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

Section 90: banks and insurance, estate agents and building society offices, etc

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

1. Scope

Under the Town and Country Planning (Uses Classes) Order 1987 (as amended) there are distinct categories of shop premises which are generally described as follows:

A1 - Shops (General Retailing)

A2 - Financial and Professional Services, and

A3 - (Hot) Food and Drink (Wales only)

A3 - Restaurants and Cafes (England only)

A4 - Drinking Establishments (England only)

A5 - Hot Food Takeaways (England only)

The A2 category as it applies to retail premises comprises use by:-

Banks, Building Societies, Betting Offices, Estate Agents, Employment Agencies, and others which provide Professional Services (other than Health or Medical).

The Shops and Shopping Centres Section of the Rating Manual Section 6: Part 3: Section 920 provides more information on the five ‘commercial’ use classes (A1 to A5) insofar as retail premises are concerned. Reference should also be made to the Town & Country Planning (Use Classes) Order, SI 764/1987 (as amended), and Part 3 of Schedule 2 to the General Permitted Development Order 1995 SI 1995/418 (as amended).

Where the bank or building society occupy offices or other premises that do not include a ground floor high street retail offer, then such occupations fall outside the scope of this section of the Rating Manual.

Other sections of the Rating Manual may be of interest, these are:

Rating Manual, Section 6: Part 3: Section 110: Betting Offices

Rating Manual, Section 6: Part 3: Section 730: Offices

2. List description and special category code

The primary description code (PDC) to be used for entries in a local rating list should be CS1, which produces the default description ‘Bank and Premises’. This can be overwritten if considered appropriate. The PDC of CS produces the default description ‘shop and premises’, which may be more appropriate for an insurance broker on the high street.

The Scat Code of 021 ‘Banks, Insurance building society offices and other A2 uses’ with the suffix denoting responsibility, which is expected to be ‘G’, for ‘Generalist’.

3. Responsible teams

Banks, Building Societies, Betting Offices, Estate Agents, Employment Agencies, and others which provide Professional Services (other than Health or Medical) are a ‘Generalist’ class. The valuations are typically made by case workers in the Units on the rentals comparison basis using direct rental evidence and using area in terms of main space as a comparator.

Requests for Information should be made on forms of return (FORs) as appropriate.

4. Co-ordination

The ‘Banks’ Class Co-ordination Team (CCT) has high level responsibility for the co-ordination of this class. The CCT is responsible for examining the approach to making valuations for retail Banks, Building Societies, Betting Offices, Estate Agents, Employment Agencies, and others which provide Professional Services (other than Health or Medical). The CCT will deliver Practice Notes as appropriate describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists.

Caseworkers have a responsibility to:

  • follow the advice given at all times - practice notes are mandatory
  • not depart from the guidance given on appeals or maintenance work, without approval from the class coordination team
  • seek advice from the class coordination team before starting on any new work

The framework for co-ordination is shown in Rating Manual Section 6: Part 1. Additionally, and where available, this class is subject to the co-ordination procedures outlined in the appropriate practice notes attached to Rating Manual section 6 part 1.

The general legal background that applies to all hereditaments in local lists applies to this class of property and is found elsewhere in the rating manual.

6. Survey requirements

6.1 General

Net Internal Area (NIA) is the preferred basis of measurement.

It is important that measurements are suitably recorded so as to enable the adoption of either a zoning or an overall approach to the valuation of the premises concerned. Reference should be made to the Survey Requirements for Shops (Rating Manual section 6 part 3 - section 920) and for Offices (Rating Manual section 6 part 3 - section 730).

The measurements of all strong rooms and ATM facilities should be recorded together with the zones in which they are placed.

In view of the obvious security aspects, an awareness should be maintained at all times of the particular sensitivities involved.

6.2 Value Sensitive Aspects

All features likely to have a bearing on value should be recorded in sufficient detail. Prominence of position is of particular relevance to the valuation. Also of significance are:

  • the age and type of the particular building, and of its surroundings
  • the size and shape of the retail business area
  • the amount and position of the storage relative to the retail business area
  • the ease and adequacy of parking
  • individual characteristics which need noting include varying floor levels, and the position of pillars or any other obstructions
  • security and CCTV systems: Number of cameras and other protection systems must be taken into consideration
  • air handling systems - type and extent - guidance in respect of air conditioning in shops is available at Rating Manual section 6 part 3 - section 920 and the appropriate practice note

6.3 Surveys

Whilst carrying out the survey, the general retail inspection checklist should be used. Special attention should be given to the following features:

Internal 1. Entrance sole/shared, front/side/rear
  2. Walls structural/non-structural, finish
  3. Floors solid/timber
  4. Ceilings finish, suspended, floor to ceiling height
  5. Frontages/Displays construction and glazing
  6. Heating Air Conditioning or space heating. Type of fuel, type of system (e.g. air handling unit and ducted air, cassette system, radiators, ducts, underfloor), extent
  7. Fire Protection Inside:- sprinklers, smoke detectors, internal procedures and precautions
  8. Lighting natural/artificial, quality
  9. Toilets extent, quality
  10. Lifts type (e.g. manual/automatic), hoist, goods, passenger, staff/customers, capacity (in persons and kilogrammes), floors served
  11. Security e.g. CCTV (including numbers of cameras) and other security systems
  12. Strong rooms Note the position and type of strong room and how it is being used
       
External 1. General description construction, age, type (e.g. purpose built, converted), location
  2. Prominence Corner position/imposing/landmark building or general high street position
  3. Frontages Type of frontage is important (Check descriptions in relevant frontage practice note, where available)
  4. ATMs Note the number and position of automatic teller machines (ATMs), both internal and external
  5. Car Parking allocated/communal, open/covered, number of spaces, staff/customers, free/charge made/refund given
  6. Fire Protection Outside: - separate tanked supplies, dry risers and other fire prevention systems
  7. Security e.g. CCTV (including numbers of cameras) and other security systems
 

6.4 Plant and machinery

Adequate information regarding all items of Plant & Machinery should be carefully recorded. Details will be required, not only to assess their effect on value but also in the event of particulars being sought by the ratepayers or their agents under the appropriate Plant & Machinery Regulations. Further information is provided in Rating Manual Section 6: Part 5 and the appropriate VOA Rating Cost Guide.

