Empty Property Rates Reform Leads to Demolitions
The recently introduced requirement to pay full business rates on empty commercial properties is already having a startling effect. In some cases property owners are even resorting to demolition of empty buildings to avoid the extra tax burden they would otherwise face under the new legislation, which came into force in April 2008.
Empty industrial properties are now liable for full business rates after six months, whilst vacant office spaces and retail units become liable after just three months. The reform aims to encourage landlords to refurbish properties where necessary so they can re-let or sell their vacant commercial units boosting the supply and in turn reducing rental costs. It has provoked a storm of criticism from the commercial property industry, which believes it may have the opposite effect, discouraging speculative development and damaging flexibility and competitiveness.
Demolition is clearly a last resort. But as one landlord commented, “If we hadn’t had to pay rates on it, we wouldn’t have knocked it down.” If no tenant or purchaser can be found, this is the only way to avoid the increased tax cost. Secondary legislation is under consideration to combat avoidance measures, such as deliberate damage to buildings to render them unusable and remove them from the ratings list. Fears are growing that attractive, non-listed buildings will be demolished purely to avoid tax – a move that would never have been considered before the new legislation took effect. There is concern, too, that newly established businesses will struggle to find their first commercial premises if lower-cost buildings become scarce as a result of demolitions and refurbishments.
The RICS commented long before the reform was introduced that it could lead to instances of deliberate damage as well as higher service charges, increased dilapidation claims and more rating appeals. “This is a repeat of the situation in the 1970s, when an empty rate was introduced in the form of penal rating surcharge. However, it didn’t create new lettings and led to the deliberate vandalising of property to avoid rate liability,” the institution noted.
The emphasis should be on finding tenants for your commercial property to avoid such drastic measures as demolition. NovaLoca is a commercial property online listings service which can market your empty property to fifty thousand of clients at the click of a mouse. . To find out how they could help you fill your commercial property please visit NovaLoca.com or call 01767 313380.
