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Rate Relief Could Boost Development but New Measures Do Not Go Far Enough

 

Exempting new commercial buildings from empty property rates has the potential to kick-start development, transform towns and cities and boost economic growth.

NECC warns that a lack of robust local plans in the region threatens to create uncertainty for potential investors, particularly in large-scale sites for housing.Exempting new commercial buildings from empty property rates has the potential to kick-start development, transform towns and cities and boost economic growth.
That's the view of the region's largest business membership organisation, but it warns that Government proposals to exempt newly built commercial property will fall short of achieving significant economic benefit unless more is done.

The North East Chamber of Commerce has long campaigned for the lifting of Empty Property Rates, which has a negative impact on the growth and development of retail, office and industrial space across the region.

The Government plans to exempt newly built commercial property completed between October 2013 and September 2016 from empty property rates for the first 18 months and allow local authorities to decide when to grant the relief.

NECC Director of Policy, Ross Smith, said: "The scrapping of Empty Property Rates is something NECC has campaigned for extensively. This levy was introduced to address a problem that did not exist in the North East, of property being deliberately left empty. The impact here, where developments have been more marginal, is to weaken the case for speculative development and damage the construction market.

"We welcome the proposal to bring in a temporary exemption. The reduction in rate relief in 2008 damaged the property market and wider economy in the North East. However, these proposals do not go far enough and must be strengthened and extended over time.

"We have the opportunity to encourage more speculative development, boost the construction industry, physically transform our towns and cities and increase economic growth, it's important that we don't waste it with half measures."

Currently businesses and non-domestic occupiers of property pay business rates to contribute towards the cost of local authority services. These rates are charged on most non-domestic premises including shops, offices, warehouses and factories.

Owners are exempt from paying rates for three months after the property becomes vacant, while industrial properties remain exempt for six months. However, after this period, charges – known as Empty Property Rates – are applicable at the full rate, leaving many with a tax bill which they have no means of funding.

Bill Naylor of Naylors Chartered Surveyors, business rates experts, believes that Empty Property Rates exemption should be extended to any property where the ratepayer can demonstrate capital expenditure equal to the rateable value of the property.
"This simple measure would incentivise owners to improve their premises, adding turnover to the construction industry, encouraging tenants to occupy and ensuring that premises do not lie empty."

"With local authorities launching Local Plans and Government easing planning regulation, there is momentum behind the effort to stimulate development across the region," added Ross.

"If the Government is serious about encouraging growth then it must extend the three-year timeframe or make rate relief permanent. Developers must secure finance and gain planning approval before construction even begins – we must give them confidence that this relief will be in place for longer than three years in order to embark on major projects."

John Irwin, Director at Chartered Surveyors and commercial property consultants Storeys Edward Symons, said: "This will have little or no effect as there is virtually no speculative development in the North East. One of the main reasons for this is the increasingly high cost of rates that impacts adversely upon the level of rent and the value which in turn makes securing finance for new builds even more difficult.

"It is good that the Government recognises that Empty Property Rates are causing problems. However, they should be looking at existing empty properties not just the new ones."