Case Study Flashcards
What is a Rating List?
Sets out all rateable values for non-domestic properties in England and Wales.
What is a hereditament?
A property which is, or may become, liable to a rate.
General Rate Act 1967
Any case law relating to this?
Gilbert v Hickinbottom superseded by Woolway v Mazzars.
What is the Check Challenge and Appeal Process?
System where ratepayers or their representatives can challenge the RV on their property.
What is the Check stage?
Confirm the factual information of the property.
What is the Challenge stage?
Challenged against the current valuation.
What is the appeal stage?
Can appeal the decision to the Valuation Tribunal for England.
Are there any time constraints for CCA?
Check - 12 months
Challenge within 4 months of Check decision and 18 months to be resolved
Appeal within 4 months of Challenge decision.
When was it implemented and why?
- To make the rating appeal system more efficient and transparent.
What are the main regulations for 2017 Rate Appeals?
The Non-Domestic Rating (Alteration of List and Appeals)(England)(Amendment) Regulations 2017
The Valuation Tribunal for England(Council Tax and Rating Appeals)(Procedure)(Amendment) Regulations 2017.
What is the definition of RV?
Estimate of the amount a hereditament might reasonably be expected to let from year to year based on three assumptions:
1 - reasonable repair
2 - tenant bears costs of rates, taxes, repair and insurance
3 - tenancy begins on day of determination.
Where can you find the definition of RV?
LGFA 1988 Schedule 6 paragraph 2 as amended by the Rating (Valuation) Act 1999.
What is the lead case?
Westminster City Council v Southern Railway Co, The Railway Assessment Authority and WHSmith and Son 1936.
Where 2 or more persons have occupancy rights over the same premises, the person deemed to have exclusive occupation will be the person who has paramount control of the use of the premises for the particular purpose for which they are occupied.
Leading case on rateability?
John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area (1949).
there are four necessary ingredients in rateable
occupation …. First, there must be actual occupation;
secondly, that it must be exclusive for the particular purposes
of the possessor; thirdly, that the possession must be of some
value or benefit to the possessor; and, fourthly, the
possession must not be for too transient a period
What are the four essential ingredients needed for Rateable occupation?
Actual
Beneficial
Exclusive
Not too Transient.
What is AVD?
Antecedent Valuation Date.
Date which all non-physical factors are considered.
Currently 1st April 2021.
Who is the client?
At the time of the proposal known as Department for Levelling Up, Housing and Communities.
Are they still called the Department for Levelling Up, Housing and Communities?
Ministry of Housing Communities and Local Government.
What is a tertiary location?
An area on the outskirts of towns and cities.
What are primary and secondary locations then?
Primary would be shop in a high street or the main part of a shopping centre.
Secondary would be a shop within walking distance of the main high street.
What important factors do you look for when valuing a retail property?
Size, location, accessibility, parking ratio, tenant quality and mix, and building quality.
What is the definition of a domestic dwelling?
Property is domestic if it is used wholly for living accommodation, includes a yard or garden, a private garage of 25m2 or less, or private storage for domestic use.
What is the Council Tax list?
Every property is given a council tax band if it qualifies as a domestic dwelling.
How did you know the age of the property?
I checked our records. Also, post-war property design was ‘more practical’ so would often get box-shaped properties with low pitched roof with a gable end.
How were the walls constructed?
Traditionally using cavity wall construction.
What is the VOA’s lone worker policy?
• Your calendar should be open to other users
• An estimated start time /end of day should be shown
• Details should be recorded in the order in which visits are to be made
• Sufficient address details should be recorded to identify either the individual property; or (e.g. for external inspections) a specific geographic area
• Ensure your Skyguard lone working protection device is fully charged.
Is there any RICS guidance?
Surveying safely: Health and Safety principles for property professionals.
Tell me about this guidance:
The RICS have introduced the ‘safe person’ concept where ‘each individual assumes individual behavioural responsibility for their own, their colleagues’ and others’ health and safety while at work’.
Also:
RICS Regulated Firms must ensure they provide:
• A safe working environment
• Safe work equipment
• Safe systems of work
• Competent staff.
Did you do a risk assessment?
I did one prior to inspecting.
What is involved in a risk assessment?
- Identify the hazards.
- Decide who might be harmed and how.
- Evaluate the risks and decide on precautions.
- Record the findings and implement them.
- Review the assessment and update if necessary.
- Advise all those affected of the outcome of the assessment and methods of work, or other control measures necessary, to minimize or eliminate risk.
