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Rating Of Vacant Properties - 1 Oct 2011

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From 1 October 2011 all empty domestic properties will be eligible for Rates. See attached guidance specifically for landlords (2 or more properties). This has been discussed before. Some further points which may be of interest:

There are 5 exclusions -

Landlords who opt for a 15% discount and pay in one lump sum - Capital Value of all props must be over £150,001

The owner is a developer of a new build which has never been occupied (time limited to a max of 18 months)

Bankrupts (may be some overlap with the second ;) )

Listed buildings

Public body prohibits occupation

Landlords who claim the 7.5% discount (properties have capital value less than £150,001) are not exempt,

The 15% discount will be reduced to 12.5% from 1st April next Year (subject to Assembly approval)

Both of the above discounts require a lump sum payment and registration as a landlord. Many 'accidental' landlords (renting a single property) will neither declare nor pay in one lump sum nor, in many cases I know of, are likely even to have appropriate insurance. I would surmise many would not reach the £150,001 capital value threshold for the 15% discount and exemption in any case.

http://www.nidirect.gov.uk/landlords_allowance_fact_sheet_8_jun11_final.pdf

It would be helpful to know the anticipated income stream for this policy costed by LPS, and the number of vacant properties they estimate to be out there.

Will the policy (logically) free up housing supply - ie owners, including developers (or banks?) sell or rent rather than pay rates on a vacant property?

Will there be any unintended consequences and how thoroughly will it be policed - will local councils be involved?

Will there be a snitchhelpline where you can report the 'tax dodgers' and will govt promote the same stigma as that portrayed in official ads on benefit 'cheats'?

At the very least it is another cost for those in the renting business - particularly for those of amatuer status who may be ill informed and unprepared.

What do contributors think?

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Funny I was just thinking about this. Was looking at a lot of 'forsale' signs dotted about the north coast at the weekend. Most of those are likely to be investment properties rather than owner occupier. Not going to be a good investment if rates are charged. Then I was wondering about other areas - how many newish properties were snapped up by 'investors' during the boom?

My opinion is that the councils will see this as a nice little earner and it will be implemented the same as existing rates. In fact, it may prove harder to avoid.

Unless they figure some way to water it down, then I believe this is a game changer.

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Unless they figure some way to water it down, then I believe this is a game changer.

... imagine many of the buy-and-hold investors suddenly becoming motivated sellers.

There is a possibility that this could cause a rush for the exits.

Only the most deluded believe there is going to be a recovery in the housing market. Realistic investors - who can afford to - will have to make a tough choice and cut their losses. Though, I wonder how many are zombie investors? Who made a massive mistake and can not afford to sell at a loss. Hanging on by their finger nails relying on the forebearance of the banks.

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http://www.bbc.co.uk/news/10445657

The NI finance minister has confirmed that empty homes will be liable to the same rates as occupied homes from October 2011.
Exemption

He said that unsold houses already built, and those that are completed in the next financial year, would be exempt from rates for 18 months.

In subsequent years new unsold houses will get a 12 month exemption.

Sorry, just realised this is an old article.

Edited by Belfast Boy

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Given that most 'investors' probably made a more of an emotional decision based on hearsay to buy rather than a financial one, this small extra cost £50/month+ may grate away at them, nevermind those after the big money will have to pay £100-200/month. People resent rates and will sell up rather than pay money to the gov't when they think they are clever business people.

I'd say we'll see a significant increase in houses for sale, but the lack of foreclosures is allowing the bankrupt to hang on and will allow sellers to hold the prices high as they eek out the last few mugs (but we've been saying that for years now). When will it all end, the gov't can just keep borrowing more to pay off its previous borrowings like the US.

Edited by Ride_on

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A lot will depend on the current state of the property. It appears that this will only apply to 'livable' empty properties. I had hoped that this would mean that all empty properties would be rated. This could have been a chance to encourage owners to do something with all those empty deralict boarded up properties. They would have been motivated to renovate and let, or sell.

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A lot will depend on the current state of the property. It appears that this will only apply to 'livable' empty properties.

Are you sure, I hadn't noticed that before. Jesus if thats the case it will be no change, most of the rented places would fail a fittness inspection (mine did and it was a high end flat..spare room window was painted shut), nevermind houses that have been empty. I suppose if they have to apply and pay for a failed fittness inspection it might also provide some deterant, but really no exemption should exist even if the house is knocked down, unless it is reassigned as garden or whatever. Otherwise these buy-to-hold investors will just have an 'accident' that causes the house to be unfit.

