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

Section 710: motorway service areas / major road service areas

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 section refers to Motorway Service Areas (MSA) SCAT code 194 and Motorway Service Area Let-Outs SCAT code 193.

1.2 These sites are identified by blue signs on the motorways.

1.3 Major Road Service Areas are not included. See RM Section 880 Roadside Restaurants. Truckstops are not included, these are covered within RM 1085

1.4 MSA sites typically comprise:

  • amenity building with shops, catering, amusements, toilets
  • lodges
  • advertising hoardings
  • ATMs
  • petrol forecourt and shop
  • parking
  • HGV driver facilities
  • car washes
  • tourist information
  • business office/lounge
  • catering vans outside the amenity building

1.5 Care must be taken in identifying the correct unit of assessment. From physical inspection it is often not obvious who is in paramount control of a particular area. Corporate branding and staff uniforms may give a false impression that a separate let-out exists when in fact franchise agreements may be in operation. Details of any contractual arrangements should therefore be sought, to establish if the motorway service area operator has in fact relinquished control.

2. List description and special category code

Primary Description Code: CX

List description: MOTORWAY SERVICE AREA AND PREMISES

SCAT code: 194

Suffix: S (Specialist)

Primary Description Code: CX

List descriptions: RESTAURANT AND PREMISES / SHOP AND PREMISES / AMUSEMENT AREA AND PREMISES / KIOSK AND PREMISES

SCAT code: 193

Suffix: S (Specialist)

3. Responsible Teams

3.1 Motorway Service Areas are a Unit Specialist class. Responsibility for inspection, survey and valuation rests with the Unit Specialist referencers and valuers.

3.2 For Reval 2017, it is anticipated that each Unit will have a named individual responsible for the class. More than one named individual is recommended for succession planning.

4. Co-ordination

4.1 The Motorway Service Area and Truck Stop class co-ordination team (CCT) has overall responsibility for these classes.

4.2 Each Unit’s Specialist Valuer will be a member of the CCT and will be responsible for assisting in the delivery of the Unit’s valuations and also for liaising on value and technical issues with other CCT Specialist Valuers across the country.

4.3 Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory
  • not to depart from the guidance given on appeals or maintenance work, without approval from the CCT
  • seek advice from the CCT before starting on any new work

4.4 It is envisaged that co-ordination within and across the Units will be necessary to ensure consistency of approach.

5.1 MSAs have been planned and controlled by the Department of Transport ever since motorways were first built. This was seen as the best way of ensuring that all motorway users had regular opportunities to rest during their journeys and to obtain essential services: fuel, lavatories, food and drink.

5.2 Until 1980 MSAs were let following a consideration of tenders which were invited from interested parties by the Department of Transport. The tender documents required offers to be submitted on the basis of a lease, usually for a term of 50 years (three sites let on 21 year terms), at a fixed annual rent plus a “participating rent” calculated as a percentage on a sliding scale of the annual turnover after deduction of petrol duty, tobacco tax and VAT. Acquisition of the land, provision of access roads, landscaping, parking areas, lighting and basic services were financed by the Department of Transport. The operator paid for buildings and equipment. The leases initially required the operator to:-

a. Maintain the site and buildings in good repair, including those facilities provided in the first instance by the Department. b. Provide services for 24 hours every day including toilets, food and drink, petrol and repair facilities (since relaxed). c. Provide up to four brands of fuel.

The cost of provision of the free facilities, such as toilets, was heavy and 24 hour opening necessitated a three shift employment system. Because most sites are in rural locations site operators were obliged to convey staff from surrounding areas which added to their costs.

5.3 In 1980/81 the Government embarked on a programme of disposal of MSA sites to the operators following publication of a Report of the Committee of Inquiry into MSAs (known as the Prior Report) in 1978. The report recommended that existing contracts should be re-negotiated to achieve an equitable transition towards new consistent lease terms with the aim of redressing the imbalance of return between operators and the Exchequer, improving standards, removing unnecessary constraints and reducing fuel prices for consumers. The existing leases were surrendered to the Department and new 50 year leases granted to the operators at peppercorn rents and a premium.

