ASSUMPTIONS AND DEFINITION OF VALUATION

Insurance Documents

DEFINITIONS OF VALUE

Market Value

VPS4 Paragraph 1.2 of RICS Valuation – Professional Standards (January 2014) adopts the definition of Market Value as defined in IVS Framework Paragraph 29 as:-

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

Unless otherwise stated in this report, no 'special assumptions' have been made in arriving at the MV and we deem the following items to fall within the definition of land and buildings included in the valuation:

Landlords fixtures and fittings, air handling, air extraction systems (except where connected with conduction machinery), air conditioning and other essential services, landlord's fixtures and fittings, mains electrical installations, lighting, permanent heating installations, water and gas mains and fittings, drainage pipes and fittings, sprinkler installation, craneage, permanent partitions, fences, yards and hardstanding.

Market Rent

VPS4 Paragraph 1.3 of RICS Valuation – Professional Standards (January 2014) adopts the definition of Market Value as defined in IVS 230 Real Property Interest Paragraph C9 as:-

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.

Market Rent will vary significantly according to the terms of the assumed lease contract. The appropriate lease terms should reflect current practice in the market in which the property is situated in matters such as the duration of the lease, frequency of rent reviews and responsibilities of the parties for maintenance and outgoings will impact on Market Rent. The definition of the basic lease terms assumed will be included with calculation of Market Rent.

Investment Value (Worth)

Investments based on Investment Value (Worth) shall adopt the definition included in IVS Framework Paragraph 36, being:-

The value of an asset to the owner or prospective owner for individual investment or operational objectives.

Fair Value

There are two recognised definitions of Fair Value being:-

  1. The definition adopted by the International Accounting Standards Board (IASB) in IFRS 13, being:- 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 and
  2. The definition adopted by the IVSC in IVS Framework Paragraph 38, being:- The estimated price for the transfer of an asset or liability between identified, knowledgeable and willing parties that reflects the respective interest of those parties.

The two definitions of Fair Value differ when adopting Fair Value the Valuer will establish the correct definition for the purpose and this will be set out in full within the body of the report and, where practical, confirmed prior to the release of the report in the Terms of Engagement.

Valuations for Inclusion in Financial Statements

Valuations undertaken for inclusion in Financial Statement to be provided in accordance with UKVS1 – Valuation of Real Property, plant and equipment for Financial Statements under UK GAAP (April 2015) to RICS Standards UK provides that:-

Valuations for inclusion in financial statements prepared in accordance with UK Generally Accepted Accounting Principles (UK GAPP) which is effective from 1 January 2015 should be measured on the basis of historical cost (the Cost Model) or fair value (the Revaluation Model) as defined in FRS102 as:-

The amount for which an asset could be exchanged, a liability settled or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction.

Existing Use Value

Valuations of operational property, plant and equipment for Local Authorities and assets for financial statements for central government as set out in the Cod of Practice on Local Authority Accounting and the Government Financial Reporting Manuel indicates that valuations should be on the basis of Existing Use Value within the definition as set out below.

The estimated amount for which a property should exchange on the valuation date between a willing buyer and willing seller in an arm’s length transaction after proper marketing and where the parties acted knowledgably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business and disregarding any potential alternative uses or any other characteristics of the asset that would cause its Market Value to differ from that needed to replace the remaining service potential at least cost

Valuations of Residential Property

Valuations of residential property for mortgage purposes will be undertaken in accordance with the RICS Residential Mortgage Specification (UK Appendix 10 of RICS Valuation – Professional Standards UK revised April 2015). The Valuer will inspect the property to be valued either on the basis of visual inspection to cover as much of the exterior and interior of the property as is readily accessible without undue difficulty or risk to personal safety while standing at ground level within the boundaries of the site and adjacent public/communal areas and when standing at the various floor levels. The basis of value adopted will be Market Value as defined above. The following additional assumptions and special assumptions may be made without verification:-

