Halls (Non Domestic Valuation practice notes)

Scope

The scope of this Practice Note is solely to ensure a consistent valuation approach for this property Class/ Subclass/ Type for Non-Domestic Revaluation 2023 and subsequent entry in the new Valuation List which becomes effective on 1 April 2023.

The basis of valuation for new entries in the Valuation List, and Rating Revision cases after 1 April 2023, is Schedule 12 (2)(1) of the Rates (NI) Order 1977.

Description

This Practice Note refers to property classified as:

Class: Non Sporting Rec Facility
Sub Class: Hall
Type: Ballroom, Bandroom, Community Hall/ Centre, Misc Unclassified Halls

The scheme includes Council Halls, Scout Halls, Orange Halls, Masonic Halls, Village Halls, Concert Halls.

The Practice note does not include Church Halls or Bingo Halls.

Legislative background

Schedule 12 Part 1 Paragraph 1 of the Rates (NI) Order 1977 applies.

“Subject to the provisions of this Order, the Net Annual Value of a hereditament shall be the rent for which, one year with another, the hereditament might, in its actual state, be reasonably expected to let from year to year, the probable average annual costs of repairs, insurance and other expenses (if any) necessary to maintain the hereditament in its actual state, and all rates, taxes or public charges (if any), being paid by the tenant”.

Article 41(2) (f) - Community Halls are distinguished as Exempt if they could be shown to be used for purposes deemed charitable under The Recreational Charities Act (NI) 1958.

Article 41A of the Rates (NI) Order 1977 provides that, subject to certain conditions, a hereditament can be distinguished as Exempt if it is occupied by one of the following bodies or an affiliate and made available or used for charitable purposes:

• Ancient Order of Hibernians
• Apprentice Boys of Derry
• Grand Lodge of Freemasons of Ireland
• Grand Orange Lodge of Ireland
• Independent Loyal Orange Institution
• Order of the Knights of St Columbanus
• Royal Anteluvian Order of Buffaloes
• Royal Black Institution

Valuation approach for 2023

The Contractor’s method of valuation is to be retained as the approach for this
type of hereditament.

The overall aim of the Contractor’s basis is to arrive at the effective capital value (ECV) that is then converted into annual rent. The primary method of arriving at ECV is to consider replacement building costs suitably adjusted.

Source: RICS guidance note: The Contractor’s Basis of Valuation for Rating Purposes 2nd edition August 2017, from the Joint Professional Institutions' Rating Valuation Forum, which is made up of representatives of the RICS, the IRRV, the RSA, the SAA, LPS and the VOA.

The method is employed in the case of properties that are not normally let out, which by their nature do not lend themselves to valuation by comparison with other classes where rental evidence does exist, and which are not of the type where a valuation solely by reference to the accounts of the undertaking would be appropriate.

The recommended approach to valuation comprises five stages.

Stage 1: Estimated Replacement Cost (ERC)

Identify the extent of the rateable hereditament, then estimate the replacement cost of the buildings, site works, all rateable structures, and rateable plant and machinery within the property on an undeveloped site.

In order to achieve consistency, a unit cost approach using Cost Guides is the primary method adopted. This approach will include the prevailing costs in the identified location, the effect of any contract size, and any associated professional fees. VAT is excluded, as are any grants or donations.

There may be cases where it would be appropriate to cost a modern, simpler or smaller substitute. The substitute would be of a design and specification that enables the use of the actual property to be carried out in a fully satisfactory manner.

Stage 2: Adjusted Replacement Cost (ARC)

The ERC should be adjusted to take account of the difference between the property, in its actual state, and the replacement property costed at Stage 1.

Stage 2 adjustments can be viewed from the perspective of an owner-occupier, as opposed to Stages 1 and 3 which are concerned with capital sums.

Allowances made at this stage are intended to reflect the disadvantages of a particular building (or an item of plant and machinery within it). These allowances are generally termed obsolescence.