Did you require to wear any PPE?
I did not but I took my personal alarm system with me.
How had the shop been measured?
NIA.
What guidance had been followed to measure the shop?
RICS code of measuring practice 6th edition and VOA code of measuring practice.
What is the difference between RICS and VOA measuring practices?
VOA COMP removes areas with headroom less than 1.5m for GIA and GEA whereas RICS COMP does not.
What is excluded from NIA?
• Entrance halls, atria, and landings used in common.
• Toilets, toilet lobbies, bathrooms, cleaner’s room.
• Lift rooms, plant rooms, fuel stores.
• Stairwells, lift-wells, permanent lobbies, and circulation areas – which do not form usable area.
• Internal structural walls, other projections, chimneys, columns.
• Space occupied by air-conditioning, heating or cooling where it protrudes more than 0.25m into space or renders space substantially unusable.
• Areas with headroom of less than 1.5m.
• Areas smaller than 0.25m between opposite faces.
• Vehicle parking areas (number and type of spaces noted).
What is zoning?
Zoning is a method of reflecting that the most valuable part of a shop is at the front where customers walk past. Zones are typically 6.1m in depth.
Is each zone always 6.1m?
No. Examples include Oxford Street - 9.1m and Islington - 4.6m.
How did you value the air conditioning?
I valued at a back stop rate of £7/m2.
Why £7/m2?
I considered if air conditioning was reflected in the rents. It was not, so I applied the £7/m2 rate which is an agreed scheme for standard retail shops based on years of rental analysis.
Is there any case law relating to air conditioning?
Yes, Iceland v Berry (2019) - Air handling system used in Iceland’s stores falls within the description of manufacturing operation or trade processes and must not be rated.
Can you tell me about Lotus and Delta?
This was an appeal on a shoe shop in Leicester which set out 6 principles of how evidence should be considered for rating.
What are the 6 propositions?
1 – Rent on the subject is the starting point
2 – How closely does that rent resemble the definition of RV
3 – Rents on similar properties
4 – Assessment evidence on similar properties
5 – Can an opinion of value be formed
6 – When no other rents or assessments are available cannot reject the subject rent.
Why did you not accept that the subject rent supported a lower £/m2?
I wanted to see how the subject rent sat within a basket of rental evidence on similar properties in the locality.
How did you analyse the rent?
I considered various factors including proximity to AVD, type of agreement, break clauses, connected parties, type of occupier, condition of the property, rent free, stepped rent, premium, reverse premium, repair and insuring liability, and contributions.
What valuation method did you use?
Comparable method.
Is there any guidance for using the comparable method?
Yes, RICS comparable evidence in real estate valuation.
What makes a good comparable?
A good comparable is comprehensive, very similar or identical, recent, a result of an arm’s length transaction, verifiable, consistent with local market practice, and a result of underlying demand.
What are the 3 categories outlined in the guidance?
Cat A – Direct Comparables
Cat B – General market data
Cat C – Other sources.
What is the hierarchy of rental evidence?
- Open market letting
- Lease renewal
- Rent review
- Independent expert
- Sale and leaseback
- Connected party transactions.
Why didn’t you just accept the agent’s valuation based on the rent on the subject?
I considered the agent’s valuation based on the subject rent and their other evidence. However, I wanted to conduct my own investigations to see how the subject rent sits within a basket of evidence.
What case law addresses mode and category?
City Duck - Scottish and Newcastle (Retail) Ltd v Williams
What was the scenario in the City Duck case?
Two identical hereditaments in the main shopping area of Milton Keynes, one used as a retail premises and the other as a pub.
What did the VO want to do in the City Duck case?
Value both properties as retail premises.
What principle is established by Rebus Sic stantibus?
Must value what is in front of you; a shop must be valued as a shop.
What are the two limbs of the valuation principle?
- Physical changes - tenant restricted to minor alterations.
- Mode or category of occupation cannot be altered.
What rules did Fir Mill v Royton (1960) identify?
1) The property is vacant to let.
2) Property is valued in the current mode or category of occupation.
How should a shop be valued according to the principles discussed?
As a shop but not any particular kind of shop.
What was the main issue in Specialeyes v Felgate?
The Lands Tribunal was asked to decide on the weight to be applied to various rental and tonal evidence to determine the correct Zone A rate for a shop.
What type of rents were given the most weight in Specialeyes v Felgate?
Rents closest to AVD were determined to have the most weight attached.
Why were rents prior to AVD considered useful?
They showed the trend in the market.
