Making the most of empty business premises

With landlords having increasingly more empty business premises on their hands and tenants choosing to close their unprofitable premises, "void rates" has become a hot topic, but there are ways to save money when dealing with empty business premises.

Retail property lawyer Matthew Hanley explains more.

Empty commercial premises (e.g. retail) are currently exempt from business rates for three months, while empty industrial premises (e.g. warehouses) are exempt for six months. After this period, full rates become payable once again.

An occupier could reduce their business rates in the following ways:

Letting to a charity: Premises held by charities are fully exempt from rates. Therefore allowing a charity to use empty premises is a useful means of reducing rates.

Short-term letting: If premises are occupied for a period of at least six weeks, then they can be left vacant again for the appropriate three or six month period before full business rates become payable again. This process can be repeated indefinitely.

Use the premises: Occupiers could consider using the empty premises themselves for at least six weeks. Thereafter, the property can be left vacant and a fresh period of empty-rates relief will begin.

Poor condition: If premises are incapable of beneficial occupation and they cannot be economically repaired, no rates will be payable.

Prohibited by law: Where occupation is legally prevented, for instance, if there are issues with asbestos or the structure is considered dangerous. An owner of dilapidated premises may decide to allow them to deteriorate to avoid rates liability.

Unfinished premises: Rates are only payable if premises are capable of occupation. If a developer delays practical completion until they have found suitable tenants, there will be no rates liability. The local authority, however, do have powers to serve a completion notice requiring completion of the development.

Small business rate relief: Small businesses with global rateable values under £15,000 (£21,000 in London) are exempt from rates.

Owner in administration or insolvency: Are exempt from rates. Landlords should think twice before forfeiting an insolvent tenant's lease if there is little prospect of re-letting.

Vacant Listed buildings: Are exempt from rates.

For more information, please contact Matthew Hanley on matthew.hanley@harveyingram.com or call 0116 257 4418.