  1. The property will be transferred with vacant possession
  2. All required valid planning permissions and statutory approval for the buildings and their use, including any extensions or alterations have been obtained and complied with. The Valuer will not make enquiries into town planning or other matters which are left to the lender’s/borrower’s legal advisors.
  3. In the case of a building that has not yet been constructed the Valuer will, unless otherwise instructed, provide a valuation in respect of the assumption that the development has been satisfactorily completed as at the date of inspection, in accordance with planning permission and other statutory requirements.
  4. No deleterious or hazardous materials have been used in the construction.
  5. The site is not contaminated and is free from other environmental hazards.
  6. The property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings and good title can be shown.
  7. The property and its value are unaffected by any matters that would be revealed in a local search, replies to usual pre-contract enquiries or any statutory notice that may indicate the property and its condition, use or intended use are, or will be, unlawful.
  8. An inspection of those parts of the property which have not been inspected, or a survey inspection, would not reveal material defects or cause the Valuer to alter the valuation materially.
  9. There is unrestricted access to the property and the property is connected and has the right to use, the reported mains services on normal terms.
  10. Sewers, mains services and the roads giving access to the property have been adopted and any lease provides rights of access and egress over all communal estate roadways, pathways, corridors, stairways and use of communal grounds, parking areas and other facilities.
  11. In the case of a newly constructed property it has been built under recognised Builder’s Warranty or insurance scheme approved by the lender or has been supervised by a professional consultant capable of fully completing the CML Professional Consultant’s Certificate acceptable to the lender.
  12. There are no ongoing insurance claims or neighbour disputes.

Valuations Without Internal Inspection

Where an opinion of value is provided following a request for a valuation without internal inspection (desktop or driveby valuation/external appraisal). The party commissioning such a valuation should be aware that when an opinion of value is provided on this basis this should not be disclosed to any third party (including the borrower) unless required to do so by the FCA Rules in Mortgages and Home Finance – Conduct of Business Source Book (MCOB). Such opinions of value should be used only as a preliminary assessment prior to a more detailed investigation at a later date. Because the valuation is provided on restricted information this is provided solely for the internal use of the recipient. It is not to be used in any proceedings without the Valuer’s consent as the opinion may change if the Valuer is later required to give evidence in formal proceedings having received additional information.

Reinstatement Cost Assessment

For the avoidance of doubt a replacement cost figure for assets other than personal property that is provided within the report, for the purposes of insurance is not a written opinion of value for the purposes of undertaking valuation services as defined in VPS1 Paragraph 1.2, mandatory application, of the RICS Valuation – Professional Standards UK (January 2014 – updated April 2015). The Reinstatement Cost Assessment is accordingly provided solely for guidance purposes and is given without liability. The recipient should be aware that if a formal Reinstatement Cost Assessment or building cost estimate is required this should be sought from either a Quantity Surveyor or Architect.

The reinstatement cost figure does not reflect any form of valuation (for market or other purposes) and where the property is a flat or maisonette the assessment would be based on an estimate of the reinstatement cost of that part of the total structure consisting of the proposed property to be valued. It is the recipient’s responsibility to enquire whether management committee or landlord arranges insurance for the building as a whole and whether that cover is adequate.

In providing a Reinstatement Cost Assessment we will consider Architect’s and Quantity Surveyor’s fees, an allowance for debris clearance but not VAT. The estimate will be based on current costs as at the date of the report and will not make any allowance for future inflation. The recommendation of the provision for building costs is annually is made in updating the Reinstatement Cost Assessment throughout the period of ownership.

Assumptions and Clarifications

Unless subject to express agreement to the contrary, the terms on which the Valuer will undertake the Valuation are, in accordance with VPS1 (minimum terms of engagement) set out below:-

