Empty Commercial Property Tax

Following on from my previous posting regarding empty property rates. I have come across the following which states that Landlords will face a bill of of nearly £1.1bn due to a new empty commercial property tax.

The tax – announced last year, and implemented on April 1st as a means to dissuade owners from keeping properties empty – was originally expected to raise £950 million.

However, falling occupancy rates in the commercial sector, means as much as an additional £142.5 million could now be raised.

A report by property a consultancy NB Real Estate reveals the numbers of unlet commercial properties has risen by 22 per cent over the last two years to 9.3 per cent in March 2008. The rule changes mean most property that has been empty for more than three months will no longer receive relief from rates – exposing them to the new tax.

Andrew Warde, director of rating at NB Real Estate, said: “This empty rates tax was conceived when the property market was performing strongly, but the downturn is heaping misery upon misery. "The government’s belief that landlords keep buildings empty without good reason is just plain wrong and the blanket application of additional rates tax just doubles the pain."

He explained commercial properties are often left empty due to low demand and high tax rates will have little effect on landlords pushing for tenants. “In the longer term landlords will simply demolish empty buildings which are particularly difficult to let rather than pay this tax, a wasteful loss of properties that might otherwise be refurbished when market conditions are right.”

Mr Warde added about six million sq ft of space due to be completed in the City by the end of the year, adding to seven million sq ft already unlet. "We could have up to 11 million sq ft empty just in the City alone a year from now.
The cost to the property sector of paying rates on all these vacant buildings since April has been considerable, and is likely to increase.”

Mr Warde concluded as a lot of construction is speculative, "developers will have to think twice about building without a pre-let in future".