Residual malls
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This instruction applies to all residual malls.
List description: Residual Mall Assessment
Primary description code: CX
SCAT code: 710
SCAT suffix: G
Bulk Class: S
3.1 The Large Shops (non food) Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. Each Regional Valuation Unit (RVU) has a representative on the team. The team is responsible for the approach to and the accuracy and consistency of residual malls.
4.1 RVU will be responsible for referencing, gathering facts and valuation.
4.2 The Large Shops (non food) CCT will deliver practice notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:
- follow the advice given at all times – practice notes are mandatory
- not depart from the advice given on appeal or maintenance work without approval from the CCT
- seek advice from the CCT before starting any new work
5.1 There is no specific legal framework in relation to this class of property.
6.1 Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice. Arrangements for inspecting properties (non-domestic rating).
6.2 When inspecting a residual mall, property inspectors should record the following aspects:
- number of shops in the mall
- locations of the short-term lettings/events space. This maybe internal, external or both
- details of the types of commercialisations available in the residual mall space. For example, children’s rides, vending machines, photo booths, events space, parcel lockers, short term kiosks, seasonal activities/attractions
- note any advertising space run by the mall operator
- request copies of agreements and appropriate receipts for list year
- photographs of the main constituent parts of the site
6.3 An inspection checklist is appended to this section (Appendix 1). This should be completed for all new properties and updated for maintenance work. This should be stored in the property folder of the Electronic Document Records Management (EDRM) system.
7.1 Rating surveys should be captured on the Rating Support Application (RSA). Plans and surveys should be stored in the property folder of Electronic Document and Records Management (EDRM).
7.2 The national sub locations below should be used for data capture.
RMUA – to be used for large shopping centres with a high proportion of short term/ transient lettings. These shopping centres will often have more than 100 units within them.
RMUB – to be used for large shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have more than 100 units within them.
RMUC – to be used for medium sized shopping centres with a high intensity of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUD – to be used for medium sized shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUE – to be used for smaller shopping centres with high numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
RMUF – to be used for smaller shopping centres with low numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
7.3 The use code of SOV should be used to record the residual mall. Area/Units should be recorded as 1. Nothing should be recorded in other additions.
For example, to achieve a Rateable Value of £15,000
1 x SOV at £15,000 (unit price on address matrix) = RV £15,000
8.1 The notice requesting statutory information (Form of Return) for this class of property is typically obtained using VO 6005.
8.2 Values will be determined by a percentage of gross receipts. The level of receipts will be taken at those which could reasonably be expected at the Antecedent Valuation Date (AVD).
8.3 It is vital that income from any permanent lettings (which will be hereditaments in their own right) are stripped out of this figure, to prevent double counting.
8.4 Car parking
Car Parking is reflected.
Rating Support Application (RSA)
Survaid
Valuation Panel 1 (VP1) large shops (non food) class co-ordination team (CCT) members
SharePoint guidance for G class suffix
Residual Malls Inspection Guide
BEFORE LEAVING THE OFFICE
- always run a Google search on the shopping centre for up-to-date information and what you may expect to find
- download any useful information relating to the property off the internet
- ensure that your Scheduler is up to date and shows your itinerary
ON SITE
a) Identifying the hereditament
- mark the boundaries of the whole hereditament on a site plan
- identify and mark up on the plan areas used for commercialisation/events space
b) Photographs
Whilst on site take plenty of photographs for evidential purposes and to minimise the risk of needing to re-inspect.
INSPECTING
RESIDUAL MALLS
INSPECTION CHECKLIST
Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.
