Empty Properties Still Bring Costs

Entrepreneurs with ambitious plans to redevelop their business premises could still face costly charges – even while the building is unfit for use.

Anneka Sohal, a Solicitor in Martin-Kaye's Corporate and Commercial Property department, warns that owners should be aware that business rates would probably still apply during the redevelopment phase.

If your business needs new commercial premises, a good way forward is to find a suitable vacant site and redevelop it. Careful design will ensure the redeveloped building will match the needs of your business perfectly – on the other hand though, major building work can take time, during which your building may well stand empty.

“You may presume too that during the redevelopment phase when you’re unable to use the building, that your business rates will cease to apply. But court cases in the last few months have shown that this is not the case, so business owners should prepare themselves for ongoing costs throughout the building work.”

Anneka said a recent case had involved the owners of a vacant floor in an office building who decided to redevelop the area into three self-contained flats.

“To carry out the work, the air conditioning system, ceiling tiles, sanitary ware and electrical wiring all had to be stripped out, and so the owners claimed they should not be liable for business rates due to the state of the building.

“Despite the local valuation officer disagreeing with their opinions, the Upper Tribunal Lands Chamber ruled in favour of the owners and said the building should only have a rateable value of £1. The officer took the case to the Court of Appeal who ruled that removing items like the sanitary ware did not make the property unfit for occupation. As such, they overturned the Upper Tribunal’s decision and said the owners must pay the business rates in full throughout the building works.”

Anneka said the court’s decision showed the only time the owners of a commercial building undergoing redevelopment would be free of business rates charges would be if the building was considered to be beyond economic repair.

“Business rates would be waived if the only sensible option would be to knock the building down and build something else in its place – so unless a business owner plans to start from scratch like this, then business rates will still need to be paid in full.”


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