Up to 1 April 2008, landlords of empty commercial properties did not pay business rates, or paid reduced rates, for their empty properties. This empty property rate relief was scrapped by the government from that day, heaping a huge financial burden on landlords and occupiers - a double whammy of a loss of rental income combined with a business rates charge.
The timing coincided with the start of the biggest economic downturn this country has seen for generations, with record numbers of empty commercial properties, particularly on high streets. We have vigorously campaigned against the move, and for the reintroduction of rate relief, with a modicum of success.
Our campaign won the Public Affairs News 'Private Sector Campaign of the Year' in 2009.
Empty rates relief was introduced in 1989 as a response to an ailing property market. The relief allowed businesses to pay lower, or no, business rates on empty commercial properties. For shops and offices this meant three months of 100 per cent relief followed by 50 per cent thereafter. Owners of empty factories and warehouses were fully exempt.
As a result of the scrapping of the relief, empty shops and offices are now only exempt from business rates for three months and industrial property for six months, after which times their owners, or those that have leased the premises from them, must pay full business rates.
The fiscal consequences of the move remain uncertain. What seems clear is that it has had a number of adverse consequences that are having an impact on the economy. These include the delaying of regeneration and redevelopment schemes (as there's no point building new properties that may stand empty and be liable for rates) and the demolition of older empty buildings (with the consequent loss of cheap business space for small and medium enterprises).
It's not just property companies that have been hit - receiving less money in rent and paying out more money in tax. Councils and development agencies are finding it difficult to get their regeneration schemes off the ground. Individuals that have a small portfolio of buildings as a pension for their retirement have found that they are now paying out money rather than receiving it from tenants. And the government, as one of the biggest property owners in the country, has saddled itself with a huge empty rates bill.
The effects are being felt at the moment, but they will also hamper the economic recovery when it comes. In many cases the office and industrial space needed by starting and expanding companies will not be available because property companies and institutions have been unwilling to invest in buildings that could stand empty, and because many empty buildings have been demolished.
Contrary to the original stated objective of the restriction of empty rates relief, it is likely to result in higher rents when the market can sustain them, as delayed development and demolitions reduce the supply of space.
Our campaign gained support from over 125 MPs and led to high level meetings with government and shadow ministers. It generated over 500 articles in the print media and over 150 interviews in the broadcast media. We also created the Empty Rates website, bringing together all those against the unfair tax, which provides a lot more detail on the campaign.
One tangible result of our campaign was the introduction of targeted relief for empty property with a rateable value below £15,000 for the year April 2009-March 2010 - subsequently extended to relieve properties with a rateable value below £18,000 until 31 March 2011.
Unfortunately, despite vociferous support for our campaign from leading Tories and Lib Dems while they were in opposition, and despite our pleas for a further extension of this relief, the coalition government ended low rateable value empty property relief in March 2011.
So the campaign continues – but it will have to change. First, because the localism agenda and decentralisation in local government finance and more generally mean that local authorities seem set to become a more relevant target for the campaign to reintroduce relief than central government. Secondly, because the problem has crossed the border, with Scotland indicating an intention to follow Westminster and restrict rates relief for empty property.