07/08/2007 Rating (Empty Properties) Act 2007

In the March 2007 Budget, the Chancellor announced that rate relief on empty property was to be curtailed with effect from 1st April 2008.

The legislation became law on 19th July 2007 and is effectively a short enabling Act, providing the Secretary of State with powers to make changes by regulation. 

Currently, all property is entitled to 100% rate relief for the first three months from the date it falls vacant, after which the empty property would be entitled to 50% relief until such time as it was re-occupied. In the case of  empty industrial and storage property, such facilities enjoy 100% rate relief until re-occupation.

With effect from 1st April 2008. this will all change and after the three month empty period, all properties will be subject to 100% rates, with industrial and storage premises being subject to 100% rates after six months. Exemption from empty rates has been given to registered charities and amateur sports clubs.

In former years, ratepayers have attempted to avoid the payment of empty property rate by rendering their premises incapable of beneficial occupation, thereby reducing their rateable value to zero. To prevent this occurring in the future, the government  makes it clear in the Act that it will seek to introduce anti avoidance provisions by regulation stating that in relation to unoccupied property any change in its physical state is to be disregarded.

These changes are designed to encourage regeneration and reduce rents, whilst at the same time increasing the Chancellor’s coffers by an estimated £1 billion in 2008/9. However, the increase in costs to owners of empty property will directly impact on profits and may actually discourage property regeneration.

There are two main options available to minimise the rate burden.

1. Lodge appeals against vacant premises to seek reduction in assessments, many of which are vacant precisely because of their lack of marketability.

2. Under current rules, if a property is re-occupied in whole or part for six weeks , the ratepayer is entitled to a further three month period (six months if industrial) of rate relief. Therefore, ratepayers may wish to consider re-occupying part of their premises for six weeks  in order to gain relief on a 3/6 month rolling programme of occupation. The government may seek to change this.

Eric Rose
Rating Partner
Dixon Webb LLP
7th August 2007