7. Survey capture

All relevant notes, plans and inspection checklists should be captured on EDRM as appropriate. Photographs should be placed on RSA.

8. Valuation approach

8.1 General

There will normally be adequate rental evidence to form the basis of valuation for banks. See also the rental adjustment practice note at Rating Manual Section 4: Part 1.

As the structural characteristics vary considerably for premises used as Banks, or Insurance, Estate Agents or Building Society Offices, instances will be found of similarity with shops, or with offices, and some will have been purpose built. Most important is the correct identification of the source of demand for the particular hereditament, and whether comparison may more appropriately be made with shops or with offices. In determining this question, the physical characteristics and the situation of the premises are of paramount importance.

An awareness should always be maintained of the possibility that different levels of value may prevail in a particular locality for each separate class A1, A2, A3, A4 and A5 of the Use Classes Order (England & Wales) SI1987/764 (See Rating Manual Section 6: Part 3: Section 920) unless free movement between the classes is available under Part 3 of Schedule 2 to the General Permitted Development Order 1995 SI 1995/418, bearing in mind the doctrine of ‘rebus sic stantibus’.

8.2 Valuation Considerations

8.2.1 Traditional Bank Premises Generally

In dealing with traditional bank premises Unit Heads should treat each case on its merits.

Where the basis of value has been derived from neighbouring retail premises, any adjustments for the traditional nature of the banking premises is expected to apply to the value of the banking hall/ground floor retail area rather than the whole hereditament.

Where there is clearly surplus ancillary accommodation and its size is such that no alternative occupier would be likely to need it, there may be grounds for values to be lower on the areas surplus to requirements. In order to preserve comparability any such allowance should be applied to the relevant accommodation only, rather than the hereditament as a whole.

In certain circumstances allowances or uplifts may rightly apply to the whole hereditament but these should only be adopted where the factors under consideration truly affect the whole.

8.2.2 Premises structurally similar to a shop, situated in a shopping area

In areas of shopping development, a bank, building society, or other A2 user will often occupy a normal shop or shop unit to which adaptations have been made to satisfy particular requirements. Special features such as a strongroom are ordinarily constructed to meet the needs of the occupier, but where the premises remain physically similar to a shop and occupy a position in a shopping area, the value should be determined by the use of the method (including zoning) applied to shops in the vicinity, duly reflecting the alterations and adaptations. In Brennan (VO) v Lloyds Bank Plc [1993] LT RA 99 (concerning the treatment of the basement strongroom), the Tribunal decided (at p 110) “the strongroom door is part of the rateable hereditament”, and “the rent of the subject premises is not a reliable guide”. It also concluded “…there would have been demand for the strongroom in the subject premises and also that the hypothetical tenant would have reflected this demand in any rental bid.”

8.2.3 Premises structurally dissimilar to a shop but situated in a shopping area

8.2.3.1 Generally

Where the premises are situated in a shopping area but are dissimilar to a shop, (as in the case of older purpose-built premises often found on prominent corner sites or in areas of high shopping value) different considerations may arise. It may be reasonable to assume that such premises, vacant and to let, would attract banks, building societies, or other A2 users, but this does not necessarily lead to an assumption that the rental value will be dissimilar from that of an adjoining shop. Much will depend upon the present suitability of the particular building for its use in that situation.

8.2.3.2 Bank Frontages

Shops do, of course, vary considerably in the form in which their frontage is developed for the carrying on of different trades, but this has not prevented comparison one with another.

In the case of Ladbroke & Co v Meade (VO): [1969] LT RA 611 (concerning a purpose built betting shop with a ‘blank utilitarian’ brick front elevation situated where a shop window would normally have been), the Tribunal stated (at p 618) “Inartistic though much of this may be, these attributes all appear useful or attractive for its designed purpose…” The Tribunal also decided (at page 621): “The appeal premises are eminently suitable for their designed purpose, just as marble slabs and tiled floors are for fishmongers or kiosks for purveyors of souvenirs and chocolates.”, and based upon the evidence provided, later in the same decision; “… I find that the rents which could reasonably have been expected in terms of per foot super overall of the Betting Office area would not have been less than those currently passing for shops (shop floor) in situations comparably attractive and convenient to customers”.

In the absence of direct rental evidence, the assessment of traditional banking halls and similar premises should be related on merit to the level of values adopted for adjoining shops enjoying similar commercial frontages, the method of valuation not necessarily excluding zoning.

In Halifax Building Society v Payne (VO) [1961] LT IR & VR 85, the President of the Lands Tribunal stated: “I do not say that the zoning system, although devised for retail shops, might not be applied to some banks. In the competition of today it is obvious that the ‘big five’ banks are just as anxious to procure a prominent street frontage as are owners of retail shops and will be prepared to pay the same rent for such a frontage”.

The presence of a traditional bank facade may or may not be seen as a disability, depending upon the character of the town or village in which the premises lie, and their situation in relation to the main shopping area.

The following points should be weighed in mind in making a decision as to whether or not an allowance would be appropriate due to there being insufficient window space to enable passers-by to look into a property.

Generally, modern banking preference is for enhanced visibility and/or improved product display facilities - to the extent of the occupation by banks of standard retail units in modern shopping area locations. Comparison with other bank premises found in surrounding towns and villages within a wide area of countryside will provide a good indication of the precise demand prevailing in the area under consideration.

