In the Spring Budget, the Chancellor announced that from 1 April 2024 business premises must be re-occupied for at least 13 weeks rather than 6 weeks in order to qualify for a further period of empty rates relief when that period of occupation ends.
Landlords can claim Empty Property Relief (making them exempt from business rates) for a business property that is empty for a continuous period of up to three months (or six months for industrial and warehouse properties). If there is then a letting at the end of this period, as the law previously stood if the letting is for a period of six weeks or more, the business rates exemption will “reset” and when that letting comes to an end, the landlord can claim Empty Rates Relief for up to three/six months again.
The Government’s intention here is to inhibit the practice known as “box shifting” in which landlords repeatedly let out their property for periods of 6 weeks or so at a time (often to specialist companies who notionally use the property for temporary storage of “boxes”), in order to be able to claim further Empty Property Relief once the short-term letting ends. The letting terms usually provide for the landlord to indemnify the tenant for the cost of the business rates due during the period of the tenancy.
This change will significantly add to the financial burden on landlords already facing a multitude of pressures. The planned business rates increase in April 2024 is likely to push more tenants into insolvency, resulting in even more empty commercial properties and reduced rental income for landlords who will now face higher rates bills and for longer periods as a result of this Budget change.
While some landlords have been using these “box shifting” companies to help mitigate their rates bills, others having been granting short term leases or licences to pop-up shops. However, since these types of tenants tend to require lets of shorter terms than 13 weeks, there is a concern that this latest Budget measure might dissuade landlords from letting to pop-up shops, preferring to hold out for a tenant or licensee who will take the premises for at least 13 weeks.
Indeed, Vivienne King, chair of the Shopkeepers' Campaign, said she was “deeply concerned” about the decision, saying it “will bring down the curtain on pop-up shops”.
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