AT the end of December 2010, the Royal Institution of Chartered Surveyors (RICS) finally published its updated guidance notes on: The Capital and Rental Valuation of Public Houses, Bars, Restaurants and Nightclubs in England and Wales.
Its aim is to create an improved and more transparent valuation framework, particularly for the purposes of rent assessments of pubs.
But what does this mean for the licensed and leisure trade...
Well, the new guidance gives updated advice to surveyors, reflecting the adjustments in the market and changes in the ownership structures of licensed property.
One of the key points it raises is that in determining or advising on rental values, a valuer must make consideration of relevant market evidence, as it is the market that ultimately determines the price or rent. Another is that the valuer needs to have experience in the sector.
This strengthens a call our firm has long since made to the North East market, to make sure that individuals and businesses seek the right expert advice.
Indeed, in the RICS Valuation Standards (the ‘rule book’ for valuers), it states that a valuer must confirm that they have ‘...sufficient knowledge, skills and understanding to undertake the valuation competently’. This means that when seeking advice, clients should always engage with surveyors with specific experience in that particular market sector.
It is important to note that the licensed property market is widely fragmented, so experience in one sub-sector will not necessarily be applicable to another.
Pubs, bars, restaurants and nightclubs are amongst those types of property generally referred to as trade-related property and they are normally bought, sold or let having regard to their trading potential.
Determining the trading potential of a property which is how licensed property generally derives both its capital and rental value, is a specialist skill.
It involves, amongst other items, a proper understanding and comparison of the physical characteristics of the property. The valuer must be able to analyse the actual trade of the incumbent occupier, conduct analysis of trading results of similar or comparable businesses, give assessment of the effect of the terms of trade (wholesale supply ties and so on) and make an assessment of the fair maintainable turnover, profitability and demand for the property – all of which are elements that affect value.
In difficult economic and trading conditions, it has never been more important to seek good professional advice to accurately assess the value of what is perhaps the biggest asset most businesses hold.
This will ensure that if you are buying or taking a lease you are not paying too much, if selling or letting a property you are receiving a suitable price or if undertaking a rent review then a fair settlement is achieved.
The skills of a specialist licensed property valuer are fundamental in achieving the best advice and getting real value. We at Sanderson Weatherall would be delighted to speak to you regarding your needs.
:: David Downing, Partner, Valuation and Licensed & Leisure Departments, Sanderson Weatherall LLP. Tel: 0191 269 0151