Valuation Flashcards
Ealing Council RtB
What is the purpose of the valuation
The valuation is to provide Ealing Council with RtB valuations which are then offered to the tenant to purchase the leasehold/freehold interest from the council at a discounted price
Ealing Council RtB
Describe the RtB scheme
RtB is a scheme where secure tenants can buy the property they reside in (at a discount) if they have occupied the property for a minimum of 3 years
Ealing Council RtB
How would you approach the valuation for the RtB
Property is valued in line with s127 of Housing Act 1985
First undertake an inspection to assess condition and assess size of property. Measurements in line with Property Measurement, 2018
Basis of Value, is red book definition of MV, as if the property was sold on the open market
Comparable method – look for similar, ex local authority property which has sold on the open market in close proximity to assess value. Most fitting comparables – similar size, long leasehold (preferably long lease left is more fitting), ex-local authority, similar condition. Sold property over SSTC/For Sale – Hierarchy of evidence
Ealing Council RtB
Describe improvements and RtB valuations
Whilst on inspection, I would ask the tenant to state any improvements they had made to the property. If they have made lots of improvements to the property and the property is in a good condition, I would value as if it was of average condition to prevent double counting within the valuation
Ealing Council RtB
Describe discounts and RtB process
• RtB discount is between 35-70% depending on the length of the tenancy. After 3 years can apply for RtB and 35% discount for house / 50% for flat. Maximum discount for 2021 is £112,800 (London) and £84,600 (rest of country).
Ealing Council RtB
What is the valuation date for a RtB
The valuation date is the date the tenant applied for the RtB
Ealing Council RtB
Describe safety on RtB inspections
Safety on inspection – risk assessment: inspect in pairs, in daylight hours only, wear PPE for covid precautions and keep all windows open within the property for airflow. Ask tenants prior to inspecting to ensure no covid symptoms
Ealing Council RtB
What Red Book exception is the valuation under?
Valuation is under the statutory function valuation exemption is PS1 of the Red Book
Guston School Valuation
Describe the purpose of the valuation
I was instructed to undertake a Red Book Valuation of some land adjacent to Guston School in Dover on behalf of KCC for the potential acquisition of the land to be used as an extension to the Guston School car park (27 car parking spaces) (1.5 miles from Dover Town Centre)
Guston School Valuation
Describe the CoI check undertaken for the instruction
CoI check – undertook a database check/sent instruction email to local offices to check whether landowner was a previous client of CJ (The Land Restoration Trust) and valuation is part of framework contract for KCC (several instructions)
Guston School Valuation
Describe the basis of value used in the instruction
Market Value as defined in the Red Book
Guston School Valuation
Describe the asset to be valued
The asset was 1 acre of grass verge and mature woodland
Guston School Valuation
Define restrictive covenant and how it impacted the valuation
Restrictive covenants are binding conditions that are written into a property’s deeds or contract by a seller to determine what the new landowner can or cannot do with their land under particular circumstances
The restrictive covenant on the title - limiting use of Property to be used as a Playing Field by the general public – instructed to assumed that the restrictive covenant does not impact the valuation as the proposed acquisition will be condition to the release of this restriction on the land
Guston School Valuation
Describe the due diligence undertook before writing the report
looked at title register for restrictive covenants, easements and rights, Local Planning Policy (designated as Open Space use only) – future development is likely to be restricted, No Planning Applications.
Guston School Valuation
Describe the valuation approach used for the property
I used the comparable method of valuation.
Area of woodland used for carparking was 0.25 acres, the rest of the area would stay as grass verge and woodland (0.75 acres)
Valued freehold with vacant possession
I was instructed to assume that the restrictive covenant does not impact on the valuation as the proposed acquisition will need to be conditional on the release of this restriction on the car parking land
Guston School Valuation
Describe the comparables used in the valuation and valuation figures
- £200,000 per acre for the land to be changed into a car park - (assumed covenant would only be released on the area for the car parking only (0.26 acres)
Comparables researched were other land comps with development potential - Best comparable - Woodland area in East Grindstead, freehold land in residential area with potential development uses, subject to planning. Comparables ranged £220,000 to 165,000 so decided that £200,000 was appropriate for the car park land
- £45,000 per acre for the area which is to stay as woodland. Referenced comparables of open space and woodland sold comparables as area designated as open space in local plan
Best comparable was Land at Mote Park, extending 0.45 acres of open space with a former building. Sold for £55,000 per acre. Made adjustments to reflect lack of building - assumed premium. Valued at £45,000 per acre
Overall market value valued at £90,000
Block A Valuation (L3)
Describe the purpose of the block A valuation
To estimate the market value of the new build units to inform sale value – LBW proposing to provide alternative accommodation for nearby council tenants and leaseholders within a new build residential block of flats, ‘known as block A’ – 40 unit block to be built on the Alton Estate, Roehampton as part of regeneration of the estate.