In the more extreme cases an allowance for a solid facade may be suitable, but solidity in itself is not to be regarded as the deciding factor. Where it appears that the existing traditional bank frontage is unsuitable to fulfil current day requirements, an assessment should be made of the extent of the changes that would be preferred/possible within the ‘rebus sic stantibus’ rule. Unless it forms an integral part of the structure it is considered that the removal of brickwork at least from below existing windows would be permissible: often this will suffice in updating the premises, and result in no allowance being appropriate.

An allowance may be suitable if premises suffer from the combination of a closed frontage and their inclusion in a Conservation Area; with the result that the alterations which might otherwise have been contemplated as being within the doctrine of rebus are not available to the hypothetical tenant. Evidence should be obtained in such instances of the history of refusals for the most minor of variations and a statement that (for example) even the removal of the glazing bars from sash windows would be strongly resisted by the planning authority.

Unless the particular frontage is incapable of providing visibility to an adequate standard within the constraints of ‘rebus sic stantibus’ or other external controls, any effect of rental value is likely to be minimal.

In some of the more traditional towns and villages the rents analysed to Zone A may already reflect the presence of small display windows, poor layout, steps, etc. depending upon the premises from which they has been derived. In such instances no allowance is appropriate.

Bank frontages are subject to practice notes attached to this Section of the Rating Manual and its Appendix 1, which should be referred to where available.

8.2.4 Premises structurally similar to offices and not in a shopping area

The basis of assessment of premises structurally similar to offices and not in a shopping area should be derived from rental evidence and/or the levels of value adopted for comparable office properties on similar sites (see Rating Manual, Section 6: Part 3: Section 730: Offices).

8.2.5 Premises where direct comparison is difficult

Premises occupied by banks, insurance companies, etc. are sometimes situated where no direct comparison can be made with shops or offices by reason of the premises being too physically dissimilar or situated other than in a shopping or office area (e.g. in rural areas). In these cases the assessment should be based upon local circumstances and rental evidence.

8.2.6 Particular features

8.2.6.1 Strong rooms and book rooms

Most structural strong rooms and book rooms were constructed before the advent of centralised cash handling and new technology. The need for this type of specialised accommodation is rapidly disappearing. Value additions should only be made where strongrooms/bookrooms are required to be secure within the context of modern banking practice. Furthermore, it must be clearly demonstrated that the demand for such secure use is beyond that which could be accommodated by a free standing safe (or safes).

Caseworkers should not rely on the fact that a strong room is merely being ‘used’ or ‘locked’ as evidence of need for such a facility, since modern banking practice has shifted to the utilisation of one or more free standing safes for secure storage. Only the largest branches (in business terms) would require a strong room of traditional size. Therefore, valuation additions over the appropriate basic storage level of value should only be made where it can be determined that the branch is sufficiently large (in business terms) to require a strong room.

Caseworkers should take into consideration information and assistance provided by the ratepayer (or its advisor) in determining which branches still have sufficient business need for safe storage to justify a strong room and, where such a need is identified in any particular branch, an indication of the amount of space required.

Value additions over the appropriate basic storage level of value should only be made where Strong Rooms and/or Book Rooms are required to be secure within the context of modern banking practice. Furthermore, where it is established there is modern demand for a strong room, additional value should only be added to that portion of the floor areas as would be required by modern banking practice. This will avoid a disproportionate uplift in value to those strong rooms which are, by modern standards, over specified.

Strong Rooms or Book Rooms: Practical considerations

Where a value addition over the basic storage level of value is not considered appropriate, care should be taken when incorporating a strong room or book room into the valuation using the Rating Support Application (RSA).

Whether used for secure storage or not, all strong rooms and book rooms should attract the accommodation use code of STR (Strongroom). The effect of this is to add up to 50% to the appropriate prevailing basic level of storage, depending on the particular valuation scheme adopted. Clearly, where for non-secured storage the prevailing basic storage level of value is considered appropriate, a downward adjustment will be required to cancel out any inbuilt uplift.

To achieve this, a line entry adjustment code of ‘SEC - Security’ (minus) should be attached to the ‘STR’ line entry, and an appropriate adjustment factor applied to counter the effect of the uplift for secured storage. The default line entry adjustment description of ‘Security’ must also be overwritten with ‘Used as normal store’.

8.2.6.2 ATMs, ‘Cash points’

Where the rateable element of an ATM is not separately assessed, its existence should be reflected in the value of the larger hereditament. Whether or not the presence of the ‘hole in the wall’ itself is considered to enhance the value of the larger hereditament, the area occupied by the machine together with any secure room should be valued at a rate which appears appropriate having regard to the treatment of the rest of the hereditament.

8.2.6.3 Ancillary accommodation

The value of ancillary accommodation should be considered from the view point of demand from the hypothetical tenant. In practice, demand in the real world will provide a strong indication of what this is likely to be needed in a particular bank premises in a particular town.

9. Valuation support

Valuations of Banks and Building Society Premises should be performed on the Rating Support Application (RSA), which contains a bespoke scale for banks and insurance, estate agents and building society offices, etc. This is expected to form the basis of any Valuation Scheme.

Appendix 1: Banks and Building Society Premises in Retail Locations (& Bank Frontages)

Practice note 1: 2017 - bank frontages

1. Market appraisal

The trends in banking identified in previous practice notes continue to a greater or lesser extent. Although the number of bank mergers has declined, surplus premises have been, and continue to be, disposed of and these transactions may produce useful evidence as to rental value for premises having traditional banking frontages. However, great caution does need to be exercised when considering premises that have changed use to the extent that they fall within a different ‘Use Class’ e.g. as public houses.

It should be borne in mind that the premises targeted for disposal by the banks are not always in prime locations. Whilst some ‘honey pot’ leisure locations in town centres see banks converted to restaurant and other commercial or leisure uses, more often it is the better-located branches that are retained, underscoring the importance of location in determining value rather than characteristics of the premises alone.

Notwithstanding the fact that location is a major driver of value, the downward trend in banking operations carried out at branches has resulted in a decrease in demand for ancillary accommodation in many locations. This will, however, vary and care should be taken to understand the local market and degree of use.