5.4 Since the 1980s the method of providing MSAs has been for the DTp to:-

  • identify gaps in the network;
  • select suitable sites to fill these gaps;
  • seek planning clearance;
  • acquire the land by agreement or, more usually, compulsory purchase;
  • offer the sites, usually by competitive tender, for design, construction and subsequent operation by private concerns (either oil companies or catering operators such as Granada, Trusthouse Forte etc).

Operation is governed by fifty year leases (granted by the DTp in return for a premium payment and peppercorn rent) which ensure that specified quantities of parking and other required facilities are provided 24 hours a day;

  • avoid adjacent MSAs being operated by the same company;
  • sign MSAs, but not off-motorway facilities, from the motorway;

maintain landlord controls over the use of the site (but not its day to day operation which remains the responsibility of the operator).

5.5 Some sites have been, and are being, identified by the private sector as a “private initiative”. In “private initiative” cases an MSA operator, developer, or land owner, obtains a suitable site which is sold, usually with planning permission, to the Department at market value ignoring the value as a service area. The site is leased back to the operator for a term of not less than 50 years at a peppercorn rent and a premium to reflect the right to put up a motorway sign and gain access to the motorway. In such cases the operator is responsible for building the access road, which can be a very expensive item. In cases where the Department of Transport already own the site it is usually put out to tender with the access road already constructed.

5.6 Under both of these methods the Department of Transport impose certain conditions on the operation of MSAs in order to secure basic services for all motorway users at all times. These conditions are that MSAs must provide:-

  • Services for all motorway users 24 hours a day every day of the year;
  • at least hot drinks and cold food at all times;
  • unleaded petrol and diesel;
  • free lavatories with public access;
  • free parking for two hours (after which charges may be made) in quantities specified by the Department of Transport;
  • a picnic area of at least half an acre;
  • showers and shaver points for lorry drivers;
  • public telephones;
  • a tourist information point if required by the Regional Tourist Board;
  • a police post if required by the local constabulary;
  • all facilities to be made available and accessible to disabled people (eg. dedicated parking spaces to be reserved near amenities);

and they must not:

  • allow the sale or consumption of alcohol;
  • allow rear access to the site to be used other than by MSA staff, delivery vehicles, and the emergency services;
  • be used for purposes unconnected with the use of the motorway. The MSA must not become a destination in its own right, generating extra traffic on the motorway. Its purpose is to serve the incidental needs of people in the course of a motorway journey.

5.7 In August 1992 the Government announced that they were reducing the central regulation of motorway service facilities in favour of a greater role by the private sector. The new approach is designed to increase competition and choice for drivers and passengers and the main features of the arrangement include:-

*responsibility for identifying new MSA sites, seeking planning permission and acquiring land will pass from the Department of Transport to the private sector;

  • the minimum interval between MSAs will be reduced from around 30 miles to about 15;

continued guarantee of 24 hour access, fuel availability, free parking and toilet facilities.

5.8 In recent years restrictions on advertising signage on motorways has been relaxed with advertising of significant brands on blue motorway service signs now commonplace. This has resulted in increased competition between sites with each trying to increase visitor numbers.

5.9 Following a relaxation of licensing regulations on motorway sites in 2014, JD Weatherspoon opened the first public house at Beaconsfield services on the M40.

6. Survey Requirements

6.1 Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.

6.2 Where the MSA operator is in control of all facilities there is no need to measure the amenity building or petrol filling station forecourt shop but plans should be obtained and a fulll written description of the facilities on site prepared.

6.3 Where the petrol filling station is occupied separately to the amentity building guidance in Rating Manual 5 Section 770 should be followed.

6.4 MSA Let-Outs should be measured to GIA for rating purposes in accordance with the RICS Code of Measuring Practice 6th edition or its replacement. Gross Internal Area (GIA) - Measurement definitions - isurv.

6.5 Advertising panels which are rented by third parties should be data captured in accordance with the instructions in Rating Manual 5 Section 20.

