When it comes to owning commercial property, there are numerous costs that landlords need to consider, one of them being rates payable on empty commercial property. These rates can significantly impact a property owner’s finances, and it is important to understand what they are, how they are calculated, and how they can be minimized.
In simple terms, rates payable on empty commercial property are the taxes that landlords have to pay to the local council when their property is vacant. These rates are based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of how much rent the property could fetch on the open market as of a certain date.
The Local Government Finance Act 1988 stipulates that property owners are exempt from paying rates on empty commercial properties for the first three months after the property becomes vacant. After this initial period, the rates become payable at the full rate, unless a property qualifies for certain exemptions or discounts.
One of the most common exemptions is the six-month exemption for properties with a rateable value of less than £2,900. Properties with a rateable value of between £2,900 and £12,000 are eligible for a 100% exemption for three months, followed by a 10% discount for the remaining six months. Properties with a rateable value of over £12,000 are not eligible for any exemption or discount.
There are also certain circumstances in which property owners may be able to claim relief from paying rates on empty commercial properties. For example, if the property is undergoing major structural repairs or alterations, the owner may be able to apply for temporary relief. Similarly, if the property is unable to be occupied due to circumstances beyond the owner’s control, such as fire damage or environmental contamination, relief may be granted.
It is important for property owners to be aware of the rates payable on empty commercial property, as failing to pay these rates can result in significant financial penalties. Local councils have the authority to take legal action against landlords who do not pay their rates, including seizing and selling the property to recover the debt.
To minimize the impact of rates payable on empty commercial property, landlords can take certain steps to reduce their liability. One option is to actively market the property for rent or sale, as properties that are actively being marketed are eligible for a 50% discount on rates. Landlords can also consider securing short-term leases or licenses to occupy the property, which can make the property eligible for a rates exemption.
Another option is to consider applying for small business rates relief if the property is occupied by a small business. This relief provides a significant reduction in rates for businesses with a rateable value of less than £15,000. Landlords can also explore other reliefs and exemptions that may be available in their specific circumstances.
In conclusion, rates payable on empty commercial property are an unavoidable cost for landlords, but there are ways to minimize their impact. By understanding how rates are calculated, what exemptions and reliefs are available, and how to actively manage the property, landlords can effectively manage their finances and avoid unnecessary penalties. It is important for property owners to stay informed and proactive when it comes to rates payable on empty commercial property to ensure the financial health of their investments.