Part 3: appendix 1 - the contractor's basis - practical considerations
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
This note has been prepared for guidance in respect of the Contractors Basis of valuation. Whilst the content is primarily relevant where the whole valuation is carried out by this method, it will also be of assistance in those cases where only part of a hereditament is valued by reference to the cost of an item, for example, items of plant and machinery and mineral producing hereditaments.
This note supplements (and should be read in conjunction with) both the preceding part of this section and the Rating Cost Guide Guidance Notes and Common Adjustments.
As indicated in RM 4:7:3, the traditional approach to establishing an assessment by this method is to build up the valuation stage by stage, and whilst in practice the valuer may be able to adopt short cuts or even re-arrange the stages depending on the class and type of property involved, it is considered that the five (or six) stage approach is a helpful discipline which assists the valuer to cover the various aspects to which he/she needs to have regard in an ordered sequence. Accordingly this note will consider various aspects of the Contractors Basis under the separate headings of the respective stages.
2.1 Interaction with other methods
Although the Contractors Basis is a method of valuation which has regard to cost, it does not follow that this method should necessarily be adopted just because full costs are known or are available.
Any method of (rating) valuation is only a means to an end, namely to establish the rental value of the hereditament and the rental basis (whether direct or indirect) should be the valuer’s preferred approach, providing of course that the rental evidence is sufficiently soundly based, and that where comparison is necessary, it can properly be made having regard to the use and class of the properties involved.
There will however be cases where the valuer is faced with the decision as to whether to change a previously adopted (and possibly agreed) method of valuation. It is envisaged that normally it will not be appropriate to change from a rental to a Contractors Basis, as the inference is that if the former method has been adopted it will have been because rental evidence has been available or because it was possible to make comparison with other classes where rental evidence did exist, and in either of these circumstances the Contractors Basis is not the most appropriate method.
The exceptions to this would be if:
- the rental evidence within the class has ceased to exist and comparison with other classes is not possible; or
- it is clear that comparison with other classes has not given the right answer; or
- there has been technological or other change within the class as a result of which comparison with other classes is no longer appropriate.
The fact that costs are now available (for example, within the Rating Cost Guide) is not sufficient in itself to cause a departure from a valuation method that would otherwise be appropriate.
Conversely, if rental evidence has become available, it may well be appropriate to change from the Contractors to a Rentals Basis, but, in any event, the valuer needs to keep firmly in mind what is to be achieved. The method to be adopted is that which it is considered is more likely to give the correct value in accordance with the statutory basis.
Where there is insufficient rental evidence available to provide a reliable basis for valuation, the Receipts and Expenditure Method is to be preferred to the Contractors Basis but it is not appropriate where the hereditament is not occupied for profit (see s6, p3, section 600 for local authority hereditament and the Lands Tribunal decision in respect of Leisure Centres : Eastbourne Borough and Wealden District Councils v PS Allen (VO) RA 16-17/1999) or where the profits arising from occupation cannot be ascertained. The Contractors Basis may not be appropriate where the hereditament is unique and incapable of being reproduced (for example, British Telecom).
2.2 Mixing valuation methods
Although as a general rule it is not appropriate to mix valuation methods in the build up of a valuation, it is acceptable to do so where a hereditament valued on the Rentals Basis includes additional items, for example, plant and machinery, which are not reflected in the rental evidence for that class, and for which no separate rental evidence exists.
In this event the valuer may adopt the Contractors Basis for the additional items but it is still necessary to keep in mind that it is the rental value of the whole that is required to be established and not the sum of the respective parts.
In exceptional cases it may be appropriate to accept that the hypothetical tenant has another alternative to renting the hereditament; quite apart from the notional possibility of constructing an alternative, he may consider renting and adapting other premises and the total annualised cost of doing so may inform his bid for the subject premises. The rebus sic stantibus rule does not prohibit using the notional cost of securing other premises for this purpose, even if that involves notional bidding against other modes/categories of use for those other premises and contemplation of altering those other premises.
3. Estimated Replacement Cost (Stage 1)
Reference should be made to RM 4:7:4 and to the Rating Cost Guide (RCG) which explain and illustrate the method to be adopted for estimating the replacement cost of the buildings and plant and machinery comprised in the hereditament.
3.2 Cost Guide
The Rating Cost Guide or Rating Manual Practice Note level of costs should be adopted in the absence of actual costs capable of being satisfactorily adjusted to accord with the statutory basis. See also RM 7:4.2.
