Business rates are taxes levied on most commercial properties in the UK. But what happens when a commercial property sits empty, generating no income for the owner? This is where “void business rates” come into play. void business rates are the taxes that must still be paid by property owners even when their commercial spaces are vacant. In this article, we will explore the impact of void business rates on commercial properties and discuss some strategies to mitigate their effects.
void business rates are a significant concern for property owners, as they can add up to a substantial cost over time. These rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rates are set by the government and can vary depending on the location and type of property. However, the general rule is that property owners must pay 50% of the normal business rates if their property has been empty for three months or more, and 100% if it has been vacant for over six months.
The impact of void business rates on commercial properties can be severe. For some property owners, especially those with multiple vacant units, paying these rates can become a significant financial burden. In addition to the loss of rental income from the vacant property, the additional cost of void business rates can eat into the owner’s profits and potentially lead to financial hardship.
Moreover, void business rates can discourage property owners from keeping their spaces vacant for extended periods. This is because the longer a property remains empty, the higher the void business rates become. As a result, property owners may be more inclined to lower their rental expectations or offer incentives to attract tenants quickly, even if it means accepting lower rents than they had originally hoped for.
Another issue with void business rates is that they can create a disincentive for property owners to invest in their properties. For example, an owner may be hesitant to carry out renovations or improvements on a vacant space if they know that they will have to pay void business rates on it. This can lead to properties falling into disrepair or becoming outdated, which can further hinder their ability to attract new tenants in the future.
So, what can property owners do to mitigate the impact of void business rates on their commercial properties? One strategy is to actively market the property to attract tenants quickly and reduce the amount of time it sits empty. This may involve lowering the rent, offering incentives such as a rent-free period or contribution towards fit-out costs, or improving the property’s curb appeal to make it more attractive to potential tenants.
Another option is to consider entering into a short-term lease or license agreement with a temporary tenant. While this may not be ideal for all property owners, it can help generate some rental income and reduce the amount of void business rates payable on the property. Additionally, short-term agreements can provide flexibility for both parties and may lead to a longer-term tenancy down the line.
Property owners can also explore the possibility of claiming exemptions or reliefs on their void business rates. For example, certain properties may be eligible for small business rate relief or charitable rate relief, which can reduce the amount of void business rates payable. Property owners should consult with a professional advisor or contact their local council to explore any potential exemptions or reliefs that may apply to their specific situation.
In conclusion, void business rates can have a significant impact on commercial properties, adding to the financial burden of property owners and creating disincentives for investment and property improvement. By actively marketing their properties, considering short-term lease agreements, and exploring exemptions or reliefs, property owners can mitigate the effects of void business rates and create a more sustainable and profitable leasing strategy for their commercial spaces.