Rating Manual section 6 part 3: valuation of all property classes

Section 200: car parks

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

1.1 This guidance applies to car parks.

For rating purposes there are three types of Car Parks that can be rateable;

a) car parks open for use by the general public and forming a separate hereditament for rating purposes;

These will include both open sites and covered areas (i.e. surface, underground and multi-storey). These may be subject to any of the following forms of occupation:-

  • Privately run, fee charging car park

  • Privately run, but Local Authority control charges levied;

  • Fee charging Local Authority car parks;

  • Free Local Authority car park with barriers, attendants, etc;

  • Free Local Authority car park without barriers, attendants, etc;

  • Privately run free car park built with adjoining shopping centre.

b) car parks, not open to the general public and forming a separate hereditament for rating purposes;

c) car parks occupied and forming part of another hereditament for rating purposes. These are dealt with in the Rating Manual under the individual class of the principal use.

1.2 This guidance does not cover ‘Park and Ride’ schemes, which are dealt with within Section 180 of the Rating Manual.

2. List Description and Special Category Code

2.1 Car park (multi storey)

List description: Car park and premises

Bulk class: M

SCAT code: 039

Suffix: S

Primary description code: CP

2.2 Car park (surfaced open)

List description: Car park and premises

BUT: M

SCAT code: 040

Suffix: G

Primary description code: CP

2.3 Car park (unsurfaced open)

List description: Car park and premises

BUT: M

SCAT code: 041

Suffix: G

Primary description code: CP

2.4 Car spaces

List description: Car space(s) and premises

BUT: M

SCAT code: 043

Suffix: G

Primary description code: CP1

2.5 Car parking within specialist property

List description: Car park and premises

BUT: M

SCAT code: 501

Suffix: G

Primary description code: CP

3. Responsible Teams

3.1 Car Parks other than Multi Storey

Responsibility for inspection, survey and valuation rests with Generalist caseworkers who have received specialist training and who have knowledge of this class.

3.2 Multi storey car parks

Are the responsibility of Specialist caseworkers. Inspection and survey requirements are the responsibility of Generalist referencers who have received specialist training or already have expertise in dealing with this class.

3.3 It is recommended that each unit should allocate a named co-ordinator (member of the Class Co-ordination Team), to act as a point of contact within the unit.

3.4 This Lead Valuer will assist in the delivery of the unit’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining units.

4. Co-Ordination

4.1 The Car Park Class Coordination Team (CCT) has overall responsibility for the co-ordination of this class. Contact details are inVP and CCT Members .

4.2 The team are responsible for the approach to and accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists.

4.3 Caseworkers have a responsibility to:

  • follow the advice given at all times

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

  • seek advice from the co-ordination team before starting any new work

5.1 Decriminalisation of car parking offences

Initially the Road Traffic Act 1991 (RTA) decriminalised parking enforcement throughout London. This allowed the local authorities to carry out all parking enforcement in both on and off-street areas. The Decriminalised Parking Enforcement (DPE) scheme was then rolled out nationally but by 2003 only 75 local authorities outside of London were operating on-street parking enforcement. In all other Local Authorities on-street parking offences were still subject to Fixed Penalty Charges (FPC) issued by Traffic Wardens who were directly employed by the Local Police Authority.

The need for a uniform and improved approach to parking and traffic enforcement led to Part 6 of The Traffic Management Act 2004 (TMA), which came fully into effect on 31st March 2008. The TMA placed the responsibility on the Local Authority to ensure that traffic is managed on the highway network as effectively as possible. Enforcement is carried out by Civil Enforcement Officers appointed by the Local Authority who issue Penalty Charge Notices (PCN).

In 2003, Civil Enforcement Officers in 33 London Boroughs and the 75 Local Authorities issued just over 7 million PCN. During the same period Traffic Wardens in the remaining 313 Local Authorities only issued just over 1 million FPC. In the light of these statistics, it may occasionally be of use to determine when the Local Authority took over responsibility for on-street parking enforcement and to consider whether this is likely to have had an impact on the level of receipts within a locality.

In April 2015 the Government introduced new legislation allowing a 10 minute period of grace before a penalty fine could be issued for any unauthorised overstay in council owned/ run car parks. This was to mitigate the adverse impact on town centres of over-zealous parking enforcement.

5.2 Confidentiality

Some national operators have provided Gross Receipts information centrally on a confidential basis. This information is considered to be particularly trade sensitive. Along with all information received by Form of Return, care must be taken not to disclose such information inadvertently during negotiations. Some operators are concerned that by openly discussing the percentage of Fair Maintainable Receipts adopted for certain types of car parks a simple calculation will inform a rival operator of the income being generated at specific sites.

6. Survey Requirements

6.1 The basis of analysis and valuation is in terms of the number of spaces, the total number of spaces and their location (per level) should be recorded. It is only in the absence of marked spaces where floor areas are required, in such instances car parks should be measured to Gross Internal Area (GIA) having regard to the definitions contained in the VOA Code of Measuring Practice for Rating Purposes.

6.2 To assist in recording all necessary factual information, a checklist has been created and stored within Appendix 2 of this section.

**Rateability **

6.3 In order to establish the rateability of a car park it is necessary to consider who, if anyone, satisfies the four tenets of rateability. For car parks open for use by the general public, the most contentious of these has in the past been that of determining ‘beneficial occupation’. More recently questions have arisen concerning ‘exclusive occupation’. Whilst legal title may be used to identify legal rights that exist, it will be the actual occupation found on the ground, which will take priority.

Occupation is a matter of fact, requiring some positive act of user performed by the potential rateable occupier. An adequate measure of control must be demonstrated of a kind which prevents strangers from interfering with the enjoyment of premises for the purposes for which they are occupied (see Newcastle City Council v Royal Newcastle Hospital 1959 PC 52 RIT 293).

An area of land abandoned to unregulated public car parking will not generally constitute a unit of occupation unless, in addition, there is some act of occupation. Charging and/or some system of management or control of the land as a car park will make it easier to identify the rateable occupier.

