Harris Lamb Blog – 23rd Dec
23rd December, 2010.
Empty Rates – The Clock is Ticking…
By Nick Aylett, Agency Surveyor.
Based in Harris Lamb’s Worcester office, Nick deals with a plethora of commercial property clients in the region. In this, his debut Harris Lamb Blog, Nick takes time to discuss the impact of the recent announcement that the Business Rates relief for empty properties below £18,000 RV is to be scrapped as of 1st April 2011.
Working predominantly within the Worcestershire area, much of the commercial property that I deal with on a day to day basis is in the smaller size category in line with majority of the businesses that locate themselves in the area.
As with all landlords of commercial property, the past two years have been challenging for landlords of these smaller premises, although we have experienced an upturn in enquiries for commercial buildings of less than 5,000 sq ft. This upturn in smaller enquiries possibly due to an increase of new, start up companies as a result of the recession.
However, from April 2011 times will prove to be more challenging for Landlords of these smaller commercial premises, with (thanks to the Government) a change in the exemption rules for empty property rates, which will see increased time pressure to dispose of vacant buildings with a Rateable Value of less than £18,000.
Currently, owners of any commercial property with a Rateable Value of less than £18,000 do not have to pay the “empty rates” levy, which effectively taxes buildings empty for more than 3 months. However, the Government has recently revealed that the empty rates exemption will be cut to just £2,600 from 1st April 2011.
From an Agents perspective, this change of legislation will undoubtedly transfer to increased pressure to dispose of the smaller buildings as quickly as possible, to reduce the landlord’s liability. Ideally, making the rates liability zero if the building can be disposed of within 3 months for an office / retail premises, or within 6 months for a commercial premises! From a tenants perspective however, this could translate into more competitive terms, to avoid landlords paying this “tax”, again as we’ve been experiencing with larger commercial premises over the past two years.
Another sector that this change in legislation will impact is Commercial Developers. Any Commercial Developer will now have to factor in the void rates liability before considering a small unit speculative development. We have seen the effect this has had on larger schemes already, there has effectively been a freeze on all speculatively built large unit schemes since the introduction of void rating legislation in 2007.
Undoubtedly, this legislation will not do anything to help restore confidence in the commercial property market. Rather than revoke the void rates relief on smaller property, it needs to be extended across the board. Until the government wakes up to this, the clock continues to tick for commercial landlords of all sizes.
Nick Aylett can be contacted on 01905 22 666 or email firstname.lastname@example.org.
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