It should not be automatically assumed that because a property is old it merits an allowance. In certain circumstances, age may be a positive asset or have little effect, for example prestige buildings such as town halls, art galleries or universities. Age in itself is not a disability but rather what flows from age.

Where a modern substitute has been costed at stage 1, allowances at Stage 2 should be restricted to the disadvantages of occupying the actual buildings in comparison with occupying the costed substitute.

The deficiencies that may be taken into account at Stage 2 can be grouped under the heading of ‘obsolescence’ and they are normally subdivided into the following types:

• Physical obsolescence which relates to wear and tear of the building due to its age. Although age itself is not a justification for an allowance the tenant will reflect the prospect of increased maintenance and running costs in his rental bid.
• Functional obsolescence may occur when the functional capability of the property is not comparable to new building or design standards in the sector. Functional obsolescence may take the form of the building exceeding the required capacity or quality compared to current market standards, or conversely being less than adequate for the intended purpose.
• Technological obsolescence is an extension of functional obsolescence where current technology has changed so radically that the actual plant and machinery to be valued or the building housing such equipment has become redundant.

For Reval2023, adjustments will apply for Age Obsolescence appropriate to the property class.

Stage 3: Value of Land

The consideration of the land element comprises two stages. The first is to establish the capital value of the site of the hereditament. The second is to make such adjustments as may be appropriate to those parts of hereditament site that have been developed with buildings or other rateable structures on it (i.e. encumbered by buildings and to which the average obsolescence allowance that was adopted to the structures at Stage 2 will normally be applied).

The capital value adopted for the land at the first stage, and before adjustment as appropriate at the second stage for the existence of rateable structures, should reflect all the advantages and disadvantages of the site and its location and assume the following:

• The site is cleared of all buildings.
• All services existing at AVD are available for connection.
• There is planning permission for the subject buildings and their existing use.
• No development potential exists over and above that required for the existing buildings or rateable structures on the land.

The assessed capital land value element will be added to form part of the total Effective Capital Value (ECV) to which the appropriate decapitalisation rate should be applied to calculate the Net Annual Value (NAV). [See Stage 4 for details on decapitalisation].

It may be appropriate to consider alternative sites in an area of high land value where the occupier of the property derives no extra benefit therefrom, however, comparisons should be made with sites of a comparable size, in the same mode or category of use.

For certain property types there may be a reasonable amount of reliable market evidence for site rents which can be used. For these property types the value of the land element may therefore be assessed by applying a rental rate per unit of assessment (acres/hectares) derived from analysis of such reliable rental information. Where this method is employed, the decapitalisation rate is not applied to the assessed land rental element, the land rental element instead being added to the decapitalised ECV to form part of the Total NAV for the hereditament.

Stage 4: Apply the appropriate decapitalisation rate to the total ECV

Decapitalising the sum of Stages 2 and 3 by the appropriate rate converts the ECV to an annual equivalent. The decapitalisation rates are prescribed by legislation, this does not allow any degree of valuation judgement.

Lower rate: 2.27% - in the case of a healthcare, educational or church hereditament.

Standard rate: 3.4% - for all other types.

Stage 5: Review. Also known as the ‘stand back and look’ stage

This stage is used to consider if any further adjustments are appropriate. Any such adjustments must be made for specific reasons and cannot be used to circumvent the decap rate. Care should be taken to ensure they do not duplicate allowances already made at Stage 2.

Adjustments made at this final stage are to reflect factors that affect the value of the property as a whole, e.g. poor access, cramped site conditions, inadequate layout. This stage provides an opportunity to consider whether a pioneering allowance or allowance to reflect the economic state of the industry is appropriate.

The value arrived at in Stage 5 is rounded to produce the NAV.

