Making Sense Of Empty Rates On Commercial Property: A Guide For Property Owners

Empty rates on commercial property, also known as business rates, can be a significant financial burden for property owners Understanding how these rates work, why they exist, and how to potentially reduce them is crucial for those looking to manage their property expenses and maximize profitability.

Empty rates are a tax imposed on non-residential properties that are unoccupied The aim of empty rates is to encourage property owners to keep their buildings occupied and prevent them from leaving properties vacant for extended periods of time By imposing a financial penalty on empty properties, local authorities hope to incentivize property owners to actively seek tenants and keep their properties in use.

While the intention behind empty rates may seem reasonable, property owners often find themselves struggling to cover the costs of these taxes, especially during times when finding tenants is particularly challenging This is particularly true in economic downturns, such as the one many businesses are currently facing as a result of the COVID-19 pandemic.

One of the main challenges property owners face with empty rates is understanding how they are calculated Empty rates are typically based on the rateable value of a property, which is an assessment made by the Valuation Office Agency (VOA) The rateable value is used to determine the amount of business rates a property owner must pay, regardless of whether the property is occupied or vacant.

In England and Wales, empty rates on commercial property are subject to a time-based system The rules for empty rates are as follows:

– Properties that have been empty for less than three months are exempt from paying empty rates.
– Properties that have been empty for three months or more are subject to 100% of the business rates bill.
– Properties that have been empty for more than six months are subject to 150% of the business rates bill.

This means that property owners must pay full business rates on their vacant properties after three months of vacancy, with the rates increasing after six months These rules can result in significant financial strain for property owners, particularly if they are struggling to find tenants or are in the process of refurbishing a property for future use.

To compound the issue, property owners can also face challenges when it comes to appealing their empty rates bills empty rates commercial property. While there are provisions for making appeals, the process can be time-consuming and complex, requiring detailed evidence to support the grounds for appeal This can deter many property owners from challenging their empty rates bills, even if they believe they are unjust.

Despite the challenges that empty rates pose, there are strategies that property owners can employ to potentially reduce their empty rates bills One such strategy is known as “material change of circumstances,” which allows property owners to request a review of their property’s rateable value if there has been a significant change in its circumstances.

For example, if a property has undergone extensive refurbishments that have made it temporarily unusable or if the surrounding area has experienced a decline in property values, property owners may be able to argue for a reduction in their rateable value While this process can be complex and requires extensive evidence, it can be a worthwhile endeavor for property owners looking to reduce their empty rates burden.

Another strategy for reducing empty rates on commercial property is to actively market the property for rent By demonstrating that efforts are being made to find a tenant, property owners may be able to qualify for a temporary exemption from empty rates This exemption is subject to certain conditions, such as providing evidence of marketing efforts and actively seeking tenants.

In conclusion, empty rates on commercial property can be a significant financial burden for property owners, particularly during times of economic uncertainty Understanding how empty rates are calculated, the rules governing them, and potential strategies for reducing them is crucial for property owners looking to manage their expenses and maximize profitability By navigating the complexities of empty rates and exploring avenues for appeal and reduction, property owners can proactively address this financial challenge and ensure the long-term viability of their commercial properties.