Valuations Flashcards
1
Q
What are the two types of valuers?
A
Internal and External
2
Q
What does the RICS professional Standard: Comparable Evidence in Real Estate Valuation, 1st Edition, 2019 (reissued as a professional Standard in April 2023) outline?
A
Outlines principles in the use of comparable evidence
1. Provides advice in dealing with situations where there is limited availability of evidence
2. Sets out a non prescriptive hierarchy of evidence, noting ‘the valuer should use professional judgement to assess the relative importance of evidence on a case by case basis’
3
Q
What is the use of the different types of valuers?
A
Internal
- Employed by the company to value the assets of the company / enterprise
- Valuation for internal use only
- No third-party reliance
External
- Has no material links with the asset to be valued or the client.
4
Q
What are the three steps before undertaking a valuation?
A
- Competence
- Check if you’re competent enough to undertake the work
- Do you have the correct level of Skills Understanding and Knowledge (SUK) - Independence
- Check for conflicts - Terms of Engagement
- Set out in writing the full confirmation of instructions prior to starting work
- Receive written confirmation of instruction
- Confirm competence of the valuer
- Extent and limitations of the valuers inspection must be stated
5
Q
What could be included under Statutory Due Diligence?
A
Could include checking
1. Asbestos register
2. Business Rates / Council tax
3. Contamination
4. Equality Act 2010 compliance
5. Environmental matters (power lines, sub stations)
6. EPC rating
7. Fire safety
8. Flooding
10. Highways
11. Legal title and tenure (boundaries, easements, rights of way)
12. Public rights of way
13. Planning history
6
Q
What’s the suggested SIXTEEN step process when accepting / undertaking a valuation instruction
A
- Receive instruction from client
- Check competence
- Check for conflicts
- Issue terms of engagement
- Receive back signed terms of engagement
- Gather information - lease, title docs, planning info etc
- Undertake due dilienge
- Inspect and measure
- Research market assemble, verify and analyse comparables
- Undertake valuation
- Draft valuation
- Peer review - have valuation / report checked by other surveyor
- Finalise and sign report
- Report to client
- Issue invoice
- Ensure valuation file in good order for archiving
7
Q
What are the FIVE main methods of valuation
A
- Comparative
- Investment
- Profits
- Residual
- Contractors (depreciated replacement cost)
8
Q
IVS 105 Valuation Approaches and Methods. What does this document set out?
A
- Income approach - converting current and future cash flows into capital value (Investment, Residual and Profits methods)
- Cost approach - reference to the cost of the asset whether by purchase or construction (DRC / contractors method)
- Market Approach - using comparable evidence available (comparable)
9
Q
What valuation methods comes under Income approach?
A
Investment, Residual and Profits methods
10
Q
What valuation method comes under Cost approach?
A
Contractors method (Depreciated replacement cost)
11
Q
What valuation method comes under Market approach?
A
Comparable method
12
Q
What is the SIX step method for Comparative Valuation?
A
- Search and select comparables
- Verify details and analyse headline rent to give a net effective rent as appropriate
- Assemble comparables in a schedule
- Adjust comparables using hierarchy of evidence
- Analyse comparables to form opinion of value
- Report value and prepare file note
13
Q
What is the document relating to the Comparative Method?
A
RICS professional Standard: Comparable Evidence in Real Estate Valuation, 1st Edition, 2019 (reissued as a professional Standard in April 2023)
14
Q
What should a surveyor do when there is lack of evidence when undertaking the comparable method?
A
The valuer should use professional judgement to assess the relative importance of evidence on a case-by-case basis
15
Q
Explain each category of the Hierarchy of Evidence
A
- Category A - direct comparables of contemporary
- Completed transactions of near identical properties for which full and accurate information is available. Can include data from subject property itself
- Completed transactions from other similar assets for which accurate information is available
- Completed transactions of similar real estate for which full data may not be available, but for which enough reliable data can be obtained to use as evidence
- Similar real estate being marketed where offers may have been made but a binding contract has not been completed
- Asking prices - Category B - general market data that cam provide guidance
- Information from published sources of commercial databases
- Other indirect evidence
- Historic evidence
- Demand / supply data for rent, owner occupation or investment - Category C - other sources
- Transactional evidence from other real estate types and locations
- Other background data (interest rates, stock market movements and returns which can give an indication for real estate yields)
16
Q
What comes under Category A in Hierarchy of Evidence?