  1. The report was undertaken by a Valuer who is an RICS Registered Valuer and who possesses sufficient knowledge, skills and understanding to undertake the instruction competently and who has experience of valuing these types of property in this locality.
  2. The Valuer will be acting as an external Valuer as defined by the Royal Institution of Chartered Surveyors.
  3. The Valuation will be prepared in accordance with the RICS Valuation – Professional Standards UK (January 2014 – updated April 2015) including the International Valuation Standards. Compliance with these standards may be subject to monitoring under the Institutions Conduct and Disciplinary Regulations.
  4. Any special assumptions made by the Valuer or any departures from the Valuation Standards have been made clear by the Valuer and stated within the report and previously agreed as part of the Terms of Engagement.
  5. The floor areas were taken and expressed in metric measurement and the imperial equivalent floor areas will be given as converted figures.
  6. Subject to Points 6 and 7 below, the Valuer has undertaken such inspections and investigations as are, in the Valuer’s reasonable professional judgement, appropriate and possible in the particular circumstances.
  7. The Valuer has relied upon information supplied by the Client and/or Client’s legal representative or other professional advisers relating to tenure, tenancies, rights of way, restrictive covenants and other relevant matters. The Valuer did not inspect the title deeds and has assumed that the property and its value are unaffected by any matters that were revealed by a local search and replies to the usual enquiries or by any statutory notice.
  8. The Valuer has had regard to the apparent state of repair and condition of the property but did not carry out a building or condition survey and the Valuer did not inspect those parts of the property which are covered, unexposed or inaccessible. Such parts were assumed to be in good repair and condition. The Valuer was not under a duty to arrange for the testing of electrical, heating, plant or other services. Where requested an indication of reinstatement cost for insurance purposes has been provided. The assessment was undertaken on reinstatement basis and is for guidance purposes only. The assessment includes architects and quantity surveyors fees, an allowance for debris clearance but be exclusive of VAT and ignoring inflation. An indication of costs for insurance purposes falls outside of the RICS Valuation Standards and does not represent a valuation for market or any other purposes.
  9. In reporting Value, the Valuer will meet the relevant requirements of the RICS Valuation – Professional Standards (January 2014 updated April 2015) and will make the following assumptions which he/she will be under no duty to verify.
    1. That no high alumina cement concrete or calcium chloride additive composite panels or any other potential deleterious or hazardous materials or techniques have been used in the construction of the property or have since been incorporated.
    2. That unless otherwise advised or an inspection reveals matters to the contrary, an assumption is made that no contamination or potentially contaminative use is, or has been, carried out at the property. Unless specifically instructed we will not take any investigation into the past or present uses of either the property or any adjoining or nearby land to establish whether there is the potential for contamination from these uses and an assumption will be made that none exists.
      However, should it be established subsequently that contamination exists at the property or on any neighbouring land or that the premises have been or are being put to any contaminative use this might reduce the values reported.
    3. That vacant possession is provided (unless valued as an investment and subject to an occupational lease).
    4. That good title can be shown to the property and it is not subject to any unusual or especially restrictive onerous restrictions, encumbrances or outgoings.
    5. That inspection of those parts which have not been inspected would not reveal material defects or cause the valuer to alter the Valuation materially.
    6. That sewers, main services and roads giving access to the property have been adopted and that any lease provides rights of access and egress over all communal estate roadways, paths, corridors, stairways, communal grounds, parking areas and other facilities.
    7. In the case of a new property where construction which has not been completed, that construction will be satisfactorily completed.
    8. That in the case of newly constructed residential property it has been built under the NHBC Buildmark Scheme, Zurich Municipal New Build and Rebuild Scheme, Housing Association Property Mutual Scheme, Premier Guarantee or for private and completed housing or equivalent, under the supervision of a professional consultant and that an appropriate certificate of satisfactory completion has been issued.
    9. We will not make any written enquiries of the Planning Authority and therefore will make the assumption that there are no known contraventions of planning law and that all buildings and structures which require planning consent and Building Regulation approval have the appropriate statutory consents.
    10. We will not make any enquiries of the Health and Safety Executive and will not make any statement that the property conforms to the necessary and legal requirements of this authority and or to the requirements of any legal enactment and we will assume that there are no contraventions that may affect the valuations.
    11. We will not make any enquiries to obtain a mining report and will assume, unless there is compelling visual evidence, that there is no potential subsidence which would affect the property.
    12. We have not carried out a detailed site inspection to ascertain the presence, or otherwise, of Japanese Knotweed. This is an invasive and insidious plant which can be expensive to clear from a site and its presence can cause damage to a building’s fabric. Under the UK Wildlife and Countryside Act it is illegal to cause Japanese Knotweed to grow in the wild. Should further investigations reveal the presence of Japanese Knotweed on or adjacent to the site then a full report identifying the extent and cost of appropriate works should be undertaken and referred back to the Valuer for comment.

LIMITATIONS AND ASSUMPTIONS

This report is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or part of its contents. This report has been prepared on the basis that full disclosure of all information and facts which may affect the valuation have been made to ourselves by the parties concerned and we cannot accept any liability or responsibility in any event unless such full disclosure has been made.

Neither the whole nor any part of this valuation or any reference thereto may be included in any published document, circular, or statement, or published in any way without the valuer’s written consent of the form and context in which it may appear.

