Supreme Court backs Nuffield Health in charity rates dispute

The Supreme Court has ruled that health club operator Nuffield Health is entitled to an 80% reduction in its rates bill, concluding a long-running dispute with the London Borough of Merton over non-domestic rate relief for charities. It is a case that, had it gone the other way, could have had major implications for all sorts of properties used by charities, from charity shops and staff accommodation to gyms, swimming pools and health clubs. Charities are entitled to an 80% reduction in non-domestic rates on premises that are used wholly or mainly for charitable purposes. “This decision brings welcome clarity, both for charities and property owners, in a climate where our high streets continue to struggle post-Covid,” said Rebecca Campbell, a real estate disputes partner at law firm Bryan Cave Leighton Paisner. “Charity lets are an increasingly common feature of commercial property, with property owners seeking to reduce exposure to business rates. This decision helps to maintain the status quo and brings certainty for all parties,” she said. The dispute concerns Nuffield Health’s Merton Abbey complex, which it bought from Virgin Active in 2016. Nuffield Health, which runs more than 100 fitness centres, is a registered charity established “to advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit”. After buying the Merton Abbey centre, the gym applied to the London Borough of Merton for the relief. However, it was rejected because the council inspector found the site was not being used wholly or mainly for charitable purposes. Specifically, the council decided that the terms of admission for the gym excluded less well-off residents of the borough, which, the council argued, meant that it did not fulfil the “public benefit requirement” of charities. Nuffield challenged the decision and won in the High Court, which found that the health club was entitled to the discount. The council appealed the decision, and later lost on a majority ruling in the Court of Appeal. The council appealed again. The case was heard over two days by the Supreme Court in March. In a ruling handed down today (7 June) a five-judge panel at the Supreme Court unanimously rejected the council’s appeal and said the gym was entitled to the full 80% relief. The ruling said that Nuffield Health “plainly uses the Merton Abbey gym for the direct fulfilment” of its charitable purposes. This is because, “viewed overall”, Nuffield does satisfy its obligations as a charity even if, at this site, access is not available for those of limited means. Handing down judgment, Lord Sales said the case turned on the interaction between charity law and rating law, both of which date back to 1601. Under current law, “where a trust or other entity is registered as a charity with the Charity Commission, it is concisely presumed that it is a charity and that all its purposes are charitable”, he said. While some charities are established for “the relief of the poor”, others are not. For example, they might be established for education or the promotion of health. While those charities must not exclude the poor, if a charity has multiple locations, “the rich may be served in some locations and the poor in others. In yet other places the rich and poor may both be served alike.” “Some charities use premises for other functions, like staff accommodation, such as a clergy house, or fundraising, such as Oxfam shops. Those functions will only attract relief from rates if those functions directly facilitate or are wholly ancillary to the carrying out of the charitable purposes of the charity,” Sales SCJ said. “In the present case, Nuffield Health is a registered charity. Its purposes of promoting health are therefore wholly charitable purposes. It uses the Merton Abbey gym to further those charitable purposes. Viewed as a whole, the charitable activities of Nuffield Health do not exclude the poor, whether or not they do so at the Merton Abbey gym on its own. Therefore, Nuffield Health’s use of the Merton Abbey gym qualifies for 80% charity relief from rating.” It has been a busy 2023 for real estate in the Supreme Court, with multiple property-related hearings and judgments since the start of the year. Most notably, in February the court ruled in favour of the residents of an exclusive apartment block that is overlooked by the viewing gallery of London’s Tate Modern, in Fearn and others v Board of Trustees of Tate Gallery [2023] UKSC 4; [2023] EGLR 14. London Borough of Merton Council (appellant) v Nuffield Health Ltd (respondent) [2023] UKSC 18 Supreme Court, 7 June 2023 To send feedback, e-mail newsdesk@eg.co.uk or tweet @EGPropertyNews Photo © Danielle Cerullo/Unsplash