Makro win is ray of sunshine on rates

DESPITE the weather and sporting failure which have dominated the summer so far, rating surveyors and owners of empty property were given a ray of sunshine last week by the High Court.

The arguments surrounding empty rates are well-rehearsed. When an occupier moves out of a property, there is a period of time during which no rates are paid – three months for shops, offices and other commercial properties and six months for industrial and warehousing.

At the end of that period, full rates are payable, even if the property is empty. However, if the property is reoccupied, for at least six weeks, the exemption of three or six months is re-triggered.

The question that ratepayers and local authorities have been tussling over is what constitutes occupation. Thankfully, the High Court has now made a ruling and, splendidly, this is in favour of the ratepayer.

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The cash-and-carry chain Makro had an empty property in Rowley's Green, Coventry, upon which it was incurring a rate liability. Makro moved 16 pallets of documents into the property between November 2009 and January 2010 and paid rates for that period.

Of the 140,000 sq ft shed, it is reported that 0.2 per cent of the floor space was occupied by the pallets. Makro then moved the pallets out, and claimed a further six-month empty rate relief. The court held that this was sufficient occupation to re-trigger the six-month rates holiday, saving Makro just over £117,000 in rates from January to July 2010.

This is rather a coup for the operators of various "imaginative" empty-rates schemes, but also for business with empty properties who will now feel able to re-occupy for a period of time without the cost of full-scale relocation.

Welcome as this ruling is, in the end its relevance may prove of limited value, as the tide may be turning anyway.

After a campaign by businesses, the Royal Institution of Chartered Surveyors, the British Property Federation and others over the past few years, I sense there may be light at the end of a long, dark and expensive tunnel for ratepayers.

Chancellor George Osborne has agreed to look again at the issue and has asked MPs to form a working group to come up with alternatives to the much maligned empty-rates liability. MPs will be pushing at an open door, as the Government has now calculated that central and local government have paid more than £50 million in empty rates themselves! This is reportedly expected to rise to £75 million next year.

Any changes will, of course, be welcome, but it will be too little and too late for many perfectly sound and adequate buildings that have been demolished since empty-rate liability took hold in 2008.

This, combined with the fatal effect of empty rates on new speculative building, means there will be a lack of stock when the market improves.

We can only hope that the MPs' working group comes up with sensible suggestions and the Chancellor adopts them.

So what would I like to see?

No empty-rate liability on new-build stock until it is first occupied.

An exemption of 80% on industrial/warehousing.

An exemption of 50% on commercial stock.

Complete exemption for small business.

I am optimistic that by the time England qualifies for the 2014 World Cup, empty rates will be a thing of the past – recalled only with a shudder!

Robert Hartley is a director of the Nottingham property consultancy Innes England