Maintenance of a car park is not itself sufficient to establish rateable occupation, other measures of occupation or controls are necessary. When acts of occupation or control exist, the totality of those acts and the maintenance can be used to substantiate rateability. Therefore a distinction needs to be drawn between ‘acts of maintenance’ and ‘control’:

a. Maintenance deals with the property, as opposed to its use and is often capable of performance by either a landlord or tenant - e.g. repairing parts, renewing, decorating and, possibly, gardening;

b. Control deals specifically with the way a hereditament is occupied or used. Examples of control usually relate to the regulation and enforcement of the manner of parking and may include:

(i) display signs (regulating use and/or showing names of occupier);

(ii)ontrol of where parking takes place, e.g. white lines;

ii)ome form of time period enforcement;

(iv) a physical presence;

(v) deterrence of vandalism;

(vi) removal of abandoned vehicles;

(vii) clearance of rubbish;

(viii) permission/refusal for an otherwise unauthorised use (preventing HGVs overnight, parking of ice cream/fish and chip vans etc);

(ix) safety measures (e.g. controlling the playing of ball games);

(x) clearing snow;

(xi) paying/controlling timers for electric lighting;

(xii)upervision of trolley parks;

(xiii)eriodic closure.

Although the above is not exhaustive, it does provide a useful check list of the indicators of control which should be noted when referencing car parks. The onus of proof will fall on the VO to show that control is exercised on the ground. It is not enough to assert that the owner has the power to exercise control over the car park unless that power is exercised in practice.

In a limited number of cases a rateable occupier may not be readily identifiable (for example - where a number of shop tenants and their customers have similar rights to use the car park and the person to whom the service charge is paid does not exercise sufficient control). Where these circumstances arise the case should be referred to National Specialist Unit via the Unit’s CCT lead.

Unit of assessment

6.4 Extent of Hereditament

The geographical extent of a hereditament will be determined by the extent of the rateable occupation(s).

Car parks used and occupied with adjoining premises will generally together form the hereditament. However, where separated from these other premises by a public highway, or other property, they will in most cases form separate hereditaments.

Internal roadways under the control of the same car park occupier will seldom justify more than one assessment being placed on a retail centre’s car parks.

Car parks not within the same rateable occupation as adjoining premises should be separately assessed.

It is important to define the geographical extent of the hereditament especially in cases where use is made from time to time of land adjoining a car park for parking purposes (for example - overspill parking facilities at peak times of the year).

6.5 Spaces in separate occupation

Single spaces, or groups of spaces, are sometimes let separately on terms which show that the owner no longer exercises control and that the actual user can be considered to be in exclusive occupation. Provided that they can be identified, such spaces may be treated as separate hereditaments. (see Renore Ltd v Hounslow London Borough Council [1970] RA 567).

In the case of licences, or other similar arrangements, it is important to investigate the facts to discover who is in rateable occupation. It was held in Port (VO) v Gray, Son & Cook and Cambridge Corporate (1952) 42 R&IT 28 that on the facts of the case, the licensor had not relinquished control, despite the licensees having a key to the enclosure.

6.6 Residual hereditaments at retail centres

The choice will be between the car parks being separately assessed, or their being reflected with other public, non let out property serving the centre, as the residual hereditament. Where parking charges are levied and the car park is being operated by a different company to the shopping centre separate assessment should be considered. Care must be taken however to ensure the operating company is not simply acting as a management agent for the centre operators, in which case - a separate assessment is unlikely to be appropriate.

Please see RM 5:200 Appendix 1 for more details.

6.7 Remote monitoring

Advances in technologies have resulted in an increase in ‘off site’ monitoring systems, such as Parking Eye.

Typically car registrations/ parking duration are monitored remotely with penalty charges issued for any period of unauthorised parking or overstay. It is understood that data is routed through security cameras to the ‘host property’ in addition to a remote location handling data from numerous sites. For this reason whilst it is accepted that the cameras and supporting structures are rateable, difficulties arise in establishing paramount control. Separate assessment is therefore not considered appropriate.

7. Survey Capture

Sub Location Codes

Locally defined Sub Location Codes should be used.

Accommodation Use Codes

To ensure consistency, the following code should be adopted:

PKS - total number of spaces (not area) to be recorded.

Detail of none standard spaces, such those designated for disabled, motorbike or coach users should be made as valuation scales adopt different factors for such areas. It should be noted that for analysis purposes, the standard base rate of PKS (factor 1) should always be used to enable comparison and ensure consistency.

RSA Matrices

Locally defined address based matrices should be used.

8. Valuation Approach

Basis of Valuation

8.1 Rentals method

Whilst the primary method of valuation is based on rental comparison. It is acknowledged that rental evidence may be limited for this class. For the majority of car parks, valuation using a percentage of Fair Maintainable Receipts will therefore be necessary. However, it must be emphasised that this approach should only be adopted in the light of rental evidence in support of the percentages adopted.

Considering a relevant percentage of Fair Maintainable Receipts is not a shortened profits valuation; it is a method of comparison and the valuation must be derived from rental evidence. Where local evidence is sparse, it may be necessary to consider rents across a wider area and co-ordination with adjoining Units will be required.

For comparative purposes, value should be expressed as a price per space. This is a useful check where it appears likely the operator is not maximising revenue.

The density of spaces within car parks can vary, sometimes significantly, depending on the physical characteristics of a particular site. Adopting a price per space basis, rather than a price per m2, enables direct comparison of uniform sites with those bound by the limitations of an irregular shape.

When analysing a rent on a per space basis a standard sized space should be taken as the norm and non-standard sized spaces should be treated as relative to this. Non-standard sized spaces will be designed and marked out for specific users such as lorry/trucks, coaches, motorbikes, bicycles and wider-access spaces for disabled or parent and baby users.

Although a car park operator will, no doubt, generally seek to make the best use of the space available to him given the shape of the site, the policy of individual operators may lead to potentially different mixes of types of spaces. By considering rental levels in relation to the number of standard spaces allowance is made for operator policy and again enables direct comparison of different sites. If rental evidence has been analysed and applied on the basis of a price per standard space, the resulting valuation should be little affected by the operator’s policy.

8.2 Receipts and Expenditure basis

This (R&E) basis is not normally a suitable method of assessing car parks, particularly those occupied by local authorities because financial gain is rarely the primary motive in providing the facility. However, in a commercially run car park VOs may have to consider an approach on this basis in those exceptional cases where there is superfluous accommodation (for example - one provided for a substantial development but in advance of its completion).