For those cases where costs are not included in the RCG or RM PN (and advice has not been given separately by NABS, e.g. to national specialists), if the valuer is unable to establish a level which would be consistent with the general view in the RCG or the PN, then advice should be sought from NABS or the Plant and Machinery Valuer (NSU) via the TA.
3.3 Actual costs
In those cases where there is some apparent inconsistency between the costs indicated in the RCG or RM PN and figures obtained from other sources, then advice should be sought from NABS or the Plant and Machinery Valuer (NSU) via the TA. Reference should be made to RM 4:7:4 and the RCG where the adoption of actual costs is contemplated, particularly in connection with adjustments that may be necessary.
3.4 Cost returns
Whether or not they are adopted, it is important that actual costs are not ignored nor their relevance disregarded as the RCG will continue to be maintained, amended and expanded as appropriate and updated in due course for subsequent revaluations.
It is essential that details of all costs as they become known to valuers whether authenticated or not should be submitted to NABS or P&M Valuer on VO 6065 (buildings) or VO 6005 (plant and machinery) specifying each item of plant or machinery individually.
3.5 Rating Cost Guide amendment
National Specialist Unit (NSU) should be notified when valuers using the RCG find anomalies or difficulties of interpretation, so that amendments can be considered and issued as appropriate.
3.6 Costs of External (or ‘Site’) Works
Although site works, for example, roads, lighting, fencing etc, should properly be separately costed at Stage 1 and adjusted (if appropriate) at Stage 2 by reference to the costs and allowances detailed in the RCG, there will be many cases where existing survey details will be insufficient for this.
Any alternative approach to obtaining an appropriate figure to reflect site works can only be a rough and ready solution to a problem and the approach to be favoured and the percentage or sum to be added will vary from class to class, and for different hereditaments within a class. However, to assist in those cases where insufficient survey details of site works are available the valuer may consider the following approach:
An addition of a percentage taken on the cost of the buildings
The percentage addition on this approach will be for site works only, excluding the basic site value. Guidance on the appropriate percentages to be adopted having regard to the circumstances of the particular case is to be found in Appendix C to this Practice Note.
Whilst the appropriate additions or percentages as detailed in any guidance issued for a particular class will have been established having regard to costs in specific cases, the application of these figures to other, albeit similar, hereditaments will inevitably be an approximation, and should be regarded as an expedient only to be adopted in those cases where the valuer is unable to separately cost all the site works.
In those cases where the level of an assessment based on the alternative approach to site works outlined above is unacceptable to the ratepayer, no adjustment should be made to the figures without an inspection to obtain full details of all site works which should then be separately costed to confirm or otherwise the addition made under the alternative approach.
3.7 Adjustment of Cost Guide Costs
The costs detailed in the RCG will require adjustment to establish the correct total Estimated Replacement Cost of the hereditament being valued.
The particular adjustments which the valuer will need to consider and apply as appropriate are:-
i. locational factor
ii. size of contract
iii. fees and charges
and references should be made to the Guidance Notes contained in the RCG as to the application and the appropriate amount of these adjustments.
4. Adjusted Replacement Cost (Stage 2)
The Estimated Replacement Cost established at Stage 1 represents the cost of the actual item under consideration or, where this approach is adopted, of a modern substitute. It does not, however, follow that the actual item is necessarily ideally suited for the purpose for which it is used. Thus the Stage 1 costs may need to be adjusted by making appropriate allowances to reflect any deficiencies in the item as a first step in the conversion of cost into value.
Before making any allowances the valuer should refer to RM 4:7:5 and the Rating Cost Guide, Guidance Notes and Common Adjustments (Section 8) for R2010.
It should be noted that the allowances contained in the 2010 RCG are intended to provide a degree of uniformity of allowances. They should be regarded as the maximum allowances to be given.
For R2017 the valuer should follow the guidance given in the Practice Note for a particular class. In all cases where there no specific class guidance the age related scales together with the accompanying notes contained in the Contractor’s Basis 2017 Practice Note attached to this section of the RM should be used as guidance.
It should also be noted that allowances at this stage are intended to reflect the disadvantages of a particular building or an item of plant and machinery. The extent of the demand for the hereditament as a whole should be considered at Stage 5.
5. Value of Land (Stage 3)
RM 4:7:6 indicates that this stage comprises two steps, firstly to determine the value of the land and, secondly, to make any allowances that may be appropriate to that value.
