commercial-signThe way it is now:

Commercial Rates are a tax, which date back to 1838, imposed by local authorities on the occupiers of commercial and industrial property. The types of property upon which rates are charged include shops, offices, factories, warehouses, hotels, licensed premises etc.

Each year, usually in March, the local authorities strike the rate for their area and it is the person in occupation of the property at the day of the striking of the rate that is liable for payment of all sums due in that year whether or not they remain in the property for the entire year.

However if the person who is in occupation of the premises at the date of the striking of the rate fails to discharge the amount due, the next person who occupies the property can be pursued for the amount of the rates due in the previous two years i.e in default of payment, a subsequent occupier may be held liable.

In cases where the property is vacant at the date of the making of the rate the liability lies with the person /company entitled to occupy the property on that date (i.e. the leaseholder or if there is no lease – the owner).

The owner of a vacant property can then make an application for a refund for each month that the property is vacant provided that the property was being actively  marketed for sale and the owner was unable to secure a tenant or if refurbishment works were being carried out. The person who is entitled to occupy the property at the date of the striking of the rate is the only person who can claim a refund.

Receivers who are appointed to vacant properties will also face the same issues as an owner in that they will need to discharge the rates to attract new tenants.  However as Receiver’s are considered to be the agent of the borrower, albeit that the Receiver is appointed by the Bank, if the Receiver is in occupation of the property when the rate is struck the borrower will be liable for the rates.

Rates are payable in two moieties (halves).  The first moiety falls due for payment as soon as the rate bill issues and the second moiety is payable on 1st of July.

The way it is going to be:

The Local Government Reform Bill 2013, which has not yet been enacted, proposes various amendments concerning commercial rates.  The proposals include provision for payment by instalments, penalties for late payments but most interestingly removal of liability for a subsequent occupier.  This amendment will mean that subsequent occupiers of a commercial property will no longer be liable for the rates arrears from the previous tenants.

This amendment is sure to give the commercial property sector a much needed boost as commercial tenants will be able to move more freely to find a commercial building that is most beneficial to them without the fear that they might be liable for two years commercial rates which belong to the period of time when the previous tenant occupied the building.

It would appear that this amendment would enable a Receiver and/or a Bank to take possession of a property and not be liable for pre-appointment/pre-possession rates arrears.

The Irish Small and Medium Enterprises Association (‘ISME’) have stated that they have been lobbying for this change for many years which they consider will have a positive impact on businesses all over the country. The ISME is of the opinion that the previous method was a major barrier to businesses countrywide taking over new premises.

We will provide a further update once the new legislation is enacted.

Breda Sheahan is a trainee solicitor in the Commercial Department of FitzGerald Solicitors. FitzGerald Solicitors are one of Munster’s leading Commercial Law Firms and are located at 6 Lapps Quay, Cork.


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