Viewpoint - 14/03/2012

How to avoid being mis-sold business rates

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In these straightened times, when most businesses are suffering the effects of a sustained economic downturn, it is tempting to give the cold caller on the other end of the line more than the usual short shrift. However, buyers beware!

After all, business rates are one of your largest outgoings. They are due to increase by a whopping 5.6% this year, and the voice on the other end is offering you a rates reduction on a ‘no win, no fee’ basis with no apparent financial risk. They will do all the legwork, and they appear to know their stuff too. So, why not?

Buyers beware - ask for clarification

With a slick line in persuasion, high pressure sales techniques are being deployed by an increasing number of small, and not so small, commercial property rating firms. They trawl the marketplace, enticing the unwary with promises of rates reductions and retrospective payments. Some of their techniques are on the verge of misselling. So, buyers beware. If you are approached, ask for clarification on the following points:

Find out how they calculated their average reduction in assessment

If they quote a very specifically calculated average reduction in assessment, such as 12.1% across the range of properties which they have dealt with in the past, then it appears they have access to very detailed information. So, ask them to calculate the average reduction for properties similar in profile and location to yours, and make sure they tell you how many properties were included in the calculation.

Make sure the fee structure works for you

Understand the fee structure. Never pay anything upfront, and be sure that the percentage of any reduction which will be claimed as a fee by the rating firm is made very clear. Some firms will try to charge as much as 50% of any reduction.

Negotiate contractual agreement

Determine what period the contractual agreement covers. Most agreements are not limited to the current year, can run for five years or more, and may be enforceable in perpetuity. Be aware that any contract which extends beyond the current 2010 revaluation period is at odds with the professional rules of the Royal Institution of Chartered Surveyors.

Check the small print

Read the very small print and, in particular, understand the scope of the abortive fee clause. Some term arrangements are very difficult to cancel, and it has been known for abortive fees to incur a charge of as much as 5% of the occupier’s total rateable value.

Know the risks: rates can go up as well as down

Be aware of the risks on appeal. Rates can go up as well as down and the professional operator should seek to undertake proper upfront investigation before he launches a reckless appeal.

Many businesses use salespeople appropriately and for the most part, they operate on the right side of the law. But for some it is only just. It is for the Royal Institution of Chartered Surveyors to investigate and pass judgement. They need only glance at a transcript of a typical conversation to understand the issues. In the meantime, be on your guard. You have been warned!

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