Update on serviced office assessments and rating cowboys

In February, I reported on a potential shift in the way the Valuation Office Agency would manage serviced offices following the decision in Ludgate House.

To recap, Ludgate was about ‘paramount control’ of an office building. Although the case primarily addressed empty rates mitigation, it had implications for serviced offices. The Valuation Office's view was that, even though tenants occupied individual offices, they were on loose, flexible agreements that afforded the landlord with lots of flexibility – including access for cleaning and moving occupiers around within buildings at a whim.

The impact? The Valuation Office proposed it would stop assessing individual offices, where the tenants were responsible for rates (and where most would receive Small Business Rates Relief) and merge the assessments to single rating assessments with the operators responsible for payment. Furthermore, the Valuation Office then intimated they would backdate these mergers to the start of the last rating list in April 2017.

The response from the serviced office industry was of absolute horror – creating a liability when previously there was none and compounding this further by backdating liability for years. The local authorities also did not want backdating – imagine the mess created by unravelling the changes in liability caused by the deletion of thousands of assessments? It was a potential nightmare.

We have spent the last few months working with our clients and our preferred legal team to amend agreements, ensuring they offer the best chance of supporting the retention of multiple assessments with tenants remaining responsible for their own offices. Significant discussions have taken place between operators, trade bodies, and other appointed rating advisors. There is now a chance the Valuation Office will accept agreements that allow serviced office providers to maintain flexibility, all while ensuring tenants retain ‘paramount control’ and, therefore, keep their separate rating assessments.

The bankruptcy of WeWork illustrates the post-Covid downturn in demand for office space, and a backdated change in rating assessments, along with a substantial unplanned liability, would no doubt have sunk others. While the Valuation Office has not formally confirmed its position, common sense might thankfully prevail. The difficulty lies in the fact that they will not provide a ‘recipe’; for what constitutes an acceptable agreement, meaning agreements may need to be assessed on a case-by-case basis.

Back to those rating cowboys

If you cast your mind back to June, I also reported on the rise of rating cowboys. Recent letters and emails from our clients show that the onslaught is not slowing down. It never ceases to amaze me the new and inventive lengths that some of these companies go to hook unsuspecting businesses into upfront fees.

The latest ruse is to suggest that the specialist is a ‘registered agent of the Valuation Office,’ implying they are officially appointed by this HMRC department to distribute savings due to the occupier. This is designed to lend credibility, but registering as an agent with the Valuation Office Agency is something that can be done by anyone, requiring no professional qualification or knowledge of what is a very complex subject.

Claims that mezzanine floors and toilets should not be valued in warehouse properties, false deadlines, and opinions of inflated value are all blatantly incorrect and are helping to justify upfront fees. Judging by what our clients send to us, this tactic seems to work, as mailing is prolific. Unfortunately, it appears that professional bodies such as the RICS and IRRV are powerless to act, and Trading Standards are so overwhelmed that they are unwilling to take on the cowboys. The government has suggested that a more formal registration process is required. This cannot happen fast enough.

In the meantime, if you think you have been caught out and paid a substantial upfront fee, please get in touch, we may be able to help:

• Richard Roberts, Principal Director
• richard.roberts@rvwcs.co.uk
• 07881 503540