When it comes to owning commercial property, one of the biggest expenses that landlords may face is the rates on empty commercial property. These rates, also known as business rates, can be quite significant and can add up quickly if a property sits vacant for an extended period. In this article, we will explore what rates on empty commercial property are, how they are calculated, and some strategies that landlords can use to manage these costs.
Business rates are a type of local property tax that is levied on most non-domestic properties in the UK. This includes commercial buildings such as shops, offices, warehouses, and factories. The rates are used to fund local services such as schools, roads, and waste collection. The amount that a landlord pays in business rates is calculated based on the rateable value of the property, which is determined by the Valuation Office Agency.
One of the biggest challenges that landlords face when it comes to business rates is when a property sits vacant. In this case, the property is still subject to business rates, even though it is not generating any rental income. This can be a significant financial burden for landlords, as they are essentially paying taxes on a property that is not generating any revenue.
The rates on empty commercial property are calculated differently depending on the size and type of the property. For small business properties with a rateable value of less than £2,900, the landlord may be eligible for small business rate relief, which can reduce the amount of business rates that they have to pay. However, for larger properties with a rateable value above this threshold, the rates on empty commercial property can be quite substantial.
There are several strategies that landlords can use to manage the rates on empty commercial property. One option is to try to negotiate a temporary reduction in rates with the local council. Some councils offer discretionary rate relief for empty properties, especially if the property is undergoing renovations or repairs. Landlords can also apply for charitable or community rate relief if the property is being used for a charitable purpose.
Another option for landlords is to consider leasing the property on a short-term basis to a pop-up shop or temporary tenant. This can help to generate some rental income and may also make the property more attractive to potential long-term tenants. Landlords may also want to consider offering incentives such as rent-free periods or reduced rent to entice tenants to lease the property.
If leasing the property is not an option, landlords can also consider other uses for the property such as storage or temporary office space. By diversifying the use of the property, landlords may be able to generate some income while they wait for a long-term tenant to lease the property.
It is also important for landlords to stay informed about any changes to business rates legislation that may affect the rates on empty commercial property. The government periodically reviews business rates and may make changes to the system that could impact how much landlords have to pay. By staying up to date on these changes, landlords can be better prepared to manage their business rates effectively.
In conclusion, rates on empty commercial property can be a significant expense for landlords. However, by understanding how these rates are calculated and exploring strategies to manage them, landlords can alleviate some of the financial burden associated with vacant properties. Whether through negotiating with the local council, finding temporary tenants, or diversifying the use of the property, there are steps that landlords can take to help minimize the impact of business rates on their bottom line.