For car parks operated purely for profit, a direct relationship between rents and receipts is a common basis of letting, and in such cases rent review clauses stipulate a specific percentage of turnover. The adoption of this approach for purposes of comparison does mean that account is automatically taken of factors such as location, size, relative pricing, occupancy rates and all advantages and disabilities in existence during the period covered.

It is emphasised that this approach should only be adopted in the light of market rental evidence in support of the percentages adopted.

8.4 Contractors basis

In exceptional cases (such as isolated multi-storey car parks not let at a rack rent) consideration may have to be given to a contractor’s basis approach but an assessment should not be determined on this basis alone. Reference should also be made to the background of rental evidence for comparable hereditaments elsewhere. Where consideration of the contractor’s basis is essential, the appropriate statutory decapitalisation rate should be adopted to arrive at the rateable value and the site should be included at a value which assumes that it is available for development only as a car park.

8.5. Method of valuation to be adopted

The primary valuation approach should be expressed on a price per space basis. Preference should generally be given to locally derived evidence. In some locations rental evidence can be sparse and in such circumstances it may be necessary to value using a percentage of Fair Maintainable Receipts. However, it is emphasised that this approach should only be adopted in the light of market rental evidence in support of the percentages adopted.

It is also stressed that the receipts approach is only appropriate in the case of commercially operated car parks. In instances where it appears likely that the operator is not maximising revenue, the approach should not be adopted.

Considering a percentage of Fair Maintainable Receipts is not a shortened profits valuation; it is a method of comparison and the valuation should be derived from a consideration of rental evidence.

Once a valuation scheme is created a ‘stand back and look’ approach should be taken to review the price per spaces within their locality. The individual levels adopted should be capable of interpretation in a logical, pragmatic pattern. There may be clear reasons for a value level at a specific car park not fitting the pattern, such as difficult access. It is also helpful to record instances where particular sites are not commercially operated but are, for example, run as part of a policy to support a local community.

8.6 Rental Analysis

Initially rents should be analysed on a price per space basis, as this is the primary approach. However, in the case of commercially operated car parks, where the Gross Receipts equate to a Fair Maintainable Trade, it may also be useful to analyse the rent in terms of a percentage of those Gross Receipts. Where useful rental information is available, every effort should be made to collate all relevant revenue information, so that the rent and receipt relationship can be identified.

For car parks operated purely for profit, a direct relationship between rents and receipts is not an uncommon basis of letting, and in such cases rent review clauses stipulate a specific percentage of turnover. The adoption of this approach for purposes of comparison does mean factors such as location, size, relative pricing, occupancy rates and all advantages and disabilities in existence during the period covered will automatically be reflected.

8.7 Physical Factors

In considering the value of a particular car park regard should be had to its individual characteristics, both external and intrinsic to the hereditament. Although not a definitive list, these may include on-street and off-street parking provision in the locality and the existence of other policies, such as, park & ride, resident parking and enforcement schemes. Regard should also be had to the levels of charges/free parking, access and signage and how well the car park is placed for shopping, entertainment and business centres, railway stations, and other facilities, together with an understanding of the pattern of demand, as compared to its competition. In order to establish a hierarchy of value it is often useful to take a snapshot of the level of charges across the locality on any one day, preferably close to AVD.

In respect of the hereditament itself, regard should be had, amongst other things, to the size, layout, internal access, facilities, superfluity and the condition and age of any structure.

Relative social and economic factors are also important, when comparison is made outside the immediate locality.

More weight should be placed upon evidence of like for like car parks, and so surface car parks should be compared to other similar surface car parks and multi storey car parks compared to other similar multi storey car parks.

8.8 Quantum

The presumption is that there should be no allowance for quantum unless there is local evidence to suggest otherwise. It is important to remember that, where a percentage of Fair Maintainable receipts has been adopted to help inform the valuation, any allowance for quantum will already be reflected in that calculation.

8.9 Factors affecting the analysis of Gross Receipts

It is important to remember that Fair Maintainable Receipts should be adopted which may not always be the same as the actual Gross Receipts. For car parks not operated purely for profit, the actual Gross Receipts may be limited by the policy of the operator, usually a Local Authority.

It is emphasised that this approach should only be adopted in the light of rental evidence in support of the percentages adopted.

VAT

VAT should be excluded from Gross Receipts.

Penalty Charges levied by the car park operator

Penalty charges may be levied by car park operators. In most cases, penalty charges should be considered to be part of the Gross Receipts. Where the proportion of income generated by penalty charges is significantly different in a particular car park, it may be necessary to compare this to the norm within the locality and determine why this car park is performing differently (i.e. policy of the particular car park operator).

Season Tickets

It should be determined whether income from season tickets is included in the Gross Receipts provided. It may be assumed that if a car park is commercially operated and issues seasons tickets then this is a commercially viable decision that a hypothetical tenant would also make and on this basis season ticket income should be included.

It may be necessary to apportion the income generated from season tickets between two or more car parks. The correct apportionment may not simply be a straight split; further investigation is likely to be required.

Disabled Spaces

Where parking within disabled bays is permitted without charge by the operator, for analysis purposes, it is important to exclude these spaces from the total number when arriving at a price per space, as they do not generate income. However, as free parking for disabled badge users is a policy decision rather than a legal requirement, these spaces should be included in the total number when carrying out the valuation.

Collection Costs

Where the costs of collection are significantly different from those at sites where rents have been analysed to determine a percentage of Fair Maintainable Receipts, it may be necessary to adjust the percentage of FMR adopted. This is not thought to be a common occurrence.

Tariffs

To establish whether a car park is commercially operated it is often useful to consider the charges made. To do this, it is recommended that a snapshot be taken of the level of charges across the locality on any one day, preferably close to AVD.

CCTV

CCTV will be reflected in Gross Receipts and therefore in Fair Maintainable Receipts, however, care should be taken to determine whether it is in fact reflected in the passing rent. Where CCTV is not reflected in the rent, the rent should be adjusted appropriately before being analysed against Fair Maintainable Receipts. Reference should be made to the Rating Cost Guide. (Hyperlink)

Other Hereditaments within Car Parks/Dual Use

It is important to consider whether any other use within a car park is taking place and then to determine whether this use forms a separate hereditament. Examples would be Hand Car Washes (RM5:190), Public Conveniences (RM5:625), Markets (RM5:630), Car Boot Sales (RM5:187), shop mobility and visitor centres.

