When it comes to owning commercial property, one of the expenses that owners must consider is the rates payable on empty commercial property. These rates can often be a significant cost for property owners, especially if their property remains vacant for an extended period of time. In this article, we will delve into what these rates are, how they are calculated, and what owners can do to minimize their impact.
In many countries, local governments levy business rates on commercial properties to fund local services such as street cleaning, lighting, and rubbish collection. These rates are based on the rateable value of the property, which is an estimate of the annual rental value of the property at a given date. The rateable value is determined by an independent valuation officer and is usually revalued every few years to reflect changes in the property market.
When a commercial property is empty, the owner is still liable to pay business rates, albeit at a reduced rate. In the UK, for example, empty commercial properties are exempt from business rates for the first three months after becoming vacant. After this initial period, owners are required to pay 100% of the rates for the property. This can be a considerable burden for property owners, especially if their property remains vacant for an extended period of time.
To alleviate this financial strain, some owners may be able to apply for exemptions or reliefs on their business rates. In the UK, for example, owners of certain types of empty properties may be eligible for exemptions, such as buildings with a rateable value of less than £2,900, listed buildings, or properties that are in need of repair or undergoing structural changes. Owners may also be able to apply for temporary reliefs, such as the 100% relief available for certain newly built properties or properties that are being refurbished.
Property owners can also take steps to reduce their business rates liability on empty commercial properties. For example, owners can consider redeveloping or repurposing their property to make it more attractive to potential tenants. By making improvements to the property, owners may be able to increase its rateable value, which can in turn reduce the amount of business rates payable on the property.
Owners can also consider renting out their property on a temporary basis to generate income and reduce their business rates liability. While this may not be a long-term solution, it can help to offset some of the costs of owning an empty commercial property. Owners may also want to consider negotiating with their local authority to come to a mutually beneficial arrangement regarding their business rates liability, such as agreeing to pay the rates in installments or deferring payment until the property is let.
In some cases, owners may be able to claim hardship relief on their business rates if they are experiencing financial difficulties. Local authorities have the discretion to grant hardship relief to property owners who can demonstrate that paying the full business rates would cause them undue financial hardship. Property owners should contact their local authority to discuss their individual circumstances and find out if they are eligible for hardship relief.
Overall, rates payable on empty commercial property can be a significant financial burden for property owners. However, there are steps that owners can take to minimize their impact, such as applying for exemptions or reliefs, making improvements to the property, renting out the property on a temporary basis, or negotiating with their local authority for a more manageable payment plan. By being proactive and exploring all available options, property owners can lessen the financial strain of owning an empty commercial property and work towards finding a long-term solution that is beneficial for both themselves and their local community.