A
- Category A - direct comparables of contemporary
Completed transactions of near identical properties for which full and accurate information is available. Can include data from subject property itself
- Completed transactions from other similar assets for which accurate information is available
- Completed transactions of similar real estate for which full data may not be available, but for which enough reliable data can be obtained to use as evidence
- Similar real estate being marketed where offers may have been made but a binding contract has not been completed
- Asking prices
17
Q
What comes under Category B in Hierarchy of Evidence?
A
- Category B - general market data that can provide guidance
Information from published sources of commercial databases
- Other indirect evidence
- Historic evidence
- Demand / supply data for rent, owner occupation or investment
18
Q
What comes under Category C in Hierarchy of Evidence?
A
- Category C - other sources
Transactional evidence from other real estate types and locations
- Other background data (interest rates, stock market movements and returns which can give an indication for real estate yields)
19
Q
How do you find relevant comparables?
A
- Inspect the area to find recent market activity by seeking agents boards
- Speak to local agents
- Look at auction results (caution as these are gross prices)
- In-house records / databases and websites (EGI / CoStar)
20
Q
Explain the investment method and how / when it is used?
A
Used when there is an income stream to value
The rental income is capitalised to produce a capital value
Conventional method assumes growth implicit valuation approach
Implied growth rate is derived from market capitalisation rate (yield)
21
Q
What should yo consider when looking at comparables?
A
Date of comparable
market sentiment can be crucial when there is lack of transactional evidence
22
Q
What is the conventional investment method?
A
Rent received (or Market Rent) x YP = Market Value
Assumes growth implict valuation approach
Importance of comparables for rent & yield
23
Q
Explain the Term and Reversion method
A
- Used for reversionary investments (market rent more than passing rent) ie when under rented
- Term capitalised until next review / lease expiry at an initial yield
- Reversion to Market Rent valued in perpetuity at a reversionary yield
24
Q
What does perpetuity mean?
A
the state or quality of lasting forever.
25
Explain the layer / hardcore method
Used for over rented investments (passing rent more than market rent)
Income flow divided horizontally
Bottom slice = market rent
Top slice = rent passing less Market Rent until next lease event
Higher yield applied to top slice to reflect additional risk
Different yields used depending on comparable investment evidence and relative risk
26
DO PRIME ?/ SECONDARY YIELDS FOR EACH SECTOR
West End Retail - 3%
Prime Industrial 5.00% - 5.5%
Multi Let Industrial - London Regional 5.25%
Prime City Offices - 5.75%
27
What is the all risks yield?
Easy: a growth implicit yield used in an investment valuation that reflects all of the risks and rewards of the subject property
Yield which encompasses all the prospects and risks attached to a particular investment
28
What is true yield?
Assumes rent is paid in advance, not in arrears
29
What is nominal yield?
Initial yield assuming rent is paid in arrears
30
What is gross yield?
The yield not adjusted for purchasers costs (such as auction result)
31
What is net yield?
The resulting yield adjusted for purchasers costs
32
What is equivalent yield
Average weighted yield when a reversionary property is valued using an initial and reversionary yield
33
What is an initial yield?
Simple income yield for current income and current price
34
What is reversionary yield?
Market rent (MR) divided by current price on an investment let at a rent below the MR
35
What is running yield?
The yield at one moment in time
36
What is the Discounted Cash Flow Technique (DFC)
Growth explicit investment method of valuation
37
Why is the DCF technique used?
Normally where the projected cash flows are explicitly estimated over a finite period:
- Short leasehold interests and properties with income voids or complex tenures
- Phased development projects
- Some alternative investments
- Non standard investments (say with 21 year rent reviews)
- Over rented properties & social housing
- The approach seperates out and explicitly identifies growth assumptions rather than incorporating them with an ARY
38
What's the guidance relating to DCF method?
The RICS Guidance Note on Discounted Cash flow for commercial property investments, 2010
39
What's the simple methodology to find the market value?
1. Estimate the cash flow (income less expenditure)
2. Estimate the exit value at the end of the holding period
3. Select the discount rate
4. Discount cash flow at discount rate
5. Value is the sum of the completed discounted cash flow to provide the NPV
40
What is the Net Present Value
The sum of the discounted cash flows of the project
41
What can NPV determine?