9.Valuation Support

9.1 Surveys, location/ site plans and inspection check lists must be filed on EDRM. The proximity and location of the subject property in relation to nearby shopping centres and other attractions should be record.

9.2 Survey capture and valuation must be stored on RSA.

Practice note 1: Revaluation 2017

1. Market Appraisal

The value of car parks is related to the market demand for shops, offices and other commercial ventures nearby. However, factors such as availability and ease of public transport, the charging policy and supply of other parking within the locality has a huge impact on levels of value.

Since the last Antecedent Valuation Date, financial uncertainty, rising fuel costs and the increased popularity of internet shopping has had an adverse impact on some town centres, affecting the demand for car parking. In addition, the proliferation of town centre supermarkets operated by major chains which normally offer an element of free parking has resulted in existing operators moving away from ‘short stay’ charging structures.

Conversely, values may have increased in localities affected by Residential Parking Zones and the moves to make cities greener by restricting on street parking, effectively forcing commuters to use designated car parks.

Local Authority charging strategies have a significant impact on private parking providers. It is recognised that a lowering of charges within a locality can improve both occupancy and income. Accordingly, in many towns, since the last AVD, parking charges have been reduced by Local Authorities and subsequently private operators, to encourage more people into the towns and to maximise income streams.

High land values are increasingly leading developers to create basement or ‘sub development’ parking in preference to stand alone car parks. Aside from reducing overall building costs, basement or ‘sub development’ car parks, when compared to traditional designs, can be more aesthetically pleasing. Long term maintenance costs may be lower as these car parks will not suffer from the problems commonly associated with existing multi-storeys e.g. falling masonry.

To maximise income and mitigate empty property rate liability landlords and owners of car parks have, in recent years, moved away from a position of simply providing car parking to one where there are numerous ‘let outs’ providing a services to customers e.g. hand car washes, electric charging points, vending machines. Other revenue raising initiatives have included the installation of advertising space and the introduction of flexible parking provision.

Flexible parking is a particularly interesting development. There is an emerging group of parking companies, who specialise in providing parking to customers via bookings made on line e.g. internet/mobile phone apps. These operators, who acquire spaces from landlords on rolling licenses, offer clients parking on an hourly or daily basis. Agreements between these companies and landlords tend to be extremely flexible and are designed to ensure landlords can take back spaces as and when required.

Recent evidence suggests, Local Authorities in London, are renting out unused parking facilities located within housing estates and other residential developments. Once identified and if paramount control is proven, this type of parking should be separately assessed.

A further change in the market is the move to use plots of land/yards attached to other commercial properties for car parking, particularly for evening and weekend leisure uses. This arrangement is increasingly common around large venues such as arenas or football grounds. In such instances the car park is unlikely to warrant separate assessment (as paramount control is unlikely to have been relinquished by the occupiers of the principal hereditament), but the expectation of this additional income may increase the rental value of the principal hereditament.

The introduction of new remote technologies such as Parking Eye in 2012 has meant that it is much easier for operators to monitor their parking facilities. Remote number plate recording means that any non compliant use or overstay will result in the offender being liable to pay a fine.

These new technologies have also facilitated increased monitoring of small areas of free parking often located in front or adjacent to local shops. It is generally accepted that the benefit of this parking facility is already reflected in the rental value of the adjacent shops. Nevertheless, greater monitoring will give rise to a much higher volume of fines, which will undoubtedly give the enforcement company and the owners of the parking area additional benefit.

Lobby groups have successfully introduced a period of grace before ‘overstay fines’ are charged from an immediate penalty to 10 minutes. This change, which came into force during 2015, is likely to diminish levels of additional income generated by penalty charges. Indeed, given that the general public, encouraged by the media, are increasingly questioning the right of private enforcement companies to levy fines, income from penalty charges may diminish significantly.

Another consequence of remote monitoring is the impact on staffing numbers for car park operators. It is now accepted practice for city centre car parks to be unstaffed; any problems are serviced by an ‘on call’ team. This serves to reduce general expenditure costs in running a car park and helps to offset any falls in income that operators may have experienced in recent years.

2. Changes since last Practice Note

Whilst the primary method of valuation is based on rental comparison, it is acknowledged that rental evidence may be limited for this class.

For the majority of car parks, valuation using a percentage of Fair Maintainable Receipts will therefore be necessary. This approach should only be adopted in the light of rental evidence in support of the percentages adopted because a percentage of Fair Maintainable Receipts is not a shortened profits valuation; it is a method of comparison. Valuation should always be derived from rental evidence. Where local evidence is sparse, it may be necessary to consider rents across a wider area and co-ordination with adjoining Units will be required.

For comparative purposes, value may be expressed as a price per space. This is a useful check where it appears likely the operator is not maximising revenue.

3. Ratepayer Discussions

Talks with several major operators within industry have taken place and whilst specific aspects are not agreed the general trends (as noted within paragraph 1 - Market Appraisal) have been accepted as being realistic.

4. Valuation Scheme

No centralised scheme has been agreed. Car parks are valued on a geographical basis, with values governed by localised factors and charges.

`##Appendix 1: Guidance note on the rating of retail centre car parks

1. Introduction

This guidance note deals solely with the rating of car parks which:

  • form part of a retail development, and

  • are owned by the landlord of the retail units in that development.

It does not apply to traditional town centres where car parks serve the shops and other facilities in separate ownership.

The need for this update has arisen as a result of the number of appeals received in respect of this class, many of which have been influenced by the Lands Tribunal decisions in the cases of Hodgkinson (VO) v Strathclyde RCSF [1996] RA 129, Church Commissioners for England v Mummery (VO) [1997] RA 327, and B&Q & others v Assessor for Central Scotland [2000] RA 205.

For ease of reference

This note is divided into two complementary sections comprising

Part A ~ Identification of the Issues followed by

~ Recommendations

Part B ~ Commentary amplifying the relevant part in A.

For further information about the scope of this note and for what is meant by owned by the landlord of the retail unit and form part of a retail development, please see B.1 of the Commentary.

Part A : Identification of the Issues

2. Identification of the hereditament

If the car park is separately managed and occupied from the retail centre, then it will most likely form a separate hereditament in its own right. If not, then it may, or may not, form part of the “residual hereditament”.

The relevant quotations and explanations regarding the residual hereditament are set out in the Commentary on this paragraph at B 2.

