SoE Flashcards
TONE: Can you talk me through your advice for the tone Challenge for the shop in Harrow?
I reviewed the rent of the subject property and comparable evidence from the parade. Following Lotus & Delta v Culverwell, I adjusted and analysed rents, noticing the property was at a “break point” where neighbouring units had a lower tone. Based on this, I advised a tone reduction was appropriate and negotiated a revised Rateable Value with the agent.
TONE: What value significant factors did you consider? How would you value the retail unit if it had a very wide with compared to it’s depth?
TONE: I considered factors like location, size and layout, condition, and tenant profile. If the unit had a wide frontage compared to depth, using the Zoning method, a larger proportion of space may fall into ZA, which typically commands the highest rent per SQM.
TONE: Can you talk me through your adjustment and weighting of the evidence? How would you adjust for a rent free period? Yield? Amortisation period? RICS guidance? Would you adjust for a 3 month rent free period at lease renewal?
In accordance with Comparable Evidence in Real Estate Valuation, 2019 I adjusted and weighted my evidence. I adjusted evidence to account for differences in lease terms. For a rent-free period, I’d spread the rent-free period over the lease term. For yields, I’d adjust based on market conditions and the amortisation period. RICS guidance suggests adjusting for incentives like rent-free periods depends on the length of the period, for instance a 3-month rent period would usually be given for tenant fit out.
TONE: Did you add-on rateable fitout for retail? Case law? If not, why not?
In the case of the subject property, I did not add on a rateable fitout.
The Bunyan (VO) v Acenden Ltd [2023] UKUT 17 (LC) decision has clarified that tenant fitouts should be considered when valuing a property.
TONE: How would you treat post-AVD evidence? How much weight would you give to an assignment or sublet?
Post-AVD evidence can be considered but usually has less weight than AVD evidence. Assignments or sublets would be given less weight unless they reflect market conditions accurately.
TONE: Were there any settlements? Was tone of the list established this far into the 2017 list? If there was a VT decision on one of the comparable assessments, would you consider this good evidence of value?
Yes, I considered comparable assessment evidence and noted that there had been reductions agreed of up to 10% to show market movement.
If a Valuation Tribunal (VT) decision existed on one of the comparable assessments, it would be strong evidence of value and likely guide the decision.
TONE: How did you determine this break point? Could the subject rent just be a low outlier?
I determined the break point by comparing neighbouring properties and noting a consistent difference in tone across units. While the subject rent could be a low outlier, I cross-checked with other evidence to ensure it wasn’t just an anomaly.
MCC: What legislation did you refer to?
LGFA 1988 Schedule 6 paragraph (2) sub-paragraph (7)
MCC: Can you tell me about your advice for the MCC in Staines?
I advised that while the closure of the large department store was a valid Material Change of Circumstances (MCC), there was no evidence to suggest that it affected the value of the subject property, so I recommended not applying an end allowance.
MCC: What was the material day and the date of the MCC?
The material day is the date when the change in circumstances occurred, which was December 2020 and the date of the MCC was December 2021.
MCC: If the material day for the MCC Challenge is 01 April 2017, is this still an MCC Challenge?
Yes, if the material day is April 1, 2017, it is still an MCC Challenge, provided the MCC occurred after the list was compiled and the issue is ongoing.
MCC: How did you determine this was a valid MCC? Did you refer to any legislation? Would crime be considered an MCC?
I referred to the Local Government Finance Act 1988, Section 6, which covers Material Changes in Circumstances. Yes, crime can be considered an MCC if it significantly affects the property’s value or use.
What do you mean by “immediate locality? How do you determine how far the locality can be stretched?
K shoe Shops v Hardy - taken to be the area where sufficient evidence can be found to produce a valuation.
MCC: Talk me through the timescales, duration and severity of this MCC?
The large department store closed in December 2020, the ratepayers representative submitted a check in December 2021, a year after the closure.
The closure of the department store had been ongoing for a significant period, and the agent claimed it affected local businesses. However, the evidence didn’t show that this closure had directly impacted the subject property over time.
MCC: If we took the vacant large department store back to AVD, did the demand at AVD suggest it would soon be occupied? How did you determine this?
At the AVD, I determined there was a buoyant market which was evidenced by the high demand, rising rental levels and low vacancy rates.
I therefore concluded that the vacant store would be quickly re-let at the AVD and I advised this the closure would have no negative effect on the hypothetical rental bid of the subject property.
MCC: Did you consider any rental evidence?
Subject property rent and rents on comparable properties in close proximity to the subject were considered. Evidence showed there were no reductions in rent agreed due to the closure of the large department store. I would consider subject rent based on the physical circumstances at the material day but at the economic circumstances at the AVD.
MCC: Tell me about the comparable evidence?
I also considered the comparable evidence of the agent and gave a low weighting for the following reasons:
o Locality – Some of comps were from a different locality.
o Mode and category – Some of the comps were for offices and were in a different mode and category to the subject.
o 2010 List – Some of their evidence were from the 2010 list and were not comparable due the different economic circumstances at the 2008 AVD.
If the Challenge was submitted a long time after the start of the MCC, what material day would you be restricted to? Could you amend the list any other way other than via the Challenge?
The date of the Check submission.
If I had advised that an allowance would have been reasonable at an earlier Material Day, I would submitted a VON. This is because a VON is not restricted to the material day of the Check DN.
DELETION: Could you tell me about the recommendations regarding the deletion for the office in Cardiff?
I recommended that the proposal was premature and did not meet the criteria to be deleted from the 2017 Rating List.
DELETION: What relevant rating principles did you consider?
- Define hereditament.
- Physical Factors on Material Day - is it in repair?
- No evidence of any works, is in repair, considered to be a hereditament.
DELETION: If there was no scheme of redevelopment, and the property was not capable of beneficial occupation and the repairs were uneconomic, what would you advise?
If the property is not capable of beneficial occupation and repairs are uneconomic, I would advise exploring the possibility of deleting the property from the Rating List.
DELETION: If the property had been redevelopment, when would we bring the property back into the rating list? Are you aware of any changes to completion notices?
The property would be brought back into the Rating List once it is capable of beneficial occupation after redevelopment. The effective date would be based on when it becomes ready for occupation. Regarding completion notices, there have been reforms in some jurisdictions allowing completion notices to be served at earlier stages of redevelopment or refurbishment to speed up the re-entry process.
SPLIT: What legislation did you refer to when determining the correct unit of hereditament? What would you do if this was a serviced office and the 2 tenants occupied by way of licences?
I referred to the Gilbert (VO) & Hickinbottom (S) case law. It defines a hereditament by:
* Being within one or more billing authority areas.
* Having a single rateable occupier.
* Being capable of separate occupation.
* Being a single geographical unit.
* Having a single definable position.
If tenants occupy by licences, they generally don’t have enough control or exclusive use to be considered in rateable occupation.
SPLIT: Are separate entrances always required? Is there exclusivity if an entrance is shared?
Are separate entrances always required? Is there exclusivity if an entrance is shared?
Separate entrances are not always required. The key is whether each occupier has exclusive control over their space. Even with a shared entrance, the occupier can still be considered to have exclusive occupation if they control their part independently.
