Empty rates have long been a headache for property owners, especially in the commercial sector. Known officially as Non-Domestic Rates, these charges are levied on empty commercial properties in the UK, and understanding how they work is crucial for those in the real estate industry. In this article, we will delve into the complexities of empty rates commercial property, discussing what they are, how they are calculated, and what owners can do to mitigate their impact.
What Are empty rates commercial property?
Empty rates apply to commercial properties that are not being used or occupied. These rates are charged by local authorities in the UK as a way to discourage property owners from leaving their premises vacant. The reasoning behind this is that empty properties can have a negative impact on the local community and economy, as well as being potential targets for vandalism and squatting.
Empty rates typically kick in after a property has been empty for a specified period, which varies depending on the type of property. For example, industrial properties are subject to empty rates after three months of vacancy, while offices and retail spaces face charges after just six weeks. These rates can be a significant financial burden for property owners, especially in cases where the property remains empty for an extended period.
How Are Empty Rates Calculated?
The calculation of empty rates commercial property is based on the rateable value of the property, which is determined by the UK Valuation Office Agency. The rateable value is essentially an estimate of the property’s open market rental value, as of a specific date. The amount of empty rates charged is usually a percentage of the rateable value, with different rates applying depending on the length of time the property has been vacant.
Owners of commercial properties are required to inform the local council when their property becomes vacant, and the council will then calculate the empty rates based on the rateable value. The rates are payable on a quarterly basis, and failure to pay can result in hefty penalties and legal action. Furthermore, the property may be subject to being taken over by the local authority if the empty rates are not paid.
Mitigating the Impact of Empty Rates
Given the financial burden that empty rates can impose on property owners, it is essential to explore ways to mitigate their impact. One strategy is to apply for exemptions or relief schemes that may be available. For example, some properties may qualify for a three-month exemption from empty rates, while others may be eligible for a 100% relief for a specified period.
Additionally, property owners can explore ways to temporarily occupy their premises, even if just to a minimal extent, in order to reset the clock on the vacant period. This could involve renting out parts of the property for short-term use, such as for pop-up shops or events. By doing so, owners may be able to avoid or reduce the empty rates payable on the property.
Another option to consider is appealing the rateable value of the property with the Valuation Office Agency. If owners believe that the rateable value is inaccurate or unfair, they have the right to challenge it through a formal appeals process. This could potentially lead to a reduction in the rateable value and, consequently, a decrease in the empty rates payable.
Conclusion
Empty rates commercial property can be a significant financial burden for property owners, particularly in cases where properties remain vacant for extended periods. Understanding how these rates work, how they are calculated, and what steps can be taken to mitigate their impact is crucial for those in the real estate industry. By exploring exemptions, temporary occupation, and appeals processes, owners can navigate the complexities of empty rates and protect their bottom line.