1.2 Frontages

Whilst banks continue to occupy high street premises with a mixture of traditional and modern types of frontage, the slow trend is towards retail premises with a more open aspect (both internally and externally).

This Practice Note confirms that the guidance and approach when considering adjusting rents and making valuations taking into account the different types of bank frontages remains largely unchanged from that provided for previous Rating Lists.

2. Changes from the last practice note

As far as bank frontages are concerned, there are no changes in practical terms to the guidance provided in the previous (2010) practice note or the practice note before that (2005).

3. Ratepayer discussions

At the time of writing (July 2015), there have been no ratepayer discussions for 2017 lists purposes.

In discussions prior to the release of the 2010 practice note, the Inter-Bank Rating Forum (IBRF) concluded that the general position set out in the 2005 practice note be adopted going forward. Valuation Officers are recommended to continue to adopt this approach for 2017 lists.

However, the guidance in respect of bank frontages should be considered alongside the guidance provided in general for traditional bank premises and strong rooms (book rooms) and other matters. These are covered in the main Rating Manual section at RM section 6 part 3 section 90 and should be considered alongside this practice note and the approaches contained in Appendix 1 to the Rating Manual section. This is found at RM 5:90: Appendix 1: Banks and Building Society Premises in Retail Locations (& Bank Frontages).

4. Valuation scheme

4.1 Rental levels on traditional banks compared to other retail/commercial or leisure uses

Whilst not universal, in certain localities rents paid in respect of banks are best adjusted and compared to each other rather than introducing complex adjustment factors to allow ‘comparison’ to other hereditaments in the surrounding area, such as shops, offices, restaurants and wine bars.

To ensure that traditional banks are valued accurately, rental evidence should be carefully adjusted, analysed and compared to see whether a level of value for traditional banks can be ascertained without the need to look much further, especially where traditional banks are in an office location, or form an ‘enclave’ in a particular retail pitch.

Care should be taken when adjusting and analysing rents in a particular locality, so that the true effects of supply and demand as evidenced by the rents are properly reflected in the valuations.

For example, if evidence suggests that the impact of ‘carrying forward’ a frontage allowance is actually resulting in too low a valuation, it may be that the rents on banks in that locality should be considered in isolation to see if a different pattern emerges to that evidenced by rents passing in respect of the surrounding shop units.

4.2 Bank frontages

Whilst it is emphasised that the bank frontages scheme for 2017 revaluation purposes has not been subject to discussions, the approach and range of allowances for bank frontages was agreed with IBRF and its representatives for 2005 and 2010 purposes. It is recommended that Valuation Officers continue to apply bank frontage allowances as appropriate when making valuations for 2017 rating lists purposes.

Where in 2010 lists there have been bespoke adjustments made to bank frontage allowances within the scope of the 2005 scheme, such as occurs where comparable rental evidence is derived from other hereditaments having traditional frontages, these should be carried forward on an ‘existing factors’ basis into valuation officers’ 2017 rating lists.

It is important to consider the written guidance contained in the main Rating Manual section and its Appendix 1, especially regarding those instances where available rental evidence points to a different approach to that embodied in the guidance. This is particularly relevant in the case of bank frontage allowances, where rental evidence on the actual bank, together with local rental evidence on comparable properties, indicate that a different approach is appropriate.

The essential details regarding the 2005 approach in respect of bank issues, together with details of the agreed 2005 approach to bank frontage allowances, can now be found at Appendix 1 to the Main Rating Manual section.

4.3 Reference to the 2005 practice note

For 2017 rating lists it is reiterated that, taken together with the above comments on specific items (bank frontages, traditional bank premises and strong rooms), the approaches contained in the main Rating Manual Section (RM section 6 part 3 section 90) and its Appendix 1 remain in place and should be considered and applied in compilation and maintenance of 2017 lists.

Appendix 1: Banks and building society premises in retail locations (and bank frontages)

1. Context and content of this Appendix

This appendix flows from the guidance provided in the Revaluation 2005 Practice Note 1, which resulted from discussions with the Inter Bank Rating Forum (IBRF) and their representatives, held between December 2003 and April 2004. It has been used to deal with valuation issues for both the 2005 and 2010 lists in respect of bank and building society premises situated within retail locations. It is the recommended approach since 2005 lists and has been reproduced here to ensure the relevant practice notes can be considered in full and in context.

This Appendix aims to contain no practical changes to the guidance offered in the original Appendix 1 to the 2005 practice note; it has been reproduced with that intention, making only those alterations required to put it into context.

Although this appendix contains some general guidance on the valuation of this class, it concentrates on the approach to the application of allowances for a variety of frontages found on bank/building society premises from 2005 onwards.

2. History of discussions with the Inter Bank Rating Forum (IBRF)

Following an approach by the IBRF in December 2003, resulting discussions explored the possibility for central agreement in respect of the issues that often arise when dealing with the valuation of banks and building societies for Revaluation 2005.

The existing and longstanding categorisation of the various bank frontage types used for 1990 lists was not altered following the discussions in 2003 and 2004. The categorisation of the various bank frontage types are the means of comparing one type of frontage with another. Additionally, in 2003-2004, agreement was reached with the IBRF in respect of the actual range of allowances appropriate to these particular categories.

The discussions in 2003 and 2004 resulted in the original Appendix 1 to the 2005 practice note.

In 2008, the IBRF expressed a commitment to central discussions for 2010, and mentioned that they considered a range of valuation issues in respect of bank and building society premises situated within retail locations. At that time, the IBRF concluded that they were content that the general position set out in the 2005 practice note be adopted for the compilation of 2010 rating lists.

However, whilst the approaches to the various issues detailed in the 2005 practice note still remain in place, further discussions took place with the IBRF, particularly in respect of strong rooms and book rooms. These discussions took place as part of the settlement of lands tribunal appeals in respect of HSBC Banks in North Wales in 2011 and the resulting guidance continues to be recommended.

