New commercial rates rules came into force on 1 January 2024, implemented, by way of a lesson in not judging a book by its cover, via amending measures contained in the Historic and Archaeological Heritage and Miscellaneous Provisions Act 2023.
The changes amend the Local Government Rates and other Matters Act 2019 and it should be noted that:
- Failure to pay rates before completion of a sale is now a criminal offence. This means that commitments to pay outstanding rates from sale proceeds after completion will no longer be possible.
- The former practice of having rates payable in half-yearly "moieties" is now replaced by a single annual charge.
- Failure without reasonable excuse to notify the local authority of a change to the liable person for rates purposes, and failure to notify changes to information on the local authority database of relevant properties are now criminal offences.
- A sale of owner-occupied property will trigger a notification obligation on both the vendor and purchaser with other transactions potentially triggering similar notification obligations on both parties, e.g. landlords and tenants on the grant of a lease.
- To ensure liable persons can comply with their obligation to pay rates before completion, they can apply to the local authority for confirmation of any unpaid rates and accrued interest at the expected completion date or confirmation that there are no outstanding amounts payable by that liable person. The local authority must respond within 10 working days.
- Failure by an owner/liable person to pay rates will trigger a statutory charge on the property which continues to apply without a time limit until the rates are paid in full.
- Any charge for unpaid rates falls away on the sale of the property, so there are no consequences for a purchaser if the vendor defaults on its obligation to pay rates before completion. Unpaid rates remain a personal liability of the vendor.
While elements of the changes are to be welcomed, it seems clear that the new rules will require changes to many long-standing practices of legal and property management professionals.
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This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.