Empty rates are the breaking point for some in the current market. By eliminating business rate relief on empty properties, companies are being penalised for situations where there is no income. Empty rates are making a bad situation worse.
Kicking the market whilst it’s down
We’re collecting evidence of the detrimental effect empty rates have had on businesses for the British Property Federation’s campaign against empty rates. We’d like to hear how the government’s latest tax has affected business in your area.
- Speculative or regeneration projects not going ahead?
- Changes in demand for property/vacancy rates?
- Rent levels influenced by rising vacancy rather than falling demand?
- More secondary or end-of-life properties being demolished rather than rented at affordable levels?
For advice on how best to minimise the effects of the new legislation on your business, contact one of our specialists by selecting the Rating department under Find a Person.
For more information on reclaiming overpaid business rates, talk to our rate audit and compliance specialists, Accurates.
Iniquitous, unfair, hurried and badly thought through
That was our considered opinion on the changes to commercial rates on empty properties. And we weren't alone – owners, occupiers, developers and council staff all agreed with us. We'd like to thank everyone who sent us their opinion which We included in our detailed response (PDF 178KB), October 2007 to the government's proposal (PDF 183KB) to modernise empty property relief, July 2007.
The enabling legislation had already been passed, but by responding we hoped to ensure the consultation was not just a rubber stamp.
You spoke, the government listened
Your feedback was crucial in producing the presentation and effecting a result. The government's response specifically referred to our document and the questions it raised.
As a result, although the 100% rate charge on empty properties still came into effect on 1 April 2008, the government agreed to:
- Defer introducing anti-avoidance regulations unless/until there is proof of abuse.
- Retain the six-week occupation rule before re-qualifying for a further three or six-month exemption period.
In addition, it agreed to:
- Maintain the exemption from empty rates for listed buildings.
- Introduce a permanent exemption for empty properties owned by companies in administration.
Read the government's summary of consultation replies it received and its response, December 2007. Read our Summary of Consultation Replies and Government Response (PDF 42KB), December 2007.
Pre April 2008 empty rates rules
Under the previous legislation, there was no liability for rates when the whole property had been continuously unoccupied for three months, and 50% liability after that time for offices and retail premises. There were exemptions for qualifying industrial hereditaments (including factories and non-retail warehouses), listed buildings, sites where occupation is prohibited, insolvent companies and buildings with a rateable value below £2,200.
Summary of the changes originally proposed
In July 2007, The Department for Communities and Local Government issued a paper outlining its proposals.
- 100% liability for commercial properties empty for three months or more (six months for industrial and warehouse hereditaments).
- Zero rate for empty properties owned by charities and community amateur sports clubs.
- Power to enable the empty property rate to be reduced from 100% to a minimum of 50%.
- Power to enable the introduction of regulations to tackle rate avoidance tactics by disregarding changes to the state of property or address failure to complete a property, intermittent occupation or bogus tenancies.
- Government considering extending rates to include derelict and vacant previously developed land.
- Government to assess other reliefs and exemptions in business rates (eg agricultural).
A selection of your replies
"No retailer or occupier will leave property vacant – it does not make sense. All the new empty rates proposals will do is make the costs rise for vacant space – any space vacant is vacant for a reason – it cannot be let!"
"From a developer's point of view this will kill speculative development dead in its tracks as we will be unable to afford the risk of empty buildings with their financial holding costs as well as a rates liability. This in turn will lead to a shortage of property available and therefore an increase in rents/prices."
"No owner of property or developer keeps property empty except in very unusual circumstances. Our raison d'etre is to get property producing income or capital receipts ASAP. This is the same for any business, whether tenant or owner occupier."
"Whoever left property vacant deliberately (other than the fabled Harry Hyams at Centre Point)? The Government is deluded."
"The measure simply doesn't understand the structure of the marketplace. Tenants have lease commitments and want to move, to upgrade, to expand, and to take on more people into employment. To add to the cost of releasing vacated space will reduce their ability to do this, as vacated space will often have ongoing lease liabilities, which means additional empty rates will fall to them. It simply is not the norm that a tenant moves out and a new one straight in. There is a void period for re-letting, marketing and fit-out."
"The levying of empty rates on some listed buildings which cannot not be made DDA compliant, and are therefore unlettable, is completely unjust."
"The imposition of empty rates will hamper the economic case for speculative development projects, particularly in weaker periods of the market cycle, thus slowing recovery process. This could damage areas both at the leading edge of high value economic activity (eg City of London) and those in need of regeneration where speculative development can lead to new economic activity. The effect would be to reduce the amount of good quality new space delivered to the market. This could reflect badly on the UK's competitive position and reduce its ability to present itself as a market leader."
Read all your replies in our detailed response (PDF 178KB).