3. Parking Rights

3.1 Irrespective of whether the car park is a separate hereditament or is part of the residual hereditament, the car should be looked at in the “real world” to establish the extent of any rights of parking which benefit other tenants in the centre and their customers.

3.2 Sources of parking rights:

3.2.1 The most usual source of parking rights is an express grant in the leases of the retails units.

3.2.2 Where no rights have been expressly granted, consideration should be given to whether any implied rights are inherent in the occupation of the Retail Units and/or other units in the development.

B 3.2.1 examines express grants of parking rights including how the wording should be construed when it extends to tenants’ customers, and when landlords’ rights conflict.

B 3.2.2 explains how implied rights of parking can arise.

4. Establishing the existence of Inseparable Rights of Parking

4.1 Where parking rights are found to exist, the next stage is to discover if they qualify as “inseparable rights”. To do this the “real world” position at the centre needs to be carefully examined.

4.2 Inseparable parking rights can only arise over a car park which forms an integral part of the centre and where there is common ownership.

B 4 provides a suitable test to apply to discover if the rights are inseparable and examines the significance of parking charges.

5. Valuation Consequences

5.1 For the centre’s other units

5.1.1 The centre’s retail (and other) units should be valued, vacant and to let, with the benefit of such implied or express parking rights as are inseparable (or inherent).

5.1.2 Where the rights are not regarded as being inseparable, the retail units should be valued on the assumption that they are vacant and to let, that the letting would be without the benefit of any express rights of parking over the car parks, but that car parks which are in fact there will continue to exist, and may or may not continue to be available on the same basis as to charges, etc., as at present, and without any liability for service charges on those car parks.

5.2 For the car parks

5.2.1 For rating purposes, car parks should be assessed consistently with the centre’s retail units, so where inseparable rights of parking are found to favour the retail units, the car parks must be rated subject to those same rights.

5.2.2 Every hereditament needs to be considered individually as, depending on the actual circumstances, such rights may reduce, exhaust, or be of little consequence to the value of the car park.

5.2.3 A bid from a hypothetical tenant is based on the value of the hereditament vacant and to let. Regard should be had to all possible uses, subject to the extent and the nature of any inseparable rights found to exist, having regard to the “rebus” doctrine.

5.2.4 Generally, demand is either for parking spaces for occupation, for revenue producing operations, or to provide socio-economic benefits for the locality.

5.2.5 Valuers need to be aware of the full picture concerning parking charges. Merely because parking is free at the material date, it does not follow that no charges can be made at a later date. Covenants may appear in a lease to permit charging, and some lease terms may in addition stipulate how receipts are to be used.

B 5 deals with Demand for the car park, Free parking v. Charges made for parking, Express Covenants concerning revenue and exhausted or nominal value.

6. Recommendations

6.1 Car parks at out-of-town retail centres occupying isolated positions - it may be assumed that inseparable

rights of free customer parking do exist providing -

  • there is no evidence to the contrary, and

  • the centre is dependant upon car borne customers, and

  • the parking is unrestricted and free of charge, and

  • these parking rights exhaust the value of the car parks,

  • the actual landlord of the centre controls the operation of the car parks, and

  • there is no significant demand for the car parks from outside the actual landlord’s ownership.

In such cases an RV of £ nil, or a nominal rateable value, is likely to be appropriate for the car park hereditament.

6.2 Car parks catering for the needs of a retail centre where inseparable rights exist but there is also significant demand for parking to satisfy the needs of persons not using the centre - the value of the car park is unlikely to be exhausted by the rights of tenants and customers to park there. Value will depend upon

  • the supply of available alternative on- and off-street parking in the vicinity together with the prevailing charging policy;

  • the strength of any demand over and above that coming from the centre’s tenants, customers, and landlord; and,

  • the extent of all likely bids for the hereditament subject to all inseparable rights continuing to be satisfied.

Such RVs are likely to be less than for such car parks without inseparable rights.

6.3 Car parks catering for the needs of a community, town, village - these car parks are seldom subject to inseparable rights to park as normally there has been no common landlord and the properties are in the occupation and control of different bodies. Value will be influenced by the extent of the demand for parking set against the provision of on- and off-street parking in the area, charging policy, and/or the socio-economic benefits derived.

6.4 Car parks catering for the needs of a retail centre where everyone is charged the same amount to park - these car parks should be assessed in the normal way. Demand for parking on the hereditament should be set against competing supply, namely from the provision of on- and off-street parking in the area generally, and the charges they apply. In cases where parking charges are waived or reimbursed for customers of certain shops, or it is suggested that all revenue is to be used to defray the centre’s service charge, the relevant documents and accounts should be examined in detail, together with the position over any surplus balances.

6.5 Where difficulties arise a copy of the standard lease for the centre should be obtained so as to determine what express rights have been granted. If none have been, then the wording adopted in the lease needs to be studied to see how it affects the test to establish whether any rights should be implied. Where they should be, it has to be decided precisely what these rights are.

6.6 If difficulties are experienced in applying this Guidance Note, please contact the Technical Adviser. Where necessary a full submission may be requested (including copies of appropriate papers, and plans).

Part B: Commentary

1. Scope of this guidance note:

This guidance does not apply to the traditional town centre car parks which serve shops and other facilities in separate ownership. In general, those car parks are not subject to parking rights in favour of any other property, even though they may be owned by the landlord of some adjacent retail units. Sometimes a number of parking places are let to nearby occupiers, but this does not create rights and burdens inseparable from any hereditament. It is a consequence of the way a particular car park occupier chooses to operate that car park. Variations on this separate ownership pattern may exist at neighbourhood shopping centres and other urban retail centres. The usual rateability and valuation considerations apply to all car parks which are in separate ownership to, or do not form part of the retail development.

(i) This guidance note deals solely with the rating of car parks forming part of a retail development, owned by the landlord of the retail units in that development.

(ii) The term “owned by the landlord of the retail units” has been deliberately chosen to include a variety of legal interests. Usually it will be the freehold interest which is in issue, but it need not be. The landlord may have only a leasehold interest in either the retail development, or the car park, or both.

(iii) Although the car park must form part of the retail development, it need not necessarily have been developed at the same time - the retail development may, for instance, have been built on or adjacent to an earlier car park. However, where such a car park replaces, or occupies the position of, an existing car park, the question of demand from premises outside the landlord’s ownership should be investigated. In most cases it will be clear whether a car park is, or is not, part of the retail development, but each case must be determined on its own facts. Cases of particular difficulty should be referred to the Technical Adviser.

