Business Rates – Empty Property Burden

Over 90% of surveyors believe that charges placed on shops and offices are ‘significantly detrimental’ to the
recovery of the nation’s town centers, according to a new survey from RICS.

Over half also believe that charges are even a contributory factor in property owners demolishing their premises, the survey added.

When commercial premises, such as a shop or an office, become vacant the owner is not required to pay business rates for three months. For industrials and warehouses the rates holiday is six months. However, after this period, these charges – known as Empty Property Rates (EPR) – are applicable at the full rate, leaving many with a tax
bill which they have no means of funding.
Over two thirds (68%) of respondents claimed that commercial property floor space is currently vacant for periods of over six months, meaning that the problem of unmanageable taxes is widespread at a time when businesses are most stretched.

Business rates collected from ratepayers are initially passed to central government and then redistributed back to local authorities as part of the Local Government Finance Settlement. These funds then contribute towards financing local services. With the situation continuing to impact so significantly on towns across Englandand Wales, the knock
on effect is also being felt in capital values. 75% of respondents believe that the rental value of retail premises will decrease as a direct result of EPR.

RICS would like to see to see changes made in the government’s forthcoming Autumn Statement by way of an extended exemption period for commercial property owners. This would mean that should a retail property owner lose their tenant, no charges would be applicable for six, rather than three, months. This would be extended to twelve months for owners of harder to let property, such as offices and industrial units.

The RICS chief economist, has been quoted as saying “The charges faced by property owners are quite simply crippling the high street and preventing businesses of all types from achieving financial stability. It is clear that in this difficult economic climate, businesses need all the help they can get. We would like to see the government take the
initiative in the forthcoming Autumn Statement and offer property owners a longer exemption period. This would allow commercial landlords some much needed breathing space and contribute towards getting the business sector moving again.”