Rent and Rates using Comparables
Having crossed swords with the Inland Revenue Rating Valuation Officers, face to face on several occasions, regarding my various Business Rating Valuations with some degree of success.
In those days, with very little knowledge of rating and a good knowledge of business viability, where as the Valuer had a good knowledge of rating and very little idea of the true viability of individual businesses, fortunately, at the end of the day viability is the key to a valuation and not the use of Comparables.
Comparables for those that have never come across them in respect of Business Rates are now a very questionable estimation of a businesses or a commercial property's assessment of rental and rating worth, rent and rates are linked together for valuation purposes.
The Valuer takes a selection of vaguely similar properties within a ten mile radius and assess the rent and rating valuation on these other properties rent or rates, not the rent that the market forces will stand, as in a recession.
In some cases, cherry picking the highest rented or rated properties to get their valuation accepted, to endorse their claim, this is wrong.
They ignore the closed properties, whose rent is nil, the fact that there is a vast difference in a businesses viability in a one mile radius, let alone ten miles.
Without considering closed business and the market state, the use of Comparables will always ratchet rent and rates higher.
Rating Valuation assessment.
In a dispute with one of the Valuation Officers, it was patently obvious that he had no real understanding of the retail business, especially the licensed sector.
His knowledge was purely based on the use of Comparables, a very easy way to assess rates.
Firstly they have all the Comparable statistics to hand, which is fine for them and brooks no argument as far as they are concerned, but there are at least two serious flaws that can be exploited, the first is obviously that a licensed business or commercial premises cannot be compared with a licensed business or commercial property between one and ten miles away, each business has it's own local foibles or advantages, so anything outside the immediate area is questionable, Comparables have always been used to raise rents and rating valuations, without justification, they have never been used to reduce rents or rating valuations.
The second point is that a number of properties are vacant, but being commercial properties the rates are payable, giving no indication that the properties used for Comparables are not commercially viable at the rent that the rating valuation has been assessed on.
I have just been through this exercise with a small factory, the rates and rent were too high to attract tenants, the obvious thing was to reduce the rent, but the rates were still too high, more than the rent, still no interest.
I contacted the Valuation Officer, who told me the rates were perfectly fair using Comparables, everyone else was paying their comparable rates.
What he failed to realise was that most of the other factories were empty and the landlords were having to pay the rates to avoid prosecution, his total ignorance of the immediate local situation was and is an expensive exercise to a business man, the same applies to small businesses.
We fortunately had a planning change of use and promptly removed the roof and commenced the alterations getting full rates relief, this sort of action should not be necessary, there should be meaningful discussions with a totally practical approach, taking into consideration the economic climate and especially the immediate local effect.
The RICS (Royal Institute of Chartered Surveyors) were and are concerned about the over valuing of commercial property and the resultant effect on the national and now world economies.
Once upon a time you were exempt or had reduced rates for a vacant commercial property, the Valuation officer was well aware of the problems, now he has no idea and assumes that all the properties are let or in use, far from it, but you need to notify the Valuation officer if your rent is reduced or the local properties are vacant, Comparables should work both ways.
Don't let them pass you off with excuses, get as many people as possible to lobby the Valuation Office, we are in a long term recession and we need as much help as possible, to survive.
The Valuation Guidelines or similar will have been adopted or adapted in other countries where the UK Rental and Rating system has been used, if Comparables are also used ask questions, in respect of the accuracy of their overall application.