The Rating (Empty Properties) Act 2007 came into force on 19 July 2007 and took effect on 1 April 2008. Prior to this, businesses could claim relief on their business rates for empty commercial properties, subject to certain conditions.
Why has rate relief been cut?
The government has argued that these changes were needed in order to encourage unoccupied commercial properties to be let out and to improve competitiveness by reducing business rents.
Is there an environmental element?
Yes. The government hopes that this will have a positive affect on the environment by encouraging redevelopment of brownfield sites and reducing the need for developments on greenfield land.
What does it mean for retailers?
As a result of the Act the 50% business rate relief for a commercial property remaining empty after three months has been abolished. Therefore, 100% of the business rates due will become payable after this period. However, there are provisions to allow this relief (up to a maximum of 50%) to be reintroduced by future regulations.
Does this affect industrial/storage premises?
The unoccupied industrial/ storage property exemption providing 100% relief will only apply for the first six months during which the property is vacant. Thereafter the property will attract no further business rate relief. This could have an impact on retailers with empty outlets and out of town storage facilities.
Are there any exceptions?
The exemptions are very narrow and include only charities and community amateur sports clubs.
What are the practical implications?
It may not always be in a landlord’s best interest to effect a surrender or a forfeiture of a lease without a new tenant in place even with what may appear to be a substantial surrender premium as the business rates on a property that has been empty for some time could surpass the surrender premium. Landlords may therefore find themselves either reducing rents or being flexible as to the tenants they let property to in an effort to fill any empty properties.
Will the relief return?
This issue is the subject of much debate at the moment. The British Property Federation (BPF) is reviewing the abolition of the Business Rates relief. They fear that the abolition has led to decreased regeneration and speculative development as well as resulting in increased occupier tax liabilities. The BPF are asking property owners and tenants to email them (firstname.lastname@example.org) with specific examples of how the abolition has affected them.