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Business Improvement Districts (Property Owners) (England) Regulations 2014

Volume 757: debated on Wednesday 19 November 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Business Improvement Districts (Property Owners) (England) Regulations 2014.

Relevant documents: 11th Report from the Joint Committee on Statutory Instruments

My Lords, noble Lords will know that business improvement districts provide a mechanism for the local business community to come together and agree to fund improvements to its local trading environment.

Introduced in 2004, business improvement districts have proved to be a popular tool, with more than 180 now in operation across England, many of which are now in their second or third term. However, only the occupiers of property—the business ratepayers—currently can vote in a ballot to establish a business improvement district levy to determine what improvements will be made and agree the funding arrangements. Property owners can contribute but only on a voluntary basis and only after the business improvement district has been established. Not only does this mean that property owners do not get an opportunity to influence the activities or services provided by the business improvement district, but the arrangements are arguably inequitable, because all property owners benefit from the business improvement district’s activities but only some contribute financially

Through these regulations, therefore, we are proposing to give property owners the opportunity to promote their own business improvement districts, where primary legislation allows. I say “where primary legislation allows” because noble Lords should note at this point that property owner business improvement districts can currently exist only where there is a ratepayer business improvement district in operation and where a business rate supplement is being levied. This is because the enabling powers are contained within the Business Rate Supplements Act 2009. As the only business rates supplement currently in operation is in London, to fund the delivery of Crossrail, a property owner business improvement district could be established for the time being only in London. We will, of course, certainly consider rolling out the powers more widely once we have had the chance to review the first schemes.

The case for property owner business improvement districts was recognised during Mary Portas’s 2012 review of the future of the high street. This highlighted the role of property owners in the regeneration of town centres, and she recommended that the Government should legislate to allow landlords to become high-street investors by contributing to their business improvement district. The Government accepted this recommendation and in 2013 consulted on the introduction of property owner business improvement districts. Consultation responses supported the principle of establishing property owner business improvement districts and the detailed approach the Government proposed. That approach was that the rules and procedures for property owner business improvement districts should, as far as possible, mirror that of the successful model adopted for ratepayer business improvement districts. These regulations enshrine that approach.

As with ratepayer business improvement districts, these regulations give a large degree of discretion to the business improvement district proposer. The size and location of a BID, the identification of those liable for the levy—and therefore eligible to vote in the ballot—the amount of levy and the activities or services to provided within the BID are all matters to be determined locally and must be clearly set out in a proposal document. Importantly, it is also for the proposer to set out the type of owner who should be liable for the proposed levy. So, for example, that may be the freeholder or long leaseholder, as the proposer sees fit, taking account of local circumstances. The proposal document should also identify the ballot date, the commencement date, a statement of any existing baseline services in the area and a map and description of the geographical area of the business improvement district. The ballot will be organised and run by the ballot holder, who will be the returning officer for elections for the relevant local authority. The ballot holder will be responsible for issuing the ballot papers and announcing the outcome of the ballot. In doing this, the ballot holder is required to state the total number of votes cast, the aggregate rateable value of each property class identified as being eligible to vote, the total number of votes cast in favour of the question on the ballot paper and the aggregate rateable value of each property class cast in favour of the question on the ballot paper

A business improvement district can be established only if the outcome of the ballot confirms that a majority of both the number of persons voting and the aggregate rateable value have voted in favour of the proposals. This mechanism provides protection against the setting of excessive levies. Once a property owner business improvement district has been established, the relevant billing authority will be responsible for issuing bills and collecting the levy, thereby maintaining consistency with the existing ratepayer business improvement district and business rate supplement. The authority will also be required to hold a separate business improvement district revenue account. The billing authority can also veto the establishment of a business improvement district where they feel the activities of the business improvement district conflicts with any of their policies or where they consider that there is a significant and inequitable financial burden on a particular class of property owner.

Noble Lords may also wish to note that there is a right of appeal against the ballot where a material irregularity appears to have occurred. A request to the Secretary of State to declare the ballot void must be made within 28 days of the notification of the outcome of the ballot and can be made by the billing authority, the business improvement district proposer or a person representing at least 5% of those eligible to vote. These regulations allow for the creation of property owner business improvement districts, which I believe will offer a welcome addition to tools this Government have provided to regenerate the high street and help businesses to grow, and will do so via a set of rules and safeguards built on tried and tested ratepayer business improvement district regulations. I commend this order to the House.

My Lords, I thank the Minister for introducing these regulations. I should make it clear that we support the proposition of property owners, the business community and local authorities working together to improve the local trading environment. BIDs themselves have a cross-party pedigree in that it was the Conservative Government who commissioned research in 1997 to assess how they might be established and it was the former Labour Government who legislated for their introduction. I was going to ask the Minister how many BIDs are currently in existence, but the noble Baroness answered that question. I think there are more than 180, with some in their second and third term.

BIDs were driven by a ballot of all non-domestic ratepayers in a proposed area. The idea of a property owner BID is driven, as the name suggests, by the ownership of property rather than its occupation, although a person could qualify under both. Property owner BIDs have developed from the Portas review of high streets. It is understood that the legislation will allow a property owner BID only for areas where there is both a ratepayer BID in place and a business rate supplement being levied. The noble Baroness confirmed that in introducing these regulations. A business rate supplement can be levied by upper-tier authorities in order to fund economic development projects. The Explanatory Note and the Minister today remind us that a business rate supplement is being levied at present only by authorities in London for Crossrail, so it would be possible to have a property owner BID only in London at the current time. Can the Minister say more about why the BRS is seen as a prerequisite for a property owner BID? What does she see as the timing of looking at developing this so that other areas of the country have an opportunity to undertake the same sort of investments? Are there any proposals for the BRS to be levied elsewhere? If not, it would seem that the rest of England is missing out. Perhaps the noble Baroness can tell us what the position in Scotland, Northern Ireland and Wales is in this regard.

