Leisure & fitness sector should make the most of MCC rating appeals

Fitness and leisure chains have been making considerable gains using MCC –Material Change in Circumstance – appeals against their rateable values, following dramatic changes to the sector over recent years.

Since the start of the recession, this previously thriving sector has had to adapt to survive when cash-strapped customers saw their monthly gym membership as a luxury that could be sacrificed.

Booming fitness centres were suddenly scrambling for members and we saw the dawn of the "no frills" gyms with slashed membership fees that appealed to the cost-conscious customer.

Customers became much more cost led, demanded more flexibility and were migrating to the centres that offered the best deal, not necessarily the most luxurious

Locations were chosen by the new breed of gyms for convenience and parking, not the aspect. Well-equipped gyms were still in demand but swimming pools and steam rooms were more easily sacrificed in the minds of the customer.

New market entrants such as Pure Gym, The Gym Group, Fit 4 Free, Klick Fitness, and Exercise 4 Less began to make their mark and suddenly the market became very defined with the top end luxury offered by operators like David Lloyd and the more "no frills" fitness gyms situated in less salubrious surroundings.

The increased competition – now very evident – opened up a window of opportunity as far as rating appeals were concerned for the sector.

MCC appeals can apply to a series of situations including changes to how a building is used, new developments or competition in the area, or changes to access routes around the premises.

If the Valuation Office Agency (VOA) is made aware of an MCC they need to look at how this affects trade and as a result the notional rental value of the property.

Changes in the level of business or trade are not classed as MCCs as such because rateable values are based on the notional rental values of property rather than the business undertaken by the occupier. But physical changes that affect trade can be taken into account.

One recent example involved Pure Gym in Bournemouth where an MMC appeal was served after a rival gym opened up close by. A 10% allowance was given by the VOA that resulted in a £13,400 saving for the client. Other appeals have seen up to 60% reductions being won.

The fitness market has really been turned on its head during the downturn but with any upheaval there are challenges and opportunities. MCCs certainly fall into the latter and any fitness or leisure centre that has seen significant changes to their trading environment should explore the opportunity to reduce the cost of business rates.