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

Section 600: local authority occupations

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

1. Co-ordination

For the purposes of co-ordination, hereditaments occupied by Local Authorities are treated in varying ways. Those valued by reference to rents and/or by direct comparison with rented hereditaments will not normally be subject to national co-ordination. Hereditaments valued by reference to receipts or on the contractor’s basis will generally be subject to co-ordination. Co-ordination arrangements for individual classes are given in the appropriate sections within this volume, but are in addition reproduced in Appendix 1 to Practice Note 1.

2. Description

Local authorities occupy a wide range of classes of hereditament. Those set out in Appendix 1 are examples of more commonly found types, but the list provided should not be regarded as exhaustive. Local authority occupations fall broadly into two main types:

i. classes of hereditament which although occupied for public purposes, would, rebus sic stantibus, attract a private sector tenant if vacant and to let

ii. classes of hereditament which are occupied for public purposes and which would, rebus sic stantibus, attract only a local authority, or a non-profit making organisation with social objectives.

The valuation of hereditaments in category (ii) above tends to present particular difficulties.

3. Survey Requirements

The nature of hereditaments involved is too diverse to allow for specific guidance in this section. But it should be noted that if it is intended to use the contractor’s basis whether as principal or subordinate method of valuation it is necessary for gross internal area to be taken in addition to any other basis of measurement.

4. Basis of Valuation

4.1 Local Authority Schools

See section 590 and the scheme of valuation provided in Practice Note 5:590:1.

4.2 Public Conveniences

a. Valuation

A scheme of valuation is provided in Practice Note 5:600:2.

b. Public Conveniences Provided for the Disabled

Conveniences which are provided for disabled persons should be regarded as exempt under para 16(1)(b) Sch 5 LGFA 1988, on the basis that their provision may be regarded as a welfare service. Occasional use by non-disabled persons should not be regarded as preventing exemption. But exemption should not be allowed for Conveniences which have been provided for undifferentiated use by both the disabled and the non-disabled, eg a room which doubles as a disabled Convenience and “a mother and baby room” will not be exempt.

In practice VOs should exempt any Convenience (or part thereof) which appears to be dedicated to use by the disabled whether by means of the wheelchair symbol or any other sign, provided that there is no indication that it is also intended for use by non-disabled persons.

Where part only of the whole hereditament qualifies for exemption, VOs should arrive at the value attributable to the non-exempt part as follows:-

i. value the whole hereditament in accordance with the Memorandum of Guidance, and

ii. apportion that value by applying the following fraction:-

GIA of whole - area of disabled part

GIA of whole

For the purpose of the calculation of the appropriate fraction in 4.3(ii), the area of the disabled part should be taken to be:-

a. in the case of a self-contained disabled section, the GIA of that section, including the thickness of internal walls,

b. in the case of cubicle(s) accessed through non-exempt parts, the area of such cubicle(s) only.

c. Closure of Public Conveniences

The closure of a Public Convenience is not itself a Material Change of Circumstances when considering the assessment of that Convenience, and is not therefore a factor to be taken into account within para 2(7) of Sch 6 LGFA 1988. Where a Public Convenience was permanently closed on or before the AVD it may be concluded that there was no demand to sustain a rent. While subsequent closure must be disregarded, the circumstances responsible for closure may be taken into account if they fall within para 2(7), eg the opening of new alternative facilities in the locality. A post AVD policy change by the local authority in respect of provision of Conveniences must in itself be ignored.

d. De Minimis Structures

Small out-of-date urinals lacking in facilities, and of low value, may be ignored.

e. Underground Public Conveniences

The ERC of Underground Public Conveniences should be found in accordance with Practice Note 2 on the basis of a replacement surface structure to a specification compatible with the internal features of the actual hereditament.

f. Automatic Public Conveniences

Automatic public conveniences are increasingly being introduced. Two common types are illustrated in Appendix 5:600:3. Valuations should be as provided in Practice Note 2. Addition may be necessary to reflect the value of Advertising Space. Where this is let out it should be the subject of separate assessment.

4.3 Other Types of Local Authority Occupation

4.3.1 Principal Methods of Valuation

Principal methods of valuation should be as follows, without prejudice to the rule in Garton v Hunter (LT 1969 RA 179) that the evidence of each method should be considered in accordance with the weight which may be attached to it:

a. the Rental/Comparative method for those hereditaments which are rented or which may be compared with other rented hereditaments;

b. the Receipts and Expenditure Basis for those hereditaments which are not rented and which cannot be compared with other rented hereditaments and which are either provided for profit or are intended to be operated for profit, or are of a type which would be operated for profit by another potential hypothetical tenant, applying broadly similar admission management policies and charges to those operated by the Local Authority at AVD;

c. the Contractors Basis for other hereditaments.

As a guide Appendix 5:600:1 sets out a list of principal methods of valuation for various classes of hereditament. There should be flexibility in deciding on which method to adopt, allowing for the evidential value of each method to be weighted. Judgement should depend on the facts of each case rather than on a pre-determined preference.

