Business rates are a valuation connected to the private rental amount of a building, as well as other elements surrounding a property. The rates are due by the right of occupancy, therefore by being able to vacate the business premises through cancellation of the lease, via an early release clause will save money on this charge as well as the rent charges.
In order to cancel a lease and exercise an exit clause, a procedure must be written into the lease with relevant details available. The landlord’s address, phone number, mobile and landline and most importantly their email address should be used, as these are very useful records of correspondence.
It is imperative that the business owner considering renting spends time and due diligence researching prospective landlords. Past renters of the property should be contacted and their opinion, alongside their experience with the landlord, should be considered. Also, how available and helpful was the landlord? Online searches are also important to build up a picture of what may have happened in the future.
It is no good having a cancellation clause if the landlord cannot be found or contacted in order to exercise this clause before the said date is passed. It is also up to the renter to notify the council before and after the property has been vacated via the lease, to pass the liability of the business rates back to the owner of the property.
Sometimes, the renter may struggle to make the landlord aware of their intentions to exit the lease via relevant clauses, which can then lead to undue stress for the renter and affect the landlord’s future rental plans.
It has been the case that confusion has rained and the renter can find it is them who are liable for rates bills they thought were no longer their responsibility. It is therefore important that the renter checks the lease agreement fully and if not completely sure of any clauses, employs a relevantly qualified person to inspect the lease agreement before signing – this expense can be well worthwhile.
There are often many properties available for commercial rent and it may pay to be choosey and spend time looking around as to the type, location and reputation of the landlord before committing to any leases. Also the same may apply to the local council and their approach assisting in removing the liability for the business rates back to the landlord.
It may pay to communicate with the council via email for a record of correspondence which may be needed or useful in the future should there be any confusion.
Once the property is vacated and the lease nullified via a release clause, the landlord then becomes liable for unoccupied business rates. There is a tax relief – (unoccupied rates relief – for a certain amount of time before this charge is due on the landlord).
This means there is an incentive for the landlord to rent the property out again within or at the end of this time frame. Once rented out again for a minimum requirement of time the landlord will then qualify for rates relief again, if the lease is cancelled through a clause, or was simply short-term.
Empty property rates can be avoided by the landlord if premises are leased to a charity or an entity (for example educational facility) that is deemed advantageous to the local community.
The council may allow such a facility to operate rates free, as they would be not for profit. This is good for the landlord, council and local community as the shop is kept operable with the charity benefiting and footfall on the high street maintained.