| Occupier/ Name of establishment | |||
| Address including postcode | |||
| Number of shops in centre | |||
|
Location of commercialisation/events space – Internal, external or both. Note where on the mall site they are located. Note anything that is present on a permanent basis, so it is not included in the residual mall. (This may require an assessment in its own right) |
|||
| Types of commercialisations available – For example: parcel lockers, photo booths, temporary kiosks, car sales, promotional space, events space, seasonal attractions/activities, charity collections, vending machines, ATM’s. | |||
| Advertising Rights – Any run by the centre? Note details if so, for example, digital or paper, size etc. | |||
| Photographs – location of space and types of commercialisations. | |||
|
Receipts information for commercialisation - Request last 3 years of gross receipts for appropriate rating list year. |
|||
| Copies of agreements – Request copies of any agreements. | |||
| General remarks | |||
| Date of survey | Survey by: |
1. MARKET APPRAISAL
1.1 It is apparent since the last AVD (particularly in areas severely impacted by the recession) that Shopping Centre operators have tried to maximise income by allowing numerous concessions and temporary traders to operate within shopping malls. Such let outs include sites of sales pitches/ retail merchandising units, sites of vending machines, photo booths and children’s rides.
1.2 Residual malls are generally found within covered shopping centres, where pedestrian areas are within the control of centre operators. This class does not cover circulation space forming part of the public highway.
1.3 Hereditaments are restricted to mall space and areas used for short term lettings only and will not include other items such as admin offices or car parking.
1.4 Generally where a centre is performing well the number of other occupations within the mall space will be limited to a restricted number within set locations. In effect, a conscious decision by centre operators to ensure they do not adversely impact future rental levels of permanent retail units. The converse is true however in less well performing centres, often with significant vacancy rates, in that centre operators will actively seek income from other means in the knowledge that rental levels of permanent retails are unlikely to depreciate further.
1.5 Due to economic uncertainty, particularly in areas hit by the recession, small independent retailers appear more willing to trade on a flexible basis rather to commit to formal long-term agreements.
1.6 Shopping centre malls no longer simply provide access to permanent retail units, they now strive to offer a retail experience in their own right. Typically providing complementary facilities for visitors including coffee shops, entertainment and ‘on the move’ refreshments.
1.7 Increasingly, available space within shopping malls is utilised by short term sales pitches, promotional lettings and sites of photo booths, vending machines, and children’s rides. Income from such let outs has increased since the last Antecedent Valuation Date, with mall income within a centre commonly generated from a combination of fixed license fees and commission percentages only.
1.8 It is commonplace for operators of electronic machines to enter into agreements covering numerous sites within any single centre and move attractions to different locations on a regular basis to maintain public interest.
1.9 Advertising space comprising Digital and Paper is often let to a third party and in such circumstances the advert hereditaments will subject to a separate assessment. However where the advertising space both digital and paper is run by the Centre then the income generated from the digital and paper adverts will be part of the residual mall income and should accordingly form part of the residual mall assessment.
2. CHANGES SINCE LAST PRACTICE NOTE
2.1 The market knowledge section has been updated to reflect the state of the market as at AVD. Whilst base rates are expected to change, there are no substantive differences to the valuation scheme.
2.2 Whilst generally in decline, such let outs are still clearly of benefit to centre operators who receive income from combined licence and commission fees.
2.3 Transient let outs should therefore be assessed and described within Rating Lists as ‘residual mall’ assessments. Kiosks or Retail Merchandising Units let out and occupied on a permanent basis, should be treated as separate hereditaments and should not form part of the residual mall hereditament.
2.4 The hereditament is identified as public areas of the shopping mall connected by walkways, stairwells, and escalators. With the assessment reflecting the rent which a centre operator would pay in return for the annual income generated from all temporary let outs. It will however exclude areas identified as other separate assessments.
2.5 Care should be taken that this area can be ring fenced, as areas outside the identifiable curtilage (for example let outs within non-adjacent car parks) should not be included within the mall assessment but should be reconstituted from the appropriate ‘host’ assessment.
2.6 It is envisaged the rateable occupier of the ‘residual mall’ will be the centre operator.
Data capture
2.7 Special Category Code 710 should be used for residual mall assessments with suffix G.
2.8 Rating list descriptions should read ‘residual mall assessment’
2.9 To achieve national conformity the following codes should be adopted -
RMUA – to be used for large shopping centres with a high proportion of short term/ transient lettings. These shopping centres will often have in excess of 100 units within them.
RMUB - to be used for large shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have in excess of 100 units within them.
