When it comes to owning commercial property, there are many factors that can affect the profitability and success of the investment. One of these factors is the rates that owners must pay on empty commercial property. These rates, also known as business rates, can have a significant impact on the financial health of a property owner, especially if the property sits vacant for an extended period of time.
Business rates are a tax on non-residential properties in the United Kingdom, similar to property taxes in other countries. These rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the annual rental value of the property if it were rented on the open market.
For commercial properties that are empty, the rates can be a significant burden for property owners. In the past, property owners were given a 100% exemption from paying business rates on empty properties for the first three months. However, this exemption was reduced to 50% in 2008, and then abolished altogether in 2017. This means that property owners now have to pay the full amount of business rates on their empty properties, regardless of how long the property remains vacant.
The reason for this change in policy was to incentivize property owners to actively market and occupy their empty properties. By imposing business rates on empty properties, the government hoped to discourage property owners from leaving their properties vacant for extended periods of time, as this can have a negative impact on the local economy and community.
However, critics of this policy argue that it unfairly penalizes property owners who may be struggling to find tenants for their properties due to economic conditions or other factors beyond their control. In some cases, property owners may be forced to lower their rental prices to attract tenants, which can further impact their ability to cover the costs of business rates on the property.
In addition to the financial burden of paying business rates on empty commercial properties, property owners also have to contend with other costs associated with maintaining an empty property. These costs can include security measures to prevent vandalism or theft, insurance premiums, and general maintenance to ensure that the property remains in good condition while it is unoccupied.
To help alleviate some of the financial strain on property owners, there are a few options available for reducing the business rates on empty commercial properties. One option is to apply for a temporary exemption if the property is undergoing renovation or repair work. Property owners can also apply for hardship relief if they can demonstrate that paying the full amount of business rates would cause them undue financial hardship.
Another option for reducing business rates on empty commercial properties is to apply for discretionary rate relief from the local council. Councils have the authority to grant rate relief on a case-by-case basis, based on factors such as the economic impact of the property being empty and the efforts made by the property owner to market and occupy the property.
Ultimately, the best way for property owners to avoid the financial burden of paying business rates on empty commercial properties is to actively market and occupy their properties as quickly as possible. This may involve lowering rental prices, offering incentives to potential tenants, or making improvements to the property to make it more attractive to renters.
In conclusion, rates on empty commercial property can be a significant financial burden for property owners. While the government’s decision to abolish the exemption for empty properties was intended to incentivize property owners to actively market and occupy their properties, it has also placed additional strain on owners who may be struggling to find tenants. By exploring options for reducing business rates and taking proactive steps to market and occupy their properties, property owners can mitigate the financial impact of empty commercial properties.