Block A Valuation (L3)
Describe procedures prior to undertaking the valuation
- Ensured competence, undertook CoI check and ensured ToE signed (in line with VPS1)
Block A Valuation (L3)
Name basis of value for the instruction
VPS4 - Market Value definition
Block A Valuation (L3)
Describe limit of liability for instruction
5 million
Block A Valuation (L3)
What special assumptions were assumed for the valuation
that the property is constructed as the layout set out in the plans supplied by the client, planning permission is granted for the development, assume units are completed and ready for occupation
Assumed units to be average specification
Block A Valuation (L3)
Extent of investigation agreed in ToE
yet to be built so no inspection of property, rely on floor areas provided by LBW
Block A Valuation (L3)
As covid 19 during production of valuation report, valuation date April 2020, what was reported during the valuation
Valuation Uncertainty - market activity is impacted in sectors and consider less weight attached to previous market evidence for comparison purposes to inform value. Reported value on material valuation uncertainty as per VPS 3 and VPGA 10 of RICS Red Book Global, less certainty and a higher degree of caution should be attached to valuation than previously.
Block A Valuation (L3)
What did you advise during the valuation
I advised on the market value (outlined in VPS4), which informed the clients shared equity offers which were offered to leaseholders which had requested to live in the new block
Block A Valuations (L3)
Describe the property within the new build block
Ranging 2,3,4 bedroom units all benefiting from a balcony. Special assumption assumed that all properties will be average spec
Undecided planning application for building
Block A Valuation (L3)
What valuation method was used?
Comparable method of valuation (Referred to Guidance note – Comparable Evidence for Real Estate Valuation)
Block A Valuations (L3)
Describe the evidence used in the valuation
- Best evidence was from modern new build transactions, long leasehold interests, similar size to units, average specification, not luxury market as for council tenants/leaseholders of ex-local authority property
- Large variation in the size of the two bedroom units, 18 sqm difference in two bedroom unit size. Not suitable to measure on a per sqft basis as only so much value can be added from the property only being two bedrooms. Without a third bedroom, additional value is likely to be modest. Tried to find comparables of large/smaller two bedrooms to work out price differences - £480,000 to £510,000
Guston School Valuation
How was the valuation priced
Hrly rate for Partner to Graduate ranging 110 - 60
PCE Grantham
What was the purpose of the PCE
The purpose of the PCE in Grantham was to advise on the estimate of the compensation that would be payable should the property be acquired by compulsory purchase.
PCE Grantham
What advice did you provide the client
I advised on the market value of the industrial property which was to be potentially acquired for the regeneration of the site, based on CPO compensation code. I advised on the estimate of acquiring the property in line with compensation code
PCE Grantham
What basis did you value the property on?
Freehold interest - Jewson’s Grantham
As agreed in ToE, valued on a vacant possession basis
PCE Grantham
Why was it agreed with the client that you did not measure the property but also inspect?
Used VOA measurements for measuring the property
PCE Grantham
Describe the heads of claim estimated in the valuation of the property
Market Value (Rule 2)
Loss Payments
Professional Fees
Disturbance (Rule 6)
PCE Grantham
How do you measure industrial Property?
In line with Code of Measuring Practice, 2015. Measurements are Gross Internal Area
PCE Grantham
Describe disturbance compensation
This is compensation for losses and costs associated with dispossession of land but not related to the value of land. Disturbance compensation is provided in s.5(6) of the Land Compensation Act 1961 and forms part of the compensation payable for compulsory purchase.
The lead case on s.5(6) is Director of Buildings and Land vs Shun Fung (1995). The tests are:
i i. Causal connection between acquisition and loss.
ii ii. Loss must not be too remote
iii iii. The law expects claimants to behave reasonably i.e. claimant must mitigate their loss.
PCE Grantham
When was the valuation date
July 2020
PCE Grantham
Describe the property - construction etc
The property comprised of a retail warehouse which is currently occupied by a building merchants and consists of a trade counter, two warehouse storage buildings and yard and parking areas. The buildings appear to be former station buildings which have been converted to their current use.
PCE Grantham
Describe what valuation method used?
Investment method - conventional approach
I researched comparable evidence of sold and rental evidence within / near to Grantham of units approx 17,000 sqft
Best comparable - Unit 4-5 Swingbridge Road which was situated on the outskirts of Grantham and comprises a modern purpose built trade counter and workshop unit. The property is smaller than the subject property with a GIA of 3,365 sqft, the property let for a rent of £5.94/sqft. It is considered that smaller units achieve a rental premium due to increased demand.
PCE Grantham
Describe what yield and rent used and how valued
Yield of 8.5% and £4.50 rent per sqft for unit of 17,000
capitalised the rental value by the YP perp multiplier (8.5% yield) to establish a market value of £900,000. Cross checked this with comparables sold (industrial units)
PCE Grantham
Describe how you advised on the disturbance costs
Disturbance costs – advised on likely disturbance items and costs caused by the relocation of the business (relocated based on site 1km from previous property)
• Fit out costs at the new unit – Jewson’s suggested the costs were in the region of £25/sqft. This was line with other fit out disturbance costs on another compensation claim at Strand East, Stratford. 25/sqft*GIA of new building area
• £15,000 stock transfer costs
