New empty property rates shock

The government this week delivered another blow to the property industry over empty rates reforms, hitting it with a £1bn bill six months earlier than expected.

It confirmed that landlords would face full business rates bills for warehouses that have been empty for six months, and for shops and offices that have been empty for three months, on 1 April, the day the legislation kicks in.

Widespread confusion in the industry over when the exemption periods began means the new details, which have only recently been circulated by the government to councils, will come as a shock to smaller landlords that have not had adequate guidance.

Some local councils could even send bills out as early as the first week of March in efficiency drives to collect the rates quickly.

Many occupiers and landlords had hoped the tax would not apply ‘retrospectively’ – and that they would qualify for a limited period of relief on properties already empty from 1 April.

This means that the £1bn hit that the British Property Federation has warned the industry to budget for will now come six months earlier than expected in a market still reeling from the effects of the credit crunch.

A spokeswoman for the Communities and Local Government department said: ‘From 1 April, any property that has been empty for more than three months – or six months in the case of industrial buildings – will be liable for empty property rates.

‘It would clearly not be appropriate to start a new clock running on 1 April, deferring liability beyond that point, and thereby allowing owners to benefit from a further rate-free period of three or six months, before the reforms take effect. The empty property rate reforms were announced in the Budget to come into effect on 1 April.

‘We have since written to all local authorities, who are responsible for informing ratepayers of the changes.’

However, while some local authorities have informed local businesses, others have not. Property Week has obtained a letter from Breckland Council in Norfolk, explaining the changes to local firm Percy Howes Commercial.

However, expert Robert Tizzard – who is the president of Altus Edwin Hill and head of its empty rates team, which advises Goodman, Gazeley and ProLogis, among others, on the impact of the legislation – said: ‘The lack of information from some local authorities to those that own vacant buildings is appalling.’

‘A number of details in the legislation have still not yet been confirmed, even though bills could be issued as early as March. There are misconceptions,’ he added.

British Property Federation financial director Gareth Lewis, who has spearheaded lobbying over empty rates, said: ‘There has been uncertainty due to the fact that the legislation has been made at government level and is implemented locally.

‘This may come as a surprise to a lot of people and present an additional hardship.’

WEBINAR
To find out more about the new Homes and Communities Agency make sure you catch Property Week's FREE webinar. Click WEBINAR for more information.