Owning a commercial property can be a lucrative investment, providing a steady stream of rental income and potential for capital appreciation. However, there are many costs associated with owning commercial property, one of which is the rates payable on empty commercial property. Understanding these rates is crucial for property owners to effectively manage their expenses and maximize their returns.
rates payable on empty commercial property, also known as empty property rates or non-domestic rates, are taxes levied by local authorities on commercial properties that are empty or unoccupied. These rates are separate from any other tax or utility bills that the property owner may be responsible for, and they can add a significant financial burden to property owners who are unable to find tenants for their vacant spaces.
The purpose of empty property rates is twofold. Firstly, they serve as a deterrent to property owners who may be inclined to leave their properties empty for extended periods of time, as vacant properties can have a negative impact on local communities and economies. By imposing rates on empty properties, local authorities hope to encourage property owners to actively seek tenants or buyers for their unused spaces.
Secondly, empty property rates help to offset the cost of providing local services and infrastructure to commercial properties, even when they are not being actively used. While vacant properties may not generate income for the property owner, they still require police and fire protection, waste removal, and other essential services that are funded by local taxes. Empty property rates help to ensure that property owners contribute their fair share to the cost of maintaining these services.
The rates payable on empty commercial property are calculated based on the rateable value of the property, which is an estimate of the property’s open market rental value as determined by the Valuation Office Agency (VOA). The rateable value is used to calculate the business rates payable on the property when it is occupied, and it is also used to determine the empty property rates when the property is vacant.
The current legislation surrounding empty property rates in the UK states that commercial properties are eligible for a 100% rates relief for the first three months that they are empty. After this initial three-month period, most properties are subject to full rates. However, there are some exceptions to this rule, such as industrial properties, listed buildings, and properties with a rateable value below a certain threshold, which may be eligible for extended relief or complete exemption from empty property rates.
Property owners who are struggling to find tenants for their commercial properties may be concerned about the financial impact of empty property rates. However, there are some strategies that they can employ to mitigate these costs and reduce the burden on their finances. For example, property owners can actively market their properties to attract new tenants, reduce the asking rent to make the property more attractive to potential tenants, or consider offering incentives such as rent-free periods or fit-out contributions to sweeten the deal for prospective tenants.
In some cases, property owners may also consider converting their vacant commercial properties into alternative uses, such as residential apartments, coworking spaces, or storage units, which may be in higher demand in their local market. By repurposing their properties in this way, property owners can generate income from their spaces and avoid paying empty property rates altogether.
Overall, rates payable on empty commercial property are an unavoidable expense for property owners, but they are an essential part of the overall cost of owning commercial property. By understanding how these rates are calculated and exploring strategies to minimize their impact, property owners can effectively manage their expenses and maximize their returns on their investments.