(iv) Where a car park serves the needs of other property outside the retail development (or landlord’s ownership) of which it forms part, additional valuation issues arise. In such cases wider research is required as it is essential to be in full possession of all the relevant facts. (Examined further in Commentary on paragraph B.5 below.)

2. Identification of the hereditament

(i) Where the car parks, along with the other common parts, are occupied and administered together, legal advice favours the residual hereditament approach in the majority of cases suggesting that the Retail Centre is to be looked at in a wider sense. Seldom in the past has this approach been adopted within VOA, however the precedents suggest that in such cases there is a degree of flexibility.

(ii) The relevant passage from Hodgkinson -v- Strathclyde [1996] RA 129 @ page 129 reads: “It appears to me that the freeholder occupies all the common parts of the Octagon centre except perhaps the car parks which [based upon the facts of this case] are apparently separately managed and may be separately occupied, for one purpose namely to service the centre. If it fell for decision by me, I should therefore certainly be inclined to treat the conveniences as part of the same hereditament as the pedestrian malls and other areas to which the public have access. I should probably treat the whole of the rest of the common parts in the same way, as I have neither heard argument nor necessarily been informed of all the relevant facts in regard thereto, I think it is better not to make further observations as to this. I reject Counsel for the valuation officer’s submission that the conveniences have a

Different use from the malls as being relevant; the relevant question is the purpose of the use by a single occupier and that without doubt is the single purpose of servicing the retail units in separate occupations.

(iii) The relevant passage from Brook -v- Greggs plc and others [1991] RA 62 @ page 76 reads: “Although none of the parties have presented such an argument, on the evidence before me, it seems that there should be a separate entry in the valuation list in respect of the entire market hall, less the 128 stalls and 32 stores which are each separately occupied (the residual section). In other words, I agree with Counsel for the city council that the four units in the occupation of the city council should form a single assessment but I go further; there should be included in that single assessment the loading bay, the boiler house, refrigeration room, passage ways and other items which go to make up the whole of the residual section.”

(iv) The fact that an entry in the rating list relates to property which could more appropriately be regarded as part of a larger hereditament, does not necessarily invalidate it - Green (VO) -v- Barnet LBC [1994] RA 235. In some circumstances the same property may be capable of assessment as a single hereditament or of assessment as part of a larger whole. As was stated in Edwards (VO) -v- BP Refinery [1974] RA 1, the appropriate course to put the matter right is to propose an assessment of a larger hereditament as a whole.

(v) Difficulties of valuation suggest continuance of the existing approach and to leave the current assessment patterns undisturbed unless circumstances arise to make this course unsuitable - for example, the ratepayer must never be placed at a disadvantage as a result of the type of approach adopted by a VO. In the real world residual hereditaments are never offered vacant and to let, and so the preferred way of arriving at its rateable value would be to aggregate the value of the individual parts. “Difficulties of valuation” were referred to in the decisions of both Green (VO) -v- Barnet LBC and Edwards (VO) -v- BP Refinery.

(viii) If a VO prefers to adopt the residual hereditament approach it is recommended that a distinction is made between the public access areas (such as malls, WCs and car parks) and those areas where the public are seldom, if ever permitted (such as centre manager’s offices and cleaners’ and security accommodation).

3. Parking Rights

3.1 It is necessary to investigate the contractual arrangements in respect of those premises dependant on the car park.

3.2 Sources of Parking Rights -

Initially these need to be considered from the viewpoint of the centre’s dominant (or benefiting) hereditaments - e.g. the retail units.

3.2.1 Express Rights:

(i) Express rights may be contained in a lease, a pre-lease agreement, an exchange of correspondence, sale particulars or a side agreement in favour of the Retail Units, and/or other units in the development. The wording of express rights varies widely.

(ii) The right may take a little effort to find: for instance, “car parks” may feature in the definition of “common parts”, and there may be an express right to “enjoy the use of” the common parts. The normal manner in which one “enjoys the use of” a car park is by parking in it.

(iii) A right of parking expressly granted to the retail tenants extends to their customers unless there is an express reservation in the lease excluding the tenants’ customers from the rights in respect of the car park.

(iv) If a right to park is expressly granted in the retail unit leases, it should be read as a right to park without charge unless charges are made or there is an express clause reserving to the landlord the right to charge.

(v) Where the right of parking granted in the leases comes with some obligation on the retail tenants (for instance, to pay a service charge), then the car park should be taken to be subject to the right to park but with the benefit of the right to collect the service charge. Similarly, if the retail lease reserves a right to levy a charge for the parking, then the car park should be taken to be subject to the right of parking, but with the benefit of the right to levy a charge (whether or not any charge is in fact made in the real world). An express exclusion of s62 of the Law of Property Act 1925, when found in leases, should be dealt with similarly. (S62 implies certain rights into leases in specific circumstances, such as on renewal.)

3.2.2 Implied Rights:

(i) In modern commercial leases implied rights are rare. The more detail in which the parties to an agreement have set out the precise terms which they have agreed, the less readily the Courts take the view that they have left out something which ought to be there. Modern commercial leases are not noted, on the whole, for their brevity.

(ii) Some retail centres are highly dependent upon car-borne customers for successful operation - e.g. most out-of-town retail warehouse parks and retail centres where the size of the development is out of all proportion to the community in which it is located and its natural public transport catchment area. If the retail leases in these centres do not expressly grant rights of parking, the Courts are likely to find an implied right of parking arising under the doctrine of “non-derogation from grant”. (That is to say, at the time the (retail) lease was entered into, the car park served those retail units and belonged to the same landlord. The retail units were let as retail units, and it was apparent at the time of the letting that they could only function as retail units if their customers had somewhere to park. Accordingly, in letting the retail units for this purpose, the landlord must be taken (and will, by law, be taken) to have made his/her car park available for this purpose and to have undertaken to keep it available for this purpose for the duration of the letting.)

(iii) It will be apparent, however, that the doctrine of non-derogation from grant can only apply where the car park belonged to and was in the control of the same landlord. This would not be the case where the car park had been let to somebody else at the time that the retail unit leases were entered into.

