Hope for commercial landlords with empty properties
Richard Cleminson is the professional services director at Kinleigh Folkard & Hayward
If you have landlord clients they will almost certainly have spoken about the empty property rate relief that was scrapped in April 2008 heaping a huge financial burden on landlords and occupiers.
This was a double blow constituting a loss of rental income and a business rates charge.
The timing couldn’t have been worse as it coincided with the credit crunch that has seen record numbers of empty commercial properties, particularly on high streets.
Many have consequently seen this as a tax on business failure.
As a result of the scrapping of the relief, empty shops and offices are now only exempt from business rates for three months and industrial property for six months, after which times their owners, or those who have leased the premises from them, must pay full business rates.
Whether this measure has been good for government is unclear.
Certainly it has negatively impacted regeneration and redevelopment schemes.
There is clearly less incentive for investors to build new properties that may stand empty and be liable for rates.
Equally the speed to demolish buildings and thereby remove cheap space for smaller businesses has pushed up rents in some parts when the economy is still fragile.
Buy-to-let landlords have been hit too. Individuals who have a small portfolio of buildings as a pension for their retirement have found that they are now paying out money rather than receiving it from tenants.
Unsurprisingly strategies for delaying with the burden have been numerous.
Some landlords have secured charitable organisations tenants on no rent and the cover the rates themselves as charities only pay 20% of the rates.
However there is some partial light at the end of the tunnel.
Last month, occupation of only a small portion of an otherwise-empty industrial property for six weeks following the first six-month rate-free period has been held to be sufficient to entitle the ratepayer to a second six-month rate-free period.
This recent High Court decision confirms that, where there is genuine occupation which benefits the occupier, empty rates mitigation schemes are likely to be successful.