Definitions to know

Question 1

What is S106

Answer 1

Legal agreement between local authority and developer for planning obligations (e.g. affordable housing, local training) to gain planning consent. It is site-specific, and is a figure that can be negotiated.

Question 2

What is CIL

Answer 2

Community Infrastructure Levy charged by Local Planning Authorities for new development area (on the uplift on GIA). It is not necessarily site specific, and can be used on local infrastructure such as schools and healthcare.

Generally, paid 60 days after commencement of development. (for 1st installment).

CIL is excluded for existing floorspace, charities, social housing.

Question 3

What is the Red Book Definition of Market Value?

Answer 3

The estimated amount for which an asset or liability should exchange,
- on the valuation date
- between a willing buyer and willing seller
- in an arm’s length transaction
- after proper marketing
- and where the parties had each acted knowledgeably, prudently and without compulsion

Question 4

What is the Red Book Definition of Market Rent?

Answer 4

The estimated amount for which an interest in real property should be leased,
- on the valuation date
- between a willing lessor and a willing lessee
- on appropriate lease terms
- in an arm’s length transaction
- after proper marketing
- and where the parties each acted knowledgably, prudently and without compulsion

Question 5

What is the Red Book Definition of Investment Value?

Answer 5

The value of an asset to a particular owner or prospective owner for individual investment or operational objectives.

(It is sometimes used as a measure of worth, to reflect the value against the client’s own investment criteria).

Question 6

What is the Red Book Definition of Fair Value? (IFRS 13)

Answer 6

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

(This is required if the International Financial Reporting Standards have been adopted by the client. This definition is also adopted by the International Accounting Standards Board).

Question 7

What are FOUR usual assumptions?

Answer 7

1. Assumed Term
2. Property available to let on the open market by willing landlord and a willing tenant
3. Covenants observed by LL and T
4. Vacant possession

Question 8

What is time of the essence?

Answer 8

• Means a contract’s stated completion time is a condition of the contract.
• Parties must complete their obligations on time.
• If a party fails to comply, the other party can terminate the contract and claim damages.

Question 9

What are the main attributes of an Independent Expert?

Answer 9

1. Evidence - wider evidence
2. Appeal - No appeal
3. Negligence - In theory liable
4. Governed - Lease
5. Outcome - determination
6. Costs - no automatic power to award costs (stated in the lease)
7. Guidance - Surveyors acting as independent experts in commercial property rent reviews (2014)

Question 11

What is Equivalent Yield?

Answer 11

Average weighted yield when a reversionary property is valued using an initial and reversionary yield.

Question 12

What is Initial Yield?

Answer 12

Simple income yield for current income and current price.

Question 13

what is a NIY

Answer 13

the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser’s cost