When it comes to owning and managing commercial property, there are various costs that landlords must be aware of in order to maintain their investment. One significant expense that often catches property owners off guard is the rates payable on empty commercial property. These rates, also known as business rates, can add up quickly if not properly managed. In this article, we will explore what rates are payable on empty commercial property, how they are calculated, and provide some tips on how landlords can mitigate these costs.
First and foremost, it is important to understand what business rates are and why they are imposed on commercial properties. Business rates are a form of tax that is levied on most non-domestic properties, including shops, offices, and warehouses. The rates are used to fund local services, such as roads, schools, and fire departments. The amount of business rates payable is determined by the rateable value of the property, which is assessed by the Valuation Office Agency (VOA) in England, the Scottish Assessors in Scotland, and the Land and Property Services in Northern Ireland.
When a commercial property becomes empty, the responsibility for paying the business rates falls on the landlord rather than the tenant. This can come as a surprise to some landlords who may not have factored in these costs when budgeting for their property expenses. The rates payable on empty commercial property are generally set at 100% of the normal business rates bill for the first three months that the property is vacant. After three months, the rates payable increase to 150% of the normal bill. This is meant to incentivize landlords to find tenants for their empty properties quickly.
Calculating the exact amount of rates payable on an empty commercial property can be a complex process due to the various factors that come into play. The rateable value of the property, the location, and the type of property all impact the final amount. In addition, there are certain exemptions and reliefs that landlords may be eligible for that can help reduce the amount of rates payable. For example, properties with a rateable value of less than £12,000 are eligible for small business rate relief, which can significantly reduce the rates payable.
So, what can landlords do to mitigate the costs of rates payable on empty commercial property? One option is to actively market the property in order to find a new tenant as quickly as possible. The faster a new tenant is found, the shorter the period of time that the property remains empty and therefore the lower the rates payable. Landlords can also work with a property management company that specializes in finding tenants for commercial properties, which can help expedite the leasing process.
Another strategy for reducing rates payable on empty commercial property is to consider applying for an exemption or relief that the property may be eligible for. There are several types of reliefs available, including charitable relief for properties used for charitable purposes, and rural rate relief for properties in rural areas. Landlords should consult with their local council or a property tax specialist to determine what options are available to them.
In conclusion, rates payable on empty commercial property are an unavoidable cost for landlords that must be carefully managed in order to protect their investment. By understanding how these rates are calculated, exploring potential exemptions and reliefs, and actively marketing the property to find a new tenant, landlords can mitigate the financial impact of empty properties. It is important for landlords to stay informed about their obligations regarding business rates and to seek professional advice when needed in order to ensure compliance and minimize costs.