Buildings destroyed after rate relief is abolished

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The Independent Online

Some landlords are already demolishing buildings, as the financial pain of the Government's removal of business rate relief on empty commercial property hits home.

This week, the industrial landlord O&H Q7 started demolishing a fifth of its Alexandra Business Park, Sunderland, and last week gave approval to demolish a further 37,000ft of the 750,000ft park.

The revelation follows the recent demolition of other buildings. Landlords now have to pay full business rates on empty retail and office property, following a three month grace period – whereas previously they received 50 per cent tax relief. Landlords of industrial space have to pay full rates after six months' grace whereas previously they had full relief.

The British Property Federation's campaign to get the Government to rethink the tax hike it introduced on 1 April is gathering pace. Rodney Walker, chairman of the Self Storage Association, said that he believed a number of buildings are being knocked down because of the tax change.

The SSA, along with other bodies including the British Retail Consortium, CBI and British Chambers of Commerce have joined the BPF campaign, which has set up a hotline

Labour MP for Halifax, Linda Riordan, has received the support of 35 MPs for the tabling of an early day motion to reintroduce empty property tax relief, as given in the Rating (Empty Properties) Act 2007.

In May, storage company Vanguard Holdings demolished an empty pub it owned in west London to make a stand against the empty property tax hike. After the knocking down the pub, Vanguard hoisted a sign over the building that said: "Sorry Mr Brown – no empty rates on this one."

A Treasury spokesman said: "Reforms to empty property relief are aimed at ensuring a fair balance between incentives to re-let property, and giving property owners a period of relief while they manage vacancies."

Malcolm Holmes, agency associate director at GL Hearn, which advised O&H Q7 on the restructuring of the Alexandra Business Park, said: "The rateable value of the units demolished would have incurred a cost of well over £150,000 per year to our clients, a cost that until then had not been necessary. In demolishing these factory units, we have undoubtedly lost some major assets not just as far as our client is concerned but also as in respect of the City of Sunderland."

He added that the units were not at the end of their productive life and that similar units on the estate have been actively occupied and utilised for the last 10 years. Mr Holmes added: "Had the other units not been available I am certain that the businesses now utilising the space would have been lost elsewhere, potentially overseas. They will never be built again in this style."

While The Independent does not know of any big commercial property landlords who are planning to demolish retail or office space, landlords, businessmen and MPs are outraged at the tax change in April. They argue that it is small businesses in some of the countries most deprived areas that will feel the full force of the Government tax changes on empty property. They fear that some industrial parks could be reduced to rubble and small private property investors will not be able to pay the additional tax burden. There is also a fear that small businesses will not be able to find affordable and temporary office space and that when the economy does return to full steam there will be a dearth of commercial properties on the market.

Peter Cosmetatos, finance director at the BPF, said: "The result will be a slowdown in the regeneration of deprived areas and higher rents when demand begins to recover."

Mr Cosmetatos slammed Alistair Darling for causing "even more chaos" to the economy by taxing empty property.

He added: "This is an ill-conceived move that is hurting regeneration and reducing the supply of affordable property that is essential for business.

"Empty rates contradict not only the Government's supposed commitment to delivering sustainable communities but its promise to support business."