Rate relief for reoccupied properties

In the 2013 Autumn Statement the Chancellor announced additional rate relief for ratepayers who re-occupy retail properties which have been long-term vacant. In order to qualify for the relief the property concerned must have been empty for 12 months or more before being reoccupied and, when last occupied, have been used wholly or mainly for retail purposes.

To qualify for the relief the ratepayer must re-occupy a qualifying property between 1 April 2014 and 31 March 2016. The new use can be for any purpose, not simply a retail one. Those ratepayers who qualify for the relief will benefit from a 50% rates discount for 18 months from the date the property is reoccupied.

The measure is designed to encourage re-letting of retail units which have been vacant for at least a year. there is no limit on the rateable value to which this relief can apply but the relief itself is limited to a maximum amount by European Union “State Aid” rules. These rules apply to limit to a maximum amount any state aid which is applicable to a particular class of recipient, as opposed to being equally available to all. The maximum amount of such aid allowed under EU rules is 200,000 euros over any rolling three-year period. At current exchange rates this equates to about £165,000 over any three years, or about £55,000 per annum if taken equally over a three-year period.

The application of the EU “State Aid” limit means that the practical benefit of this measure is likely to be limited to smaller properties. But for those properties a 50% discount in the current, very high, level of business rates could well be an attractive incentive. Landlords will no doubt be aware of properties which may qualify and it could have the perverse effect of encouraging landlords to hold out for higher rents on those that do.

Landlords who have been practising empty rate mitigation strategies by intermittent occupation of empty properties may find that this strategy has rendered the property ineligible for the relief as it may not have been empty for the qualifying period.