Empty Property Rates Relief - a recent court ruling

At the moment, vacant commercial property is exempt from paying rates for a period of 3 months in respect of offices and shops and 6 months for industrial properties.   Thereafter a rates payer has to pay the full business rates bill for that property.  

If it is apparent that the property could be vacant for some time, Landlords can however mitigate this liability by re-occupying the property for a minium of 6 weeks, after which the property is vacated again, then a further 3 or 6 months rates void will be triggered again.   Such short term lettings will be monitored closely by local authorities to ensure that a 'scam tenancy' is not being created. 

Local authorities will have to be advised by the property owner that the building is to be occupied and be given dates of occupation and the date that the property is vacated.   This is importannt as a local authority may wish to inspect the property is establish that it is actually being occupied.

A recent court case between Nuneaton and Bedworth Council and Makro Self-Service Wholesalers Ltd determined a High Court ruling that the storage of documents taking up only 0.2% of a 140,000 sqft warehouse for a minium of 6 weeks was sufficient to trigger a further 6 month period of empty business rates.  In this case it was shown that Makro had to store the documents in question and therefore there was a bonefide reason for the warehouse being used for this purpose.

There are a number of other opportunities that are available to business rate payers to mitigate their liability to pay empty business rates:

Listed Buildings - are exempt from empty business rates.  Owners may wish to consider seeking to get the property listed, but there will be other implications for the property owner following the listing.

Charities - only pay 20% of business rates whilst in occupation and are now emempt from empty rates completely.  Landlords should therefore consider both short and longer term lettings to charities.  A landlord may even consider paying the 20% rates liability to the charity to assist in a short term letting.  This might also be tax deductable for the landlord.

Insolvent tenants - Companies in administration are exempt from business rates so a landlord should consider carefullly as to whether to take back a property from an administrator (unless forced to do so) until the landlord is ready depending upon how quickly the property is expected to be re-let.

Unoccupiable properties - A building that is incapable of occupation is exempt from business rates.  In order to achieve this a landlord will have to undertake certain destructive works to the premises, such as the removal of WC's, removal of electrical systems or the complete demolition of the property.   This would be most relevant to owners of obsolete buildings, or buildings intended to be either demolished or redeveloped/refurbished.

This articile is given as guidance and an overview on empty business rates and is not substitute for detailed professional advice.  No responsibility can be accepted for the consequences of any action taken or refrained from as a result of this article.  Business rate payers should seek professional advice before taking action to avoid the payment of empty rates.