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Empty Property Relief – where are we now?

With market conditions likely to worsen and lenders appearing to act with undue haste when foreclosing on property companies, so the Government needs to do more to help struggling commercial property owners than just the piecemeal offering served up in the recent PBR.

Certainly commercial property owners could have done with some of Gordon Brown's festive cheer of their own when he announced the surprise emergency rescue for mortgage defaulters in the Queen's speech.

On the face of it deferring mortgage interest payments for up to two years for homeowners who have lost their jobs or suffered a severe drop in earnings, is laudable although the detail may change that, but why not announce a similar deferral scheme for empty property rates?  After all commercial rents have fallen and, according to the RICS, commercial property values are set to halve by the end of next year. In addition, and apart from the number of business failures, tenants are fairly thin on the ground at the moment and alternative uses for redeveloping empty properties are not exactly in demand.

However, the Government seems to have lost sight of the fact that in the case of many commercial property owners, they too have mortgages with banks on their commercial property.  Many of these mortgages will now be held against, what are now empty properties, with little likelihood in the short term to be let or redeveloped, so little prospect of having the means to pay the empty property rates on top of the mortgage payments expected by the banks who, are unlikely to be sympathetic to the difficulties commercial property owners are experiencing in the current downturn.

Gordon Brown for his part has sought to paint struggling homeowners as mere victims of circumstance, who have come a cropper, while – in that well used New Labour mantra – trying to do the right thing.  But like the residential mortgage defaulter who has lost his job or suffered a severe drop in earnings, the predicament now faced by commercial property owners is not necessarily of their own making.  They too are just victims of circumstance yet have received no help from the Government other than the temporary extension of the threshold at which empty property relief becomes payable.  This threshold extension to £15,000 rateable value, will, according to the Chancellor, exempt some 70 per cent of properties from the charge but in reality this 70 per cent of properties represents less than 20 per cent of the total charges raised.   

If the Government, as it says, continues to believe that in the long term that it is right to charge rates when properties stand empty, since they believe this increases incentives to re-let and re-use empty property, then why not allow commercial property owners of empty properties to enjoy an empty property rates holiday for two years in the same way as has been proposed for residential mortgage defaulters and other deferrals announced in the PBR.

This would at least allow commercial property owners a reasonable time to find a new tenant or obtain planning permission for a new use or development, which can take considerably more than the six months on industrial property and three months on all other commercial properties that the Government misguidedly believes is adequate before empty property rates becomes payable.  It would also mean the Government would still get its empty property rates in two years time or sooner if the property is let or redeveloped.

If nothing is done soon then the irony is the largest commercial property landlord could well end up being an administrator, who is exempt from paying empty property rates.  And where would the Government be then?

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