How were rents occurring after AVD treated in the valuation?
They were considered last as they may require large and uncertain adjustments to relate them to AVD levels.
How did you adjust for IRI?
I took 5% off the valuation to reflect this.
What is the Effective Date for the 2017 Rating List?
The Effective Date is 01-Apr-2017.
This date was chosen because the Challenge was based on the 2017 Compiled List entry being incorrect.
Why was the Effective Date set to 01-Apr-2017?
The alteration/change was applied to the Rating list for Rates Billing purposes starting from this date.
What rules of conduct did you demonstrate when dealing with this case?
Demonstrated all of them but in particular Rule 3, providing a good-quality diligent service and Rule 4, treating other with respect.
Why did you consider the subjects location to be a tertiary location?
It is located in a sub-urban, mixed use area approx. 1.5 miles from the nearest high street
Why did you compare the subject to other shops even though it is a betting shop?
There was no rental evidence on other betting shops in the locality, however as per the Fir Mill case I treated the property as vacant to let and that the property is valued in the current mode or category of occupation ‘shop as a shop but not any particular kind of shop’
What is the planning use code for this property?
Sui generis - in a class of it’s own
- Is planning use determinative of Mode or Category?
No, as per the City Duck case, Planning – Use Class Order (Permitted Development) cannot be determinative as to Mode or Category of Occupation.
What was the location like and the subject?
Mixed use location
Property located on a small shopping parade with mainly residential properties surrounding it
How did you know it was 1950s build?
I checked our internal records and did my own due diligence and checked the local authority’s planning portal
Ok, if you didn’t have this information, is there any other ways you could tell it was a 1950’s build?
By looking at the brickwork. Properties of this age would often use the stretcher bond. Also, during the post-war period architectural merit was often less important than practicality.
Britain was rebuilding its commercial building stock and resources were limited. External ornamentation popular in the 1930’s ‘art deco’ era was no longer used, again because of limited resources.
What type of defect would you expect in this type of property?
Cracking - possibly from cavity wall tie failure or shrinkage due to the use of stiffer mortar used in this period
Damp issues depending on how the property has been maintained
General wear and tear due to the property being approx. 70 years old
Presence of asbestos - commonly used in this time period
Was there any P&M?
Yes, the property had lighting, heating and air conditioning
What are the P&M regs?
Plant and Machinery regulations 2000
How many classes are there?
4
1 - Power
2 - Services
3 - Movement
4 - Named structures
What class would air con come under?
2 - Services
What was the air conditioning system?
Split system AC – easy to install with no ducting required. More affordable installation. A split system consists of an outdoor unit and an indoor unit that is typically wall-mounted. A split air conditioning can only heat or cool one room or a small space
Any other types of air con?
- VAV – variable air volume (highest capital cost but most flexible)
- Fan coil – usually 4 pipe (lowest capital cost and good flexibility, but higher running cost)
- VRV – variable refrigerant volume (lower capital costs but higher running and maintenance cost)
How did you value the air conditioning?
I used a £7/m2 back stop
Why £7?
- £7 per sq. m for A/C. Based on years and years of rental analysis. Outdated but accepted backstop figure.
Did you consider anything else?
Evidence for valuing AC (established in case law):
1. Comparable rents
2. Comparable assessments
3. If no good evidence, do cost approach
4. Find annual equivalent
5. If unreliable, adopt £7 backstop
Any case law relating to A/C?
- A/C rateable unless used for trade related purposes as held in SC judgement of Iceland Foods v Berry 2018
Ruled that trade process is simply trade carried out in course of trade - keeping food frozen is sufficient. Rejected VO assertion that proviso limited to productive classes of industry - regulations suggested applied to all types of hereditaments. Plant deemed ‘tool of the trade’ and therefore non-rateable.
Which ground did this challenge fall under?
disputes accuracy of RV shown in the rating list
Can you name any other grounds?
- Change to the RV made by the VO
- RV is inaccurate
- Compiled list error
- MCC
- description is wrong
-Effective date is wrong - Address is wrong
- property should be deleted
- property should be split or merged
- hereditament is not shown in the list but should be
- a hereditament shown in the list ought not to be shown in that list
- property or part of the property is exempt
When were you allocated this case?
At the challenge stage - May 2023
When was the challenge submitted?
September 2022
When was the DN sent out?
August 2023
When was the check submitted?
June 2022
When was the check dn sent out?
24 August 2022
What was the effective date?
1st April 2017
Why is the Effective Date 01-Apr-2017?