3. Rental evidence

Rental evidence that demonstrates the relative value of particular features should be carefully considered. The main section of Rating Manual, Section 6: Part 3: Section 90 provides guidance on valuation generally, and on bank frontages specifically at paragraph 8.

4. Traditional Frontages: Premises in retail locations with retail style frontages - Action to be taken

4.1 Check All Rental Evidence on Banks and consider the comparable evidence.

  • it is important to recognise that frontages form just one element contributing to a particular style. Other valuation considerations also arise from the general character of bank premises, particularly older examples of accommodation that are out of step to varying degrees with the space requirements of modern retail bank premises
  • frequently situated on corner street positions, both return frontage and main frontage window space reflected design considerations from a time when the display needs of ordinary retailers were not a relevant consideration in the design of bank premises
  • A considerable number of banks are rented; therefore before reviewing assessments to take account of the revised ranges of allowances suggested at Paragraph 6 of this Appendix, caseworkers should take into account all relevant local rental evidence
  • investigations should therefore be made to identify any rented banks in the locality. These should be analysed to see if a clear local pattern exists between the rents passing on the different types of banks. It will then be necessary to decide how this should be reflected in the assessments placed on them
  • depending on type of frontages already ‘reflected’ in the Zone A ‘starting point’, an adjustment may need to be considered with respect to the eventual bank frontage allowance applied to the subject property. This is particularly relevant if the Zone A has been derived from local rental evidence on properties other than ‘Category 1’ or ‘standard’ shop front (for more detail on definitions, see paragraph 6 below)
  • careful judgement will be required to determine the effects non-standard frontages have on the rents of comparable retail units in the locality. This will involve directly comparing the subject property with the other retail properties from which the evidence is derived
  • when there is a rent (other than a ground rent) on bank premises full details should be obtained, preferably on a Form of Return
  • it should be remembered that mere identity of a rent at, or in excess of its RV is little more than a preliminary to finding reliable evidence. Other comparable retail rents need to be examined to discover the value of such premises at the same date
  • comparison can be made from a number of viewpoints - frontage, style, layout, and size of accommodation. In doing so, consider:
  1. a) the effect on the occupation of the premises by both A1 retail users and banks/other A2 users; and,
  2. b) how the rent of those premises has been affected as a consequence
  • A dispassionate stand back and look at all evidence is needed. Sensible and pragmatic conclusions should be reached based on full consideration of the facts and of the supporting rental evidence.
  • in the absence of compelling rental evidence Valuation Officers would be unwise to proceed solely on the basis of an historical stance. It is seldom appropriate to take cases to Valuation Tribunal where a VO relies mainly upon the premise that it is the appellant’s duty to prove his/her case. A VO should take steps to provide supporting rental evidence
  • where VOs advocate an alternative approach in dealing with a bank frontage to that set out in this appendix, Technical Advisers should be given adequate advanced notification of the position, including all relevant evidence and reasoning

4.2 Application of the Guidance

  • where the local rental evidence is not conclusive the allowances suggested in this appendix at paragraph 6 should be adopted
  • the allowances suggested for frontage will only be appropriate where evidence of the zone A price is derived from premises which have a standard retail frontage. Where Zone As have been derived from rents on premises which do not have standard retail frontages, care will be needed in applying the scale as some allowance may already have been built into the tone adopted. For example, the zone A applied in a Cotswold town may already reflect non-standard retail fronts and any application of the allowances in this guidance note must take this into account
  • the percentage allowances for frontage are inappropriate where office levels of value are used as the valuation basis
  • in deciding where to pitch an allowance within the suggested range the local rental evidence already obtained for the banks (in accordance with 4.1 above) may provide a useful indication of the significance attached in the local letting market
  • in addition it may prove helpful to compare the subject hereditament in its specific location with:-

a. other premises occupied by banks (and other A2 users) in the same city/town/village, and b.like-for-like bank premises in similar positions in comparable cities/towns/villages in surrounding districts.

  • it should of course be remembered that the effect on rental value might be different in different financially significant locations. City premises should therefore be compared to other city premises, town ones with others in towns and rural ones with other rurally located banks
  • any allowances for additional disabilities, such as those set out in sub-paragraph 5.5 below, are a matter for individual negotiation dependent upon the individual circumstances of each case
  • paragraph 5 contains details of the factors identified as being relevant when considering the rental value of bank premises
  • paragraph 6 provides a recommended framework of allowances to apply when dealing with appeals on this class in respect of the various frontage types. However, it is important to remember that this approach should only be used where there is insufficient rental evidence in the locality on which to form a basis
  • paragraph 7 contains notes relating to the application of any percentage allowance for traditional bank frontages, once it is considered that such an allowance is appropriate

5. General considerations to be made

The valuation of banks for rating purposes involves consideration of a number of factors, each of which may impact to a greater or lesser extent depending on the circumstances. Valuers will need to use their skill and judgement when dealing with this class of hereditament.

The major factors that need to be considered are detailed below and should be used to assist in determining where within the suggested range of allowances a particular hereditament should be pitched.

5.1. Overriding General Factors

  • demand drives rental levels
  • location is more important than characteristics of the building
  • who is already in town, and who would be looking to rent/occupy those premises for uses within the same mode or category of use
  • all advantages and disadvantages of premises are to be weighed

5.2. Premises

  • degree of visibility into banking hall from outside
  • prestigious style
  • architectural style, internal layout, pillars, high ceilings, steps, access generally (including ‘wells’ between streets and the premises) etc
  • surplus accommodation/vaults/strong rooms
  • considerations stemming from the ‘rebus sic stantibus’ rule to be examined (see Rating Manual, Section 6: Part 3: Section 90 and appropriate Practice Notes)
  • banks sometimes partially obscure retail frontages for their own purposes (e.g. the installation of ATMs) but this does not lead to a fall in rental value

