What are 'back rates' and who must pay them?
The Local Government Act 1989 provides that land used for certain purposes are exempt from rates. This Act and the Cultural and Recreational Land Act 1963 allows councils to impose a maximum of five years back rates on urban farm land and a maximum of ten years back rates on recreational lands, where the properties have previously been exempt from rates but the use of the land has changed, resulting in the exemption being no longer applicable. For example, golf course land used for recreational purposes may have been exempt from rates for many years. If the golf course land is sold and that use is ceased, the council would be entitled to seek payment of an amount equivalent to the rates that would have been payable on that land if it had not been exempt for the previous 10 years. To make this calculation, it is assumed that the value of the land at the time the exempt use ceased is the value of the land for the previous 10 years. The back rates are levied immediately after the use of the land changes, and the owner of the land at that time will be liable.
The vendor of a property should disclose the potential for back rates to the purchaser in the Vendors Statement.