6.6 Automatic Teller Machines (ATMs) should be be data captured in accordance with the instructions in Rating Manual 5 Section 1120.

7. Survey Capture

7.1 Rating surveys should be captured on the Rating Support Application (RSA) for SCAT 193 assessments of MSA let-outs.

7.2 Plans and survey sheets for all facilities on sites should be stored in the property folder of the Electronic Document Records Management (EDRM) System.

7.3 For SCAT 194 assessments and separately assessed MSA petrol forecourts survey data should be captured in the non bulk server even though the valuation application may not be available for Revaluation 2017.

8. Valuation Approach

8.1 The preferred basis of valuation is a profits basis. Full details of this method of valuation can be found in RM4:6.

8.2 This class will be the subject of central negotiations and the appropriate percentage, or percentages, to be applied to the gross receipts will be discussed with agents representing the motorway operators.

8.3 The gross receipts split between fuel, forecourt shop, amentity building shop(s), catering, accommodation and other receipts will be provided by the site operators on a form of return.

8.4 MSA Let-Outs will be valued on the rentals method.

9. Valuation Support

All valuations should be entered either on the stand alone spreadsheets for MSAs, or RSA for let outs.

Additional support is available through:

  • Survaid.
  • Class Co-ordination Team
  • EDRM

Section 710: Practice Note 2017 - Motorway service areas/ Major road service areas

1. Market Appraisal

Historically motorway service areas were not allowed to be destinations as such but were designed to ensure that motorists had access to basic rest and fuel facilities. In recent years, this requirement has been relaxed with advertising of significant brands on blue motorway service signs now common place. This has resulted in increased competition between sites with each trying to increase visitor numbers.

Since the last Antecedent Valuation Date (AVD) this major change has meant that all major operators have moved from having their own in-house catering facilities/shops and entered into partnerships with the likes of McDonalds, M&S, Greggs and Costa Coffee. These partnerships are crucial to success, with the aim of increasing visitor numbers/customer spend within the service area as a whole. ‘High profile’ brands can have a cannibalisation effect on existing outlets, particularly catering. Individual motorway service operators are therefore keen to offer a wide retail mix to reduce this impact within any given service area.

It is now commonplace for catering outlets, overnight accommodation and petrol stations at service areas to be ‘occupied’ in a variety of ways, ranging from formal leases to franchise agreements. Where franchises are in place, the motorway service area operator fits the unit to the specification of the franchisor and provides staff, purchases stock and retains the income. A franchise fee is then paid based on a percentage of sales.

Few new players enter into this market, however petrol forecourt operator Euro Garages opened their first site in 2011 (Rivington Services on the M61). Also new to the market was Gloucester services which opened on the M5 during 2014. Gloucester services introduced the new concept of selling local produce much akin to a farm shop, such innovation lead to the service area being awarded the title of ‘Forecourt Trader of the Year 2015’

Following a relaxation of licensing regulations on motorway sites in 2014, JD Weatherspoon opened the first public house at Beaconsfield services on the M40, this was despite intense opposition from safety campaigning groups.

A further change affecting turnover levels is the introduction of remote car parking technologies which effectively monitor any unauthorised overstay. The income generated by such penalties is significant with third party companies normally receiving 50% of income generated from fines as an administration fee and the motorway service operator retaining the remainder

Increasingly there is a move from operators to divest themselves of the responsibilities of operating petrol forecourts, effectively concentrating their efforts in running the amenity buildings.

2. Changes from the last practice note

No Practice Note was published for the 2010 list.

3. Ratepayer discussions

Discussions have taken place with representatives of the major operators.

4. Valuation scheme

There is currently no agreed scheme for this class.

Appendix 1: Motorway service areas/Major road service areas - MSA/MRSA’s 1990 Rating List Basis of Valuation

Background

Central discussions were held with Messrs Savills and Gerald Eve who act on behalf of the Motorway Operators Committee.

The MSA and MRSA organisations were extremely reluctant to provide details of turnover for fear that the information might be divulged to third parties. To allay their fears CEO(R2) entered into a Code of Practice which confirms the confidentiality of the information provided (copy attached Appendix 5:710:2).