5.3. Location

  • peak, Off-peak, Secondary, Tertiary
  • traditional town/village
  • modern shopping area
  • prominent position - on street junction
  • poor position - set back from pedestrian flow
  • conservation area
  • listed building
  • restrictive A2 planning consent policy applied locally
  • consider whether requirements of planners for A2 users moving into retail locations dictate Banks’ shift towards preferring retail frontages rather than pure requirements of their business operation

5.5. Valuation

In general

  • in the real world, A2 users are in competition with all other likely users
  • where there is little visibility into premises from the street, potential users are likely to consider a valuation on an overall basis, whether as a primary or secondary approach

Zoning method:

  • usually adopted for banks in retail areas where banks are anxious to procure a prominent street frontage
  • an allowance may be inappropriate for premises lying in a good position in a retail area where demand is strong, and where the frontage allows fair to good inward visibility
  • conversely retailers in such areas may be more demanding in quality of frontage
  • if the emerging tone (expressed as Zone A or otherwise) is based on adjoining similar style buildings then these characteristics will have already been reflected. Double counting would result if a specific allowance for frontage was adopted
  • where demand is strong and a building’s architectural style, plus its location is particularly prestigious, then little or no allowance may be appropriate
  • allowances are more likely where demand is weak, inward visibility is poor, and/or the premises are particularly expensive to maintain and out of keeping with the surroundings
  • all factors need to be carefully weighed - style, layout, frontage, steps, general access and size should all be considered: frontage should not be dealt with in isolation

The overall approach:

  • the alternative office value approach should be compared in cases where the premises have a fortress style frontage or are similar in nature to office premises
  • where premises have a retail location but no retail style frontage valuations should be prepared using both a zoned approach and an overall approach. The value adopted should sufficiently reflect the lack of display but the advantage of location
  • A valuation on an overall basis may be particularly relevant in low value areas where an office user may be considered as a potential occupier. This would form a minimum value for the premises

Ancillary accommodation:

  • ancillary accommodation should be valued as a part of the whole hereditament. The valuation approach should therefore be consistent with the basis adopted for the banking hall and not with separately let office, storage or other space
  • in valuing ancillary accommodation regard should be had to the demand for that particular accommodation in that particular position
  • where there is clearly surplus ancillary accommodation and its size is such that neither the tenant nor any alternative occupier (within ‘rebus’) would be likely to need it, values should adequately reflect this fact

Allowances applicable to whole or part of hereditament:

  • in certain circumstances allowances may rightly apply to the whole hereditament but these should only be included where the factors under consideration truly affect the whole. The effect of a frontage where visibility into the banking hall is impeded because of the structure of the premises will generally only apply to the value of the banking hall rather than the whole hereditament

Strong rooms:

  • the need for strong rooms and other similar rooms offering this type of specialised accommodation in branches has greatly diminished over recent years
  • caseworkers should take account of the actual use made of the structural strong room and book room space, as this is an indicator as to whether there is demand for it as secure storage. Where the use is actually to provide secure storage for documents, deeds, money, etc., then this should be reflected in the value adopted
  • value additions over the appropriate basic storage level of value should only be made where strong rooms and/or book rooms are required to be secure within the context of modern banking practice
  • strong rooms have been subject to discussions in 2011. The resulting guidance has been incorporated in the Rating Manual, Section 6: Part 3: Section 90 and the appropriate revaluation practice note. These also provide guidance on the practical considerations when valuing Strong Rooms as part of a valuation using the Rating Support Application (RSA)

Steps up into banking hall:

  • in considering whether the presence of steps up into the banking hall should attract an allowance beyond that which is indicated in Paragraph 6 regard should be had to whether the shops from which the evidence is derived have similar steps up
  • frontage Types 1, 2 and 3 identified in Paragraph 6 are typically no different from retail units. Consequently, if a hereditament of one of these types does have steps up then an allowance may well be appropriate, as it would be for ordinary retail shops
  • however, where steps up into the banking hall are characteristic of the frontage type then a further allowance may not necessarily be appropriate unless the circumstances are out of the ordinary for that frontage category in that location. Valuers will need to exercise judgement as to what is typical and what is not typical

6. Bank Frontage Types and ranges of allowances

The evidence presented by the IBRF during discussions in 2003 and 2004 supports ‘ranges’ of allowances rather than a single percentage figure within each category; this is therefore mirrored in the agreement made at that time. It is considered that this will still allow for flexibility and locational variations.

Note: all ranges assume that the start point is an ordinary shop front or ‘category 1’ frontage. this means that where the ‘comparable’ or ‘scheme’ zone a evidence already reflects frontage disadvantages in a particular locality, any allowance in that locality should be reduced to a ‘net allowance’ to take this into account.

(e.g. In a historic Market town where all comparable rental evidence has Cat 3(a) features, the available range on a bank in a higher category should be adjusted downwards by 0%-5%).

NB: Items in this table have been agreed with IBRF in 2003-2004.

Frontage Type 1,2,3,4,5 or 6 Description % Allowances Range Off Banking Hall 'retail' Value
1    Ordinary shop front Fully glazed retail frontage (may include ATM in glazing) 0
2    Ordinary shop front, inward visibility obstructed Retail frontage but inward visibility from street has been obscured by non-structural works 0
3    Transitional types

3A : Predominantly full/near full height glazing with some structural piers and pillars.

3B : Predominantly glazed down to waist height with some structural piers and pillars.

3C : Approximately 50% glazing down to waist height with remainder of frontage structural.

0 - 5

5 - 7. 5

7. 5 to 12.5

4    Typical restrictive bank frontage. Little inward visibility Limited glazing and above eye level 12. 5 to 17.5
5    Monolithic type premises Monolithic. Seldom with glazing to frontage, or if it exists, of negligible benefit Zoned and overall office valuations may be needed to reflect lack of display but advantage of location/public access
6    Office style premises Office style premises adjoining retail locations Zoned and overall office valuations may be needed to reflect lack of display but advantage of location/public access

The above table of frontage types and allowances should be considered for the valuation of different frontage types for rating purposes where no rental evidence exists and premises are situated in retail locations. These allowances should be considered in the context of Rating Manual, Section 6: Part 3: Section 90, together with all appropriate practice notes and appendices.

