Shops offered £1 rents on hard-up streets

An article in the Financial Times reports that landlords are offering hard-to-let shops at rents of just £1-a-year. With the number of boarded-up shops proliferating on high streets, retail landlords have become desperate to avoid paying business rates on empty units and are happy to sacrifice the rent. Chains such as Dixons and Card Factory have £1-a-year or business-rate-only deals on a handful of properties.

The business rate system has been criticised by both landlords and retailers, partly because the present round of valuations was made before the recent slump in rents, and partly because of delays in dealing with appeals.

We would not disagree with this criticism. But it should not be forgotten that rents had been soaring in recent years, and tenants have been under pressure from upward-only rent revision clauses, which successive governments have refused to rule out through legislation. It is also the case that changing patterns of shopping have meant that some traditional shopping locations have lost their popularity.

One hopes that the government will not miss the point that things would be even worse if vacant premises were not now subject to the business rate. This at least acts as a useful incentive to keeping commercial property occupied and thus mitigates the effect of recession on employment.

But it really serves to reinforce the case for a switch to assessing the business rate on site values alone, and to raise revenue from both vacant and agricultural land as well as business premises. Once the system had settled down, the number of reviews would be much reduced and it would be possible to amend the valuations annually, to prevent them from getting out of date – which is not practicable if buildings and improvements are included in the assessment.