If an investment gives a positive return against a target rate of return
42
What does it mean if an NPV is positive?
The investment has exceeded the investor's target rate of return
43
What is internal rate of return (IRR)
Rate of return which all future cashflows must be discounted to produce a NPV of zero
44
What does it mean if an NPV is negative?
It has not achieved the investors target rate of return
45
What does IRR assess?
Return from investment opportunity
Used to assess the total return from an investment opportunity making some assumptions regarding rental growth, re-letting and exit assumptions
46
What's the purpose of the Profits Method?
- It's used for valuations of trade related property, where there is a monopoly position?
- Used where the value of the property depends upon the profitablity of its business and its trading potential
47
What uses typically mean the Profits Method is required?
1. Pubs
2. Petrol Stations
3. Hotels
4. Guest Houses
5. Children's Nurseries
6. Leisure and healthcare properties
7. Care homes
48
What is required when undertaking the Profits Method?
1. Accurate and audited accounts if possible for 3 years
2. Use estimates / business plan if needed for a new business
49
What's the method used when calculating gross profit?
Annual turnover - costs / purchases
50
What's the method used when calculating unadjusted net profit?
Gross profit - reasonable working expenses
51
What's the method used when calculating unadjusted Fair Maintainable Operating Profit?
Fair Maintainable Operating Profit = Gross Profit + Unadjusted Net Profit - Operators Remuneration
52
What's the purpose of the Professional Standard - Valuation of development land, 2019
Provides detailed overview of the valuation of development property and defines development property as 'interests where redevelopment is required to achieve the highest and best use, or where improvements are either being contemplated or are in progress at the valuation date'.
53
What may come under development land
1. Construction of buildings
2. Previously undeveloped land which is being provided with infrastructure
3. Redevelopment of previously developed land
4. Improvement or alteration of existing buildings or structures
5. Land allocated for development in a statutory plan
6. land allocated for a higher value use of higher density in a statutory plan
54
When valuing development property, what must be clearly identified in the report?
Assumptions and or special assumptions (e.g. marriage value or hope value)
55
When valuing development property, what other valuation method should it be compared to?
Residual method
OR in more complex cases the DCF technique
56
When undertaking a Financial Viability Assessment, what must practitioners comply with?
RICS Professional Standard - Financial Viability in Planning: Conduct and Reporting, 2019.
57
What's the Depreciate replacement costs method commonly know as?
Contractors method
58
When should the DRC method be used?
Should be used where direct market evidence is limited or unavailable for specialised properties
Including
- Sewage works
- Lighthouses
- Oil refineries
- Docks
- Schools
- Submarine base etc
59
What's the purpose of a Depreciated Replacement Cost (DRC) valuation?
Used for owner / occupied property
For accounts purposes for specialised properties
Also used for rating valuations of specialist properties
60
What's the simple methodology for DRC valuation?
Value of land in its existing use (assume planning permission exists)
ADD
Current cost of replacing the building
PLUS
fees
Less
A discount for depreciation and obsolescence / deterioration
61
Types of of depreciation
1. Physical obsolescence: result of deterioration / wear and tear over the years
2. Functional obsolescence: where the design or specification of the asset no longer fulfils that function for what is originally designed
3. Economic obsolescence: due to changing market conditions for the use of the asset.
62
Is DRC Red Book Global compliant?
No, not compliant for secured lending purposes.
63
What can DRC be used for?
Calculation of Market Value for specialised properties only for valuations for financial statements
64
If a Depreciated Replacement Cost valuation is undertaken in the public sector, what should it be accompanied by?
A statement that it is subject to the prospect and viability of the continued occupation and use.
65
When reporting a DRC valuation, what must the valuer state?
Market value for any readily identifiable alternative use, if higher or if appropriate, a statement that the market value on cessation of the business would be materially lower
66
What is the guidance relating to DRC method?
Depreciated Replacement Cost Method of Valuation for Financial Reporting 2018
67
What is the structure of the red book?
1. Introduction
2. Glossary
3. Professional standards (PS)
4. Valuation technical and performance standards (VPS)
5. Valuation applications (VPGA)
6. The International Valuation Standards (IVS)
68
Part 3 of the Red Book. What is PS1?