Reference is also made to the need to reflect the value of site works which should be taken into account at this stage if they have not been included already at Stages 1 and 2.
For those classes where there is evidence of land values then it is for the valuer to interpret that evidence in its application to the site in question. There will however be many cases where there is no evidence of land values for a development restricted to the actual use of the hereditament. RM 4:7:6 expands on the approach whereby the valuer may have regard to the value of land for the adjustment prevailing use for which there is evidence.
5.2 Value of the land “rebus sic stantibus”
It must be borne in mind that the land has to be valued rebus sic stantibus and that, accordingly, the value has to be determined on the assumption that development of the site is confined to the class of hereditament under consideration.
Thus an actual price for the land in question, or for a comparable site, may need to be discounted, or even disregarded, if it is clear that the price reflects an alternative development value unrelated to the actual development.
For those cases where there is no evidence of land value for the actual use, RM 4:7:6 and the next paragraph in this section refer to the adjacent prevailing use value to which reference was made in Dawkins (VO) v Royal Leamington Spa Borough Council and Warwickshire County Council (1961) 1 RVR 291.
However this route to the value of the site must be used with care, and whilst it may be a useful indicator to which the valuer can have regard, the prevailing use value in the locality may need to be discounted to remove any additional value attributable to commercial aspects in the worth of surrounding land where the use of the hereditament in question is non commercial. Where the present occupier has acquired the site for the development of the existing hereditament, the cost (adjusted to AVD) may be good evidence of value even if it is influenced by other more profitable potential uses.
5.3 No evidence for actual use
Where there is no evidence of value for land restricted to the particular use in question, regard may be had to the prevailing use value of land in the immediate locality in which the hereditament is situated, although reference should be made to the preceding paragraph 5.2 as to the need for care.
If the hereditament is situated in an area where its use is such that it would be clearly inappropriate to have regard to the prevailing use value of land in that actual locality, then the valuer may have regard to the prevailing use value of land in the type of locality most appropriate to the use in question. If this approach is adopted adjustments may be required to this substitute site value to reflect the advantages or disadvantages associated with the particular use of the actual site.
It should be noted that the valuer should not necessarily adopt the prevailing adjacent use value but have regard to it in establishing an appropriate value for the land restricted to the particular use. In those cases where there would be difficulty in relating the value for the use in question to that for either the actual or substitute adjacent, then the valuer may consider having regard to a value for the land related to the buildings erected thereon on the basis that land values will bear a relationship with developed building costs. Practice Notes for schools, hospitals, health centres and universities provide appropriate percentages to arrive at site value as a proportion of building cost. Where the valuer can identify other classes of hereditament as being broadly similar in size, density, and location to one of these examples, then regard may be had to the appropriate percentages indicated.
It is emphasised that these percentages are derived from a consideration of a number of alternative use values (residential, industrial and high tech) and from discussion with interested bodies. Consequently they should not be applied automatically to other classes where there is no market evidence. They are indicative only for use as a signpost of levels to which a valuer can have regard in formulating the valuation of the land, which in any event should be checked for reasonableness having regard to the prevailing use value in the actual or appropriate substitute locality.
5.4 Adjustments to the value of the land
Whilst land as such is not subject to depreciation in the same way as the buildings, etc, with which it may be developed, nevertheless having established the value of the land for the particular use, the valuer is then required to consider whether any adjustment is necessary to that value to reflect the fact that the site is not available for a modern development but has been developed with less than perfect buildings, and/or plant and machinery as evidenced by the adjustments at Stage 2.
It will be appreciated that any evidence of land values will be for sites available for new development. The value required, however is for the land for the actual development and clearly evidence of value of land for development with old, possibly obsolete or inefficient buildings and plant and machinery never becomes available.
Thus the valuer has to consider such evidence as is available and, in effect, to discount it, if and as appropriate, to reflect the particular circumstances under consideration.
Although the adjustment that would be appropriate for the land may not necessarily be the same as that applied to the buildings and plant and machinery at Stage 2 (each case should be considered on its merits) nevertheless in most cases where only developed land is being considered the same adjustment can be adopted. The ERC and ARC figures should be totalled to calculate the overall allowance given at Stage 2, which can then be applied to the developed land value. Undeveloped land (eg. for recreation or landscaping) is unlikely to suffer from obsolescence and no allowance will normally be needed.
For those where a land value is established by taking a percentage of building cost the application of the appropriate percentage to the ARC will automatically reflect the same adjustments.
