MacRoberts Property Law e-update 04/07/07

EMPTY PROPERTY RATES RELIEF

Proposals to amend Empty Property Relief in England and Wales from April 2008, as announced in the March 2007 budget, continue apace as the Rating (Empty Properties) Bill reaches the House of Lords.

At present, most empty commercial properties receive 100% relief from business rates for the first three months during which they are unoccupied, after which a 50% relief applies. Industrial premises currently benefit from 100% relief for as long as they are empty.

The new Bill proposes that the relief available for empty commercial property is restricted to three months after which they will be subject to the full occupied rate. The relief available for empty industrial properties will be restricted to six months. The reforms also provide that charities and community amateur sports clubs which own empty property will not be liable to rates, as long as it appears that the empty property will continue to be used for charitable purposes or for the purposes of the club.

The Bill extends only to England and Wales, and so the current regime will continue to apply in Scotland.

No announcements have yet been made at Holyrood as to whether the Scottish Executive will follow Westminster in removing empty property rates relief. Prior to the recent election it was widely expected that Holyrood would follow Westminster’s lead, but it remains to be seen what view the new SNP administration will take.

The Westminster Government have stated that the intention behind the Rating (Empty Properties) Bill is to encourage owners of empty non-domestic properties to bring them back into occupation. In his last budget, the Chancellor stated that commercial property lying empty leads to higher rents being charged in areas with highest demand.

Reaction to the Bill has been mixed. Many within the property industry believe that the proposed legislation is simply a revenue-raising measure that will have adverse effects on the industry. Notably, the Royal Institute of Chartered Surveyors have suggested that the Bill may discourage developers from speculative development as they will not want to incur the increased costs of properties lying empty for longer periods. This will affect regeneration projects in disadvantaged areas.

Developers and purchasers of commercial property will need to take account of these reforms and the potential impact they could have on their investments. We will update you on the Scottish position as and when decisions are made by the Scottish Executive.

If you require any further information please contact Allan Mackenzie or Roy Johnstone on 0131 229 5046

© MacRoberts 2007