Part 10 - Appendix 2: Frequently asked questions
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
Q1 Is the introduction of the Energy Regs from 1 April 2018 an MCC?
The introduction of the Energy Regulations is not an MCC.
The prohibition from letting cannot preclude the valuer from applying the statutory assumptions and rating principles that the property is lawfully available to let at the Material Day.
The prohibition is not a physical matter neither is it a physically manifest matter so cannot give rise to an MCC proposal.
Prohibition only affects the letting of a property with a substandard EPC certificate not the occupation of it e.g. by an owner-occupier, tenant prior to 2008 or an EPC has expired and there is no trigger to require a new one to be sought etc.
Q2 Can a proposal/Check be made due to a property being designated sub-standard?
If a property is given an EPC rating of F or G, then following from above, the EPC certificate rating cannot be considered a physical matter or physically manifest as the property has not been physically altered in anyway. Any Check or proposal submitted on these grounds alone cannot result in a change in RV.
Q3 Can a proposal be made citing the works to bring the property up to standard is an MCC?
Under the Recommendation Report from an EPC assessor there may be works identified to be carried out to bring the property up to standard. Until any works are undertaken, i.e. a physical change at the property, there would be no grounds for a proposal to be made.
If works are started, then there could be grounds for an MCC proposal/challenge to be made. The valuer would have to carefully consider the details of the works being undertaken as some will constitute repair and others, improvements. Items that are replaced with the modern equivalent, possibly albeit to a higher specification would probably fall under the umbrella of disrepair and would be disregarded for rating purposes and so not affect the RV (please see RM s2 pt 8 para 6.1-3 where works constitute improvements) eg changing a defunct boiler for a new efficient one would be repair whilst in contrast changing a boiler that has not reached the end of its life but is just inefficient could constitute an improvement. Therefore, consideration will be needed regarding the timing of the replacement of the items, life remaining etc to ascertain if there was actually any ‘disrepair’ for each item of works being carried out or whether they are actually improvements.
Q4 How do I value a substandard property?
If the property has an EPC certificate showing a rating of F or G, then under the Energy act it is substandard and cannot be let until works have been completed to bring it up to E or higher. However, for rating purposes, if the property is below the minimum energy standard, the prohibition on letting has to be disregarded (see above).
This means that the valuer must value the property ignoring the certificate but having regard to the physical characteristics of the property in relation to similar buildings
e.g. a basic 1970s office block with crittal windows, would be valued commensurate with other 70s builds of similar design, features and construction. Any difference in the quality of finishes e.g. double glazing, insulation etc. would be reflected in the price adopted if the market evidence shows a differential for such items.
It is possible that the nature of the works required to bring a substandard property up to the minimum energy standard means they may not affect the price per metre that is achieved on the open market. The market evidence will have to be examined carefully to determine the correct levels to apply although establishing that level of detail may prove difficult in practice.