Compliance with standards and practice statements where a written valuation is provided
69
What are the FIVE exceptions to the requirement to use the Red Book Global?
1. Advice is expressley provided in preparation for, or during course of negotiations or litigation
2. The valuer is performing a statutory function except for the provision of a valuation for inclusion in a statutory return to tax authority
3. The valuation is provided for a client purely for internal purposes, without liability, and not communicated to any third party
4. The valuation is provided as part of agency and brokerage work in anticipation of receiving instructions to dispose of, or acquire, an asset, except when a purchase report is required which includes a valuation
5. The valuation advice is provided in anticipation of giving evidence as an expert witness.
70
Part 3 of the Red Book. What comes under PS2? (short)
Ethics, competency, objectivity and disclosures
71
What comes under PS2 (long answer)
1. Professional and Ethics standards
- must act in accordance with RICS rules of conduct
2. Independence, objectivity and identification and management of conflicts of interest
3. Terms of engagement
72
Part 4 of the Red Book. What is VPS 1?
Terms of engagement
73
What must be outlined in VSP 1?
Terms of Engagement must include:
1. Identification and status of the valuer
2. Identification of client
3. Identification of any other intended users
4. Asset to be valued
5. Currency
6. Purpose of valuation
7. Basis of valuation
8. Valuation date
9. Extent of investigation
10. Nature and source of information
11. Assumptions and special assumptions
12. Format of the report
13. Restrictions for use, distribution and publication
14. Confirmation of Red Book Global / IVS compliance
15. Fee basis
16. Complaints handling procedure to be made available
17. Statement that the valuation may be subject to compliance by RICS
18. Limitation on liability agreed
74
What are assumptions made?
Where it is reasonable for the valuer to accept that something is true without the need for specific investigation
75
What are special assumptions?
Is a supposition that is taken to be true and accepted as fact, even though it is not true
76
What comes under VPS 2? (short)
Inspections, Investigations and Records
77
What comes under VPS 2? (long answer)
Inspections - valuers must take steps to verify the necessary information being relied upon for a valuation to ensure the information is professionally adqueate to for its purpose.
Restricted information (desk top) - When a valuer is instructed to undertake a valuation on the basis of restricted information or without a physical inspection.
78
What should a valuer consider when a desk-top valuation is undertaken
1. Nature of the restriction must be agreed in writing in the terms of engagement
2. Possible valuation implications of the restriction confirmed in writing before the value is reported.
3. Valuer should consider whether the restriction is reasonable with regards to the purpose of the valuation.
79
What should be consider when a revaluation (without re-inspection) takes place?
Revaluation without re-inspection of the property previously valued must not be undertaken unless the valuer is satisfied that there have been no material changes to the property or nature of its location since the last inspection.
Must be confirmed in the terms of engagement and in the valuation report.
80
What comes under VPS 3? (short)
Valuation Reports (IVS 1 103 - Reporting)
81
What's the minimum requirements to be stated within a report (under VPS 3)
1. Identification and status of the valuer
2. Client and any other intended users
3. Purpose of valuation
4. Identification of the asset to be valued
5. Basis of value
6. Valuation date
7. Extent of investigation
8. Nature & source of information relied upon
9. Assumptions and special assumptions
10. Restrictions on use, distribution and publication
11. Instruction undertaken in accordance with IVS standards
12. Valuation approach and reasoning
13. Valuation figures
14. Date of valuation report
15. Comment on market uncertainty
16. Statement setting out any limitations on liability that have been agreed.
82
Why is a valuation advice drafted first?
Has to marketed as draft and only for internal purposes only.
If provided to the client, must state that it is a draft and subject to completion of final report
A draft valuation can be discussed with the client, but the valuer cannot be influence by the client in any way
Any changes made to preliminary valuation must be noted on file and reasons provided
Any additional information supplied by the client as a result of the discussion regarding the draft report must be stated in the report.
83
What does VPS 4 come under?
Bases of value
84
What are the SIX bases of values?
1. Market Value
2. Market Rent
3. Fair Value
4. Investment Value
5. Equitable Value (not used in UK)
6. Liquidation Value (not used in UK)
85
What's the definition of Market Value?
