Empty rates liabilities were changed on 1st April 2008

What does this will mean for the commercial property sector?

From 1 April 2008, the Rating (Empty Properties) Act 2007 changed the level at which rates are to be charged on most vacant non-domestic properties from 100%.

The regulations have recently been published and will apply to the calculation of empty rates liabilities for financial years from 1 April.

Under the Unoccupied Property Regulations, the new level of empty rate liability will apply to all "relevant non-domestic hereditaments". These are defined as buildings, or parts of buildings, together with land used for the purposes of the building.

The legislation aims to "increase incentives for property that is empty to be let or for the property and site to be redeveloped and thereby to reduce rents and prices for new and existing businesses". It is hoped that rents will be reduced by around 0.25% to 0.5%. However, there are two major concerns over the structure of the changes.

First, the rate-free periods do not reflect the time needed to relet, regenerate or redevelop major properties. Second, the new revenue (estimated at £950m in the first year and £900m pa thereafter) will not be used to reduce the uniform business rate (UBR). Sir Michael Lyons, in his report, recommended a full review of exemptions and reliefs from business rates: "If the net result of any changes was an increase in the yield, this could be used to reduce business rates for all businesses".

The changes could have reduced the level of UBR by almost 5%. The new liabilities have been introduced without reflecting the new yield in a reduced UBR.

The property sector will therefore be in no doubt that, despite messages about improving the competitiveness, fairness, and efficiency of commercial property, this is at heart a revenue-raising measure.