Marinas (Non Domestic Valuation practice notes)
These Practice Notes were developed for the purpose of revaluing non domestic property in Northern Ireland as part of Reval2023. They were produced primarily as guidance for LPS Valuers to ensure, amongst other things, consistency of approach and practice in rating valuations.
Scope
The scope of this practice note is solely to ensure a consistent valuation approach for this property Class/ Sub Class/ 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 marinas. A Marina is a natural or artificial harbor for privately owned pleasure boats, both motor & sail. It may be on the coast, or adjacent to, or within, a river, estuary, lough, lake or canal. Marinas will usually have an enclosed area of water with a number of jetties and landing stages, fixed or floating, with boats being berthed alongside and/ or at right angles. There may also be a slipway, a crane or hoist, an area of hard standing used for car parking in the season and boat storage in winter, a marina office, a chandler’s shop, boat sales, repair workshop, fuel pumps, toilets, changing rooms, laundry and refreshment facilities.
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”.
Valuation approach for 2023
The recommended valuation approach for Reval2023 is the Receipts & Expenditure method of valuation.
In the absence of rental evidence, or a suitable unit of comparison to permit such rental evidence to be reliably analysed, the preferred method of valuation may be either the R&E method or the Contractor’s basis. Where the nature of the occupation of the property is primarily concerned with achieving anticipated profit, and the tenant’s rental bid is, therefore, likely to be based upon a consideration of receipts and expenditure, then in the absence of reliable rental evidence, the R&E method may be the most appropriate method of valuation to adopt.
Source: The Receipts and Expenditure Method of Valuation for Non-Domestic Rating Guidance Note produced in 1997 by the Joint Professional Institutions' Rating Valuation Forum which consists of the RICS, the IRRV, the RSA, the SAA, the VLA and the VOA.
Step 1
Gross Receipts will be determined by taking into account all income reasonably to be derived from occupation of the property. A period of three years accounts, prior to the AVD should give sufficient information to establish a fair and reasonable indication of the trading position. In the case of new ventures where trading accounts do not exist, refer to the accounts of similar ventures, or to the business plan prepared for the new occupier.
In general, receipts should include all income derived directly and indirectly from occupation of the property.
Step 2
The proper Cost of Purchases made in order to produce those receipts should be deducted to determine the Gross Profit. Such costs relate only to those purchases which form part of the venture undertaken.
Step 3
Deduct the Working Expenses from the Gross Profit to determine the Divisible Balance. Outgoings considered as allowable working expenses are those incurred as a result of the operation. For example, salaries, National Insurance payments, provision of services, insurance, phone bills, advertising, Head Office expenses. However, a mortgage payment, which is an expense of the business, is not an expense for a rating valuation.
Step 4
The Divisible Balance (or net profit) is the remaining sum available to be shared between the landlord, and the tenant. It comprises two main elements:
a. The Tenant’s Share – to provide a return on any tenant’s capital employed and a reward to the tenant for his venture reflecting the extent of the risk and the need for profit. It must be a proper and sufficient inducement, not merely a fraction of the divisible balance. A 50/50 split of the divisible balance is adopted as a last resort. This is deducted from the Divisible Balance to leave:
b. The Landlord’s Share – i.e. the amount available for the payment of rent and rates.
The above sets out the methodology for assessing a rent using the R&E method of valuation. However, having derived a number of rents from a full analysis, it may be possible to determine a ‘shorthand’ approach whereby the NAV may be expressed by reference to either:
(a) price per metre run of jetties, pontoons; or
(b) price per berth.
This is in effect a comparative method of valuation using comparable assessments, which have been derived from a full R&E analysis.
Where a hereditament comprises a marina plus another bulk class of property beyond that which is required to operate the berthing business, the bulk class element will be valued using the comparative method with reference to local rental information.
In this case the turnover figures should be carefully examined to ensure there is no element of double counting.
Having arrived at an initial valuation it will be necessary to stand back and take an overview of the assessment to ensure relativity with other comparable premises.
Rent and Lease Questionnaires
For this class of property Rent and Lease Questionnaires (RALQs) were issued by the Practice Note author.
Contacts
For advice on any aspect of this Practice Note contact LPS on 0300 200 7801.
Appendix 1
Purpose
The guidelines are to provide a uniform approach to the referencing of Marinas in connection with the Reval2023 Valuation Scheme and to calculate “maximum lettable length” of Marina berths.
Definitions
Maximum Lettable Length
This is:
a. In the case of Finger Pontoon berths, the length of the Finger Pontoon measured from the walkway to the extremity of the Finger Pontoon plus average or reflecting any reduced length where mooring restrictions occur.
b. In the case of Alongside Berths, the total length of the walkway properly useable for the mooring of boats less 15%.
c. In the case of walkways/pontoons to post of buoy moorings, the length between the walkway/pontoon and post/buoy less 10%.
Average
Shall mean any additional length beyond the length of the Finger Pontoon (up to a maximum of 10% of the length of the Finger Pontoon) which is properly useable when mooring a boat to the Finger Pontoon.
Reduced Length
Means any reduced length where a mooring is restricted by access, mooring post etc.
Alongside
Means a berth alongside a walkway or pontoon.
Finger Pontoon
Means a floating pontoon attached at an angle to a walkway.
Walkway
Means an access way or pontoon serving Finger Pontoons which may also be used for alongside moorings and may be a floating structure, quay wall or bank.