Valuation L3 Flashcards
Trinity House. Tell me what you mean by ‘Red Book’ valuation.
A valuation provided in accordance with RICS Global Valuation Standards undertaken by a qualified and competent surveyor with the relevant experience.
If asked what the benefit is…Consistency Transparency Fairness
Trinity House.Tell me about the investment method and how it is utilised in practice.
The Investment Method is used to calculate the capital value of an income producing property.
It capitalises the annual rent with yields reflecting different risks most notably the security provided by a tenancy.
Trinity House. Why did you measure to NIA?
That’s what RICS Code of Measuring Practice 6th Edition 2015 stipulates.
Trinity House. You advised on condition but what caveats did you use?
Limited visual inspection.
I am not a building surveyor and this was not a building survey.
Trinity House. Why did you advise that the guide was significantly higher than MV.
I calculated the estimated market rent and applied a yield supported by evidence to determine the MV was significantly lower.
If asked about hope value… the red book had a special assumption that the building was not to be developed.
How did you attribute ‘hope value’ within you’re advice?
I simply stated that hope value might lead others to offer at a level that represented an unacceptable yield to my client.
Portland House. Tell me about the existing tenancies that you reviewed in order to provide opinion on market value.
3 commercial and one residential tenancy. 2 retail, 1 office, local occupiers and a Resi AST.
What else must also be included in a probate valuation?
Inheritance Tax (IHT) purposes, S.160, Inheritance Tax Act 1984 broadly define market value as: “the value at any time of any property shall for the purposes of this Act be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time”.
Portland House. You advised that renewing the leases would be beneficial, what led you to this conclusion.
It was an investment property, and generally speaking securing new leases on the units where tenants were holding over would improve market value.
Portland House. Would the asset not be more suitable with vacant possession?
Owner occupiers make up a relatively small portion of the local market, AND this was a multi let property.
Portland House. You advised on contracted out leases. Could an investor not serve notice mid term anyway and remove the tenants?
Not without a mutual break.
Portland House. What would the risks of tenants holding over be?
That they create an implied periodic tenancy that benefits from protection under the 1954 LTA act.
