Charity shops – illegal?

You might have started to notice a proliferation of Charity Shops on our High Streets. It isn’t, in my view a good sign. Our measure of aspirational shopping – which leads to a feel-good factor doesn’t normally include Oxfam and the like. I have nothing against these shops – they do serve a purpose – but there is a point at which they can destroy a street-scene.

One of the reasons we have seen the growth is not necessarily them selling ‘cheap’ goods – although that does have a part to play in the current economic climate. There is another reason – landlords are pay full business rates on empty commercial properties, but charities using commercial property for charitable purposes qualify for an 80% automatic discount on business rates – plus a discretionary further discount of 20%.

This clearly can be a good deal for the landlord – and likewise for the Charity tenant. Despite the Governments contention that the removal of empty rate relief encourages landlords not to leave premises vacant we all know that this is rubbish. My landlord clients don’t wait for a rising market – they do deals with people who come along.

But something interesting has now happened. The Charity Commission is investigating over 700 deals between charities and landlords where concerns have been raised by local authorities that the properties appear to be unoccupied and that the arrangements may constitute business rates avoidance. This is because we have seen a new phenomena. This is where the Charity make an approach and offer to ‘take’ the premises with some form of sharing – i.e. the landlord pays the Charity (because anything less than the Rates bill is a saving!). They don’t occupy they simply pocket the cash.

The Charity Commission are now saying that they will look closely at these ‘arrangements’ and the Charities might fall foul of the law.

The angle taken is to see that Charities are not being taken advantage of by business…

This I find rather amusing – my dealings with Charities suggest that some (not all) of them know precisely the position they occupy and use it to further their interests. Fair? – I’m not sure. But this little loophole might now get closed – and with it comes more misery for landlords and more vacant shops on the High Street.

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