Valuation Officers should ensure that all staff dealing with MSAs and MRSA files are aware of the Code of Practice and its importance.

Having given an assurance that the details of turnover would be treated in confidence, the agents completed Forms of Return. They also provided CEO(R2) with the accounts of 13 MSAs/MRSAs, covering a range of turnovers and geographical locations. The sample accounts were analysed in accordance with RM 4:6 and a scale of percentages was agreed with Messrs Savills and Gerald Eve. The details of the agreement are set out below:-

Gross Turnover % (Net of VAT, fuel of tobacco duties)

Up to £4 million 4
£5 million 4.5
£6 million 5
£7 million 5.5
£8 million 6
£9 million 6.5
Over £10 million 7

It was agreed to interpolate between the turnover bands to the nearest £1/2 million and 1/4 %.

Travel lodges

In accordance with the centrally agreed basis travel lodges should be valued at £750 per bedroom. This figure is inclusive of reception areas, ancillary stores and car parking, but is exclusive of conference rooms, restaurants and other additional facilities which should be valued in line with local “tone” levels.

Appendix 2: Code of Practice - Motorway service areas

1.

The Valuation Office acknowledges the wish of the Motorway Service Area Operators to preserve the confidential nature of trade information contained in Forms of Return.

The Valuation Office accordingly agrees to enter into a general code of practice with representatives of the Motorway Service Area Operators Committee on the following basis:-

2. Disclosure of trade information in negotiations or prior to any rating appeal

(i) Trade details obtained in respect of a hereditament to which a Form of Return relates will not be disclosed to any person, other than the parties to an appeal in respect of that hereditament.

(ii) If, however, in order for the Valuation Officer to deal with the assertions made by any party to an appeal it becomes essential to refer to the actual trade of other Motorway Service Areas, those details (or, in the last resort, the returns in which those details are contained) will be disclosed, in confidence, only to the parties or their professional advisers.

(iii) Wherever possible, Valuation Officers will endeavour to give details of analysis, etc, which have had regard to trade details in such a manner that an individual property’s trade cannot be identified.

3. Disclosure of trade information in rating appeals

Section 83(4) General Rate Act 1967 provides that:- * “sub-sections (2) and (3) of (Section 83) shall not apply to any proceedings relating to the ascertainment of net annual value of a hereditament on the profits basis. * Provided that this sub-section shall not be construed as preventing the use of any return in such proceedings in circumstances where the return could be so used apart from (Section 83)”. * It is agreed that the valuation of a Motorway Service Area made by reference to receipts disclosed in a Form of Return, VO 7177, is a valuation on the profits basis for the purposes of s.83(4). * Prior to any hearing by the Valuation and Community Charge Tribunal or Lands Tribunal, the Motorway Service Area Operators and their professional advisers will co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparables to which either side proposed to refer. * The Valuation Officer will treat sympathetically a request from any other party to a hearing before a Valuation and Community Charge Tribunal to be heard in camera where trade information is to be disclosed. * If exceptionally another party should become entitled to inspect a Form of Return containing trade information in respect of a Motorway Service Area, by virtue of the provisions of Section 83(3)(b) or 83(5), that party will be offered a photocopy of the form with the trade details obliterated, so as to preserve the confidentiality of the trade information. Should any person offered such a copy insist on sight of the original, the person who completed the form will be advised.

Contact will be made with the Motorway Service Area Operator through Chief Valuer (Rating) and the Operator’s instructed agent.

4. General

(i) The Motorway Service Area Operators and their agents acknowledge that this code of practice, which is being issued as an indication of the general policy of the Chief Valuer’s Office on the disclosure of trade information regarded by the said operators as confidential, it is entirely without prejudice to any requirement to disclose such information by law, and to each Valuation Officer’s statutory duty.

(ii) The content of Forms of Return will not be disclosed to other Government Departments, subject to any statutory provisions to the contrary. It is understood however that no restriction can be placed on the use within the Inland Revenue of the returns or the information contained in them.