5.5 Where the actual site is rented
The preceding notes on this stage of the valuation process have been based on the assumption that the valuer should properly be seeking the capital value of the land which will be added to the figure produced at Stage 2 (ARC).
However, there will be cases, perhaps particularly certain classes, eg. mechanised coal depots, where the site is in fact rented and the actual tenant has incurred expenditure in providing buildings and/or plant and machinery. If these tenant’s improvements are of a specialist nature so that the valuer concludes that the Contractor’s Basis is appropriate, the fact that the site is rented does not preclude the adoption of this method of valuation.
The approach to be adopted, however, will depend on the extent of the improvements in relation to the land. In those cases where the value of the land predominates, then the approach should be similar to those cases where the Rentals Method is adopted, with additional items of plant and machinery to be included based on a value derived from the Contractor’s Basis. Where the tenant’s improvements predominate and a Contractor’s Basis valuation is appropriate, then the relevance of the rent paid for the land will be to assist in establishing the land value which in this method of valuation would normally be determined as a capital figure at Stage 3.
It is not appropriate to endeavour to capitalise the rent in order to produce a figure for Stage 3. The decapitalisation rate should be applied to the Stage 2 total and the land value, such as, the rent paid, added to the resultant sums.
Particular care needs to be exercised by the valuer in considering whether any allowances which he/she feels are appropriate should be applied to the land element on the basis that they may already be reflected in the rent paid.
This is especially relevant when considering whether any allowances conceded at Stage 2 should also be applied to the land, and will be dependent on the terms of the lease and the basis on which the lease rent has been established.
6. Decapitalisation Rate (Stage 4)
6.1 Determining an annual equivalent
It may be argued that the addition of the figures produced at Stages 2 and 3 does not necessarily give a value and thus the adoption of the term “Effective Capital Value” for the figure to which the decapitalisation rate is to be applied is not appropriate. Whatever the terminology adopted, this stage is concerned with the conversion of the adjusted capital figure for land, buildings and plant and machinery to an annual equivalent.
6.2 Reasons for the statutory rate(s)
RM 4:7:7 refers to the contentious nature of this stage in the valuation process and litigation on the 1973 Lists revealed that the route to, and the level of, the appropriate rate(s) for the 1990 and subsequent Revaluations would have been subject to considerable debate.
In addition, for the first time in 1990 a revaluation was carried out in England and Wales and Scotland at the same date and, traditionally, the Scottish Assessors had applied higher rates than had been adopted in England & Wales.
Thus in order to assist in the harmonisation process with England, Wales and Scotland and to seek to avoid the inevitable litigation as to the appropriate rate or rates that should be adopted, the Secretary of State as empowered by the Local Government Finance Act 1988 Schedule 6 made Regulations establishing the decapitalisation rates to be adopted in any Contractor’s Basis valuation (whether in whole or in part) in England Wales and Scotland.
6.3 Adjustments to the statutory rate(s)
The statutory decapitalisation rates (see RM 4:7:3) are to be applied strictly, and no variation should be made to the rate to be applied under any circumstances. Where the nature of a particular hereditament is such that there is doubt as to whether the lower rate is applicable, reference should be made to CEO (Rating) for advice.
The Regulations do not make provision as to the circumstances under which, nor the classes to which, the Contractor’s Basis method of valuation is to be applied, nor do they detract from the requirement for the valuer to ascertain the rateable value of the hereditament in accordance with the definition in Schedule 6.2(1) of the LGF Act.
Accordingly it is envisaged that some valuers may take the view that the statutory rate has been pitched at a level above (or below) the rate that would be appropriate in the absence of a statutory rate and that a further adjustment would be necessary at Stage 5 in order to offset this apparent distortion and produce a correct rateable value.
Whilst the valuer is still required to ascertain the rateable value in accordance with the definition in Schedule 6.2(1) it is not appropriate at any stage in the valuation process to make any allowance which seeks to adjust the figure produced by the application of the statutory rate to accord with a level that would be achieved by the adoption of any different decapitalisation rate.
Where a valuer perceives that an appeal is to be pursued on these grounds details should be submitted to CEO (Rating) for further advice. In such cases the valuer should consider very carefully the evidence for his opinion, and in particular whether it can be supported by a different basis of valuation.