(iv) A right of parking arising under the doctrine of non-derogation from grant should be taken to be a right to park without charge unless, at any time either:

a charge was/is made for parking in the car park; or

it is clear from notices, reservations, covenants or otherwise that the owner has reserved the right to levy a charge.

(v) A right of parking arising under the doctrine of non-derogation from grant without the right for the owner of the car park to levy a charge for parking will nevertheless be affected by the doctrine of “mutual benefit and burden”, so that the landlord will be entitled to recover a fair proportion of the cost of maintenance of and repairs to the car park from the tenants. Thus if no contribution is in fact being made there are unlikely to be any implied rights in existence. (But conversely it does not follow that valuable rights exist just because services charges a paid.)

4. Establishing the existence of Inseparable Rights of Parking

(i) To qualify as rights which are inseparable (sometimes referred to as inherent, or appurtenant rights) they must be so important to the current occupation of the associated hereditament that without them that hereditament could not be used for that purpose, for example for it to be physically impossible to use (e.g. without access) or because there would be no demand (e.g. an out of town shopping centre without parking or other significant transport facilities). Merely becoming less valuable without the rights would not be sufficient to qualify. Inseparable rights were examined in Shell-Mex & BP Ltd v Langley (VO) [1962] RA476.

(ii) A suitable test to apply in deciding if inseparable rights are present in a particular case is to consider whether, had the leases of the retail premises (or other units) contained no express rights of parking, what if any, implied rights of parking would arise under the doctrine of non-derogation from grant. In other words, to not include the rights would effectively destroy the purpose for which the leases were granted.

5. Valuation Consequences for the car parks

(i) Demand for the car park -

  • Hypothetical tenants may be expected to be fully aware of the express terms in the leases of adjacent units, of the nature and extent of implied rights, and of what competition to use the car park exists in the real world (but keeping within the “rebus” doctrine).

  • In determining value it will be appreciated that demand can come from occupiers or landlords of nearby property for use by their, or their tenants’ staff and/or customers, or from bidders likely to be interested in turning the car park into a profit making venture. Local authorities may also wish to ensure that the locality enjoys the socio-economic benefits derived from the presence of a free car park.

  • Where as a fact there is significant parking by the owners of cars who are not based in, or visiting the centre the expectation would be for the car park to have value.

(ii) Free Parking v Charges made for parking -

  • Express or implied inseparable rights to free customer parking are likely to have an impact on value - the extent of the impact will depend on the circumstances.

  • Where (a) the extent of such use leaves no parking spaces for anyone else; or (b) there is no demand from elsewhere, value will be exhausted and only a nominal (or nil) value remains.

  • Where there is an express provision in the leases for the landlord to make charges, an inseparable right of free parking cannot be implied; even though no charges are, or have in practice ever been made. Sometimes in these circumstances there is little or no demand for the particular car park, but then the real issue is one of value and not to do with inseparable rights. In such cases a full investigation should be made of the sources of demand for parking, and supply of on- and off-street spaces within the area.

  • Occasionally an express reservation to charge is coupled with another requiring the landlord to use car parking receipts to reduce the service charges of the retail centre. Here the rental value will depend upon the source of the demand; if the generation of revenue is the primary driving force, only a nominal value is likely. But where the demand is for actual use of those parking spaces still available, value will depend upon local market rental values. Demand from the local authority should not be overlooked.

  • In some cases whilst there is no provision for parking charges, the operator rigidly applies a policy of penalty charges to anyone who overstays their free parking period. Where a significant income is generated from this source, there is a presumption of value; how much will depend on the facts.

  • Where charges are the same for all car drivers alike, such rights to parking seldom have any detrimental affect on value.

  • But where parking charges are the same for all drivers and retail tenants make a refund, it is important to discover who bears the eventual cost. Where it is the tenants themselves, this would signify that there are no implied rights to free parking; on the other hand if the operator of the car park reimburses the tenants, this would tend to indicate that free parking rights do exist.

  • Where there are no inseparable car parking rights, either express or implied, then the car park should be assessed in the normal way.

(iii) Statutory Rights and Restrictions -

  • The provision of car parking facilities generally form a vital element in the granting of planning permission for shopping centres. Usually the planning requirements are set out in some detail so as to ensure adequate car parking provision at the various stages of development. Whilst hereditaments should be valued for rating purposes as subject to statutory conditions, these restrictions seldom relate to the charging aspect.

Practice note 1: Revaluation 2010

1. Co-ordination

Co-ordination responsibilities are set out in Rating Manual section 6 part 1.

Car parks are designated as a Group class and Special category codes should be applied as follows:

039 (Multi-Storey)

040 (Surfaced Open)

041 (Unsurfaced Open)

043 (Car spaces)

For Reval 2010, non multi-storey Park and Ride Car Parks where the buses pick up or set down passengers within the hereditament are the responsibility of SRUs and will be dealt with elsewhere in the Rating Manual.

Following on from the 2005 Practice Note, it is recommended that each Group should nominate a single person to lead this class and provide co-ordination across the Group and between Groups.

To assist with co-ordination a structure of Group files have been provided on the P’drive for recording of relevant information.

2. Confidentiality

Some national operators have provided Gross Receipts information centrally on a confidential basis. This information is considered to be particularly trade sensitive. Along with all information received by Form of Return, care must be taken not to disclose such information inadvertently during negotiations. Some operators are concerned that by openly discussing the percentage of Fair Maintainable Receipts adopted for certain types of car parks a simple calculation will inform a rival operator of the income being generated at specific sites.

3. Decriminalisation of Car Parking Offences

Initially the Road Traffic Act 1991 (RTA) decriminalised parking enforcement throughout London. This allowed the local authorities to carry out all parking enforcement in both on and off-street areas. The Decriminalised Parking Enforcement (DPE) scheme was then rolled out nationally but by 2003, only 75 local authorities outside of London were operating on-street parking enforcement. In all other Local Authorities, on-street parking offences were still subject to Fixed Penalty Charges (FPC) issued by Traffic Wardens who were directly employed by the Local Police Authority.

The need for a uniform and improved approach to parking and traffic enforcement led to Part 6 of The Traffic Management Act 2004 (TMA), which came fully into effect on 31st March 2008. The TMA placed the responsibility on the Local Authority to ensure that traffic is managed on the highway network as effectively as possible. Enforcement is carried out by Civil Enforcement Officers appointed by the Local Authority who issue Penalty Charge Notices (PCN).

In 2003, Civil Enforcement Officers in 33 London Boroughs and the 75 Local Authorities issued just over 7 million PCN. During the same period Traffic Wardens in the remaining 313 Local Authorities only issued just over 1 million FPC. In the light of these statistics, it may occasionally be of use to determine when the Local Authority took over responsibility for on-street parking enforcement and to consider whether this is likely to have had an impact on the level of receipts within a locality.

4. Valuation Approach

The primary valuation approach should be expressed on a price per space basis.

The approach to valuation is one based on rental comparison. Preference should generally be given to locally derived evidence. However experience in some locations show that rental evidence can often be sparse and in these circumstances it will be necessary to consider rents across a wider area and co-ordination with adjoining Groups will be necessary.

A valuation by a percentage of Fair Maintainable Receipts may be appropriate, although ultimately expressed on a price per space basis, and in many cases this approach can be used as a useful check. However, it is emphasised that this approach should only be adopted in the light of market rental evidence in support of the percentages adopted. It is also stressed that the receipts approach is only appropriate in the case of commercially operated car parks. In instances where it appears likely that the operator is not maximising revenue, the approach should not be adopted.

Considering a percentage of Fair Maintainable Receipts is not a shortened profits valuation; it is a method of comparison and the valuation should be derived from a consideration of rental evidence.

Once a valuation scheme has been created a ‘stand back and look’ approach should be taken to review the price per spaces within their locality. The individual levels that have been identified should be interpreted to produce a logical and pragmatic pattern. There may be clear reasons for a level at a specific car park not fitting within the pattern, such as difficult access, but it will also help to identify where the site is not commercially operated but is, for example, run as part of a policy to support a local community.

4.1. Rental Analysis

Initially rents should be analysed on a price per space basis, as this is the primary approach. However, in the case of commercially operated car parks, where the Gross Receipts equate to a Fair Maintainable Trade, it may also be useful to analyse the rent in terms of a percentage of those Gross Receipts. Where useful rental information is available, every effort should be are made to collate all relevant revenue information, so that this comparison can be made.

For car parks operated purely for profit, a direct relationship between rents and receipts is not an uncommon basis of letting, and in such cases rent review clauses stipulate a specific percentage of turnover. The adoption of this approach for purposes of comparison does mean factors such as location, size, relative pricing, occupancy rates and all advantages and disabilities in existence during the period covered will automatically be reflected.

4.2. Physical Factors

In considering the value of a particular car park regard should be had to its individual characteristics, both external and intrinsic to the hereditament. Although not a definitive list, these may include on-street and off-street parking provision in the locality and the existence of other policies, such as, park & ride, resident parking and enforcement schemes. Regard should also be had to the levels of charges/free parking, access and signage and how well the car park is placed for shopping, entertainment and business centres, railway stations, and other facilities, together with an understanding of the pattern of demand, as compared to its competition. In order to establish a hierarchy of value it is often useful to take a snapshot of the level of charges across the locality on any one day, preferably close to AVD.

In respect of the hereditament itself, regard should be had, amongst other things, to the size, layout, internal access, facilities, superfluity and the condition and age of any structure.

Relative social and economic factors are also important, when comparison is made outside the immediate locality.

More weight should be placed upon evidence of like for like car parks, and so surface car parks should be compared to other similar surface car parks and multi storey car parks compared to other similar multi storey car parks.

4.3. Quantum

The presumption is that there should be no allowance for quantum unless there is local evidence to suggest otherwise. It is important to remember that, where a percentage of Fair Maintainable receipts has been adopted to help inform the valuation, any allowance for quantum will already be reflected in that calculation.

4.4. Factors affecting the analysis of Gross Receipts

It is important to remember that Fair Maintainable Receipts should be adopted which may not always be the same as the actual Gross Receipts. For car parks not operated purely for profit, the actual Gross Receipts may be limited by the policy of the operator, usually a Local Authority.

It is emphasised that this approach should only be adopted in the light of rental evidence in support of the percentages adopted.

4.4.1. VAT

VAT should be excluded from Gross Receipts.

4.4.2. Penalty Charges levied by the car park operator

Penalty charges may be levied by car park operators (generally Local Authority operated Car Parks) but this may not always be the case. In most cases, penalty charges should be considered to be part of the Gross Receipts. Where the proportion of income generated by penalty charges is significantly different in a particular car park, it may be necessary to compare this to the norm within the locality and determine why this car park is performing differently (i.e. policy of the particular car park operator).

4.4.3. Season Tickets

It should be determined whether income from season tickets is included in the Gross Receipts provided. It may be assumed that if a car park is commercially operated and issues seasons tickets then this is a commercially viable decision that a hypothetical tenant would also make and on this basis season ticket income should be included.

It may be necessary to apportion the income generated from season tickets between two or more car parks. The correct apportionment may not simply be a straight split; further investigation is likely to be required.

4.4.4. Disabled Spaces

Where parking within disabled bays is permitted without charge by the operator, for analysis purposes, it is important to exclude these spaces from the total number when arriving at a price per space, as they do not generate income. However, as free parking for disabled badge users is a policy decision rather than a legal requirement, these spaces should be included in the total number when carrying out the valuation.

4.4.5. Collection Costs

Where the costs of collection are significantly different from those at sites where rents have been analysed to determine a percentage of Fair Maintainable Receipts, it may be necessary to adjust the percentage of FMR adopted. This is not thought to be a common occurrence.

4.4.6. Tariffs

To establish whether a car park is commercially operated it is often useful to consider the charges made. To do this, it is recommended that a snapshot be taken of the level of charges across the locality on any one day, preferably close to AVD.

4.4.7. CCTV

CCTV will be reflected in Gross Receipts and therefore in Fair Maintainable Receipts, however, care should be taken to determine whether it is in fact reflected in the passing rent. Where CCTV is not reflected in the rent, the rent should be adjusted appropriately before being analysed against Fair Maintainable Receipts. Reference should be made to the Rating Cost Guide. (Hyperlink)

5. Other Hereditaments within Car Parks/Dual Use

It is important to consider whether any other use within a car park is taking place and then to determine whether this use forms a separate hereditament. Examples would be Hand Car Washes (RM5:190), Public Conveniences (RM5:625), Markets (RM5:630), Car Boot Sales (RM5:187), shop mobility and visitor centres, etc.