Understanding Empty Rates: The Impact On Commercial Property Owners

empty rates, also known as vacant property rates or business rates on empty buildings, are charges imposed by the government on commercial properties that are unoccupied. These rates can have a significant impact on property owners, especially in today’s uncertain economic climate.

empty rates were first introduced in 2008 as a way to encourage property owners to occupy or sell their empty buildings. The government believed that by imposing these charges, property owners would be motivated to bring their buildings back into productive use, thus stimulating economic growth. However, empty rates have since become a burden for many property owners, especially those who are struggling to find tenants or buyers in a challenging market.

The rateable value of a property is determined by the Valuation Office Agency (VOA), and empty rates are calculated based on this value. The rates are charged at the normal business rates multiplier, which for the financial year 2021-2022 is 49.9p in England. In Scotland, the rate is 49.8p, while in Wales it is 53.5p.

For the first three months that a property is empty, there is usually no charge. However, after this period, property owners must pay the full rate. This can be a significant financial burden, especially for owners of large commercial properties or those with multiple vacancies.

empty rates can have a substantial impact on property owners’ finances. For some, the charges may outweigh any potential rental income or sale value, making it difficult to justify keeping the property. This can lead to a cycle of vacancies and further financial strain on the property owner.

In addition to the financial impact, empty rates can also have other negative consequences for property owners. Vacant buildings can attract vandalism, squatters, and other security risks, which can further devalue the property and make it harder to find tenants or buyers in the future. Moreover, the perception of an area with many empty properties can deter potential investors and tenants, leading to a decline in property values and economic activity.

Property owners have few options when it comes to empty rates. Some may try to mitigate the charges by applying for exemptions or reliefs, such as the 100% Small Business Rate Relief or the Charitable Rate Relief. However, these schemes have strict eligibility criteria and may not be suitable for all property owners. Others may attempt to challenge the rateable value of their property through the VOA, but this process can be lengthy and costly.

To avoid empty rates altogether, property owners may consider temporary uses for their vacant buildings, such as pop-up shops, events spaces, or storage facilities. These short-term leases can help generate income and bring life back to the property while the owner searches for a long-term tenant or buyer. Property owners can also work with local authorities, developers, and other stakeholders to explore alternative uses for their buildings, such as residential conversions or mixed-use developments.

In conclusion, empty rates can have a significant impact on commercial property owners, both financially and operationally. These charges can be a burden for owners already facing challenges in the market and may discourage them from investing in or maintaining their properties. It is essential for property owners to understand the implications of empty rates and explore all options available to them to mitigate the charges and bring their vacant buildings back into productive use. By working proactively with stakeholders and considering creative solutions, property owners can navigate the challenges of empty rates and unlock the potential of their properties.