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Are you sure, I hadn't noticed that before. Jesus if thats the case it will be no change, most of the rented places would fail a fittness inspection (mine did and it was a high end flat..spare room window was painted shut), nevermind houses that have been empty. I suppose if they have to apply and pay for a failed fittness inspection it might also provide some deterant, but really no exemption should exist even if the house is knocked down, unless it is reassigned as garden or whatever. Otherwise these buy-to-hold investors will just have an 'accident' that causes the house to be unfit.

I think they have tightened the criteria to capable of being made habitable. If it has no roof it will not be charged but if just needs a bathroom replacement etc, it will still have to pay. I believe there is a new-build developers exemption.

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Are you sure, I hadn't noticed that before. Jesus if thats the case it will be no change, most of the rented places would fail a fittness inspection (mine did and it was a high end flat..spare room window was painted shut), nevermind houses that have been empty. I suppose if they have to apply and pay for a failed fittness inspection it might also provide some deterant, but really no exemption should exist even if the house is knocked down, unless it is reassigned as garden or whatever. Otherwise these buy-to-hold investors will just have an 'accident' that causes the house to be unfit.

See first post for the 5 exclusions - one of which is public body prohibits occupation. I'm assuming a Council building control H&S or demolition order or an unfit for human habitation order or whatever (or perhaps DOE/DSD). A tiny % of vacant properties, I would have thought and fair enough if not abused.

Don't know what the criteria of habitable would be but water, sewerage and electricity connections and accessibility should feature.

Would be interesting to see how many more 'fires' there are after 1 Oct or simply trashed properties.

Remember this is a revenue raising exercise and is not without cost (inspections/staff/admin and eventually enforcement through the courts). The last thing the Assembly needs is another dud policy.

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Article in Agenda NI mag. Sadly not online.

Quote:

DFP expect to raise £10 to £15 million in the first year. It was scheduled for April 2010 but postponed due to the depressed housing market.

A landlord has told AgendaNI that many developers had experienced a "50% loss of wealth, crippling debts or, at best, barely adequate cash flow" over the last four years. "Some have income so low, they qualify for working tax credit" he commented adding that it was hard to find "a working capital to renovate properties at the moment"

Quote ends.

There are 36,000 vacant domestic properties on the valuation list, though there will be some exemptions to vacant rating.

The average Capital Value for a house in NI is £116,000 and whilst rates differ marginally over council areas I think the rule of thumb is to multiply this CV by 0.007 to "guesstimate" actual rates payable.

This equates to £800 per property.

This would bring a total of £29 million for the 36,000 properties so even with exemptions, I think their income estimate is conservative. These are, of course, averages.

Vacant commercial property is rated at 50%, unlike England and Wales which is 100%. We do however have a Rates Freeze which is estimated to save businesses at least 8 million per year.

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http://www.nidirect.gov.uk/index/information-and-services/property-and-housing/rates/your-rate-bill/rating-of-empty-homes/rating-of-empty-homes-exclusions.htm

No exclusions for unfittness unless a public body has prohibited occupation. Also if an owner is suspected to have deliberatly damaged a property 'they have powers to deal with it'.

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I had missed this when first posted. It will maybe chase a few people on because there are so many unoccupied properties where the sellers are just stubbornly staying put. It is asking price or nothing and we need this sort of behaviour moved on.

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UK - also posted on main board - limited relevance here, but of interest nonetheless.

Council tax blow for second-home owners

http://www.telegraph.co.uk/news/politics/8857774/Council-tax-blow-for-second-home-owners.html

Sources emphasise, however, there are no plans to change the rules on relief for "exceptional circumstances" such as homes left empty because someone has died, been moved to hospital or a care home or has moved in with someone else to be a carer.

Instead, ministers are seeking new powers to tax banks and other lenders who repossess homes, forcing occupiers to leave, and then keep the properties empty

Councils will, furthermore, be encouraged to offer discounts to householders who pay bills via the internet while ministers propose letting council tax payers pay their bills over 12 months, rather than over 10 months as at present.

Mr Pickles will also pledge to review the current system which sees tax inspectors treating "granny flats" as distinct properties, meaning families who house a relative in an annex face two separate council tax bills.

In our own circumstances, has the vacant rating had any impact on those that repossess ie does it encourage them to sell as quick as possible - or is it an irrelevance to them in the big scheme of things? If a bank was sitting on a few dozen properties I suppose it would soon add up - if applicable. More relevant to domestic and bust BTLers as newbuilds get a time limited exemption, I assume. Wonder if NAMA has any (not newbuild) that fits the bill/

Edited by Shotoflight

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