The Director of Regeneration will be in attendance to provide an overview in relation to Middlesbrough Council’s responsibilities with regard to empty commercial properties in Middlesbrough.
Recommendation: that the Panel determines what further
information will be required for this scrutiny investigation.
Minutes:
The Head of Resident and Business Support was in attendance at the meeting and gave a presentation in relation to Empty Non-Domestic Properties in Middlesbrough.
Middlesbrough had a significant number of empty non-domestic (commercial) properties, within the town centre and throughout the borough, some of which were in poor condition.
Properties like Vancouver House could attract anti-social behaviour, squatters, increase crime rates and decrease local property values and outside investment opportunities.
It was important for the Council to have a strategy for tackling empty properties although it did not have a great deal of power to do so. The majority of empty properties were in the central area of the town. A slide showing the break down of different categories was provided as well as a heat map.
As at September 2024, out of a total of 2522 non domestic properties, 761 were currently empty. The total number of businesses properties in Middlesbrough was 4638, meaning 16.4% were empty. Reliefs were available when properties were left empty. Previously exemptions could be claimed and properties could be used as storage although there had now been a change in legislation. The Valuation Office Agency (VOA) determined the rateable value of properties and when they could be taken out of rating.
When a property became unoccupied the following applied:
• Non-industrial – shops or offices - a 100% exemption was applied for 3 months, followed by 0% relief, a 100% unoccupied charge.
• Industrial - Factories, Warehouses or Workshops - a 100% exemption applied for 6 months, followed by 0% relief, a 100% unoccupied charge.
In all cases, where there might be a change of ownership or leaseholder, the exemption period did not reset. The new ratepayer was only entitled to claim the remainder of any 3 or 6 month exemption period. If these had expired the new ratepayer would be billed for the 100% empty charge straight away.
When properties were taking out of the rating by the VOA, the Council did not have any influence, although pressure was being applied for the VOA to take a different approach. Once properties were taking out of the rating, the owners were less inclined to maintain them. The Council continued to inspect those properties however to check whether any work was taking place on them and try to engage with the owners. If empty properties became unsightly or unsafe, the Council would use what powers it had to intervene. 426 non-domestic properties were currently stood empty in Middlesbrough with zero rate value.
There were several large office buildings in Middlesbrough that the VOA had taken out of rating including Centre North East, Church House and Gurney House. This was lost revenue to the Council since business rates were not payable.
Members were shown a slide showing the top ten empty non-domestic properties with the highest rateable value and maximum annual charge which included, Debenhams Store, DW Sports Fitness and House of Fraser (Middlesbrough Development Corporation).
To try and encourage owners to bring properties back into use there were exemptions from paying business rates for unoccupied properties where the rateable value was below £2900, for listed buildings, bankruptcy or liquidation or prohibited by law. Small business rates relief was also available.
A ratepayer could see their charge increase because of the property becoming unoccupied. For example, if they had been in receipt of Small Business Relief and the property became unoccupied, a 100% charge would become due.
The risks faced by empty properties fell into three main categories. The most obvious was financial loss to the Council, but there was also risk to the building itself; and the risk of the owner incurring legal liabilities.
• Business rates - the financial impact of an empty property - no rates payable for a period (3-6 months), following which full rates became payable. The ability to collect worsened when properties were empty as there were limited options for enforcing when there was no trading and/or a reluctance to pay. Rates avoidance reduced the potential empty charge payable each year.
• Obligations - unless the landlord took active steps to keep the building in good repair and secure, there was a real danger that it would deteriorate or be subject to vandalism and become an eyesore.
• Squatters and illegal use of premises - empty commercial properties could be attractive to squatters. Once squatters were in the building, it could be difficult to remove them.
In addition empty properties might be used for illegal purposes.
The Council was in the process of developing an Empty Property Strategy to include:
• Collaboration with other stakeholders, partners and Council Services such as Street Wardens who could provide intelligence/local knowledge.
• Using legislation that had been introduced to address rates avoidance issues to maximise rates payable.
• A review of properties within the town to identify those that should be in the rating system that were not currently.
• Ongoing - empty property inspection programme and cross-directorate working arrangements.
An element of the new strategy would be identifying where the Council could make the most impact with the powers it had available, by identifying the right route for the relevant property. There was a cross organisation arrangement with the Regeneration Directorate as well as a Business Support Strategy. Advice and direction was available to new business start ups. One thing that had been encouraged was converting former commercial properties into accommodation. Funding was available of up to £14,000 per unit from the Towns Fund, although this was generally only sufficient for small conversion projects. The Regeneration Directorate also worked with owners to try and get their properties occupied.
One option open to the Council to deal with empty properties was by Compulsory Purchase Order (CPO) and the powers around CPO had recently been changed. However, the funding required to implement that legislation was not currently available to Middlesbrough Council. Another option was rental auctions, where the Council could take ownership of a retail unit and auction it off. However, there was not the demand in Middlesbrough for this type of property currently.
A suggestion was made that the Council could be empowered to take ownership of de-rated properties and sell them. However it was highlighted that the Council would then become responsible for the rates and ensuring the property was secure whilst empty and this would incur cost to the Council. The Head of Resident and Business Support suggested more cohesive working with the VOA around the timeframes for properties being removed from the ratings. Modifying current legislation to provide powers that allowed the Council to positively influence and persuade businesses to take a more proactive approach would be beneficial.
It was clarified that the ratable values of properties outside of London were determined by a national calculation which was set by the VOA.
In terms of the success rate of the current investigation strategy it was confirmed that there were two investigation officers who visited and inspected empty properties to check that they were indeed unoccupied and details were kept on a database. In terms of enforcement – this would form part of the new strategy.
The Chair thanked the Head of Resident and Business Support for the presentation.
AGREED as follows that the:
1. Information provided was received and noted.
2. Information requested in relation to the following would be obtained and circulated to Panel Members:
- annual amount of Council Tax due on empty properties in Middlesbrough.
- amount of rents lost on empty properties owned by the Council.
- Middlesbrough share of the national non domestic rates on empty buildings owned by the Council and also on properties owned privately.
- a list of the enforceable powers that are available to use in relation to empty domestic properties.