Many believe that the recently enacted Local Government Rates and Other Matters Act 2019 (the “Act”) will have negative legal and practical implications for the commercial property sector.
There are concerns that the introduction of this Act will result in landlords and in some cases, lenders incurring increased costs with landlords assuming liability for their tenant’s failure to pay rates.Most notably, Section 13(1) of the Act provides that, when an owner of a commercial property proposes to sell it, he must pay all outstanding rates and interest to the local authority prior to the completion of the sale. This is a very onerous obligation on the property owner and therefore, will be an additional factor which commercial property owners must bear in mind before deciding to sell a property.There are however many options open to commercial property owners and landlords in order to mitigate the risks posed by the introduction of this Act. These options include the following:
• Actively monitor the payment of rates by tenants;
• Increase the deposit being paid under all new leases;
• Factor unpaid rates and the interest thereon into any decision to determine a lease;
• Factor unpaid rates and the interest thereon into the purchase price for the property; and
• Ensure all new leases provide that the non-payment of rates is an event of default.
This Act also provides that interest will be payable at a rate of 8% on unpaid rates (Section 12) and that unpaid rates will be a charge on the property (Section 14). The Act further provides that the local authority has the power to set-off sums due to a person against sums owed by that person to the local authority (Section 7).If you have any questions on this matter, please feel free to get in contact with a member of the Flynn O’Driscoll commercial property team.