We have not carried out a structural survey nor have we inspected woodwork or other parts of the property which are covered, unexposed or inaccessible and, therefore, are unable to give any guarantees whatsoever as to the soundness of these areas and for the purposes of this report all such parts are assumed to be in good repair and condition.

We have not undertaken any investigations to determine whether or not high alumina cement, asbestos, concrete, sulphates or calcium chloride additive or any other potentially deleterious material has been used in the construction of this property or has since been incorporated and we are therefore unable to report that the property is free from risk in this respect. For the purpose of this valuation we have assumed that the building does not comprise any deleterious materials.

Certain of the information upon which the valuation has been made is obtained from the client, some from the Local Authority, some of it is in the form of plans and letters and some orally. We do not doubt the accuracy or validity of any of this information, but if we subsequently are advised that any of it is incorrect then the valuation is set aside. If the valuation is set aside, we reserve the right to prepare a revised valuation taking into account the correct information.

The valuation does not take into account any matters concerning the consideration of or the incidence of taxation whether in the nature of stamp duty, capital gains tax, income tax, corporation tax, development land tax, or any other tax or levy (whether national or local) that may arise or be taken into account on any transaction. Nor does the valuation have regard to any incidental costs of sale that may arise on a disposal. The property has been valued free from borrowings.

We will not tested the electrical, gas, oil or other energy installations to include all wiring, cables, piping and conduit, switches, plugs, fuses and taps and water and drainage systems and plumbing, heating and ventilation as this is outside of our instruction and consequently no opinion or any assurance or guarantee as to their existing conditions or suitability is made.

We will not inspected the Title Deeds or proposed lease in respect of the property, and will rely upon on the verbal information provided to us, Land Registry extracts obtained, in online search, in respect of tenure and boundaries only, unless otherwise stated within the report. It will further be assumed that:-

  1. that the property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings;
  2. that good title can be shown;
  3. that the property and its value are unaffected by any matters which would be revealed by a local search and replies to the usual enquiries, or by any statutory notice.
  4. We shall not make any enquiries whether written or oral of the Planning Authority to ascertain the presence of and compliance with planning regulation and building regulation approval and shall therefore assume that there are no known contraventions of planning law and that all buildings and structures and the use thereof which require planning permission have a valid consent.
  5. We shall not made any enquiries of the Health and Safety Executive and shall therefore value subject to assumption that the property and buildings conform to all the necessary and legal requirements of this Authority or to the requirements of any other legal enactment and we have assumed there are no contraventions which may affect the valuation.
  6. We shall not commission any coal mining report or undertaken any geological surveys and shall assume that there are no adverse ground conditions affecting the property.
  7. We will not undertake an access audit of the property which may be required under the provisions of the Disability Discrimination Act 1995. We will not undertake a Fire Risk Assessment of the property that may be required under the provisions of the Regulatory Reform Act (Fire Safety) 2005. We are accordingly unable to state whether these legislative powers are applicable, the extent to which they can be applied and the associated implications. We have therefore assumed there are no contraventions that might affect the valuation.

We will not carry out a detailed site inspection for the presence of Japanese Knotweed. This is an invasive and insidious plant that can be expensive to clear from the site and its presence can cause damage to building fabric. Due to its vigorous nature and damage it causes it is listed by UK Wildlife and Countryside Act as illegal to cause it to grow in the wild. Should further investigations reveal the presence of Japanese Knotweed on or adjacent to the site then a full report identifying the extent and cost of appropriate remedial work should be undertaken and referred to the valuer to determine the impact upon the valuation.

Unless otherwise stated within the report, we are not aware of the content of any environmental audit or other environmental investigation or soil survey which may draw attention to any contamination or the possibility of any such contamination. The valuation has been undertaken on the basis that, unless stated within the main body of the report, we have assumed that there is no contamination at the site affecting the property. We have not carried out any investigation into past or present uses either of the property or of any neighbouring land to establish whether there is any potential for contamination from these uses or sites to the subject property and have therefore assumed that none exists.

Should it, however, be established subsequently that contamination exists at the property or any neighbouring land or that the premises have been or are being put to a contaminative use this might reduce the values reported.

Commercial and Industrial Sales, Acquisitions or Valuations

Looking to buy, sell, rent or lease office or industrial space?

With a wide range of expertise, let us help you make the right decision.

Contact us on 01484 530361 or browse our branches to find out which is most convenient for you to get in touch.

Alternatively, e-mail us commercial@bramleys1.co.uk