Strategies to Avoid Business Rates on Empty Properties
The Strain of Business Rates on Empty Properties
In our view, the need to pay business rates on most vacant commercial properties can exacerbate financial problems for many UK businesses. In most cases, office and retail spaces are only entitled to a maximum of three months of business rates relief on becoming empty. From then, full rates are payable. Local Government argues it uses them as an active incentive to keep properties occupied, but their punitive nature can also discourage risk-taking and hinder economic growth and urban renewal. Businesses, already contending with market uncertainties, find the additional weight of business rates on empty spaces an unwelcome challenge. As a result, how to avoid business rates on empty properties legally and responsibly is an important question for many.
Who pays Business Rates? The Landlord or Tenant?
Business rates are typically payable by the person or company named on any lease agreement, tenancy contract or licence document. It is important to acknowledge individual tenancy agreements might vary but according to law, it is the party deemed ‘responsible’ for the property who has to ultimately settle the bill. This is true even if they are not trading from, or actively occupying, a building directly themselves.
Importantly, this applies only if a property is deemed occupied. Local Authorities will deem a property occupied if there is a tenancy agreement in place even if there is no commercial activity underway or goods and equipment present. If you are a tenant, you will need to provide evidence that you have left the building and your lease agreement has ended to stop being billed.
Liability transfers to the owner of the property once properties are deemed to be vacant or empty and lacking a tenancy agreement. As a result, commercial property owners and landlords are forced to consider this additional Business Rate liability alongside any loss of rent when calculating the costs of vacant periods.
Commercial Property Rates: Implication for Property Owners
Once office and retail space is empty without a tenant, the owner or landlord typically has a three-month window when business rates are not payable. This is extended to six months for industrial spaces. Once this exemption period is over, however, full rates become their responsibility. This is an incentive on the part of Local Government to encourage prompt reletting and re-occupancy and reduce the likelihood of areas and neighbourhoods falling into disrepair.
Empty Business Rates Relief refers to steps landlords can take to mitigate the financial burden of periods when their premises are not earning rental income. Designed to ease the strain on commercial spaces, this relief provides a temporary respite while the search for new tenants is underway. Rules vary from local authority to local authority, but we have highlighted some of the major exemptions and mitigations below.
Business Rates Mitigations and Exemptions
If your property has a rateable value below the level set by your local authority, you will not be asked to pay business rates. There are also specific types of property that are exempt. Agricultural land and structures, for example, enjoy a complete exemption. Providing they are correctly registered with their local authorities, religious buildings and halls, are free of business rate liabilities too. Properties deemed to be used for the welfare of disabled residents have also been granted exemptions.
Other possible beneficiaries of waivers include some listed building owners, owners of properties vacant due to local authority or court action, businesses in administration or being wound up and the estates of deceased persons. It is important to note that rules vary around the country so it is imperative to get local advice if you are unsure if you are liable or not.
Special Empty Rates Relief Cases: Charities and Community Groups
Key to ASTOP’s service is the fact that properties are also typically exempt from Business Rates if they are used solely by charities or registered community groups. The exemption is a UK Government policy designed to support organisations contributing to the public good. When a charity, community group or good cause occupies commercial properties, owners will be eligible for relief from business rates during tenancy periods even if they are short-term and temporary in nature. This exemption recognises the unique circumstances of charitable and community-focused organisations and acknowledges their important role in supporting societal well-being.
In short, no business rates are payable, by either party, if a landlord allows a charity or other registered good cause to use an empty property. The relief serves as a financial benefit for community groups, allowing them to redirect resources away from premises towards their missions. It also encourages adaptive use of commercial spaces by landlords who would otherwise be faced with the risk of deterioration associated with leaving property empty.
While the spirit of the exemption is welcome, organisations can find navigating the eligibility criteria complex. Striking a balance between encouraging community engagement and maintaining fiscal responsibility remains a constant consideration for Local Government too. However, specialists such as the ASTOP team are well placed to provide advice to both landlords and good causes.
Collaborative Solutions: Vacant Property Guardianship
Business Rate relief is not the only benefit a landlord can enjoy by partnering with a charity or good cause. A tenancy, even on a short-term basis, means the property is occupied rather than empty. This means a significant reduction in problems associated with empty properties such as anti-social behaviour, crime and illegal occupation. Properties also benefit from more proactive care and maintenance when occupied. Everyday use keeps them in good condition. This means landlord costs can be kept to a minimum. Re-letting is also proven to be more likely for occupied properties than for empty ones.
Specific guardianship clauses can be included in temporary tenancy agreements with charities and good causes. In the case of short-term leases, provisions can be made to respond quickly to any new permanent tenants once they are found. Charities and good causes can be asked to vacate with a minimal notice period of days rather than weeks or months.
The sense of partnership between tenants from the charity and community sector and commercial property owners is a key feature of ASTOP’s work. You can find out more about our services on our website.
Empty Rates Relief Success Story
ASTOP’s work mutually beneficial arrangements between landlords and high-profile charities. The latter includes Mind, Age UK and Freecycles as well as many housing associations, food banks and many other smaller charitable organisations and social enterprises. Our use of donated retail, warehouse & office space to gain business rates relief has been welcomed and approved by over 100 local authorities to date. Our charity-landlord partnerships are widely viewed as the most ethical form of rate reduction by both Local and National Government. Alternatives that may initially appear marginally financially more rewarding often come with hidden charges and the risk of legal challenge. ASTOP’s business rate ‘loophole’ comes with a proven track record as the preferred ethical and responsible solution for all parties involved.
