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Challenging the business rates of masonic buildings: John Pagella, Grand Superintendent of Works

What’s the use?

How a local council values a centre or hall can have significant financial implications. Grand Superintendent of Works John Pagella scrutinises the fine print

One of the more significant elements within the overhead costs of occupying and running a non-residential property is business rates. While economies can be made in managing most day-to-day expenses, the payment of business rates to local councils is a legal obligation over which there is no direct control.

Business rates are calculated by reference to values entered in local rating Valuation Lists. The rate in the pound is not something about which anything can be done, making it all the more important that every care is taken to see that the property is correctly assessed in the rating Valuation List as this can be challenged. 

The recent experience of Freemasons in Bury St Edmunds offers an example of how important it is to look carefully and, if necessary, challenge individual rateable values. When local Freemasons decided that their masonic centre was no longer fit for purpose, they decided to relocate to a more suitable property that had previously been used as offices and as a warehouse. The building had been assessed by the valuation officer as having a rateable value of £52,000. Currently, rateable values are assessed on the basis of the annual value at which the property would be let as at 1 April 2008, broadly as it stands for its current use.

Planning permission was needed to change the use of the property to a club to be used for masonic purposes. The application was made and, in anticipation of permission being granted, the property was acquired. It was decided that, amid the many things that needed attention during the move, advice was required about the property’s rating assessment. 

Rating valuation involves a complicated interaction between commercial reality and a complex area of law and regulation, so a local firm of chartered surveyors with a specialist rating valuer was instructed to advise. With years of experience in valuing properties used for masonic purposes, the firm investigated and then challenged the rating assessment.

Despite every effort to resolve the case by negotiation, the matter ended up in the Valuation Tribunal where the key issue was whether the change of use from offices and warehouse to a club required adjustment to the rateable value, despite the initial absence of works of adaptation. Significantly, there was no dispute over the fact that the annual value of the building when used as a club for masonic purposes was considerably less than for its former commercial use. 

The decision of the Valuation Tribunal was that the rateable value should be reduced from £52,000 to £16,500, backdated to August 2011. The saving in business rates payable by the Freemasons was in the region of £16,500 per annum.

Delving deep

The Bury St Edmunds case illustrates how the valuation officer can unreasonably resist requests to alter the rating list. In seeking to convince the officer otherwise, one needs to delve deep into rating statute and case law, and also have an appreciation of how the Freemasons operate and how this impacts upon their property requirements.  

The lesson Freemasons can take from this is the importance of being aware of the process that is available to challenge assessments in the rating list, and the need to seek specialist advice when doing so.

It is worth noting that the valuation supporting the revised assessment of £16,500 was based upon local rating schemes for clubs, but also a comparison with the rateable value of other masonic centres across the region. Most masonic centres and halls are owned rather than leased, and for that reason evidence of rental values available from open-market lettings is limited. Despite this, the hypothesis underlying rating valuations has over the years been accepted as requiring valuations by comparison wherever possible – even where the evidence base is narrow.

Clubs come in many guises, some of which are commercial and profitable, while others such as masonic halls may not be. This case shows that for rating purposes, a distinction between use as a commercial club, or indeed for any commercial use, and use as a club for masonic purposes is accepted.

‘Be aware of the process that is available to challenge assessments in the rating list, and seek specialist advice when doing so.’