When it comes to owning commercial property, it’s important to understand all the costs that come with it – including rates on empty properties. These rates, known as business rates, are set by the local council and can have a significant impact on your bottom line. In this article, we will explore what rates on empty commercial property are, how they are calculated, and what you can do to minimize them.
Business rates on empty commercial properties are a form of property tax levied by the local council. These rates are charged on most non-domestic properties, including shops, offices, and warehouses. The purpose of these rates is to help fund local services such as schools, roads, and police. However, when a commercial property sits vacant, the owner is still required to pay business rates even though the property is not generating any income.
The rateable value of a commercial property is determined by the Valuation Office Agency (VOA), an agency of HM Revenue and Customs. The rateable value is based on the estimated rental value of the property at a certain date. The local council then uses this rateable value to calculate the business rates owed by the property owner.
In England, the standard multiplier for business rates is set by the government and is applied to the rateable value of the property to determine the final amount owed. The multiplier is revised each year and can vary depending on the size and location of the property. Properties that have been empty for a certain period of time are subject to additional charges, known as empty property rates.
Empty property rates were introduced to discourage property owners from leaving their properties vacant for extended periods of time. The idea is to incentivize property owners to either rent out their properties or put them to some productive use. The rates on empty commercial properties are typically set at 100% of the normal business rates for the first three months that a property remains empty. After three months, the rate increases to 200% of the normal business rates.
For property owners, these empty property rates can quickly add up and become a significant financial burden. However, there are some strategies that can help minimize these costs. One option is to negotiate with the local council for a temporary reduction or exemption from empty property rates. Property owners can make a case for why their property is empty and demonstrate their efforts to actively market and rent out the property.
Another strategy is to consider demolishing or repurposing the property to avoid paying empty property rates. Depending on the location and condition of the property, it may be more cost-effective to convert it into a different type of commercial space or even residential units. By doing so, property owners can start generating income from the property and avoid paying empty property rates altogether.
Some property owners may also consider using their vacant properties for short-term rentals, such as pop-up shops or events. This can help generate some income while also reducing the amount of empty property rates owed. It’s important to check with the local council to ensure that any temporary use of the property complies with regulations and does not impact the property’s rateable value.
Overall, rates on empty commercial properties can be a significant financial burden for property owners. However, with careful planning and proactive management, property owners can minimize these costs and maximize their profit potential. By understanding how rates on empty commercial properties are calculated and exploring different strategies to reduce these costs, property owners can make informed decisions to make the most of their commercial properties.