The estimated amount for which an asset should exchange
- On valuation date
- Between willing buyer and willing seller
- In an arms length transaction
- After proper marketing
- Where parties had each acted knowledgeable, prudently and without complusion
86
What is the definition of Market Rent?
The estimated amount for which an asset should be leased
- On valuation date
- Between willing lessor and willing lessee
- On appropriate lease terms
- In an arms length transaction
- After proper marketing
- Where parties had each acted knowledgeable, prudently and without complusion
87
What's the definition of Fair Value?
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
- Basis of valuation is now required if the International Financial Reporting Standards have been adopted by the client
- It is adopted by the International Accounting Standards Board
- The RICS view is that this definition is generally consistent with the definition of Market Value
88
What is the definition of Investment Value?
'The value of an asset to an owner for individual investment'
The value of an asset to a particular owner, or prospective owner for individual investment or operational objectives
- May differ from Market Value
- Sometimes used as a measure of worth to reflect value against the clients own investment criteria
89
What is the definition of Equitable Value?
The estimated price for the transfer or an asset or liability between identified knowledgeable and willing parties that relfects the respective interests of those parties.
NOT used in the UK
90
What is the definition of Liquidation Value?
Basis of value can be used for a group of assets sold in piecemeal basis considering the costs of getting the assets into a saleable condition
NOT used in UK
91
What comes under VPS 5?
Valuation Approaches and Methods
92
What comes under VPGSA 1?
Valuation for inclusion in financial accounts
93
If you don't have a software programme to calculate IRR, how do you calculate it?
1. Input current market value as a negative cash flow
2. Input projected rents over holding period as a positive value
3. Input projected exit value at the end of the term assumed as a positive value
4. Discount rate (IRR) is the rate chosen which provides a NPV of Zero
5. If NPV is more than zero, then the target rate of return is met
94
What must be declared under VPGSA 2 (Valuations for secured lending?)
1. Any previous, current or anticipated involvement with prospective borrower or the property to be valued must be disclosed by the lender
95
Who's responsibility is it whether to accept an instruction?
The valuers
96
If the valuer and client agree that any potential conflict can be avoided, can it progress?
Yes arrangements must be added to the instruction TOE and valuation report and be recorded in writing.
97
What is VPGA 8?
Valuation of real property interest
- Covers inspections and investigations with particular emphasis on ESG and specific environment constraints and sustainability issues
98
Under VPGA 8 what are ESG / Sustainbility issues that need to be considered?
- Identifies ESG and Sustainability issues including:
- direct valuation factors e.g. storm or flood risk
- indirect valuation factors e.g. resilience or carbon emissions
- physical risks (heat or wildfire)
- transaction risks (regulatory change or carbon emissions)
99
What is VGPA 10?
Matters that may give rise to material valuation uncertainty
- Valuation report must not be misleading
- Valuer should draw attention to and comment on any issues resulting in uncertainty in relation.
- Standard caveat does not suffice.
100
What are the two standards in International Valuation Standards 2017
General Standards and Asset Standards
101
What is General Standards
Addresses matters such as terms of engagement, approaches to and bases and methods of valuation as well as reporting
102
What is Asset Standards?
Relating to specific types of asset, such as real property and development property.
103
How does the UK National Supplement compliment the Red Book Global?
It sets out clarification that the UK Red Book Global UK requirements for valuation in the UK and is not a substitute for it.
Provides specific requirements for members on the application of RICS valuation - Global Standards to valuations undertaken subject to UK jurisdiction
104
What are the contents of the Global Standards UK National Supplement?
1. Introduction
2. UK Professional and Valuation Standards - mandatory
3. UK Valuation Practice Guidance Applications - advisersy
4. Summary of changes from Red Book UK
105
What's the five purposes of UK VPS 3 Regulated purpose valuations?
1. Financial reporting (company accounts)
2. Stock Exchange Listings / Inclusion in prospectuses and circulars
3. Takeovers and mergers
4. Collective investment schemes
5. Unregulated property unit trusts.
106
Is secured lending regulated?
No, because they are not relied upon by third party or in the public interest
107
What is the guidance for ESG and Sustainability?
Global Guidance Note Sustainability and ESG in commercial property valuation and strategic advice, 3rd ed, Dec 2021.
108
What is the case law for Margin of Error?
Singer & Friedlander Ltd v J.D. Wood 1977
109
What is the principle margin of error?
