Commercial Rates Landlord’s liability
The Local Government Reform Act 2014 repealed the pre-existing arrangement whereby a subsequent occupier of a property could be held liable for the unpaid rates of the previous occupier for a period of up to two years. This pre-existing arrangement was considered to be unduly interfering with the operation of the commercial lettings market, particularly from the point of view of making a subsequent occupier responsible for the unpaid rates of a previous occupier.
Fairness at a Price
To an extent the unfairness has been addressed, but it has left landlords with particular responsibilities. No doubt the Local Authorities will argue that if they no longer have the comfort of being able to go after the subsequent occupier, at a minimum they need to be notified when there is a change of occupier. That responsibility now rests with the landlord and there are significant penalties for failure of the landlord to deal with the new statutory requirements. By giving up the right to chase the subsequent occupier, the Local Authority need to know the former occupier is departing so they have an opportunity to collect any unpaid rates.
Section 32 Notice
In the circumstances, landlords need to be aware that they need to serve on the Local Authority a special form available on the Local Authority website called a Section 32 Notification and it needs to be served within 14 days of a change of occupier. Typically the Section 32 Notice requires to be served in the following circumstances:
1. A tenant vacates a premises even if there is no new tenant coming into possession.
2. A landlord consents to a tenant assigning their tenancy to a new tenant.
3. A landlord who is the rated occupier creates a fresh letting resulting in a new tenant becoming the new occupier.
In all of the foregoing circumstances, if the landlord fails to serve the required notice within 14 days of the date of change in occupier, then the landlord incurs a penalty on the 15th day of the equivalent of up to two years of unpaid rates outstanding on the subject property.
Penalty Secured on the Property
It should be noted that this penalty is a charge on the property, i.e. affects the property as if it were akin to mortgage and lasts for 12 years. As such, the landlord could not subsequently sell a property without showing proof that the penalty had been discharged. It is also noteworthy that the Department of Environment, Community and Local Government consider that even if the previous occupier subsequently pays their outstanding rates, this does not have the effect of reducing the penalty imposed on the landlord. This seems quite a harsh interpretation of the legislation and it is not unforeseeable that it might be subject to legal challenge at some point in the future.
For further information, please contact us at fmcmanus@morgancmanus.ie or 047 51011.
FERGAL MCMANUS
Solicitor, Chartered Tax Adviser and Notary Public
Morgan McManus Solicitors