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

Section 980: sports stadia

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1. Co-ordination

Sports Stadia as a class are subject to co-ordination as outlined in the relevant Practice Note.

2. Description

The majority of Sports Stadia are likely to be encompassed in other classes for which guidance is given in the section of the Rating Manual, Section 6 part 3, relevant to that class, eg Football League and Rugby Football League Grounds (Section 420) and Greyhound Race Tracks (Section 470).

This category is therefore in the nature of a “sweep-up” class relating to stadia where guidance is not specifically given elsewhere. The type of hereditament included in this category is typified by the Rugby Football Union’s headquarters at Twickenham and the Welsh equivalent at the National Stadium, Cardiff Arms Park, Cardiff. Examples of other sports where stadia are included in this category are in the case of athletics - Gateshead and Crystal Palace; as well as some Speedway and Cycle Tracks and the multi-sport/function Wembley Stadium. The class will therefore cover a wide variety of hereditaments occupied for sporting purposes, the essential aspect of the class is that in addition to the pitch, track or other sporting medium there are a considerable number of other facilities including grandstands, entertainment areas, conference suites etc.

3. Background

The last three decades have seen a considerable increase in the range of sporting facilities available to the public, and the way in which they are provided.

At the same time there has been a decline in the popularity of many of the more traditional sports and leisure pursuits, many of which have also been affected by greater levels of control imposed by either the particular sport’s governing body or the health and safety authorities.

There is now a much greater commercial provision of such facilities not all of which have been created with adequate knowledge about the requirements of the particular sporting or leisure activity. The results of such speculative ventures can sometimes be properties which are either the wrong size, provide the wrong accommodation or are developed in inappropriate locations. The maxim that cost does not equal value is particularly relevant to this class of hereditament.

4. Survey requirements

It is envisaged that in most cases consideration will have to be given to the contractors basis of valuation. As such the survey should provide sufficient detail to accommodate this.

5. Valuation methods

The changes referred to in para 2 highlight the problems in determining the appropriate method of valuation for this class of hereditament, and it will often be the case that no one method can be considered in isolation.

5.1 Rental method

Where there is adequate sound rental evidence, this will form the basis of valuation. However whilst such evidence will of course be relevant to the actual hereditament from which it derives, considerable caution is required when using it as a basis for valuing other hereditaments, unless there is a sufficient amount of such evidence to produce a reliable pattern.

The value of sports and leisure hereditaments is particularly sensitive to location, quality of building and facilities, and optimum size requirements. Because of the different requirements for various sports and leisure uses, properties developed for one specific type of occupation are rarely ideally suitable for use by a different sport or leisure class, without either offending “rebus”, or making an uneconomic or wasteful use of resources.

Accordingly, if the indirect rental method of valuation is adopted, the evidence is likely to require a substantial degree of subjective adjustment, and an alternative more appropriate valuation method should form the primary approach. Where there is direct rental evidence, it should be analysed not only in terms of unit price, but also in terms of a percentage of receipts, which may form a more reliable method of comparison especially in respect of hereditaments run as commercial operations. The unit price analysis should be not only in terms of area, but also in terms of spectator capacity or unit of use.

5.2 Accounts based Valuations

Where hereditaments are operated commercially with the main object of maximising profit, and there is no suitable rental evidence, the most appropriate method of valuation will be accounts based, either as a percentage of receipts or on a full profits basis. When the hereditament is of a new type, or there is no other evidence, then the contractors basis should be used.

Whilst it would not normally be expected that the resultant level of assessment would be lower than that derived from a properly adjusted contractors basis valuation, it is recognised that this may occur in the case of developments which have either proved to be “white elephants” or are of such a scale that they would never be rebuilt. In such cases, valuers will need to ensure that any accounts based valuation has full regard to the potential of the hereditament and to the possibility of any “overbid”.

Additionally, the concept of a year to year tenancy with a reasonable prospect of continuance is likely to be of assistance when considering hereditaments that are not immediately profitable following completion, and the question of “pioneering” allowances needs to be considered in this context.

5.3 Contractor’s basis Valuations

This is likely to be the most appropriate method of valuation for those hereditaments which are run to provide a public amenity, and should be carried out in accordance with Rating Manual - Section 4 - Part 3 and the VO Cost Guide. However where it is considered on the evidence that the potential hypothetical tenant might be a commercial operator who would be prepared to pay a rent greater than that derived from the contractor’s basis, it will be appropriate to take this into account in arriving at the rateable value.

When carrying out a valuation on the contractors basis, due consideration of some or all of the following factors may reduce the incidence of apparent anomalies in respect of these types of property.

a. Care should be exercised to ensure that there is no duplication of costs and that the item costed is of similar quality to that of the Cost Guide beacon or other beacon.

b. Appropriate allowances should be made for obsolescence, under utilisation and for any problems caused by the age of a property, in accordance with the VO Cost Guide and associated instructions. Any limitations or restrictions imposed by legislation or events eg The Safety of Sports Grounds Act 1975 or the Taylor Report following the Hillsborough disaster should be considered separately.

c. Land values should be realistic for the property valued. Many rents of land suitable for sports properties are modest and sound evidence is needed if high site values are to be defended.

d. A realistic approach should be adopted to the “stand back and look” stage. The criteria for the design of many sporting properties has rapidly and radically changed in the last few years, particularly with increasing restrictions imposed to improve safety.

e. The position regarding any alleged grants should be investigated fully having regard to Appendix 2 to Rating Manual: Section 4 - Part 3.

f. VOs should guard against giving “pioneering allowances” in respect of new ventures valued on a contractors basis, as it seems incorrect to give such an allowance where it is known that the actual occupier has been prepared to fully fund the cost of the development.