Primecover Property Insurance - Primecover News 25th June 2008

Primecover News 25th June 2008

Since the 1980’s, commercial property owners benefited from tax breaks on any empty properties within their portfolios. However, these benefits recently disappeared overnight when, at the beginning of April 2008, the Rating (Empty Properties) Act 2007 was introduced, leaving hundreds of small and medium-sized businesses in danger of becoming potential victims of spiralling rate bills.

The Royal Institution of Chartered Surveyors has regularly voiced its concerns regarding this new legislation, which it predicts will have negative connotations not just for those in the commercial property sector, but anyone who occupies business premises.

The rating (Empty Properties) Act 2007, which came into force on April 1, 2008, heralded the introduction of a situation whereby owners of vacant shops and offices only receive three months’ worth of 100 per cent relief from rates, following which they become liable to pay full rates. Those owning or occupying industrial properties and warehouses enjoy 100 per cent rate relief for the first six months only, after which full rate liability kicks in.

The only properties exempt from this new regime are sports centres and charities.

While the Government’s thinking behind the law seems to be well intentioned – it hopes to encourage disused properties back into use, creating thriving high streets and business parks and enabling rent reduction because of increased supply. No one deliberately leaves premises empty and current market conditions are such that a certain number of vacant units are to be expected.

The new laws could potentially deter investors to an even greater extent, with devastating consequences for the commercial property sector. Less development will put a brake on speculative investment, and suppress the market.

Business owners should now be especially careful when signing any property agreements or contracts. Those owing property face increased rate bills, and will probably be keen to move new occupiers into premises as soon as possible or quickly sell the unit to avoid accumulating bills.

We advise all businesses to ask a chartered surveyor to review property portfolios and to ask advice on the best course of action to take in order to reap the best financial reward.

Those who are planning to rent new premises could find themselves faced with increased overheads if they do not check the finer detail of their contracts. It is vital that terms and conditions are properly negotiated to ensure that the occupier does not find themselves facing bills for amounts which have been passed on by the landlords.

If in doubt, consult a RICS expert.