For full details see the following documents:

• RICS guidance note: The Contractor’s Basis of Valuation for Rating Purposes 2nd edition August 2017.
• LPS Code of Measuring Practice
• LPS NI Reval 2020 Rating Cost Guide Practice Note
• LPS NI Reval2023 Rating Cost Guide Spreadsheet
• LPS Contractor’s Basis of Valuation

Superfluity is not applied to this class of property at revaluation. Its possible presence and effect on value is for the ratepayer or agent to demonstrate and evidence.

The quality of the hall should reflect all aspects of the premises including age/ obsolescence, repair, construction, range and state of the facilities and degree of modernisation. Definitions of the five quality categories are set out in Appendix 1.

Rent and Lease Questionnaires

For this class of property Rent and Lease Questionnaires (RALQs) were not issued.

Contacts

For advice on any aspect of this Practice Note contact LPS on 0300 200 7801.

Appendix 1: Halls AVD 1/10/2021

Purpose built concert halls and theatres, council halls, scout halls, orange, Masonic and village halls. Not including church halls.

Category 1 excellent

Spacious well-appointed halls etc. constructed to prestige standards of stone, facing brick or similar. Plastered and/or timber panelled walls and ceilings. Timber floors and polished hardwood or expensive tiling. Very good lighting and heating systems. Good, spacious, cloakroom/toilet accommodation with superior fittings. Probably good kitchen facilities, ante rooms, stage and other ancillaries. Generous accesses, circulation and other ancillary space. Finish throughout of a high standard. Modern examples may include community or recreation facilities, exhibition centres and civic suites with at least one large hall, other lesser halls, committee rooms and offices. Many modern libraries will fall into this category. Older examples may incorporate concert halls, large function rooms with much decorative stone and plasterwork. Costs do vary but the rate quoted above is for the norm in this category. The rate may be increased where the subject is very much better but care must be exercised at the valuation stage, as this extra cost could be unremunerative.

Category 2 good

This category has a combination of the features found in the Category 1 and Category 3 halls and may be similar in design and accommodation to Category 1 but have the more functional/ utilitarian finish of category 3 or, have the much more basic design and accommodation of category 3 hall but with the more prestigious and expensive finish of category 1.

The Main Hall in this category should have a ceiling height high enough to allow sporting activities such as badminton to take place. Modern examples include large but plain local community centres etc. with exposed internal block/brick work, exposed roof members and the like. Older examples include large but plain “town halls” or even the most capacious church halls. Smaller scale but well finished local community centres, e.g. with a main hall of modest size and most ancillaries would also fit this (cost) category. It includes the best meeting and clubrooms.

Category 3 good/ average

This typically includes standard modest scale local halls and similar of traditional construction i.e., stone, facing brick or brick roughcast walls, plastered walls and ceilings internally, ordinary timber or concrete floors; satisfactory heating and lighting systems. Good plain toilet accommodation generally limited but sufficient kitchen facilities, with at best limited stage and anteroom facilities. The halls will have a good but plain standard of finish. Modern examples tend to be narrow with little more than domestic ceiling heights. Meeting rooms and clubrooms have only domestic ceiling heights but have extra partitions breaking up the accommodation into compartments. Older meeting etc. rooms may take the form of adapted soundly constructed late nineteenth century houses. The most recent examples tend to incorporate a timber framed structure.

Category 4 average/ poor

This category comprises superior timber or other industrialised non-traditional buildings such as Medway, Terrapin or Banbury buildings, with a similar standard of accommodation, facilities etc. to Category 3. This category may also be applied to minor halls, meeting and clubrooms of rather rudimentary traditional construction, e.g. mid-nineteenth century artisans' dwellings and industrial cottages with limited adaptation, which are of an overall quality between Categories 3 and 5.

Category 5 poor

Inferior industrialised buildings in the nature of contractors' huts or offices: inferior (generally second-hand re-erected) huts: old Nissan huts and prefabricated houses. Also poorest billets and simple houses unfit for human habitation, probably unlined internally with no heating and very limited toilet accommodation.

More useful links

• Valuation Lists