6.4 Adopting an alternative method
Similarly it may appear to a valuer that to (or not to) adopt the Contractor’s Basis method of valuation with a statutory decapitalisation rate at Stage 4 may result in a more favourable assessment for the ratepayer. However this should not be accepted as a criterion for adopting a particular method of valuation, and reference should be made to Section 2 of this Practice Note for the appropriate guidelines.
7. Overall Consideration (Stage 5)
By this stage the valuer will have costed the buildings and plant and machinery included in the hereditament, made adjustments to those costs to reflect any deficiencies in the particular item, added the value of the land (including site works) and applied to the resultant figure the appropriate statutory decapitalisation rate to give an annual equivalent.
Providing the valuer concludes that no further adjustments are necessary, this annual equivalent can be adopted as the rateable value of the hereditament although more often than not some adjustment will be required even if this merely comprises rounding to produce a more appropriate figure as an assessment.
The main function of this stage, however, is for the valuer to be satisfied that the figure produced does represent the rental value of the hereditament on the statutory hypothesis.
It should be appreciated that adjustments made by the valuer at Stage 5 may be for factors which affect both capital and rental value, eg. poor access or site layout, but for convenience these are made at Stage 5 under overall consideration rather than at any earlier stage when capital figures are being considered.
7.2 Comparison with sale price
Whilst the figure produced after Stage 3 may be referred to as the Effective Capital Value, the valuer needs to be aware that it does not necessarily represent the capital value of the hereditament and should treat with extreme caution any attempt to relate this figure to any sale price.
This is partly due to the fact that further adjustments may be made at Stage 5, but more importantly that the sale price may reflect factors unrelated to a valuation conforming to the statutory hypothesis. Thus a sale price may reflect development potential, non rateable items, liabilities imposed by the vendor or acquired by the purchaser, etc. Where a sale price is depressed by a relatively short remaining useful life, caused by economic factors beyond the control of the owner or occupier, advice should be sought from PSD.
7.3 Adjustment categories
It is envisaged that the adjustments that may need to be considered by the valuer at this stage fall into four categories. In each case, however, the valuer must be mindful of the reasoning behind any allowances made as there is a real danger of overlapping or even duplicating allowances made at earlier stages in the valuation process. The categories, which should be considered and applied (if appropriate) in the order as listed, comprise:-
i. Those factors which affect the value of the hereditament when looked at as a whole and which would not have been reflected when considering the buildings and land separately at Stages 2 and 3.
Thus the poor layout of a particular building would have been reflected at Stage 2 but this would not have taken account of the (perhaps) poor layout possibly due to piecemeal development and, if appropriate, this should properly be reflected at Stage 5.
ii. Those factors which affect the value of the hereditament due to its location, eg. poor transport facilities, access etc.
In this case there is the strong possibility that any allowance under this category will already have been made when considering the value of the land under Stage 3, particularly if regard has been given to evidence of land values in that locality. Accordingly care must be taken to ensure that there is no duplication.
When considering the quantum of any adjustment under categories (i) and (ii) the valuer should be mindful that it is unlikely that there will be any hereditament which, together with its locality, can be regarded as ideal. This is not to suggest that every hereditament justifies an end allowance but rather that comparison should be made not with perfection, but with what might be regarded as typical or average for the class in question.
It is inevitable there will be a persuasive argument that the same allowance for site specific disabilities which have been agreed or applied for the previous Rating List should be similarly applied to the current valuation. However the application of the same allowance on Revaluation should not be automatic as the valuer needs to consider all the evidence that is available and take into account changes to the hereditament and/or the locality which may have lessened (or worsened) the effects of any disability. It will also be necessary to consider whether part or all of the disability may have been reflected at an earlier stage of the valuation process and whether this was not the case for the previous valuation.
Subject to the above and to the valuer being satisfied that a previous allowance was a reasonable appraisal of the situation, then it would be difficult to refute the argument that the same adjustment should be applied.
iii. Those factors which affect the suitability of the whole hereditament for the particular specialist purpose for which it is actually and indeed probably only capable of being used.
Since it is likely that the Contractor’s Basis will have been adopted as the appropriate method of valuation as the hereditament is of a specialist nature, it is important to recognise whether there have been any changes, technological or otherwise, since the hereditament was built which make it less valuable in its present form.
It must be stressed that at this stage the valuer is considering the value of the hereditament as a whole, as adjustments may already have been made under Stage 2 where a building or an item of plant and machinery has some obsolescence or may have become obsolete due to technological changes.
iv. Those factors which affect the demand for the use, or the product of the specialist hereditament, this category being referred to in RM 4:7:8 as “the state of the industry”.