7. Bank frontage allowances: notes relating to their application

  1. a) Where conclusive rental evidence exists it should be used in preference to the above guidance. Similarly, once a tone already becomes established by settlements that tone should be followed unless appropriate evidence is provided
  2. b) If a frontage is typical of other premises in that particular location it is necessary to check from where the Zone A has been derived. No allowance would be needed when the rental evidence was taken from other premises with similar frontages and formed the basis of the assessments. But where the rental evidence does not already reflect these frontages, adjustment may still be necessary regardless of such premises being common in the area
  3. c) Where a hereditament does not fall clearly within one of the above types interpolation between the two most appropriate types should be made
  4. d) Exceptionally, where a hereditament is situated in a location that is in marked decline and the above guidance is considered not to be sufficiently reflective of the circumstances, valuers may at their discretion increase the suggested allowance by 2.5%
  5. e) Where there is strong competition for premises in a locality such that it is considered the effect on rent suggested above would be too high, the bottom of the range may be lowered by 2.5%
  6. f) In the case of Type 5 premises above (monolithic types) where it is advocated that both a zoning and an overall approach be considered it may be that the value finally adopted could, if analysed from a zoning perspective, devalue to a higher percentage allowance than one derived from this scheme

8. Premises in retail locations with no retail style frontage

Premises with no retail style frontage yet situated in retail locations (Type 5 Frontages – see Paragraph 6) may raise other valuation issues. Occupiers of such premises who desire to be in the High Street position may look to High Street values as a guide to the bids of rent that they would be prepared to make - In Commercial Union Assurance Co Ltd v Burne (VO) [1978] LT RA 173, the ground floor of a bank operating on basement to 3rd floors was used as offices. The LT held that the market in which the ratepayers’ property must be assessed was an office market, there would be competition from other occupiers, and prospective tenants would look to High Street rents in making their rental bids.

The adoption of a zoning approach in these particular circumstances may not be appropriate since the premise upon which it is based - most valuable space being nearest the frontage display - may not be appropriate where there is no display frontage. An overall price per metre is generally more suitable but this leaves the difficulty of how High Street values are to be taken into account. Usually there is insufficient rental evidence from similarly located premises having the same characteristics on which to base a unit price.

In such cases it is recommended that valuations be considered from both the zoning approach, assuming a retail style frontage, and an overall valuation where unit price is derived from office values. A view will need to be taken as to where within the range between the two figures the value to be adopted should be pitched. The adjustment from retail levels reflects the lack of display frontage whilst the addition over office levels reflects the enhanced public accessibility which being located in a retail area brings. In such circumstances it may be that the figure considered to be appropriate actually exceeds the allowances suggested in Paragraph 6 (above) when analysed purely from a zoning perspective.

The problem may be alleviated in the future through evidence derived from rent reviews of those premises the banks have sold in recent years.

9. Recording action taken

Whilst caseworkers will be familiar with the practice of recording the extent of any allowance conceded on the valuation held on Rating Support Application (RSA), in the case of Banks it is equally important to record where no allowance has been conceded on frontage types (as identified in Paragraph 6) where one might normally expect to find one.

The frontage type (types 1 to 6) and any percentage allowed for frontage should be recorded in the Remarks field of the valuation screen in the Rating Support Application (RSA).

This will aid co-ordination both within and between Units.

Where VOs advocate a different allowance for a bank frontage to that set out in this Appendix, Technical Advisers should be provided with the necessary details. Furthermore, the Class Coordination Team (CCT) should be made aware, well in advance of any possible hearing at the Valuation Tribunal for England, of the evidence to be relied upon by VOs in justification of allowances outside the scope of the negotiated scheme.

Practice note 1: 2010 - Banks and insurance, estate agents and building society offices, etc

1. Co-ordination

Banks and Building Society, Insurance and Estate Agents’ offices are a Group Co-ordination Class, and as such responsibility for ensuring that the appropriate co-ordination takes place lies with the groups.

The framework for co-ordination is shown in Rating Manual Section 6 Part 1.

These hereditaments vary in nature from pure retail premises to fortress fronted traditional banking premises. Special category code 021 should be used with the suffix G for all traditional banking premises. A guide on how to determine the correct SCat code is available from the Rating Homepage.

The trends in banking identified in Practice Note 2005 have continued and are ongoing. Although the number of mergers has declined, surplus premises have been, and continue to be, disposed of and these transactions may produce useful evidence as to rental value for premises having traditional banking frontages. However, great caution does need to be exercised when considering premises that have changed use to the extent that they fall within a different Use Class e.g. as public houses.

It should be borne in mind that the premises targeted for disposal by the banks are not always in prime locations. Whilst some “honey pot leisure locations” in town centres see banks converted to restaurant and other commercial or leisure uses, more often it is the better-located branches that are retained, underscoring the importance of location in determining value rather than characteristics of the premises alone.

Notwithstanding the fact that location is a major driver of value, the downward trend in banking operations carried out at branches has resulted in a decrease in demand for ancillary accommodation in many locations. This will, however, vary and care should be taken to understand the local market and degree of use.

3. Valuation considerations

3.1 Rental levels on traditional banks compared to other retail/commercial or leisure uses

More rental information should be available on traditional bank premises following sale and leaseback arrangements in recent years.

Whilst not universal, in certain localities rents paid in respect of banks are best adjusted and compared to each other rather than introducing complex adjustment factors to allow “comparison” to other hereditaments in the surrounding area, such as shops, offices, restaurants and wine bars.

To ensure that traditional banks are valued accurately, rental evidence should be carefully adjusted, analysed and compared to see whether a level of value for traditional banks can be ascertained without the need to look mush further, especially where traditional banks are in an office location, or form an “enclave” in a particular retail pitch.

