In this series of articles, CBRE Scotland answers questions on business rates – this week looks at empty property charges.
Question: The tenant of an industrial unit in my portfolio vacated their unit today as their lease had expired. Do I now have to start paying empty property rate charges?
Brian Rogan: In short, it depends on how long the property was vacant before it returned to you and how long it will continue to remain vacant.
Vacant industrial properties (for example factories, warehouses etc) did not attract any empty property rate charges prior to 1 April 2016, but from that date they are levied at 90 per cent of the fully occupied rate charge. They apply after a six month period of grace, starting from the date of vacation, during which there is no liability. Consequently, if the property is re-let within the period of grace, you should avoid any empty property rate charges altogether.
The period of grace runs with the property and is not re-set with a change of ratepayer. In this case your tenant did not use up any of the period of grace, therefore your liability will only start after six months from now. However, if your tenant used up some or all of the period of grace before their lease termination, you will only benefit from any unused residual period.
If the tenant vacated the property more than six months before lease termination, your liability for empty property rate charges would commence immediately on the lease expiry.
There are two other important points to mention. Firstly, certain mitigation measures can be taken to reduce empty property rate charges after the period of grace has expired. Secondly, the period of grace does not apply to vacant non-industrial properties (for example shops, offices etc), although a 50 per cent discount in rate liability does apply for the first three months following vacation.
• Brian Rogan is head of rating at CBRE Scotland