In the recent Spring Budget announcement, the Chancellor introduced significant changes affecting the eligibility criteria for Empty Property Relief for business premises. Effective from 1st April 2024, properties must now be reoccupied for a minimum of 13 weeks, up from the previous 6 weeks, to qualify for further relief from business rates when the period of occupation ends.
Empty Property Relief allows landlords to be exempt from paying business rates on properties that remain vacant for a specified period, typically up to three months (or six months for industrial and warehouse properties). Previously, if the property was let for six weeks or more at the end of this period, the rates exemption would reset, allowing the landlord to claim relief for another three or six months, depending on the property type.
The motivation behind this change is to curb the practice known as “box shifting,” where landlords repeatedly lease their properties for short periods, often to specialist companies using them for temporary storage, solely to qualify for further Empty Property Relief once the short-term lease ends. Typically, landlords indemnify tenants for the business rates during these short-term leases.
However, this alteration adds a considerable financial burden to landlords who are already facing numerous pressures. Coupled with the planned business rates increase in April 2024, this change is anticipated to exacerbate tenant insolvency, leading to more vacant commercial properties and reduced rental income for landlords who now face higher rates bills for extended periods.
While some landlords have utilized box-shifting companies to mitigate rates bills, others have preferred granting short-term leases to pop-up shops. Nevertheless, the concern arises that the new 13-week requirement might deter landlords from engaging with pop-up shops, as these tenants typically require shorter leases. This shift might prompt landlords to hold out for tenants willing to commit to at least 13 weeks, potentially impacting the vitality of the pop-up shop industry.
Vivienne King, chair of the Shopkeepers’ Campaign, expressed deep concern over the decision, fearing its detrimental impact on pop-up shops. She believes that this change might mark the end of pop-up shops, as landlords may shy away from engaging with shorter-term tenants.
In conclusion, the adjustment in Empty Property Relief criteria presents challenges for landlords and may disrupt the flourishing pop-up shop sector. The full implications of this change remain to be seen, but it underscores the intricate balance between incentivizing property occupation and supporting small businesses in the dynamic commercial landscape.