating property is very real.”

The Government has suggested that the legislation will prevent landlords from leaving properties empty unnecessarily but this suggestion seems to be based on very little factual evidence according to Aitchison Raffety who are certainly not aware of any landlords who would willingly leave properties empty and most are usually very keen to get premises re-let.

“This would appear to be another example of a tax on the soft target of the property industry or perhaps seen as a tax on fat cat landlords”, says Bunting. “In reality, most landlords are either private individuals who own properties through private pension funds and are struggling to meet repayments anyway in the event of vacancy or alternatively large pension funds that the public rely upon to pay them after retirement.

“More worryingly, there will be numerous significant negative affects of this legislation. Last time this was introduced in the 1970’s, numerous properties were rendered unusable by such destructive actions as removal of the roof in order to avoid rates. We are already starting to see properties demolished before redevelopment is necessary and this removes a stock of cheap flexible accommodation which is often popular with fledgling businesses. Of more concern is that this will add a significant additional risk and cost to redevelopment, particularly in less buoyant areas and therefore essential redevelopments in depressed areas will be even less likely to happen.”

In reality, there are limited options in the event of a landlord being faced with empty rates as destructive action is rarely welcome and can be very expensive to carry out and certainly reverse. A rates appeal may be worth considering. Another approach may be to arrange a short term letting where possible whilst still seeking a long term tenant. Following the short term letting a three or six month rate holiday will normally be enjoyed whilst the property remains vacant.

“This new legislation appears focused on short term financial gain for the Government at the expense of long term damage to the property industry and we encourage businesses, local chambers of commerce and other organisations to continue to lobby for change”, concludes Bunting.

For advice on all commercial property matters contact Aitchison Raffety on the web at www.argroup.co.uk