Different Bases of Value
-Market value [VPS 2 para. 4]
-Market rent [VPS 2 para. 5]
-Investment value (or worth) [VPS 2 para. 6]
-Fair value – IFRS definition [VPS 2 para. 7]
-Fair value – IVS definition [Removed] (see IVS 104 – Equitable Value)
-Existing Use Value [UK VPGA 6]
-EUV (SH) [UK VPGA 7]
The statutory definition of Rateable Value is set out in Schedule 6, paragraph 2(1) of the Local Government Finance Act 1988
Rateable value is the amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year, on the assumptions that the tenancy begins on the valuation date, the hereditament is in a state of reasonable repair (excluding uneconomic repairs), and the tenant pays all usual tenant’s rates, taxes, repairs, insurance and other expenses necessary to maintain the property so as to command that rent.
What is marriage value?
Marriage value is the additional value created by the merger of separate property interests, where the combined value exceeds the aggregate of the individual values, and in enfranchisement cases is shared equally between landlord and tenant when the lease has less than 80 years unexpired.
What is a special assumption?
An assumption that either assumes facts that differ from the actual facts existing at the valuation date, or that would not be made by a typical market participant in a transaction on the valuation date.
What are the four ingredients of rateable occupation?
Actual occupation
Beneficial occupation
Exclusive occupation
Not transient occupation
What is the investment value or worth and when would you apply it?
Investment Value (also called “worth”) is the value of an asset to a particular owner or investor, reflecting their individual objectives and circumstances, rather than the wider market. Under the RICS Red Book it is defined as the value of an asset to the owner or a prospective owner for individual investment or operational objectives, and is therefore an entity‑specific, non‑market basis of value.
You would apply investment value where the purpose of the valuation is to inform a specific investment decision, rather than to estimate what the asset would sell for on the open market. Typical examples include assessing whether a property meets a particular investor’s target return, appraising a purchase or retention decision, or where the investor has specific advantages such as cheaper finance, tax efficiencies, or active management strategies that mean the asset is worth more (or less) to them than to the market generally.
Because it is not Market Value, the Red Book requires that the use of investment value is clearly stated, justified, and explained in the terms of engagement and report, so that users do not confuse it with a market‑based valuation.
What is Fair Value
Fair Value is a financial reporting basis of value, defined in line with IFRS 13 as 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
List the VPGA’s that apply to valuation?
VPGA 1 – Valuations for financial reporting
VPGA 2 – Valuations for secured lending
VPGA 3 – Valuation of businesses and business interests
VPGA 4 – Valuation of individual trade‑related properties
VPGA 5 – Valuation of plant and equipment (including infrastructure)
VPGA 6 – Valuation of intangible assets
VPGA 7 – Valuation of personal property, including arts and antiques
VPGA 8 – Valuation of real property interests
VPGA 9 – Identification and valuation of portfolios, collections and groups of assets
VPGA 10 – Matters that may give rise to material valuation uncertainty
VPGA 11 – Relationship with auditors
List the UK VPGA’s?
UK VPGA 1 – Valuation for financial reporting: general matters
UK VPGA 2 – Valuations for other regulated purposes
UK VPGA 3 – Valuations for assessing adequacy of financial resources
UK VPGA 4 – Valuation of local authority assets for accounting purposes
UK VPGA 5 – Valuation of central government, devolved administration and NHS assets for accounting purposes
UK VPGA 6 – Local authority and central government accounting: existing use value (EUV) basis of value
UK VPGA 7 – Valuation of registered social housing providers’ assets for financial statements
UK VPGA 8 – Valuation of charity assets
UK VPGA 9 – Relationship with auditors
UK VPGA 10 – Valuation for commercial secured lending purposes
UK VPGA 11 – Valuation of UK residential property
UK VPGA 12 – Valuation of residential property for miscellaneous purposes (now merged into UK VPGA 11)
UK VPGA 13 – Residential secured lending guidance for other related purposes including RICS HomeBuyer Service (now merged into UK VPGA 11)
UK VPGA 14 – Valuation of registered social housing for loan security purposes
UK VPGA 15 – Valuations for Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Annual Tax on Enveloped Dwellings and Residential Property Developer Tax
UK VPGA 16 – Valuations for compulsory purchase and statutory compensation
UK VPGA 17 – Local authority disposal of land for less than best consideration
