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Viewpoint - 15/01/2013

Chancellors lip service to empty property

The Chancellor’s passing reference in his Autumn Statement to the effect of Empty Property Rates (EPR) on the motivation of the speculative property developer makes clear that he is listening to, though perhaps not acting in the best interests of, the marketplace.

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By referring to the issue in public, he acknowledges that EPR presents a serious problem for owners and landlords. By continuing to tax the owners of empty property during this period of austerity, the case is being made for investors to abandon the commercial property asset class in favour of alternative investment opportunities. The Chancellor is wilfully squeezing the life out of the speculative development market.

Ignoring the experts

By delaying any easing of the effects of EPR for speculative development until October 2013, and failing even to acknowledge the real world impact of EPR on today’s beleaguered owners and landlords, the Chancellor has also made clear to the industry that it has lost the battle to appeal to his better judgment. The deeply held opinions of industry experts, at pains to persuade the Chancellor of his folly, have been ignored in favour of headline grabbing initiatives and the deft massaging of the numbers.

A gaping hole in EPR anti-avoidance

Perhaps the Chancellor has underestimated the determination of landlords, developers and investors, who are clearly listening to the market and considering their options. The executives of respected UK plcs now regularly put their heads above the parapet to complain about the effect of EPR on their businesses. Some are even going further; Makro, the successful cash and carry business, successfully appealed against an EPR liability levied by Nuneaton and Bedworth Borough Council, arguing that a pallet of documents in a warehouse constituted occupation, and that the timely removal of the pallet allowed a further period of EPR exemption to commence. Not only did the decision reportedly save the business £117,000 in business rates, it blew a gaping hole in the government’s anti-avoidance aspirations.

Similarly, the Vale of Glamorgan Council failed to persuade the court that, even though a landlord had removed some documents from a warehouse in order to commence a new period of EPR relief, the property was “awaiting something to store” and therefore continued to be occupied. The court ruled that, in light of the particular circumstances of the case, the premises had once again become vacant and therefore qualified for EPR relief.

Getting the facts right

It is important to note that facts are paramount. Similar to the well established rating case law surrounding fixed charge receivership, although the supporting legislation for EPR relief may appear impenetrable, the facts of each individual case have the potential to upset the status quo. What is also clear, is that local authorities with much to lose are also preparing for the fight.

When a fiscal risk threatens business survival, it is clear that businesses will take the government on in the courts. Is this really what the Chancellor wants to achieve?

This article is part of Asset Class winter 2013

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