When you own a commercial property, whether it be retail, office space, or industrial, one of the many expenses you will need to account for is rates payable on the property. Rates are a type of property tax that must be paid to the local council, and they can vary significantly depending on the location and value of the property.
One issue that many commercial property owners face is what to do when their property is sitting empty. In some cases, the rates payable on empty commercial property can be a significant financial burden. In this article, we will discuss the implications of rates payable on empty commercial property and offer some guidance on how to manage this expense.
Rates payable on commercial property are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the open market rental value of the property at a specific date, taking into account factors such as size, location, and condition. The council then applies a multiplier, known as the uniform business rate (UBR), to calculate the rates payable.
When a commercial property is occupied and generating rental income, the rates payable are usually the responsibility of the tenant. However, when the property is empty, the owner is typically liable for paying the rates. This can be a significant financial burden for property owners, especially if the property remains vacant for an extended period of time.
In some cases, the rates payable on empty commercial property can be reduced or even waived. The government has introduced various relief schemes to help alleviate the financial burden on property owners. For example, empty property relief can be granted for a limited period of time, typically three or six months, depending on the property type. This relief allows property owners to claim a full exemption from rates for the specified period.
Another option for reducing rates payable on empty commercial property is through transitional relief. This scheme provides a gradual increase in rates over a period of several years, giving property owners some time to adjust to the new rateable value. Transitional relief is designed to prevent sharp increases in rates following a revaluation of the property.
Property owners may also be able to claim hardship relief if they are experiencing financial difficulties and struggling to pay the rates on their empty property. Hardship relief is typically granted on a case-by-case basis and is subject to approval by the local council. Property owners will need to provide evidence of their financial situation and demonstrate that they are actively seeking tenants for the property.
One strategy that property owners can use to mitigate the financial impact of rates payable on empty commercial property is to consider leasing the property on a short-term basis. This can help generate some rental income to offset the rates payable during the period of vacancy. Short-term leases are often more flexible and can be a good option for property owners who are looking to lease their property while they search for a long-term tenant.
Alternatively, property owners may consider renting out the property on a temporary basis for events or pop-up shops. This can help generate income and bring attention to the property, potentially attracting long-term tenants. However, property owners should be aware that renting out the property in this way may have implications for planning permission and licensing requirements.
In conclusion, rates payable on empty commercial property can be a significant financial burden for property owners. However, there are various relief schemes and strategies that can help reduce the impact of this expense. Property owners should explore their options and work with their local council to find a solution that works for them. By taking proactive steps and seeking professional advice, property owners can effectively manage the rates payable on their empty commercial property.