Avoiding business rates

Relief from business rates on empty property previously applied to unlet commercial property that had a rating value of under £18,000. From April 2011 the level at which empty property business rates apply has reduced to £2,600.

This follows changes in 2008 when the periods during which landlords of empty properties in England and Wales were exempt from business rates were reduced. Today they only have three months' exemption for non-industrial property and six months' exemption for industrial property.

So if your property has a rateable value of £2,600 or higher and has already been empty for 3 months (commercial properties) or 6 months (industrial properties) a 100 per cent empty rate charge will be due from 1st April 2011.

This has prompted landlords to look for ways to reduce their empty property business rates liabilities by various means and schemes. Some of the methods being used by landlords are listed below.

More attractive terms

Landlords can try, of course, to make their empty properties more appealing to tenants by offering attractive terms. For example, terms could include long rent-free periods, help with fit-out costs, fixed rent reviews for predictability (rather than open-market rent reviews), shorter periods in break clauses and monthly (rather than quarterly) rent payments to help tenant cash flow, and extending planning permissions to cover new uses.

Charity tenants

If a landlord can find a charity to be tenant, or a community amateur sports club, there is an exemption from business rates for the part of a property that they occupy, provided they use the property mainly for charitable, or relevant sporting, purposes.

Demolition

Another option, and one that the British Property Federation fears, is that owners of empty property may choose to demolish them to avoid full business rates - they predict a return to 'bombsite Britain'.

Short-term tenants

Another is for the landlord to let the property so it is occupied for at least six weeks by a tenant. The tenant is liable to pay full business rates but, when the (short) lease expires and the property is left empty, time starts to run again on a new 'empty property' exemption period. Again, it seems that this scheme can be repeated again and again. Practically, of course, the difficulty is in finding a tenant prepared to occupy a property for a short period only.