As the Challenge was on the grounds of the 2017 Compiled List entry being incorrect, the start of the 2017 Rating List (01-Apr-2017) was the Effective Date which the alteration/ change was applied to the Rating list for Rates Billing purposes.
Why did you inspect?
I wanted to gain a better understanding of the subject property and the locality it was situated in
Did you do you a joint inspection?
No, I wasn’t able to organise a time that suited myself and the agent
Talk me through the inspection process
I conducted a risk assessment prior to inspecting.
Arriving at the property, I conducted an internal inspection, followed by an external inspection of the property and surrounding area.
What locality is it in?
It is on the outskirts of Walsall
Tell me about how the retail market was trending in this locality?
Retail in Walsall like the rest of the country was up against the rise in online shopping at this time.
What was the yield?
Evidence from the market sat between 6-7% for shops in Walsall
What type of yield was this?
All risks yield
What is an all risks yield?
a growth implicit yield used in an investment valuation that reflects all of the risks and rewards of the subject property.
In your rental analysis how would you account for size allowance this in you rental analysis?
Add value of end adjustment to get net value
Why did you add this end adjustment to get your Net Adjusted Rent?
This is because the VOA adopt the mantra that ‘As we devalue, we must value’ and vice-versa. In essence this means that as the VOA have given −5% end allowance for size when determining the RV, the end adjustment in the rental analysis will add 5% back on.
Why is your YP multiplier different from Parry’s YP single rate multiplier?
This is because the VOA’ in-house Central Database’s (CDB) default position is to analyse rents Quarterly in Advance
What is meant by the term ‘locality’?
As per K Shoe Shops v Hardy 1983: ‘Locality’ taken to mean area within sufficient evidence to produce a reasonably expected rent and outside which the rent might be different
One of your rents is 1.5 miles away, could this be considered outside the locality? Any case law relating to this?
- Barclays Bank Plc and Poundland Ltd v Moore (VO) [2024] – VTE rejected the VO’s contention that the locality of four retail units for the purposes of sch 6 para 2(7) LGFA 1988 was a reasonable walking distance from each retail unit because many people travelled by car or public transport.
- Tribunal held that a recently constructed and extended shopping centre 12-20 miles away was in the locality of each of the four subject retail units.
- VT put forward general guidance that when deciding whether or not a physical change falls within the locality, the following matters will need to be considered:
1. The nature of retail hereditament, since not all hereditaments will be affected to the same extent.
2. If the shop is within a town centre, what is its catchment area and from where is regular clientele drawn?
3. Does the out-of-town retail park serve the same catchment area and does it directly compete for the same customers?
4. Is the retail park within a reasonable travelling distance either by car or public transport from the appeal property?
How did you determine that a 10% end allowance for ‘Size’ was still applicable?
- The allowance was 1st applied in 2005 Rating List
- Nonetheless, aware that any allowance should not automatically carry over into next Rating List, I reviewed appropriate property and rental evidence in the locality to see if the market discounts for the particular disadvantages the property had.
- I amassed comparable evidence and noted that stand-alone properties with similar issues warranted an allowance of 5 – 12.5% for access. I then used my valuer judgement to establish what % within the range was applicable to the property, and was satisfied that an allowance of 10% was appropriate.
Was it applied to the 2023 list?
All allowances should be reviewed at the start of every list. In this case the allowance has been applied to the 2023 list.
Being a graduate valuer, why were you able to act as both an expert witness and advocate in this case?
Able to act in a dual capacity role as Expert Witness and Advocate as the VTE is deemed a form of mediation.
It is also a more cost effective approach
Would you be qualified to act as expert witness and advocate if the case went to Upper Tribunal (Lands Chamber)?
No, I would need to be an RICS Registered Valuer to act as expert witness and advocate at Upper Tribunal.
What is an advocate?
Duty is to the client
Outlines the facts of the case, case history, cites pertinent legislation and case law
Protect the clients interests and argue for the clients interests
Never be dishonest or misleading
Emphasise the key points of the case and focus on the weaknesses of the appellants case
Does not express an opinion of value
Cross examine the witness
Sum up
When acting as an advocate, a surveyor is able to put forward arguments and conclusions with which they do not necessarily agree.
What is an expert witness?
Duty to the Valuation Tribunal
Explanation of the valuation, providing a confident opinion on the valuation
Explain rental and assessment evidence
Give opinion as an expert
Give reasons why the facts lead to your conclusions
Will be cross examined
When acting as an expert witness, the surveyor is obliged to put forward their genuine opinion, must not omit any evidence or argument that appears relevant to them in reaching that genuine opinion and must be impartial and uninfluenced by those instructing or paying them.
