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Commercial Property News
Landlords demolish rather than pay rates on empty commercial property may force tax U turn
Growing evidence of the effect of the removal of empty property rates relief on commercial buildings has led to landlords demolishing buildings rather than pay the Treasury, has caused members of the Government to reveal privately that they are considering reintroducing the relief, the Telegraph reported.
A well-placed source said: "There are some people within Government that accept the situation is not as clear as the Treasury thought it would be. Ministers within both Treasury and Communities and Local Government have let it be known there may be scope for mediating or repealing the changes."
The Government introduced the changes in April this year in an effort to force landlords to find tenants for empty buildings. By charging business rates on empty property, landlords would be forced to lower rents or refurbish their buildings, the Government argued. They also expected an extra £1.4billion from the commercial property sector in rates revenue.
The reality, however, is that property owners are tearing down buildings rather than pay the new levy, which can run to hundreds of thousands of pounds on large buildings.
The effects of the change in law have hit industrial property owners particularly hard. Steve Owen deputy chief executive of Brixton, one of the UK's largest industrial property companies said: "The effect of this change is that it will take space out of the market. People who want to take space on short-term leases will have less choice and less choice means higher prices."
Owen said Brixton was already considering bringing forward the demolition of 300,000 sq ft of space that was not due to come down for another two to three years.
The introduction of the change in the law has led to fierce opposition from business leaders including the chief executives of Brixton and rival property group SEGRO, as well as industry groups such as the CBI and the British Property Federation.
CBI head of infrastructure Karen Dee said: " The Government needs to monitor this properly and thoroughly and if it is not working they need to revoke it."
Although sources said it was unlikely ministers would reintroduce relief on commercial property rates before the regime had been in place for 12 months, there are provisions within the current legislation for rates to be cut by 50% on empty buildings depending on the state of the economy. Since the change in the law was first proposed over a year ago the commercial property market has fallen around 15% with many analysts predicting further falls to come.
A Government spokesman said the purpose of the reforms were to provide an incentive to increase the number of properties available for business. The spokesman added: "As with all taxes, the Government will keep the reforms to empty property rate relief under review."
A well-placed source said: "There are some people within Government that accept the situation is not as clear as the Treasury thought it would be. Ministers within both Treasury and Communities and Local Government have let it be known there may be scope for mediating or repealing the changes."
The Government introduced the changes in April this year in an effort to force landlords to find tenants for empty buildings. By charging business rates on empty property, landlords would be forced to lower rents or refurbish their buildings, the Government argued. They also expected an extra £1.4billion from the commercial property sector in rates revenue.
The reality, however, is that property owners are tearing down buildings rather than pay the new levy, which can run to hundreds of thousands of pounds on large buildings.
The effects of the change in law have hit industrial property owners particularly hard. Steve Owen deputy chief executive of Brixton, one of the UK's largest industrial property companies said: "The effect of this change is that it will take space out of the market. People who want to take space on short-term leases will have less choice and less choice means higher prices."
Owen said Brixton was already considering bringing forward the demolition of 300,000 sq ft of space that was not due to come down for another two to three years.
The introduction of the change in the law has led to fierce opposition from business leaders including the chief executives of Brixton and rival property group SEGRO, as well as industry groups such as the CBI and the British Property Federation.
CBI head of infrastructure Karen Dee said: " The Government needs to monitor this properly and thoroughly and if it is not working they need to revoke it."
Although sources said it was unlikely ministers would reintroduce relief on commercial property rates before the regime had been in place for 12 months, there are provisions within the current legislation for rates to be cut by 50% on empty buildings depending on the state of the economy. Since the change in the law was first proposed over a year ago the commercial property market has fallen around 15% with many analysts predicting further falls to come.
A Government spokesman said the purpose of the reforms were to provide an incentive to increase the number of properties available for business. The spokesman added: "As with all taxes, the Government will keep the reforms to empty property rate relief under review."
Mon, 30th Jun 2008