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

Section 890: serviced apartments

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1. Co-ordination arrangements

This class is split between Groups and Specialist Rating Units. Groups will be responsible for single units and complexes, the largest complexes operating in the manner of hotels or lodges will be dealt with by Specialist Rating Units (SRUs). Responsibility for effective co-ordination lies with both Groups and SRUs.

Special Category Code 131 and primary description code CH1 should be used for single units and smaller complexes operating in a similar manner to self-catering holiday accommodation with the description overwritten Serviced Apartment(s) as required, the appropriate suffix letter will be G. For larger complexes Special Category Code 137 or 160 should be used for group properties and 138 for SRU properties with the primary description code CH. As a split class the appropriate suffix letter should either be G or S. The description should be overwritten Serviced Apartments or Aparthotel as appropriate.

2. Serviced Apartments

As a class, serviced apartments (SA) have grown out of demand for more self contained living accommodation, from regular hotel users. The market is usually aimed at regular business users requiring high quality accommodation, for the short term, but who would prefer to have more independence than checking into a hotel. The accommodation in many cases is cheaper that the equivalent hotel accommodation.

They will be fully serviced in terms of services, cleaning and provision of utilities. The fees will be inclusive of taxation. Booking accommodation will be similar to booking a hotel room and in the largest properties there will be a reception desk where the complex operates as an hotel albeit letting apartments rather than bedrooms. In occasional instances there may be ancillary bar or restaurant facilities and breakfast may be supplied as part of an inclusive rate for an apartment. The larger properties operating in this manner are often known as Aparthotels.

SA are most commonly found in the larger towns and cities where the focus is on business use with some weekend break use but are also to be found in some towns in tourist areas where the focus is use by tourists and holiday makers. There are some chain occupiers such as Saco Apartments and Premier Apartments and accommodation companies such as Citybase Apartments.

3. Domestic Non-Domestic Borderline

The class can be difficult to fit into a category, and full factual information will be needed as to the nature of occupation of the premises, the nature of the business carried on and the identification of the ‘relevant person’ mentioned in the legislation.

3.1 The law S66 LGFA paragraph 2B

Section 66 defines what is and is not domestic property. Para 2B states:

A building or self-contained part of a building is not domestic property if –

a.the relevant person intends that, in the year beginning with the end of the day in relation to which the question is being considered, the whole of the building or self-contained part will be available for letting commercially, as self catering accommodation, for short periods totalling 140 days or more, and b. on that day his interest in the building or part is such as to enable him to let it for such periods.

3.2 Application

Whilst the law is applicable to holiday flats and cottages let commercially whether in blocks or individually, it will also sweep up serviced apartments under the same principles. An apartment, or block of apartments, let out commercially for short periods in the course of a business, will fall under this non-domestic provision, and will therefore be included as an entry in the Rating list. The CT ‘disaggregation’ will not apply as this is non-domestic, and the hereditament will be determined on paramount occupier principles, i.e. the relevant person who controls the letting of the accommodation.

3.3 Short period

Where a single apartment is clearly not let for a short period, but a longer term arrangement is in place, then this will fall to be banded for CT if it is let to an individual(s) and is their permanent residence. The definition of ‘short period’ is not defined anywhere in the legislation, but it is considered as a matter of policy that a period significantly in excess of say, 30 days would begin to suggest a longer term occupation, and would therefore indicate a domestic CT list entry. If this issue is not clear, then Rating Team Leaders should seek advice from CEO Technical Advisers in the first instance. (It should be noted, for example, that the London planning definition of ‘short period’ is as long as 90 days, well in excess of what might normally be considered the domestic borderline period).

The reference to 140 days refers to the period for which a property is available for letting, and it does not define the short period itself. The period may vary according to the rental market in which the property operates and possibly the location in different parts of the country. A short period in an area where holiday lets in a coastal location predominate, may be different from a short period when considering an apartment block in a city centre location, where ‘short’ lettings of very differing lengths to business clients for their staff may be the norm. For the avoidance of doubt, where in a block of SA one or more units are let for long periods to companies these will be part of the larger non-domestic hereditament. Examples would be the letting to a firm of accountants, or engineers, where they are carrying out a contract for six months and use the apartment(s) to accommodate staff working on the contract, or the renting of apartments for staff members where they are being permanently moved to a new location but have yet to move home, their residences still being in the locations they were moved from.

3.4 Apartment Complexes

The hereditament should be viewed as a whole, and the overall purpose taken into account. The fact that on occasion one flat will let for more than, say 90 days, should be viewed in the context of the whole hereditament and the general pattern of occupation. Where the purpose of the accommodation is that which would fall within the serviced apartment category, primarily aimed at short term occupiers, then this would strongly suggest a non-domestic use. This will invariably be the case where the complex’s occupier’s business is the provision of short term accommodation. The precise length of lettings will be of lesser importance than the fact that the flats are available for short-term lettings. If the details of all the lettings in the block are available, this should indicate the minimum and maximum lettings.

4. Identification of the hereditament(s)

As in any valuation for rating the first and fundamental step is to establish and identify the hereditament. With serviced apartments, however, the problem can be difficult, where some units are short stay and some are long stay. It is vital where a mixture exists that the correct identification is made. This may result in individual apartments being separately assessed in circumstances where the relevant units are not contiguous.

5. Survey Requirements

The apartments should be measured to NIA in accordance with the VO Code of Measuring Practice for England and Wales. The area of bedrooms should include that of any en-suite bath- or shower-room. Details should be taken of the standard of fittings, general level of fittings and fit-out, services supplied by the operator and any ancillary facilities to the apartments.

If a brochure exists, this should be obtained together with tariff details and occupancy rates, if available.

6. Valuation

There is unlikely to be any direct rental information available for the specific use, where it exists local evidence will prevail.

In the absence of direct evidence consideration should be given to the nature of the occupation. SA bear a strong resemblance to self-catering holiday accommodation, in many cases the terms are interchangeable, other than in large urban areas there may be no “holiday cottages”. It is therefore appropriate for single SA and small complexes to have regard to the valuation advice set out in RM : Section 6 :Part 3 S480 – Holiday Accommodation – Self Catering and the relevant Practice Notes.

For larger complexes which operate much as lodges or budget hotels – aparthotels – it will be appropriate to have regard to the guidance on these types of hotels set out in RM : Section 6: Part 3 S510 – Hotels and the relevant Practice Notes. For comparison purposes the usual DBU factors to be adopted for aparthotels will be for a one bedroom flat with lounge/kitchen – 1.5 DBU, and 2 DBU for a two bedroom flat. The valuations should be carried out using the Licensed Property Application of RSA.

If a particular property or complex does not fit into the above categories then accounts should be obtained for the three years preceding the valuation date and a full receipts and expenditure valuation carried out – see RM : Section 6 : Part 3 S6