Do I need to think about anything in relation to empty rates?

Question:

I am a landlord and my tenant is in administration.  I want to market the premises and agree a surrender of the current lease.  Do I need to think about anything in relation to empty rates?

Answer:

A tenant company in administration remains an occupier, for the purposes of the Local Government Finance Act 1998, and remains liable to pay business rates for as long as the lease is in place. 

If an administrator is using the premises for the purposes of the administration, then business rates should be paid as an expense of the administration.

Once occupation has ceased, then the administrator is entitled to seek relief for empty rates, which would otherwise be charged at 100% of the basic occupied rate, under the Non-Domestic Rating (Unoccupied Property) Regulations 2008. 

The effect of the 2008 Regulations means that the administrator will be exempt from liability for empty rates for as long as the administration continues.

The Regulations also provide a rate free period for the first three months that the premises are unoccupied or six months if it relates to industrial property.  These periods do, however, run concurrently with any exemption period claimed by the administrators.  Therefore, if a landlord takes premises back from a tenant in administration who vacated more than three to six months earlier, then the landlord is immediately liable to pay empty rates.

A well advised landlord should therefore refuse any request by an administrator to agree a surrender until a new tenant has been found.  If a new tenant can be found, then the landlord should tie in the surrender of the lease with the grant of the new lease, to avoid any liability for empty rates.

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