RMUC – to be used for medium sized shopping centres with a high intensity of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUD - to be used for medium sized shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUE - to be used for smaller shopping centres with high numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
RMUF – to be used for smaller shopping centres with low numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
Smaller arcades, which contain a small number of units, and form a ‘cut through’, are likely to have very limited residual mall area and are unlikely to have an assessment.
The values to be adopted for each sublocation code are as follows:
RMUA = £21,000
RMUB = £15,000
RMUC = £15,000
RMUD = £6,000
RMUE = £4,500
RMUF = £3,000
Accommodation Use Codes
2.10 Data should be captured on RSA using an Accommodation Use Code of SOV
For example, to achieve a Rateable Value of £15,000 1 x SOV at £15,000 (unit price on address matrix) = RV £15,000
3. RATEPAYER DISCUSSIONS
3.1 To date, no discussions have been held with the industry.
4. VALUATION SCHEME
4.1 There is no agreed national scheme for this class. The valuation approach and percentages applied have however been accepted as part of the appeal discussion process.
4.2 Assessment of the residual mall is basically a judgement of what an operator would pay in rent for the expectation of a certain level of annual receipts received from the income generating capacity of the mall.
4.3 The starting point is to ascertain the level of receipts which could reasonably be expected as at the Antecedent Valuation Date. It is recommended three previous years accounts prior to the AVD are sought. Where major fluctuations between years are identified, clarification should be sought as to why this has happened. This may reflect significant differences in the number of let outs, MCC’s impacting on the centre or a change of operators’ policy moving temporary lets to permanent and vice versa.
4.4 It is vital that income from any permanent lettings (which will be hereditaments in their own right) are stripped out of this figure to prevent double counting.
4.5 Once the maintainable level of income is established, a percentage of this figure should be adopted to arrive at the notional rent/ Rateable Value. The following ranges have been formulated having regard to the management costs involved in generating that level of income. Where appropriate, figures should be interpolated.
| Income Generated | % applied to achieve rent |
|---|---|
| £100,000 or under | 20% |
| £100,001 to 250,000 | 25% |
| £250,001 to £999,999 | 30% |
| £1,000,000+ | 35% |
1. MARKET APPRAISAL
1.1 It is apparent since the last AVD (particularly in areas severely impacted by the recession) that Shopping Centre operators have tried to maximise income by allowing numerous concessions and temporary traders to operate within shopping malls. Such let outs include sites of sales pitches/ retail merchandising units, sites of vending machines, photo booths and children’s rides.
1.2 Residual malls are generally found within covered shopping centres, where pedestrian areas are within the control of centre operators. This class does not cover circulation space forming part of the public highway.
1.3 Hereditaments are restricted to mall space and areas used for short term lettings only and will not include other items such as admin offices or car parking.
1.4 Generally where a centre is performing well the number of other occupations within the mall space will be limited to a restricted number within set locations. In effect, a conscious decision by centre operators to ensure they do not adversely impact future rental levels of permanent retail units. The converse is true however in less well performing centres, often with significant vacancy rates, in that centre operators will actively seek income from other means in the knowledge that rental levels of permanent retails are unlikely to depreciate further.
1.5 Due to economic uncertainty, particularly in areas hit by the recession, small independent retailers appear more willing to trade on a flexible basis rather to commit to formal long-term agreements.
1.6 Shopping centre malls no longer simply provide access to permanent retail units, they now strive to offer a retail experience in their own right. Typically providing complementary facilities for visitors including coffee shops, entertainment and ‘on the move’ refreshments.
1.7 Increasingly, available space within shopping malls is utilised by short term sales pitches, promotional lettings and sites of photo booths, vending machines, and children’s rides. Income from such let outs has increased since the last Antecedent Valuation Date, with mall income within a centre commonly generated from a combination of fixed license fees and commission percentages only.
1.8 It is commonplace for operators of electronic machines to enter into agreements covering numerous sites within any single centre and move attractions to different locations on a regular basis to maintain public interest.
1.9 Advertising space comprising Digital and Paper is often let to a third party and in such circumstances the advert hereditaments will subject to a separate assessment. However where the advertising space both digital and paper is run by the Centre then the income generated from the digital and paper adverts will be part of the residual mall income and should accordingly form part of the residual mall assessment.
