Welcome for empty property court decision
Experts have welcomed a supreme court decision which means businesses will no longer be charged a controversial tax while a property is undergoing refurbishment.
Previously, commercial properties undergoing redevelopment were liable for business rates based upon their rateable value in a usable state.
David Bailey, partner and Commercial Property Dispute specialist at Napthens LLP solicitors, revealed this often meant that a landlord could be in the situation where a property was unusable due to serious work taking place in an empty property, but was still classed as liable for full rates (after any period of empty rates relief had expired).
The Supreme Court ruled recently in a case involving property which was being redeveloped and incapable of occupation. The building was being internally refurbished and had no air conditioning, electrical wiring or ceiling tiles and had a rateable value of more than £100,000.
The court decided that the property was not capable of occupation and therefore was to be given a rateable value of just £1 and classed as ‘building undergoing reconstruction.’
David Bailey of Napthens LLP said the decision would be welcomed by property owners, and comes after the Chancellor announced a package of measures to help ease the burden on property owners paying business rates.
He explained: “Without an occupier, liability passes back to the owner of a property. If they are getting no rental income, and the period of empty property rates relief ends, they can end up with a significant payout.
“Business rates, plus the fact they are getting no income, and often paying a commercial mortgage, can hit property owners hard.
“Before this decision, businesses were also expected to pay business rates even if a property could not be occupied due to refurbishment.
“Many felt this was a highly unrealistic scenario, and argued that the rates should not be due if a building cannot be occupied.
“It’s great that the Supreme Court has given its view in this case, which in future could ease the burden on many owners of empty commercial property.
“It comes hot on the heels of the Chancellor’s announcement on new measures to ease the burden of business rates, including capping rates for businesses leaving the period of empty property relief, supporting the licensed trade, and creating a multi-million-pound pot to help struggling businesses.
“Although this case is helpful it is by no means a ‘silver bullet’ and it is likely that there will be further arguments as to whether a property is capable of beneficial occupation.
“The first step is to approach the valuation office agency and advise that the property is not capable of rateable occupation and request that the rateable value be reduced accordingly.
“It is possible that a dispute will follow based on the interpretation of whether the property is capable of rateable occupation so it is important that legal advice is sought as soon as possible.”