The fact that the hereditament was built in the first place and perhaps has been altered and extended over the intervening years implies that there is, or at least was, a demand for the use or the product of the hereditament.
In a constantly changing world, however, it is inevitable that there will be changes in demand, and whilst in the long term or in extreme conditions this may be self balancing by closures or demolition, the extent of the investment in the buildings and plant and machinery (rateable and non rateable) and their inflexibility in most cases to short term change, may result in the continuing occupation of the hereditament, but at a level below that for which it was originally designed.
In this respect the valuer needs to be mindful that no works will operate at full capacity for an extended period of time and there should be no automatic reduction merely because, on the figures provided, there would appear to be a design capacity in excess of requirements. In particular, a closer examination of the figures may reveal that the apparent surplus capacity is in fact required to meet short surges in production.
Thus the valuer needs to be fully conversant with the requirements and methods of operation of the specialist hereditaments with which he/she is concerned, together with the state of demand and the industry at the relevant date. Indeed full details need to be recorded so that in the maintenance of any assessment the basis on which it was arrived is clear.
Although co-ordination should result in a uniform approach one hereditament with another and one class with another, it is important that there is consistency particularly on the question of allowances as under the Contractor’s Basis, where the same levels of costs and decapitalisation rate are used, it is the allowances which will reflect demand and distinguish between the healthy and the depressed industries.
Thus it would be inappropriate to apply a larger allowance to an industry which is only slightly less than healthy than to one which is depressed.
Accordingly significant allowances for the state of the industry should not be made unless the valuer is fully aware of the position and the details involved and PSD has been informed. It should be noted that the allowances considered under this category would be relevant principally when the hereditament has remained unchanged.
A fall in demand may, however, have already resulted in a contracted hereditament which should be valued accordingly and thus no further allowance may be appropriate. Alternatively where a fall in demand is reflected by part demolition but leaving part of the hereditament which is incapable of division with surplus capacity then this may more properly be considered under category (i).
7.4 Grant Aid
Following the decision of the Land Tribunal (now Lands Chamber of the Upper Tribunal) in Allen (VO) v English Sports Council/Sports Council Trust Company no allowance should be made within a Contractors Basis valuation either specifically for grant funding, or for limited affordability on the part of the hypothetical tenant, even in instances where the means of the only identifiable likely tenant are slender.
Reference should be made to RM 4 Section 7 Appendix 2 for further detail of the Tribunals reasoning behind the decision and the ramifications for contractors basis valuations
7.5 Date at which Stage 5 allowances are to be considered
When considering allowances under Stage 5 it is important for the valuer to have in mind that the relevance and the quantum of any allowance must be judged against the background of the circumstances at a particular date, but that this date will vary depending on the allowance being considered.
Thus, for those allowances which relate to the level of demand, the state of industry, etc, the AVD is the relevant date; those which have regard to the physical circumstances of the hereditament and the locality should be considered as at the material day, ie. the date the list comes into force or the date of a proposal or the date of alteration of the list by the VO.
7.6 Valuer overview
Having considered the relevance of any allowances under Stage 5, but before finalising the valuation, it is important for the valuer to take an overview of the levels of value achieved by this method to ensure that they sit properly with the broad pattern of values in the locality which have been established by other methods.
It must be stressed, however, that no automatic adjustment or allowance will be appropriate, or should be made merely as a result of this overview. The Contractors Basis will or should have been adopted for the hereditament in question because it is not readily capable of being valued by other methods, in particular by comparison with other classes where rental evidence does exist.
Nevertheless it is likely that elements within the hereditament will be similar to items in the locality which will have been separately assessed by reference to rents, but the valuer must not lose sight of the fact that it is the value of the whole hereditament that is required and not just the aggregate of its component parts.
Thus it is not appropriate to adjust the value produced by the Contractors Basis of a particular part of the whole so that its value is similar to its separately assessed equivalent. Furthermore, there can be no fixed relationship one with the other, as factors such as the class of property involved, local demand and the demand for the specialist hereditament will play a part in whether the level achieved for an item in a Contractor’s Basis valuation will be higher or lower than its separately assessed counterpart.
The overview should, however, indicate to the valuer whether there is sufficient disparity to justify a review of any of the stages of the valuation to ensure that the assessment produced properly reflects all the circumstances, and is fair and reasonable having regard to the class of hereditament involved, and also to the general pattern of values in the area of which it forms part.