Since 1 April this year owners of industrial and warehouse premises must pay full business rates on premises once they have been empty for six months. For owners of offices and retail property the liability comes in after the premises have been empty for only three months. Clearly this could be an enormous expense for a commercial landlord with a number of empty properties. Anecdotally, I have heard in my area that landlords are slashing rents on empty premises just to get them occupied to avoid the rates liability. This is obviously good news for anyone currently looking for commercial premises to rent.
There are a couple of other solutions though for landlords looking to avoid this liability.
One option is to let out the property on a casual basis for at least six weeks. If a property is occupied for a period of six weeks or more, then it can be empty again for the six month or three month period before the landlord is once again liable for the business rates. If a landlord were to let a property out for six weeks every three or six months (depending on the type of property) the liability could be deferred indefinitely.
If a property cannot be occupied because it is in poor condition and cannot be economically repaired, no rates will be payable. Similarly rates will not be payable where occupation is prohibited by law if, for instance, there are issues with asbestos or the property is deemed to be a dangerous structure. A landlord of dilapidated premises may therefore have an incentive to allow them to deteriorate further to avoid the rates liability.
Unfinished buildings in the course of development are exempt from business rates. However, a local authority can serve a completion notice on the developer requiring completion of the development, if the authority considers that the building is within three months of completion. If you are a landlord halfway through development of commercial premises and you do not have a tenant you may be well advised to halt work until a tenant is found. This may give rise to the situation commonly seen on the continent where unfinished properties are commonplace to avoid tax liabilities.
If you require further advice on legitimate strategies to avoid paying business rates on empty property then contact commercial property lawyer, Steven Petty, on 01926 629005.
**For the financial year 2010/11 the relief is being restored for certain properties. Check the latest position here**
Steve Petty, Commercial Property Lawyer
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this blog applies to your particular situation. We offer a free 30-minute telephone advice session to discuss your particular circumstances.