Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

RICS APC - YN > Valuation Examples > Flashcards

Valuation Examples Flashcards

1
Q

What was the market value of Lebanon Park?

A

£3.4million

(£1,185 per sq ft)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Can you run me through your valuation of Lebanon Park?

A

Checked competence, independence, terms of engagement
Purpose: Purchase
Basis of value: Market Value
Desktop research before inspection
Inspected & measured
Drafted report
Searched, verified, assembled comparable evidence & spoke with local agents
Adjusted comps
Analysed comps
Reported on Value
Advised client on the Market Value of the property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Can you run me through your valuation of The Circle?

A

Checked competence, independence, terms of engagement
Purpose: Inheritance Tax purposes
Basis of value: MV as defined in the Inheritance Tax Act 1984 (S160) which is broadly equivalent to the Red Book definition of MV
Desktop research before inspection
Inspected & measured
Drafted report
Searched, selected, verified, comparable evidence & spoke with local agents
Assembled comps
Adjusted comps
Analysed comps
Reported on Value
Advised client on the MV of the property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What were your strengths and weaknesses of Lebanon Park?

A

Strengths:
- Located in the popular residential area of Twickenham
- Quiet cul-de-sac location
- Attractive period property
- South west facing rear garden
- Off street parking

Weaknesses:
- Small garden which is somewhat overlooked
- Plot backs onto road

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Why did you the recommend to your client to put forward a cash offer? (Lebanon Park)

A
  • Client wanted to secure the property at the best price
  • Cash offer more attractive to vendor as speeds up a sale significantly as there are fewer hurdles & usually less risk CHECK
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How did you carry out the report in accordance with the red book? (Lebanon Park)

A
  • Reported in accordance with the minimum requirements set out in the Red Book
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What were your strengths and weaknesses of The Circle?

A

Strengths:
- Established area of south east London with good local amenities and Zone 1 & 2
transport connections
- Allocated parking space in underground car park
- Balcony
- 24-hour concierge

Weaknesses:
- No longer considered a new development
- On site leisure facilities are not included within service charge
- Requires some updating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What was your opinion of Market Value of The Circle?

A

£500,000

(£894 per sq ft)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Gledhow Gardens - Who sets the fair rent? (submission)

A

The Rent Officer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Gledhow Gardens - What is fair rent? (submission)

A

The maximum rent a landlord can charge a regulated or protected tenant.
CHECK WITH JOHN

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Gledhow Gardens - When can a T/ LL apply to the VOA to re-register the fair rent at a property? (submission)

A
  • A LL or a T can apply to the VOA to re-register the fair rent at a property 21 months after the effective date of the previous registration
  • The application (also know as RR1 Form) must specify the rent that the applicant wants the Rent Officer to register and contain other prescribed particulars
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Gledhow Gardens - How do you calculate the capped (Maximum Fair Rent Order 1999) rent? (submission)

A

The existing registered rent multiplied by a figure (which based on the change to the Retail Price Index from the last registration to the current registration – found on ONS website)
Plus 5% (or 7.5% in the case of first registration), then rounded up to the next 50 pence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Gledhow Gardens - What does the Rent officer consider? (submission)

A
  • The state of repair of the property
  • The character of the property, its locality and its age
  • How much furniture is provided and what it is like
  • Any premium lawfully paid.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Gledhow Gardens - What does the Rent officer NOT consider? (submission)

A
  • The personal circumstances of the landlord and the tenant
  • Any disrepair for which the tenant is responsible
  • Any improvements that the tenant has made which he or she did not need to make under the terms of the tenancy.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Gledhow Gardens - How do you calculate the uncapped rent? (submission)

A
  • Start with the market rent of the flat calculated using the comparable method
  • Deduct for T obligations under the tenancy which are more onerous then ASTs (higher for houses (FRI) than flats (IR)
  • Deduct for T improvements
  • Deduct for scarcity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Gledhow Gardens - What are tenant obligations for a flat typically? (submission)

A
  • Would check the lease first
  • Tenants of flats under Rent Act 1977 are typically responsible for the internal repair and maintenance of the flat
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Gledhow Gardens - What is scarcity? (submission)

A

Where the imbalance of supply and demand for rented dwellings has the effect of inflating the rent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Gledhow Gardens - Which rent (uncapped/capped) did you recommend in your client should include in their application to the VOA? (submission)

A

The higher of the two rents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Gledhow Gardens - What is the Rent Registration process? (submission)