2. CHANGES SINCE LAST PRACTICE NOTE
2.1 No Practice Note was published for the 2010 Revaluation
2.2 Following representations from ratepayers of permanent sites of sales pitches and other retail premises, it is acknowledged that inconsistencies exist in that not all let outs are assessed. This is due to the fact that many do not fulfil the tests of rateability in their own right - predominately on the grounds of transience and/ or paramount occupation.
2.3 Whilst previously not assessed, such let outs are clearly of benefit to centre operators who receive significant income from combined licence and commission fees.
2.4 Transient let outs should therefore be assessed and described within Rating Lists as ‘residual mall’ assessments. Kiosks or Retail Merchandising Units let out and occupied on a permanent basis, should be treated as separate hereditaments and should not form part of the residual mall hereditament.
2.5 The hereditament is identified as public areas of the shopping mall connected by walkways, stairwells, and escalators. With the assessment reflecting the rent which a centre operator would pay in return for the annual income generated from all temporary let outs. It will however exclude areas identified as other separate assessments.
2.6 Care should be taken that this area can be ring fenced, as areas outside the identifiable curtilage (for example let outs within non-adjacent car parks) should not be included within the mall assessment but should be reconstituted from the appropriate ‘host’ assessment.
2.7 It is envisaged the rateable occupier of the ‘residual mall’ will be the centre operator.
Data capture
2.8 Special Category Code 710 should be used for residual mall assessments with suffix G.
2.9 Rating list descriptions should read ‘residual mall assessment’
2.10 At present a variety of sublocation codes are in use, but to achieve national conformity the following codes should be adopted -
RMUA – to be used for large shopping centres with a high proportion of short term/ transient lettings. These shopping centres will often have in excess of 100 units within them.
RMUB – to be used for large shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have in excess of 100 units within them.
RMUC – to be used for medium sized shopping centres with a high intensity of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUD – to be used for medium sized shopping centres with a low proportion of short term/ transient lettings. These shopping centres will often have up to 100 units within them.
RMUE - to be used for smaller shopping centres with high numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
RMUF – to be used for smaller shopping centres with low numbers of short-term or transient lettings. These shopping centres will often have less than 50 shop units.
Smaller arcades, which contain a small number of units, and form a ‘cut through’, are likely to have very limited residual mall area and are unlikely to have an assessment.
The values to be adopted for each sublocation code are as follows:
RMUA = £35,000
RMUB = £25,000
RMUC = £25,000
RMUD = £10,000
RMUE = £7,500
RMUF = £5,000
Accommodation Use Codes
2.11 Data should be captured on RSA using an Accommodation Use Code of SOV
For example, to achieve a Rateable Value of £50,000 1 x SOV at £50,000 (unit price on address matrix) = RV £50,000
3. RATEPAYER DISCUSSIONS
3.1 To date, no discussions have been held with the industry.
4. VALUATION SCHEME
4.1 There is no agreed national scheme for this class. The valuation approach and percentages applied have however been accepted as part of the appeal discussion process.
4.2 Assessment of the residual mall is basically a judgement of what an operator would pay in rent for the expectation of a certain level of annual receipts received from the income generating capacity of the mall.
4.3 The starting point is to ascertain the level of receipts which could reasonably be expected as at the Antecedent Valuation Date. It is recommended three previous years accounts prior to the AVD are sought. Where major fluctuations between years are identified, clarification should be sought as to why this has happened. This may reflect significant differences in the number of let outs, MCC’s impacting on the centre or a change of operators’ policy moving temporary lets to permanent and vice versa.
4.4 It is vital that income from any permanent lettings (which will be hereditaments in their own right) are stripped out of this figure to prevent double counting.
4.5 Once the maintainable level of income is established, a percentage of this figure should be adopted to arrive at the notional rent/ Rateable Value. The following ranges have been formulated having regard to the management costs involved in generating that level of income. Where appropriate, figures should be interpolated.
| Income Generated | % applied to achieve rent |
|---|---|
| £100,000 or under | 20% |
| £100,001 to 250,000 | 25% |
| £250,001 to £999,999 | 30% |
| £1,000,000+ | 35% |