Valuation SOE

Question 1

How did you undertake your DRC valuation?

Answer 1

I valued a newly built school in Walton-on-Thames for the 2023 non-domestic rating list using the contractor’s basis.

Following site inspection:

1. calculating replacement cost,
2. adjusting for age/obsolescence
3. added land value
4. applied the decap rate (2.6%)
5. stand back and look

I then uploaded all documents to the VOA database.

Question 2

How did you undertake your residual valuation in Kenley?

Answer 2

I was instructed to value a detached house on a large plot for inheritance tax purposes.

1. Confirmed viability using planning records. Planning application for construction of 2 bed bungalow was in progress at date of death.
2. I calculated Gross Development Value using comparable sales data.
3. Deducted all costs: construction, contingency (5% Build C), financing (7% BC), professional fees (8% BC), and developer profit (20% GDV).
4. Surplus amount remaining is known as the residual value.
5. 15% reduction to account for planning uncertainty (Fifield and Another v CIR 1972). A Registered Valuer approved my findings. I advised HMRC that the returned value was acceptable.

Question 3

How did you undertake your red book valuation in Slough?

Answer 3

Under supervision, I performed a Red Book valuation of a Slough flat for lease extension purposes.

1. I confirmed my competence and no conflicts of interest.
2. I drafted VPS 1 compliant terms of engagement, which were approved and issued to the client.
3. I inspected the property in accordance with VPS 2, assessing quality and condition.
4. Back at the office, I used the comparable method to produce my valuation, determining the value of both current and extended leases.
5. In accordance with VPS3 I presented my Red Book compliant report to a Registered Valuer for review, which was approved and sent to the client within the agreed timeframe.

Question 4

How did you undertake your investment method valuation in Croydon?

Answer 4

For IHT purposes, was instructed to value a retail unit for inheritance tax purposes. As the property was income generating, I utilised the investment method.

1. I read the lease provided for the subject property, establishing the agreement was under FRI terms with 3 years remaining until the next lease event at the valuation date.
2. I researched market rent and yield and concluded the property was under-rented.
3. I performed a term and reversion valuation, capitalising the term income at market yield until the next lease event.
4. Next, I capitalised the reversionary income into perpetuity with an adjusted yield, deferred until the next lease event. I adjusted up the yield by 0.5% to reflect the increased risk following the rent increase.
5. After adding the income streams together and concluding the investment value, I undertook the stand back and look approach by referring to comparable sales evidence in the locality.
6. I concluded the returned value was reasonable and reported to HMRC.

Question 5

Tell me about your leasehold extension calculations - Red Book Slough

Answer 5

1. Purpose was to calculate compensation payable by leaseholder to freeholder
2. No ground rents payable.
3. Calculated current market value of subject and freeholder interest, referring to Savills E (90.5%) Sloane Stanley Estate v Mundy (2016)
4. Calculated impact to freeholder interest of deferring reversion by further 90 years (total 170 years). PV @5.25% (outside London, Zuckerman)
5. No marriage value payable (80y 2m remaining)
6. Finally, advised Registered Valuer on compensation payable.