HOW WOULD YOU PHRASE THIS QUESTION - ASK VICKY

A
  • A LL or a T can apply to the VOA to re-register the fair rent at a property 21 months after the effective date of the previous registration
  • The application (also know as RR1 Form) must specify the rent that the applicant wants the Rent Officer to register and contain other prescribed particulars
  • On receipt of the application the Rent Officer will write to both parties confirming receipt of the application and inviting either side to request a consultation to discuss the application
  • If no consultation is requested the Rent Officer will carry out their valuation and send a copy of the new Rent Register to both parties
  • The LL must then serve a Notice of Increase on the T
  • Both parties can appeal the Rent Officer’s determination within a given time frame and the matter will be referred to the First-tier Tribunal for determination
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Gledhow Gardens - When does the Maximum Fair Rent apply? (submission)

A

Applies to all fair rent registrations made to rent officers since 1 February 1999 as long as a fair rent has previously been registered on the property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Gledhow Gardens - What are the rules of succession? (submission)

A
  • Only the original Ts spouse or civil partner can succeed to a regulated tenancy. To qualify the spouse or civil partner must have lived at the premises immediately before the death. The successor must have lived with the tenant for 2 years prior to death
  • The original Ts child would success to an assured tenancy but only if they had been living at the property with the T for 2 years prior to death

On the death of the first successor a member of the first successor’s family who:
- Had also been a member of the original tenant’s family
- Had lived with the successor for two years prior to the successor’s death will succeed to an assured tenancy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Gledhow Gardens - When do the capping provision not apply? (submission)

A
  • If there is NO existing registered fair rent (ie. it is a first registration)
  • Because of a change in the condition of the property or common parts and, as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord the rent at the time of the last registration would have been at least 15% more
  • It is important to emphasise that the 15% increase test is for increases that are directly attributable to the change in condition of the property NOT due to a change in general rental levels in the market
23
Q

Gledhow Gardens - How did you ascertain if the tenant in compliance with their obligations? (submission)

A

Reviewed their lease & their obligations

When inspecting the property, was aware if anything was suspicious. Typically, subletting for example is not allowed.

24
Q

Gledhow Gardens - What is the significance of the Retail Price Index (RPI) in determining the capped rent? (submission)

A

It reflects inflation & helps in figuring out rent increases over time

25
Q

Gledhow Gardens - What are the different obligations between the tenant of a AST to a tenant of Rent Act? (submission)

A
  • Would have to check Rent Act 1977 lease obligations
  • The obligations of a Rent Act 1977 are more onerous than the tenant of an AST
  • But generally Rent Act 1977 tenants have the responsibility for the maintenance and repairs and internal structure whereas AST tenants would call a landlord
26
Q

Gledhow Gardens - What rent will the Rent officer register? (submission)

A

The lower value

27
Q

Gledhow Gardens - What are the principles of the Rent Act 1977? (submission)

A
  • Applies to all residential tenancies created before 15 January 1989 (save for those types set out in the first part to the Act – eg. holiday lettings, agricultural tenancies)
  • Introduced rent regulation
  • Introduced long term security of tenure
  • Introduced rules of ‘succession’ which change what happens to the tenancy after the tenant dies
28
Q

Gledhow Gardens - Please can you talk me through the process of calculating the fair rent? (submission)

A

Two valuations are to be carried out:
- Calculate the uncapped rent
- Calculate the capped rent

The Rent Officer will register the one which produces the lowest value

29
Q

Portfolio - Central London - Can you elaborate on the process you undertook for property inspections and why were only vacant properties chosen? (submission)

A

Four step process:
- Desktop
- Locality
- External
- Internal

Vacant properties were chosen because of ease of access + it is a mixed tenure portfolio some of the properties the client doesn’t have the right to inspect ( CHECK WITH JOHN)

30
Q

Portfolio - Central London - What was the purpose of acquiring a full tenancy schedule from the client? (submission)

A

Essential for us value their portfolio and gain a better understanding of their portfolio
Understand any changes
Update any tenancy details
Changes to passing rent or ground rent
Used it to update our records & valuation system

31
Q

Portfolio - Central London - How did the details of sales, purchases, and refurbishments over the year factor into the valuation? (submission)

A

Changed the valuation
Can remove any properties that have been sold
Can add any properties that have been purchased
Refurbishments of properties increasing the value of existing assets (better specification)

32
Q

Portfolio - Central London - Can you run through this valuation process?

A
  • Received instructions from the client
  • Checked competence, independence and signed and returned ToE
  • Valuation date= 31st September
  • Received tenancy data - mid-early September
  • Inspect a selection of their vacant properties
  • Upload the updated tenancy schedules to our valuation system
  • Comp search for all the properties to ascribe values to all units
  • Throughout instruction, there was regular client meetings throughout the year where the client would update us on any changes to the portfolio and we would give an indication of where values were at
  • Reported in draft to the client to their financial controller and they conducted internal checks
  • Finalised the valuation
  • Meeting with the auditors to go through the valuation and answer any queries they might have
33
Q

The Circle - Can you explain to me what the difference between the definition of market value is in comparison to the definition of market value for a tax valuation? (submission)

