Avoiding the void rates

16th October 2009

Businesses across the region are being urged to seek professional advice regarding void rates, as unoccupied business premises can no longer enjoy the empty rate benefits they were once entitled to.

Leading Midlands law firm Higgs & Sons says that many people may not know that unoccupied industrial premises now get a six month exemption and then have to pay 100 per cent of the rates, whilst commercial premises, including retail and office, get a three month exemption and then have to pay the full rates.

Property litigation specialist Nyree Applegarth says there are various schemes and devices in place which can assist landlords in these difficult times. 

She said: "Options such as a short term letting for a minimum of a six week period, as long as it is genuine, will allow the owner to claim a further period of relief if the property becomes vacant again.  Another choice is the owner occupying the premises themselves, for example for storage purposes, again for at least six weeks.  On vacation of the property a new period of empty relief would be triggered."

Charities and companies in administration are exempt from the rates.  Whilst charities are in occupation they only have to pay 20 per cent rates, therefore if there is no other tenant available, it is worth considering a charity, even rent free, to avoid empty rate liability. 

There are companies on the Internet that can arrange for a landlord to make a charitable contribution equivalent to 20% rate bill, incurred by the charity which can then be set off against tax. 

Nyree added: "Landlords should think carefully before taking a property back from an insolvent tenant as it may be preferable to keep a lease in existence to avoid the rates.  Total demolition would also terminate any rate liability, however 'constructive vandalism' may not.  Using a state of disrepair to support an appeal could be beneficial as to the rateable value of the property.

"Developers may also want to consider deferring completion until a suitable tenant has been found or the occupation of the property is legally prohibited, in which case there would be no rate liability.  It is worth contacting a Health & Safety Consultant to inspect the property and support the fact that occupation would be illegal.

"On a final note there has been a large increase in the number of owners challenging rateable values.  Some have even removed services so as to render the premises unfit for specific purposes, for example offices."

To find out more about minimising or avoiding rate liability, Higgs & Sons suggests businesses always seek professional advice first, before putting any ideas in place.


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