4.3.2 Application of Valuation Methods

Application of the respective methods of valuation should be as follows: a. the method of rental adjustment and comparison is as for all other hereditaments; b. the Receipts and Expenditure Basis should utilise actual accounts where the hereditament is operated with a view to maximising profit, but where it is being applied in circumstances in which the local authority has not sought to maximise profit, both receipts and expenditure may need adjustment to accord with the targets of a competing hypothetical tenant. An end addition may also be needed where the hereditament is operated for mixed motives, ie profit and intangible benefit. Where the particular hereditament (being of a type which is frequently found in private sector occupation) is likely to attract a private sector tenant who would operate it in a manner which would not differ from the policy of the local authority, the assessment should not differ from that of an exactly similar privately occupied hereditament. Receipts in the form of revenue grants should not be deducted, but it is incorrect to have regard both to such grants and to higher charges which would be made by a competing bidder, unless the same grants would be available to that bidder. The nature and quantum of available grants should be taken as at the AVD, but the prospects of their continuance should also be viewed as they would have been perceived at that date; c. in circumstances where the Contractors Basis applies, the five stages will be applied as follows:

Stage 1. It will be assumed that the occupying authority would have required either an exactly similar or a substitute building, had the hereditament in question not been available, unless evidence to the contrary can be shown. A substitute structure costed for Stage 1 may be smaller in size and/or cheaper in design than the actual hereditament provided that it would fulfil the hypothetical tenant’s requirements. No deduction should be made in respect of grant aid or donations, unless it can be established that the hereditament or part thereof would not have been provided at the AVD in the absence of the specific grant involved. It is appropriate to consider the availability of other grants or other sources of funding (eg. local taxation). The nature and quantum of available grants and subsidies should be taken as at the AVD. Reference should be made to Rating Manual section 4 part 3 - Appendix A on the effect of grant aid in a Contractors Basis Valuation.

Where use of the premises had permanently ceased on or before the AVD and no other demand existed, a nominal value may be appropriate unless the premises are, rebus sic stantibus , available for another use within the same mode or category of occupation.

Where the hereditament was either in use or retained for future use at the AVD, it may nevertheless be established that neither the actual hereditament, nor any substitute would have been required to be provided at the AVD, on the evidence of a resolution made on or before AVD (documented in council proceedings) to cease use of the hereditament on a permanent basis, PROVIDED that resolution was implemented within 5 years after and otherwise than as a result of a change in policy. In such cases where the hereditament is or could be revenue producing, the Contractors Basis should not be regarded as the principal method of valuation; but where it is not even potentially revenue producing, the Contractors Basis may be applied and Stage 1 thereof must involve an assumed requirement for the hereditament or part thereof (see Stage 5 for special allowance in these circumstances).

Stage 2. Allowance should be made for physical and functional obsolescence. The allowance for physical obsolescence should reflect the regular expenditure needed for annual repair of the subject hereditament as compared with a new structure. Functional obsolescence directly associated with features such as unnecessary height, excessive size, excessive ornamentation and inferior facilities should already have been identified and reflected in the lower costings adopted for the substitute building in Stage 1 and no further deduction is needed. But a specific functional obsolescence allowance will be appropriate for higher running and efficiency-in-use costs as compared with those incurred in the occupation of a new “substitute” building. General guidance is provided in the form of age-based scales set out in Appendix 5:600:2. Caution should be exercised in the use of these scales in view of the variety of Local Authority hereditaments and their differences in exposure to physical and functional obsolescence. Obsolescence is not directly related to age and these tables are age-related for convenience of use only. Examples may arise where an allowance (or no allowance) outside the indicated upper and lower percentages may be appropriate, but departure from the table should be justified on the facts of each case.

Stage 3. Land value should be arrived at as indicated in Rating Manual: section 4 part 3 - para 6. Where the hereditament is located in an area of high land value, but could without material functional detriment operate from an alternative lower value site, it is appropriate to adopt the lower site value on the footing that this would be the most likely location of a substitute hereditament. The immediate site of the structure(s) together with immediate landscaping, access and car park(s) should be subject to the same percentage obsolescence allowance as accorded to the buildings in Stage 2. Undeveloped land beyond the immediate site of the buildings, immediate landscaped areas, access areas, yards and car parks should be valued separately but as an integral part of the hereditament; it will not be subject to obsolescence allowance, but a deduction may be made for superfluity if appropriate.

Stage 4. The decap rate as prescribed is to be adopted.

Stage 5. Where a substitute building of smaller size and/or cheaper design is assumed for Stage 1, and where a cheaper substitute site is adopted in Stage 3, it may be necessary to examine whether a Stage 5 addition is appropriate to reflect the additional value which the actual hereditament has, as compared with the substitute building and site envisaged in Stages 1 and 3; such value should not be found by reference to cost, and must instead have regard to extra revenue receipts or other advantages which accrue to the local authority. Stage 5 also affords the opportunity to make a specific allowance in the case of hereditaments which while in use or held for future use at AVD, would not have been required to be provided on that date (see Stage 1 for necessary proof); it is not possible to establish any generalised guidance on the size of this allowance which must depend on the facts of each case. This will also be the appropriate stage to consider factors which affect the value of the hereditament as a whole, but were not reflected in Stages 2 and 3, eg piecemeal development resulting in poor layout between buildings. Finally, the result of all 5 stages must be consistent with assessments of comparable hereditaments; this may involve re-examining Stages 1 - 3, but no adjustment should be made whether directly or indirectly to the decap rate. Where it is possible to use an alternative method of valuation, the result of applying the Contractor’s Basis should be compared and, if possible adjustments should be made in order to produce consistent results. Where there is no reasonable scope for adjustment, a judgement must be formed of the evidential weight of each basis, on the facts of each case.

Appendix 3 : Local authority occupations

Description

Unisex toilet. Factory made for location in any situation. Construction is of vertically ribbed pre-cast concrete with a flat sandwich roof. Tilting concrete floor. Internal wall and ceiling finish of graffiti-proof lacquer. Electric lighting. Hot and cold water. Heated.

Retro Column incorporating an Automatic Public Convenience; manufactured and supplied by

J C Decaux, also known as Street Equipment Ltd.

Description

Independent structures, often located in a shopping precinct or pedestrianised area, combining an automatic public convenience with advertising panels.

Overall height 4m, excluding fin, which is 1 metre high. Diameter 1.436 metres.

Height of main display 3.134 m. Area available for display 14.14 m2.

Lit by fluorescent tubing.