A

The difference is that the market value for tax valuation reflects the bid of a special purchaser in the market and assumes the asset is sold in lots to achieve best value

34
Q

The Circle - What are the drawbacks of using online databases?
(submission)

A

Need to be verified with another source
Sometimes missing information
CHECK WITH PHILLIPA

35
Q

The Circle - What do you need to consider for an inheritance tax valuation that you wouldn’t for your standard valuation? (submission)

A

The date of the death of the owner

36
Q

The Circle - Where can I find the definition of Market Value ? (submission)

A

VPS 4 of the Red Book 2022

37
Q

The Circle - Where can I find the definition of Market Value (for tax purposes) ? (submission)

A

UK VPGA 15.2 Basis of value

Inheritance Tax (IHT) in section 160, Inheritance Tax Act 1984

38
Q

The Circle - Is hope value to be included in the statutory MV? (submission)

A

YES

39
Q

Lebanon Park - How did your advised Market Value impact the client’s decision-making process? (submission)

A

My advised Market Value helped the client make a more informed decision about what offer they should put forward to acquire the property

Their offer was subsequently accepted by the vendor

40
Q

Lebanon Park - How did your advised Market Value impact the client’s decision-making process? (submission)

A

My advised Market Value helped the client make a more informed decision about what offer they should put forward to acquire the property

Their offer was subsequently accepted by the vendor

41
Q

Lebanon Park - Why does a purchase report fall outside of the Red Book? (submission)

A

As you are just providing advice
CHECK

42
Q

Are draft valuations signed reports?

A

NO

43
Q

Lebanon Park - Why did you decide to follow the Red Book best practice guidelines even though your report fell within the exemptions of PS1? (submission)

A
  • It is best practice to follow the Red Book
  • Shows clients that we uphold the highest level of professionalism
44
Q

How would you advise a client if a property is subject to a statutory tenancy?

A
  • Harder for a client to regain the property with vacant possession
  • To be able to recover possession from a statutory tenant, a landlord must obtain a court order. The grounds for possession are set out in Schedule 15 of the Rent Act.
45
Q

How did you go about valuing properties that were subject to statutory tenancies?

A
  • Value it with FVP
  • Deduct 25-30% (which is based on marked-based/norm)
46
Q

How would you search for comparables a statutory tenancy?

A
  • Auction Results
47
Q

Gledhow Gardens - What adjustments would you be making for scarcity?

A

20% (first-tier tribunal)

CHECK WITH JOHN

48
Q

Gledhow Gardens - What adjustments would you be making for s70 deductions for a flat?

A

Flats - 35% (first-tier tribunal)

Houses - 55% (first-tier tribunal)

49
Q

The Circle - Can you explain how different that instruction would have been if the date of death was quite a long way before the date that you did the inspection? How would that impact your valuation and what you have had to consider?

A
  • Ask if anything has changed to the property between the date of death and the inspection date e.g. ask if any improvements had been made between the date of death and the inspection date
50
Q

Portfolio - Central London - The tenancy schedule. Is that something that you verified yourself?

A
  • Valuation is based on the information provided by the client
  • Provided with tenancy schedule when the valuated commenced + then a final tenancy schedule at the valuation date and which was cross checked with the data that we had

CHECK WITH JOHN

51
Q

The Circle - Can you define Market Value as per the Inheritance Tax Act?

A

The price it might reasonably be expected to fetch if sold in the open market at that time

BUT that price must not be assumed to be reduced on the grounds that the whole property is going to be placed on the market at one and same time

52
Q

Portfolio - Central London - What is fair value?

A

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

53
Q

The Circle - Where can I find this definition of market value (inheritance tax)?

A

Definitions of the basis of value for:
- Inheritance Tax (IHT) in section 160, Inheritance Tax Act 1984

Also, UK VPGA 15.2 Basis of value RICS Valuation - Global Standards 2017: UK national supplement

54
Q

The Circle - What assumptions are made as per VPGA15 UK National Supplement for tax purposes?

A
  • The valuation should reflect the bid of any special purchaser in the market
    (provided that purchaser is willing and able to purchase).
  • For the purposes of the hypothetical sale, the vendor would divide the property, i.e. asset to be valued into whatever natural lots would achieve the best overall price (assumes the asset is sold in lots to achieve best value)
  • The sale is a hypothetical sale
  • The vendor is a hypothetical, prudent and willing party to the transaction
  • The purchaser is a hypothetical, prudent and willing party to the transaction
    (unless considered a special purchaser)
  • All preliminary arrangements necessary for the sale to take place have been carried out prior to the valuation date
  • The property is offered for sale on the open market by whichever method of sale will achieve the best price
  • There is adequate publicity or advertisement before the sale takes place so that it is brought to the attention of all likely purchasers

RICS APC - YN (22 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions