Rates on empty buildings will hit Liverpool landlords

Mar 12 2008 by Tony McDonough, Liverpool Daily Post

FROM April 1, new business rates will become payable on office and retail buildings that have stood empty for three months or more and on empty industrial buildings after six months.

The introduction of the rates is designed to make what is believed to be an expensive UK property market more competitive against its European counterparts by bringing empty properties back into use.

However, the implications of this for developers and landlords throughout Liverpool could prove devastating. It is estimated the rates could equate to 45% of a building’s annual rental value and lead to a glut of commercial properties flooding the market as property professionals attempt to mitigate the taxes. Given the current economic climate, buildings are likely to take longer to rent or sell, meaning that market values may suffer significant falls.

Developers may also begin to cut back on speculative building in fear of the added rates jeopardising capital returns. This would choke the supply of new space, leaving businesses with a limited supply of ready-built premises. The far-reaching impact on the local economy may prove even more damaging as demand for labour and materials dwindles and new investment opportunities are missed.

With calls for the Government to revoke the law falling on deaf ears, developers and landlords must adopt a thorough understanding of the application of the rates to help reduce the financial burden.

For example, there are a number of exemptions such as an 80% discount on rates for charities, exemptions for agricultural buildings and discounts for unusable buildings – developers may choose to stop short of finishing a building so it is not capable of beneficial occupation.

Similarly, buildings may be due a rating reassessment and those which are let for just six weeks qualify for a fresh exemption period.

In theory, the new rates should aid urban renewal. In practice, they’re likely to penalise landlords and devel- opers for factors beyond their control.