I have a number of other questions. Where the property ownership involves a freeholder or a leaseholder, or possibly a sub-lessee, as well as a tenant, who will have the right to vote in a ballot for a property BID? As I understand it, the noble Baroness suggested that it would be for the proposer of the property owner BID to decide who should be on the electoral roll for these purposes and subject to the levy, but it would be helpful to have some clarification of that. Would it always have to be the same type of ownership? Would it be possible for a proposer of a BID to say that it would be freeholders in some instances and long-leaseholders in other instances who would be involved in these arrangements?

As I understand it, the BID must, by its nature, be in place before proposals for a property owner BID can proceed. What happens if there is a conflict between the property owner proposals and the settled BID? The interests of the property owners will not necessarily coincide with those who occupy the properties. Paragraph 42 of the Government’s response to the consultation looks at the prospect the other way round and says:

“As it will be a requirement for property owner schemes to provide information about any ratepayer schemes in the same area, information about the objectives of the ratepayer scheme will be available prior to the property owner scheme”.

I accept that, but what is the position if the property owner scheme ballot and proposals are potentially in conflict with the BID that is already entered into? I assume that people are, in a sense, potentially locked in. The BID cannot run for more than five years but might be terminated earlier. Presumably, this would have to bring the property owner BID to an unexpected end. What would be the position with, say, outstanding contracts of the latter?

The government consultation and responses set down the difficulties for any proposer to identify property ownership. What is the position if there is incomplete identification of property owners in the proposed area? Can a proposal still proceed and what happens if it is subsequently established that a wrong owner has been identified in that process? Can we have some clarity on the rules for multi-property ownership? Paragraph 55 of the government response to the consultation suggests multiple votes but paragraph 9 of the regulations suggests otherwise. Will the noble Baroness clarify whether the double lock will exist for property owner BIDs as well as the existing arrangements? What number of voters will that double lock be? Is it still going to be based on rateable value? In some instances, depending on who the voters are, the rateable value may have to be aggregated. For example, if it is the long leaseholder that can be the subject of separate hereditaments and different occupations. I presume that a local authority, being a business ratepayer, would also be entitled to vote and participate in these arrangements, or perhaps not.

Overall, we can support the thrust of these regulations but note that they are narrowly based. We recognise that successful SMEs are critical to the renaissance of our high streets, not just in London but throughout the country. Given that business rates have already gone up by an average of some £1,500 under this Government, we would look to help such businesses by actually cutting their rates. However, as I said, we support the thrust of these regulations.

I thank the noble Lord, Lord McKenzie, for his constructive comments and questions and for the interesting history that has led to this on a cross-party basis, which is always good. The noble Lord’s first question was why BRS was a prerequisite. It is because that was how the legislation was framed back in 2009. He also asked whether it would be possible for the proposer to decide to levy only on leaseholders or freeholders. The answer is yes: it is at the discretion of the BID proposer to decide who should be levied.

Could I clarify that with the Minister? Can the promoter of the property-related BID choose that it is a freeholder in one case, long leaseholders in another and a sub-lessee in another? What sort of information is expected and on what basis will those judgments be made?

I will get the answer to that in a second. I am guessing that it would not be possible for him to discriminate against somebody because they were a freeholder and that it would be in relation to the types of property that were in the BID.

The noble Lord’s other question was what would happen if there were outstanding contracts when the five years were up. The BID body is expected to manage its business while recognising the potentially limited timeframe in which the BID will exist. It is a short timeframe but it can be renewed. The noble Lord also asked about conflict.

Sitting suspended for a Division in the House.

My Lords, the answer to the question of whether the proposer can differentiate between leaseholder and freeholder is yes, but he has to give a reason why in the proposal. I am sorry, I have completely lost my stride, but I am sure the noble Lord will tell me if I have missed any questions out.

There was also a question on multiple ownership and what would happen if more than one person was levied and voted in the ballot—that is, a leaseholder and a freeholder both have an interest in the property. There could be more than one property owner in respect of the same hereditament. The legislation provides that in those instances the rateable value is divided between the owners for the purposes of calculating the result of the ballot.

On the question of what happens if a BID conflicts with an existing ratepayer BID, the only conflict that could occur would be around what each BID is doing. In practice, we would not expect this to happen and would expect proposers of a property owner BID to be talking to an existing BID company about the value that they could add.

The noble Lord asked whether there are plans to levy business rate supplements elsewhere. Not that we are aware of. We have addressed the question of outstanding contracts and when the five years are up. I think that I have answered all the questions but I am very happy for the noble Lord to intervene if I have not.

I am grateful to the Minister for a good set of replies. Can I come back on the issue of multiple ownership? Let us assume that there was a person who owned two freeholds and each was occupied directly so the divvying up of rateable values was not an issue. When it comes to a vote, you look at the numbers of voters and the aggregate rateable value. If someone owns two properties, are they counted twice for those purposes or only once?

I want to make one final point on the issue of terminating arrangements. Say you had a property owners’ BID—which might be expected to last for three years if there are two years gone of the other one—but the ratepayers’ BID was terminated early for some reason, that would automatically bring to an end the property owners’ BID. Obviously, if that was prior to its expected end, there could be contractual issues. How might that be resolved? Have those situations arisen under ratepayers’ BIDs?

I am guessing that they would follow the same legal arrangements as any contractual arrangements and be dealt with in the proper legal way—breach of contract, for example.

Motion agreed.

Committee adjourned at 7.01 pm.