Business rates after forfeiting a commercial lease?

by Property 118

16:13 PM, 23rd March 2020
About 6 months ago

Business rates after forfeiting a commercial lease?

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Business rates after forfeiting a commercial lease?

I own a commercial property and had to forfeit the commercial lease of the tenant due to non payment of rent. The property remained empty for some time partly due to a legal issue with the ex-tenant and then trying to ensure any new tenant was suitable.

During the period of the legal issue we did not take the risk of letting the property in case the tenant was permitted to reenter the property and continue if they cleared the outstanding debt.

Eventually the property was re-let. However, the council is now looking to recover the business rates for the period the property was empty from me.

My legal advice has stated that the tenant who was removed is still legally liable with regards to the terms of the lease.

Has anyone been through this type of scenario and how have you succeeded in making the ex-tenant responsible? Is there any previous case law we can use?

Many thanks

Saeed



Comments

Ian Narbeth

17:48 PM, 23rd March 2020
About 6 months ago

Hi Saeed
As between the Council and you, you are liable to pay business rates after forfeiture. The lease has come to an end and the tenant is no longer allowed to occupy.

You may be able to claim damages from the tenant but the outcome will depend on his ability to pay.

Hedley

10:14 AM, 24th March 2020
About 6 months ago

I agree with Ian. Once you have forfeited the lease the tenant is no longer responsible. Unless, and this is uncertain, the tenant has applied for relief against forfeiture.

Ian Narbeth

10:16 AM, 24th March 2020
About 6 months ago

I should of course add that the current moratorium on business rates should save you from having to pay.

Martin Bennett

11:41 AM, 24th March 2020
About 6 months ago

Reply to the comment left by Ian Narbeth at 24/03/2020 - 10:16
Hedley
Please confirm the source of your advice that Small commercial LLs, like I am with a few (4) vacant commercial small properties will be entitled to the moratorium on business rates. I’ve gained the impression that it only applies to commercial tenants. Thanks Martin

Smartermind

11:49 AM, 24th March 2020
About 6 months ago

Reply to the comment left by Ian Narbeth at 24/03/2020 - 10:16It is doubtful that the moratorium will be applied retrospectively. No doubt business rates will want to recover previous debts incurred before the lock-down.
Some relief may be available from business rates for part of the period the property was vacant while it was empty. I know in Manchester relief is given for 3 months for an empty property. But that depends on that property being your sole property. If Saeed has a number of properties, then he should have leased the property to a friend on a pepper-corn rent while it was empty for 3 months to claim that relief.

Martin J

15:40 PM, 24th March 2020
About 6 months ago

To clarify, the standard 3 month exemption period (6 months industrial) runs with the property, so may have been applied when the tenant ceased using the property. Note that any of the recently announced reliefs or Small Business Relief only applies to occupied property and it not available to landlords.

Badger

13:34 PM, 30th March 2020
About 6 months ago

Reply to the comment left by Smartermind at 24/03/2020 - 11:49There are companies that will organise the 'peppercorn rent' solution for you.
I don't want to name any as I don't have any direct personal experience of any as yet, although I am looking into this for myself having been advised by a number of seasoned professionals (a RICS surveyor that specialises in business rates and a commercial property managing agent) that the technique is legal.

A bit of googling around should turn up some examples.

The councils hate it for understandable reasons but there is nothing that they can do about it.


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