Law Firm Urges Landlords To Support Petition

Irwin Mitchell’s Real Estate team is urging developers and landlords to throw their weight behind a new petition to get the government to scrap its empty rates hike.

Experts at the law firm say the rates are hurting development and stalling new business growth. Now the British Property Federation (BPF) has instigated a new petition calling for the Coalition Government’s decision to lower the empty rates relief threshold to be reversed.

Empty rates relief was severely curtailed in early 2008. Until then industrial property landlords paid no business rates on empty buildings, while others, mainly offices and shops, had three months of no rates and 50 per cent relief thereafter.  After the review, industrial property owners pay no rates for a period of six months and thereafter pay 100% rates.  In relation to shops and offices, no rates are payable for a period of three months and thereafter 100% rates are payable.

As a concession to the industry, the Government allowed for “targeted relief” for any empty property with a rateable value below £18,000. However, from April this year the Government has lowered this threshold to just £2,600 rateable value. The BPF assesses that this will cost businesses an additional £400m a year.

Thomas Hall, an Associate Solicitor in the Real Estate team, said: “Being required to pay full business rates on empty premises is a serious problem for developers and landlords, exacerbating the issues that many are already facing in the current economic climate. With money tight for many companies, being forced to expend further money on tax on their empty buildings means that this money cannot be used for other business purposes such as research and development, staff hires, or to fund growth.”

He said some developers are taking even more drastic action to reduce their empty rates liabilities. “There is clear evidence of empty buildings, particularly those nearing the end of their useful life, being torn down early rather than offered to the market on short leases. The reduction in the targeted relief will inevitably mean more developers and landlords are forced to consider whether to demolish empty buildings as they may not be able to afford to pay empty rates.”

The demolition of older buildings removes them from the possible lettings market. Historically, older buildings have played an important role in the lettings market with Landlords more willing to let their older buildings on lower rents and more flexible terms – ideal for small or start-up enterprises. Removing this kind of Property from the market means smaller enterprises have much less choice of premises and may find the cost of any available premises too steep to survive.

The imposition of rates on empty buildings does not just result in the possible demolition of existing buildings, but it also means Developers are being forced to think twice about starting new speculative schemes because of the uncertainty of potentially having to pay empty rates if they are unable to let the building.

Hall added "We urge businesses to support the BPF’s petition and believe our clients would generally welcome a move back to the pre-2008 position on business rates as a catalyst to development of a large number of new schemes and as a fillip to wider economic growth as a result.”