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Roger Cohen authors article in ‘Estates Gazette’ on the receipts and expenditure basis of valuation

Roger Cohen authors article in ‘Estates Gazette’ on the receipts and expenditure basis of valuation

Jan 31, 2023
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BCLP Senior Counsel Roger Cohen authored an article published Jan. 31 by Estates Gazette (subscription required) concerning how the receipts and expenditure method is an appropriate way to value certain properties. “If rating issues come across your desk, whether as a rating agent, a financial controller or a revenue officer for a local authority, there’s lots to get your head around. In England and Wales, new rateable values come into force one 1 April 2023. These value properties for rating purposes as at 1 April 2021. So there is no better time to introduce to those who have not encountered it before the valuation method known as the receipts and expenditure basis of valuation.”

“Most rateable properties, by number of properties, are valued by the rental method. This depends on the evidence of comparable transactions. Not all rateable properties can be valued by the rental method. Some get leased in the real world, but the rents which emerge are not the product of an area multiplied by a rate per square meter. This is because the area of the property is not a driver of value in the way that is when valuing shops or offices.”

“Of the three primary methods of valuation for rating, the rental method is usually preferred where the property is rented or where there are sufficient comparables to provide reliable evidence. Where comparables are lacking it may be necessary to undertake a valuation using the ‘receipts and expenditure’ (or R&E) method, or the ‘contractor’s basis’ (or CB) method. The R&E method is likely to be preferred where the rental evidence is sparse or non-existent and the rent is likely to be driven by the actual or anticipated profit of the business carried out at the property. The contractor’s basis is preferred for properties which do not generate revenue in a way which enable valuation using the R&E method.”

 

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