Shopping centre landlords in the UK are being hit by unexpected running costs and lower rental returns due to local authorities increasingly charging backdated rates for items such as cash machines, photo booths and vending machines, according to Cushman & Wakefield.
The UK government’s drive for localism has given local authorities a direct interest in rates collected in their area as they now retain a proportion of it. As a result, authorities are increasingly instructing the Valuation Office Agency (VOA), which delivers a range of valuation and surveying services to over 4,000 public sector bodies in the UK, to assess extra items which will increase their income.
This has included kiosks, photo booths, ATMs and vending machines as well as pop-up or temporary stores with some shopping centre owners now facing rates bills backdated to 2010 on these items as part of residual mall assessments.
As a result shopping centre operators are facing unexpected bills of up to £75,000/year (€97,000/year) which is increasing running costs and also potentially impacting rent returns, as well as creating service charge disputes.
So far 61 such assessments have been made across the UK, totalling £2.79m (€3.62m) in Rateable Value – equivalent to circa £1.4m (€1.8m) in rates liability.
Mark O’Leary, a director in the business rates team at Cushman & Wakefield, which manages 28,000 UK properties with a total rateable value of £1.3bn (€1.7bn), said: “There is a clear move by local authorities to seek to maximise their rate revenues and this will only increase as ultimately they will retain all rates revenues from their locality under Government changes. We are increasingly seeing examples of the Valuation Office Agency being instructed to inspect shopping centres to look for items in the commercial area of the mall which could attract a rateable value and therefore a rate liability.
“This is a major change in approach and landlords may incur a non-recoverable liability not previously budgeted for. This is turn may affect capital market values going forward. Assessing the whole of the common parts of malls as one also raises a debate around service charge recoverability of rates costs.
“This situation is compounded by recently-introduced restrictions on appeals which mean that in some cases ratepayers will have just six months in which to appeal against these assessments, including having them deleted. We therefore recommend that any affected centre instructs a rating surveyor to review this immediately.”
Catherine Lambert, Cushman & Wakefield’s head of retail property management, added: “Some of these charges go back more than five years and it is imperative mall owners review all their existing leases and licences to tenants specifically looking at where rates liabilities should fall. The legality of assessing the residual mall space is currently being reviewed and may be challenged in the coming months with a view to having assessments, and therefore any liability impact, removed.”