In K/S Lincoln and Others v CB Richard Ellis 2010. Judge stated:
Standard residential - +/- 5%
One off commercial property - +/- 10%
Exceptional features +/- 15%
110
What is hope value?
Value arising from any expectation that future circumstances affecting the property may change. Example being future prospect of securing planning for development of land, where no planning permission exists at the present time.
111
What is marriage value?
Created by merger of interests.
Undertake a before and after valuation and calculate the level of marriage value created
Typical negotiated outcome is to split the marriage value create 50:50 or divide it pro-rata to the value of the individual interest
112
What's the stamp duty land tax for non residential or mixed use property
£0 - £150,000 Nothing
£150,001 - £250,000 2%
Over £250,000 5%
113
What's the stamp duty land tax for residential property?
£0 - £250,000 Nil
£250,001 - £925,000 5%
£925,001 - £1,500,000 10%
Over £1,500,000 12%
114
What is the relief rate for first time buyers?
First time buyers can claim relief with nil rate up to £425,000 and 5% on the portion from £425,001 to £625,000.
115
Is stamp duty payavle on leases?
Yes on new leases.
If the:
Net Present Value up to £150,000 (£125,000 for resi) - Zero
NPV over (£150,000) (125,000 residential) 1%
NPV over £5,000,00 2%
116
What is the Welsh and Scottish version of Stamp Duty?
Scotland - Land and Building Transaction Tax
Wales - Land Transaction Tax
117
What is a surrender and renewal valuation?
When landlord / tenant wants to surrender or existing lease and agrees to grant a new lease
Calculation of a premium to reflect the change in the value of the leasehold interest
118
What comes under VPGSA 2?
Valuations for secured lending
119
What is the process when valuing for charities and what is the act?
The Charities Act 2011 requires trustees of a charity to obtain a valuation prior to the disposal of an asset in accordance with Section 19.
The Charities Act 2022 makes changes to the current arrangements for legal requirements to dispose of property and land, with effect from June 2023
120
What is included in a valuation report for a charity?
Confirmation that the Charity has to obtain best terms for the transactions
121
What does the DCF technique involve?
Short: Projecting estimated cash flows over an investment holding period, including an exit value (typically based on an ARY), and discounting them to the present using a discount rate that reflects the perceived risk level.
Long: Projecting estimated cash flows over an assumed investment holding period, plus an exit value at the end of that period, usually arrived at the end of that period, usually arrived at on a conventional ARY basis. The cash flow is then discounted back to the present day at a discount rate (also know as desired rate of return) that reflects the perceived level of risk
122
What's an example of a particular buyer / special value?
A tenant purchasing their freehold interest
123
What is a building costs reinstatement valuation / estimations?
For building insurance purposes.
The cost of the reinstatement of the building without profit
124
How do you value a long leasehold interest?
The ground rent is deducted from the gross income to calculate the net rent received. This is capitalised at a yield for the length of the lease to create a market value
125
What is the simple methodology for long leasehold interests
Rent received less ground rent = net rental income
Capitalised at an appropriate yield for the remaining length of the lease
= Market value of leasehold interest
126
What typically happens with Purchasers costs?
It is usual valuation practice to deduct the likely costs of purchase from the gross market value to provide a net market value of the property as a purchaser will have to pay these costs
127
What costs are usually assumed with purchasers costs?
SDLT - prevailing rate
Agents Fees - 1% of purchase price + VAT
Solicitors Fees - 0.5% of purchase price + VAT
128
What does WAULT mean?
The weighted average unexpired lease term remaining to the first break or expiry of lease across asset weighted by the contracted rent.
129
When is WAULT used?
Often undertaken when valuing an asset or considering appropriate investment yield comparables for multi-occupied individual investments or portfolios
130
How do you analyse rent free periods / headline rents?
Use straight line basis either until end of lease or until the next review / lease event
131
What is normally deducted from rent free period before devaluation?
3 month fitting out period
132
What are the three approaches to calculate a net effective rent?
1. Straight line method
2. Straight line method assuming time value of cash flow using a yield
3. Use of DCF
133
What is a ransom strip?
A piece of land that controls the access to another piece of land
134
How do you value a ransom strip?