Valuation Officers have already considered the rents passing on certain banks with traditional frontages and reported that there are particular instances where the bank frontage allowances are not supported by the rents passing. In some cases, an analysis of the rent without the effect of the allowance allows the rent to be better compared to the surrounding retail units. In others, it appears that the rental analysis shows banks with traditional frontages would be better valued by adopting a non-zoned approach.

This differential between traditional banks and other retail properties is not reported to be a universal finding, but does indicate that care should be taken when adjusting and analysing rents in a particular locality, so that the true effects of supply and demand as evidenced by the rents are properly reflected in the valuations.

For example, if evidence suggests that the impact of “carrying forward” a frontage allowance is actually resulting in too low a valuation, it may be that the rents on banks in that locality should be considered in isolation to see if a different pattern emerges to that evidenced by rents passing in respect of the surrounding shop units.

3.2 Discussions with the Inter Bank Rating Forum (IBRF)

In 2008, the IBRF expressed a commitment to central discussions for 2010, and mentioned that they considered a range of valuation issues in respect of bank and building society premises situated within retail locations. At that time, the IBRF concluded that they were content that the general position set out in the 2005 practice note be adopted for the compilation of 2010 rating lists.

However, whilst the approaches to the various issues detailed in the 2005 practice note still remain in place, limited discussions have taken place with the IBRF, particularly in respect of strong rooms and book rooms. These discussions have taken place as part of the settlement of lands tribunal appeals in respect of HSBC Banks in North Wales.

The following comments in respect of bank frontages, traditional bank premises and strong rooms (book rooms) should be considered in the first instance where these items fall to be considered for 2010; these should be considered alongside the approaches contained in Appendix 1 to the 2005 Practice Note.

Bank frontages

Whilst it is emphasised that the IBRF have not agreed any bank frontages scheme for 2010 revaluation purposes, the approach and range of allowances for bank frontages was agreed with IBRF and their representatives for 2005, and it is now recommended that all GVOs continue to use the 2005 scheme of bank frontage allowances as a basis for incorporating such allowances in valuations made for inclusion in the 2010 rating lists.

Where there have been bespoke adjustments made within the scope of the 2005 scheme, such are occurs where comparable rental evidence is derived from hereditaments with traditional frontages, these should be carried forward on an “existing factors” basis for 2010.

It is important to consider all the written guidance contained in the 2005 PN appendix 1, especially regarding those instances where available rental evidence points to a different approach to that embodied in the note. This is especially true in the case of bank frontage allowances, where rental evidence on the actual bank, together with local rental evidence on comparable properties, indicate that a different approach is appropriate.

The 2005 approach in respect of bank issues, together with full details of the agreed 2005 approach to bank frontage allowances, can be found at Appendix 1 to the 2005 Practice Note.

Traditional bank premises

In dealing with traditional bank premises GVOs should treat each case on its merits.

Where the basis of value has been derived from neighbouring retail premises, any allowances for the traditional nature of the banking premises will generally apply to the value of the banking hall/ground floor retail area rather than the whole hereditament.

Where there is clearly surplus ancillary accommodation and its size is such that no alternative occupier within rebus would be likely to need it, there may be grounds for values to be lower on the areas surplus to requirements. In order to preserve comparability any such allowance should be applied to the relevant accommodation only, rather than the hereditament as a whole.

In certain circumstances allowances may rightly apply to the whole hereditament but these should only be included where the factors under consideration truly affect the whole.

Strong rooms or book rooms

The need for strong rooms and other similar rooms offering this type of specialised accommodation in branches has greatly diminished over recent years. Whilst some are still in use by banks for that purpose, some banking companies have dispensed with their use altogether.

Caseworkers should not rely on the fact that a strong room is merely being “used” or “locked” as evidence of need for such a facility, since modern banking practice has shifted to the utilisation of one or more free standing safes for secure storage. Only the largest branches (in business terms) would require a strong room of traditional size. Therefore, valuation additions over the appropriate basic storage level of value should only be made where it can be determined that the branch is sufficiently large (in business terms) to require a strong room. Caseworkers should take into consideration information and assistance provided by the ratepayer (or its advisor) in determining which branches still have sufficient business need for safe storage to justify a strong room and, where such a need is identified in any particular branch, an indication of the amount of space required.

Value additions over the appropriate basic storage level of value should only be made where Strong Rooms and/or Book Rooms are required to be secure within the context of modern banking practice. Furthermore, where it is established there is modern demand for a strong room, additional value should only be added to that portion of the floor areas as would be required by modern banking practice. This will avoid a disproportionate uplift in value to those strong rooms which are, by modern standards, over specified.

3.3 Practical considerations: strong rooms or book rooms

Where a value addition over the basic storage level of value is not considered appropriate, care should be taken when incorporating a strong room or book room into the valuation using the Rating Support Application (RSA).

Whether used for secure storage or not, all strong rooms and book rooms should attract the accommodation use code of STR (Strongroom). The effect of this for 2010 is to add up to 50% to the appropriate prevailing basic level of storage, depending on the particular valuation scheme adopted. Clearly, where for non-secured storage the prevailing basic storage level of value is considered appropriate, a downward adjustment will be required to cancel out any inbuilt uplift.

To achieve this, a line entry adjustment code of “SEC - Security” (minus) should be attached to the “STR” line entry, and an appropriate adjustment factor applied to counter the effect of the uplift for secured storage. The line entry adjustment “Security” must also be overwritten with “Used as normal store”.

3.4 Reference to the 2005 Practice Note

For 2010 rating lists it is reiterated that, taken together with the above comments on specific items (bank frontages, traditional bank premises and strong rooms), the approaches contained in Appendix 1 to the 2005 Practice Note remain in place and should be considered and applied in 2010 lists compilation and maintenance.

Should any future discussions result in amendments to the approach during the life of the 2010 rating lists, it is envisaged that advice stemming from them will be added to this practice note.