Ethical Property Foundation warns charities ‘Beware landlords bearing gifts'

Changes to the way businesses rates are charged on empty property from 1 April 2008 are creating opportunities for charities looking for cheap premises on a short term basis.  But the Ethical Property Foundation is urging charities to beware landlords bearing gifts, as these deals may not be all they seem.
 
A London-based charity was recently offered a large office building rent free for two years.  The landlord is keen to avoid business rates of £50,000 per year for which he will become liable come 1 April if the building is empty.  But the offer came with a sting in the tail.  The charity would not be occupying all of the space that the landlord wanted to lease.  If the charity had been unable to find tenants for the rest of the space, it would have become liable for the business rates.  The landlord was simply passing on his liability for the business rates to the charity.  (The charity would not have been eligible for the 80% charitable rates relief on the parts of the office that it was not using itself).  This risk, plus the costs and hassle of moving, fitting out, and maintaining the new premises turned a dream deal into a potential nightmare.  The charity has decided to stay put and focus their energies on a longer term strategic plan for their accommodation.
 
In an attempt to bring empty commercial buildings back into use, the Government is reforming the way business rates are charged on empty properties.  From the 1 April, owners of office buildings that have been empty for three months or more (six months for industrial buildings and warehouses) will have to pay full business rates.  This change is legislation is likely lead to an increase in short term lettings offered at low or no rent as landlords rush to let their premises before the end of the three month rates relief period.   
 
“These changes may result in opportunities for charities to find low cost premises.  However, we would encourage charities to ask themselves why the premises are empty and to look into the full costs of taking on the space – just because there is low or no rent doesn’t mean it’s a good deal.  There are often hidden costs” said Victoria Howse, Property Advice Manager for the Ethical Property Foundation.
 
Source:  The Ethical Property Foundation (www.ethicalproperty.org.uk)

Further Information The Rating (Empty Properties) Act 2007
Currently, most commercial properties receive 100% rates relief for the first three months that a property is vacant, and 50% rates relief thereafter.  With the introduction of the The Rating (Empty Properties) Act 2007, owners of commercial office buildings across England and Wales will, from 1 April 2008, have to start paying full business rates on empty properties after three months.  Empty factories and warehouses which have traditionally been exempt from business rates, will now only get 100% business rates relief for six months after which they will be liable to pay full business rates.
 
For further information about The Rating (Empty Properties) Act 2007 see the Communities and Local Government website www.communities.gov.uk