The first consideration when assessing a property is whether it is capable of beneficial occupation.
Below we detail our approach when dealing with properties that are both fit and unfit for occupation.
Property is unfit for occupation
If a property is not fit for occupation it may be completely removed from the rating list, thereby removing its entire rates liability.
The test of whether a property is fit for beneficial occupation can be nuanced and will depend on a myriad of factors.
Properties Undergoing a Programme of Alteration/Redevelopment
A property can be removed from the rating list if it is no longer capable of occupation due to ongoing alterations or redevelopment. Removal from the list is only possible once the works have begun. Properties that are demolished are also no longer rateable. Light refurbishment works do not always justify a removal from the rating list.
The VOA often challenge appeals related to alterations or redevelopment and will require proof of works including, for example, a grant of planning permission or evidence that demolition/strip out has begun. We typically supply a broad spectrum of relevant information to build the strongest, most defensible case to the VOA.
A newly builtor redeveloped property becomes liable for rates on the date it is completed. Developers, therefore, may try to delay formal completion until they have tenants ready to occupy the space. This can be achieved in several ways depending on the circumstances and the type of property. Some local authorities are more proactive than others in monitoring building works, but most go through a process to formalise completion for business rates purposes.
The local authority may serve a completion notice if they believe the property could be completed within three months. The 3-month or 6-month rate relief period will then commence after the property is completed. This gives developers a potential for a maximum of 6 months where rates will not be payable.
Properties in a State of Disrepair
Properties that are damaged and “beyond economic repair” will benefit from rates relief.
There are some important conditions which must be met. First, the works must be deemed as repairs and not renewals or improvements by the VOA. Then the VOA will consider if the cost of required repairs is economically viable. Both the nature of the repair and the economic worth of repairs are subject to legal tests defined by previous case law.
If the repairs required are substantial and it can be demonstrated that they would be uneconomical to undertake, then we can seek for the property to be removed from the rating list. What constitutes a repair over a renewal or improvement depends on the circumstances, and the same applies for determining what is economically reasonable. A full assessment of the property and its circumstances must be carried out to ensure the best outcome.
It is worth noting that when determining a property’s rateable value, the property is valued by the Valuation Office Agency (VOA) as if it were in a state of good repair, regardless of the actual situation. Therefore, a property that is not fit for occupation will stay on the Rating list unless it is challenged.
A property can be removed from the rating list when severe damage, as a result of flooding, a storm or another external factor such as fire, renders it incapable of occupation. In this situation, damage to the property must be severe enough that substantial repair works are required to make occupation possible again and as a result it can be removed from the rating list.
Property is fit for occupation
When a property is deemed fit for occupation there are several exemptions and methods that can eliminate or reduce its rates liability. Exemptions are awarded by the Local Authority, so this approach can be a more efficient alternative to appealing a historic rates bill with the VOA.
We undertake a full assessment of your property and its circumstances before we can determine what exemptions may apply and identify the most appropriate solution.
The empty property rates relief is triggered when a property becomes vacant after a period of occupation lasting more than six weeks. Vacant commercial property, such as offices and shops qualify for 100% relief for a continuous period of 3 months. Industrial property, such as warehouses and storage units qualify for 100% relief for a continuous period of 6 months.
Other exemptions include property:
- Listed by Historic England or a property that is partially listed.
- That can’t be occupied due to being prohibited by law, such as a breach of building regulations.
- That is closed due to the action of public authority such as breaching health and safety regulations.
- That is empty and has a rateable value below the minimum threshold of £2,900.
- That is empty, whose owner is entitled to personal possession.
- That is empty, whose owner is entitled to possession as a trustee under a deed of arrangement.
- That is empty and owned by individuals subject to bankruptcy or a company subject to a winding up order or that is in administration.
Discretionary Relief for Partial Occupation
The local council has discretion to grant business rates relief when a property is partially occupied, such as when some of the space is surplus to requirements. The property owner must apply for an informal split of the rates assessment to reflect the occupied and unoccupied areas.
Supply and Demand
A property may be removed from the rating list, or be subject to a reduced rateable value, if it be determined there is no demand for the property and that it therefore commands nil rent. The VOA will decide whether there is demand or not by considering comparable properties in the locality and whether the absence of demand is due to surplus similar properties or due to the owner’s actions.
This exemption exists for an empty property where the owner is either a charity or a Community Amateur Sports Club (CASC). It is retained on the basis that when the property is re-occupied it will be primarily used for either charitable purposes or by a CASC (whether that is through owner occupation or through leasing).