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Empty Property Rates

14 April 2009

The Commercial Property sector has, amongst others, been a victim of the current economic downturn. Plummeting rent levels caused by a drop in demand for property, combined with the effects of empty property rates are pushing commercial businesses over the edge.

When the Rating (Empty Property) Act 2007 came into force in April 2008, the Government changed the entitlement to relief from rates for empty non-domestic property.  As a result, empty property relief was reduced from 50% to 0% and exemption from rates for empty industrial property was limited to 6 months. 

The Government hoped that the changes would provide a strong incentive for Landlords to reduce rent levels on their empty commercial properties and bring them back into use.  Instead, the empty property rates have resulted in a slowdown of regeneration schemes and the demolition of buildings, as firms struggle to keep up with rate payments.  Around 15m square feet of buildings have been demolished in order to avoid paying the tax.

Opposition to the changes has been gathering pace, with the launch of the British Property Federation's campaign website http://www.emptyrates.com/ to give the public a voice over the damage the tax is doing to the property market, regeneration and the wider economy.  The Confederation of British Industry has also asked the Government to consider increasing relief to 50% for struggling business and leading trade bodies in the manufacturing industry have called for empty rates to be scrapped.  

In the Chancellor's Pre-Budget Report in December 2008, it was announced that from April 2009, empty commercial properties with a rateable value below £15,000.00 will be exempt from business rates between April 2009 and 2010.  It has been estimated that this exemption should cover 70% of empty properties, although in reality, it has made little difference to the industry.   

Ashton Morton Slack's Commercial Property Partner, Richard Larking commented:

"In these difficult economic times, it is hard enough running a business, without having the additional expense of empty property taxes.  The Government changes have not so much helped the troubled property sector, as hindered it.  I agree that the Government should review their decision to scrap the relief and a change in this policy, along with other fiscal measures will assist in turning around the property market."