Empty property rates relief - bad timing

The current state of the economy has had a range of dire consequences for the property market. Some legislative changes (e.g. EPCs, HIPs) have sadly arrived at precisely the wrong time. Reduction in empty property rates relief is another example of a legislative change that is ill-timed for the commercial market. The Rating (Empty Properties) Act 2007 amended Part 3 of the Local Government Finance Act 1988 so as to increase the empty business property rate from 50% to 100% of the basic occupied business rate. (The aim being to provide an incentive to owners to re-let, re-develop or sell empty non-domestic buildings). Commercial property used to secure 100% rate relief for the first three months from the date it fell vacant, after which 50% was available until such time as it was re-occupied. In the case of empty industrial and storage property, 100% relief was available until re-occupation.

However, from 1st April 2008, after the initial three month empty period, all properties are subject to 100% rates (industrial and storage premises becoming subject to 100% rates after six months).

Anti-avoidance provisions were mooted by the Government at the outset in order to prevent avoidance of empty property rates by rendering premises incapable of beneficial occupation, thereby reducing rateable values to zero. Changes in the state of the property were to be disregarded in specified circumstances. However, no anti-avoidance provisions were introduced by the Government, and concerns are now surfacing in news stories that property owners are resorting to deliberate incapacitation and part demolition to avoid a rates liability. See BBC News item - 26th August 2008. If this practice is widespread, we can expect some anti-avoidance regulations swiftly to be introduced.