Any guidance?
Surveyors acting as expert witnesses 2023
Surveyors Acting as Advocates, 2nd edition professional statement; 3rd edition guidance note
Were the rates/ yield adopted for each Bulk Class the same?
- No, the rates in the 2017 Rating List adopted for each Bulk Class were different, as follows:
- Shops – 6.5%
- Offices – 7%
- Warehouses – 8.5%
- Factories – 8%
- Land/ Miscellaneous – 9.5%
Why is a 6.5% rate used?
- This yield is essentially the market rate expected for such a retail investment in the 2017 Rating List and is used to determine the Years’ Purchase single rate multiplier.
Where did you establish the 6.5% yield from?
- This default rate of 6.5% for Retail stems from the Reval and Market Analysis Team, who co-ordinate and identify the rates adopted for each Bulk Class in each Rating List.
- However, in carrying out the necessary due diligence, and aware that these default yields are likely to vary within classes depending on such factors such as: age, location, quality, type of tenant etc. – I verified this rate by examining the market evidence in the Walsall Retail sub-market to decide whether this rate was appropriate for the Walsall locality.
Was your analysis over the full term of the lease?
No it was up to the upwards only rent review after 3 years
How did you adjust this rent?
We adjust over a straight line, amortise over the length of the lease or up to the next lease event.
What is quantum?
- Quantum is predicated on the application of the theory of economies of scale, and that rental values for property drop with size (allowance for buying in bulk in effect).
Any case law regarding Quantum?
- Case of Trevail (VO) v C and A Modes Ltd [1967], established a three-stage test for quantum:
- No presumption in favour of Quantum;
- Only comparatively slender evidence is required to establish that the market still allows for quantum in any location;
- Once this is done, positive evidence is required in order to displace the assumption of a quantum
Tell me about the case of O’Brien V Harwood
The case concerns the rateable value of a hereditament on the edge of the city centre of Sheffield, consisting of the right under licence to display advertisements on the flank wall of a warehouse building.
What did it set out?
Three stages:
New list has yet to be challenged and tested by negotiation, so more weight placed on rental evidence.
Over time assessments will be challenged and agreed or determined by VT or accepted by lack of challenge.
Finally, a stage is reached where enough assessments have been agreed or determined or are unchallenged to establish a pattern of values, a tone of the list. The list is then said to have been accepted.
Tell me about Futures London Ltd v Stratford
- Office assessment in central London Subject rent lower than the tone.
- As per Lotus v Delta, subject rent is the starting point, but as the case was heard late in the list, multiple comparable assessments (agreed, withdrawn and unchallenged) outweighed a single rent (even though it was the subject rent).
Before the list had settled the rent would have carried much greater weight but at this later stage rents can now be taken to be subsumed into assessments
Why didn’t you apply £150 to the parade when the subject rent supported this?
The price of £170 is supported by the rental evidence. Adding the allowance reflected disability of the subject being larger and brought it in line with the subject rent
Why did you analyse comparable 2 to IRI?
Our FOR information stated the lease was on a FRI basis.
Agent contended this and stated it was on a IRI basis.
Agent wasn’t able to evidence this.
Requested a copy of the lease but wasn’t able to access one.
However, analysed the rent on both FRI and IRI terms and both supported the current tone
Was the tone supported?
Rental evidence showed the tone was reasonable, subject rent showed the size difference could have been reflected.
Any case law on post AVD rental evidence?
Special eyes v Felgate
If too far post AVD they won’t reflect market conditions at AVD
Less than 6 months after AVD, there may have been negotiations between landlord and tenant
Often ‘large and uncertain adjustments for the passage of time’
Comparable 1 - had the rent gone up or down?
Subject - had the rent gone up or down?
How do you value a composite property?
Why compare the properties using ITZA?
Comparing properties in the terms of the most valuable area
Strips out any ancillary areas
Fairest way of valuing a shop
Consistency of analysis, put everything on the same playing field
Why did you inspect if the factual detail were confirmed at Check?
As the agent was disputing the size allowance, I wanted to see if there was any merit to their claim
Inspecting the property allowed me to compare the subject to the other properties on the parade and in the locality
What is a composite?
A ‘composite’ hereditament is a dwelling (Local Government Finance Act 1992 Section 3(3)) which has domestic and non-domestic parts, specifically one where an appropriate entry will appear in both the Council Tax and Rating List.
