RICS produces guidance for rent valuations
The Royal Institution of Chartered Surveyors (RICS) has finally published its guidance notes covering the rental valuation of pubs in the much of the UK.
The long-awaited document - entitled The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales - outlines what a surveyor should be looking for when assessing a pub for rental purposes and is a response, in part, to calls from MPs sitting on the Business Innovations and Skills Committee to clarify the procedures relating to rent assessments.
The document is 'advice only' and not legally binding, although RICS warns that courts will take into account whether or not a surveyor had made reference to it should a professional negligence case come to trial.
Among the points put forward in the paper are that the market determines the price and or the rent charged.
"A valuer needs to fully understand the trading aspects of the type of property to enable:
• proper understanding and comparison of physical characteristics, e.g. location, size, configuration, relevant and surplus accommodation, etc.;
• analysis of actual trading results of the incumbent operator, where available;
• analysis of actual trading results of similar businesses, where available;
• assessment of the effect of the terms of trade (particularly if there is a wholesale supply tie);
• assessment of trading potential, profitability and market demand."
The paper says a valuation "should be considered having regard to the valuer's general experience and knowledge of the market".
Comparable evidence "and analysis thereof" were key criteria to assessing rental value by the profits method of valuation, it said, with valuers looking for evidence of fair maintainable trade; fair maintainable operating profit, and the split of the divisible balance between landlord and tenant.
RICS stresses that the paper constitutes guidance, and members of the institution "are not required to follow the advice and recommendations contained in the paper".
However if surveyors are sued for professional negligence and are have found not to adhered to the guidance, courts were likely to take account of this, it added.
"In the opinion of RICS, members conforming to the practices recommended in this guidance note should have at least a partial defence to an allegation of negligence by virtue of having followed those practices.
"However, members have the responsibility of deciding when it is inappropriate to follow the guidance. If it is followed in an inappropriate case, the member will not be exonerated merely because the recommendations were found in an RICS guidance note.
"On the other hand, it does not follow that members will be adjudged negligent if they have not followed the practices recommended in this guidance note," it said.
RICS said it was for each individual chartered surveyor "to decide on the appropriate procedure to follow in any professional task".
- To read the full Guidance Notes, click on the document on the right.
