All non-domestic properties pay business rates set by their local council. But what happens if your property is empty or unoccupied?

In 2007, The Rating (Empty Properties) Act was reformed to ‘increase liability to business rates for unoccupied properties to the same basic level of liability as for occupied properties’. So, simply put, landlords still have to pay business rates for their property when it’s vacant.

The updated regulations were introduced to try and reduce the amount of time empty properties are left unoccupied - and to some extent to penalise landlords for what could be seen as wasting their empty property rather than repurposing resources. 

With over 225,000 long-term empty properties across the UK , and a downturn in economic activity due to Covid-19, finding a new tenant for your empty property is not always easy. So, what options are you left with? Do you still have to pay business rates? And how can you keep your outgoing costs down?

The General Rules for Empty Property Business Rates

Commercial property landlords with non-domestic property (e.g. a shop/office/pub/factory/etc) are, more often than not, liable to pay business rates. The amount you pay is calculated based on the rateable value of your property and any business rate relief you might be entitled to.

The good news is that empty properties do get a 3-month relief period where they do not have to pay any business rates. However, if you do not manage to secure another tenant for your empty property within the 3 months, then most commercial property landlords will have to start paying full business rates again.

Important to note - industrial properties, such as warehouses and factories, are applicable for extended empty property business rates relief. They receive an extra 3 months on top of the standard relief period to find a new tenant. Meaning that for industrial landlords, your total empty property business rate relief period is 6 months.

Business Rate Exempt Properties

Some commercial properties are fully exempt from paying business rates, regardless of whether they are empty or not. These include:

• Agricultural land or buildings

• Buildings used for the welfare of disabled people

• Public places of worship

There are also some commercial properties that, although they would be liable to pay business rates while occupied, are exempt when empty. These include:

• Listed buildings

• Properties owned by charities (if the next use will be for a charity)

• Community amateur sports clubs (if the next use will be as an amateur sports club)

• Buildings with a rateable value under £2,900

How to Avoid Paying Business Rates for Empty Property

For commercial property landlords who don’t own an exempt building, the short 3-month period of relief is often not enough time to secure a new tenant for your empty property. However, there are a few options available to help you reduce the amount you spend on empty property business rates.

Property Guardians

Property Guardians can be an effective way to avoid paying empty property business rates. The scheme is also a great way to protect and secure your property for the duration it’s vacant.

Here’s how it works: professional security guardians move onto your site in their capacity to keep it safe and maintain its value. With this model, your property becomes temporarily residential. Meaning that instead of paying business rates, the guardians pay council tax. Plus, because the arrangement is temporary and guardians are not considered the same as tenants, it doesn’t constitute a change of use for the building.

Not only do the property guardians protect and maintain your asset, but they also make it completely exempt from business rates - making the scheme a really great choice for most landlords.

With Blue Door, we offer our property guardian protection service at zero cost to the landlord. To find out more about how our flexible, personalised, guardianship service could help you save money, get in touch today.

Short-Term Lease

Another way to avoid paying business rates on your empty property is to find a short-term lease that will reset your 3-month relief period.

For this to work, you need to find a tenant that is happy to lease your empty property for at least 6 weeks. (If the contract is any less than 6 weeks then it will be ignored in the eyes of the taxman, and you will continue to pay business rates throughout the period.)

If your short-term tenancy runs for 6 weeks+, then your 3-month business rates relief period will reset – giving you valuable extra time to find a long-term/permanent tenant or use for the property without paying business rates.

Incapable of Beneficial Occupancy

If your empty property is incapable of beneficial occupancy, then there’s a good chance you could be exempt from paying business rates altogether.

Beneficial occupancy is the term used to describe whether a building is fit for use or not. So, if your empty property has been affected by a fire, flood, or other serious damage – it may not be considered capable of beneficial occupancy. Meaning you might not have to pay any business rates at all.

To qualify, the damage must be serious. But, if your property requires reconstruction before it can be fit for purpose again, then you could be eligible for business rates exemption.

Letting to Charity

If you lease your commercial property to a charity, the building could qualify for an 80% business rate relief. The charity then only has to pay 20% of the full business rate, which is far better than you paying 100% of the rates for a vacant property.

The 80% relief also applies to anyone who leases your empty property building for educational or religious purposes. Which is a great incentive to help re-lease your empty property, taking the burden of expensive business rates out of your hands.

How Can Blue Door Property Guardians Help Reduce Empty Property Business Rates?

Although every commercial property landlord will have a different and unique perspective, we think that choosing property guardians is the easiest of the above options. Not only does the scheme reduce your business rates to zero, but it also minimises the costs of other empty property outgoings e.g vacant property insurance and security systems.

At Blue Door Property Guardians, we have a dedicated on-site team who can help reduce your empty property business rates. The teams help is part of our efforts to help maintain the value of your asset while minimising your outgoings.

Whether you manage an unleased shop, an empty office space, or any other unoccupied building, property guardians are a great choice to simultaneously protect, secure, and maintain the value of your asset. To find out more about how property guardians can help businesses click here, or get in touch today and one of our advisors will be happy to answer any questions you might have.