The Upper Tribunal (Lands Chamber) evidence suggest the value of the ransom strip could be in order of 15% - 50% of the development value unlocked by the inclusion of the ransom strip within the proposed development scheme. The Upper Tribunam assess each case on its own facts
135
What is the key case when valuing a ransom strip and what does is state?
Stokes v Cambridge (1961)
When a value of one third of the uplift in the development site value was awarded to the owner of the ransom strip.
136
What is zoning?
A valuation technique but not a method
137
When is Zoning used?
For the comparison of retail properties to create a unit comparison for different sized buildings
138
What is the rationale behind zoning?
The rental value of the property reduces away from the street
139
What is the principle of zoning?
The halving back principle with 6.1m zones
140
When using the Zoning technique, what are basement / first floor area treated as?
A/10 approx - depends on upon comparable evidence
141
When can 'end allowances' be allowed when using the Zoning technique?
Allowed for shape, such as split levels, excessive front to depth ratio and hard frontages depending on comparable evidence.
142
What do you add for return frontages?
Usually 10% uplift (depends on comparable evidence and footfall)
143
When is Natural Zoning used?
When the property zones reflect physical changes in the building, such as steps
144
When is Mirror zoning technique used?
When a shop has two main frontages
145
What does masking mean when using the Zoning technique?
When there's a hidden / obscured area
146
What is a 'party wall'?
A wall that stands astride the boundary of land belonging to two or more different landowners
147
What is the framework that deals with party walls?
Party Wall etc. Act 1996
148
What does the Party Wall 1996 framework state?
Helps resolve disputes in relation to party walls, boundary walls and excavations near neighbouring buildings. The Act provides a building owner, who wishes to carry out various sorts of work to an existing party wall, with additional rights going beyond ordinary common law rights.
149
What is the guidance regarding rights to light?
RICS Guidance Note on Rights of Light, 2016
150
When does the right to light arise?
The right to leight of a building arises after twenty years uninterrupted enjoyment of light without the consent of a third party by way of easement with prescriptive right.
151
What happens if right to light if infringed?
An injunction can be granted, or damages awarded
152
What is the case for Rights to Light?
HKRUK II (CHC) Limited (Highcross) v Heaney 2011
153
What was the outcome of the case for Right to Light 2011?
Left Highcross with remedial works bill and mandatory injuction to reduce the scale of its extended Toronto Square scheme in leeds where two new floors were added to an existing building
154
When was the RICS Consumer Guide to Right to Light published and who was it published for?
April 2022 and home-owners
155
What is the RICS Valuer Registration Scheme (VRS)
It's a regulatory monitoring scheme for all valuers carrying out Red Book Global valuations from October 2011.
156
What are the three main aims of the Valuer Registration Scheme (VRS)
1. Improve quality of valuation and ensure highest possible professional standards
2. Meet RICS' requirement to self regulate effectively
3. To protect and raise the status of the valuation professional as the leading expertise in valuation
157
What should Clients expect from a RICS valuation? As stated in the Valuer Registration Scheme
- Openness and transparency
- RICS protection and international valuation standards
- Expertise and clear reporting
- World Class Regulations, RICS 2010
158
What can a RICS Registered Valuer put on their business card?
The they're a RICS Registered Valuer
159
Who is eligible for the RICS Registered Valuer scheme?
Any member who took APC valuation competency to Level 3. Or took an alternative route post qualification to become a registered valuer.
160
What is required when registering to be a RICS Registered Valuer?
Have to provide valuation work undertaken, such as
- Type of valuations
- Purpose of valuations
- Number of valuations
- Firms total fee income from Red Book Global valuations in the last year
- What data sources are used
- Quality assurance audit procedures in place
- History of any negligence claims and notifications
161
Who can remove a member from the RICS Registered Valuer scheme?
Head of Regulation
162
What is Parry's table?
Parry's Table is a financial tool designed for real estate professionals to quickly and accurately calculate the present value of future income, the capitalized value of property income, and leasehold or freehold interests, using compound interest and annuity principles. It simplifies complex calculations, making it easier to apply in property valuations, particularly for income-producing properties.
163
What are the 6 types of yield?
- Initial yield
- Reversionary yield
- NIY
- Equivalent yield
- Running yield
- Gross yield
164
What is your companies liability cap?
Covered up to £50million (can't dicslose)
Covered up to 25% of Market Value (can disclose)
