Case Study question: 1. Describe your property.
Traditional brick construction. Multipitched roof with clay roof tiles. Metal cladding and UPVC windows.
Case Study question: 2.Did the client being a Guernsey company represent more of a risk?
I searched on my firms AML system to confirm if the entity was known, which it was given my building surveying colleagues had provided some advice a short while before. If this wasn’t the case, I would’ve requested full information and org chart. Third party runs information against companies house and shows ultimate beneficial owners. AML team then reviews and approves.
Case Study question: 3. Is this a Purpose Built Student Property?
This property, which opened in 1961, was previously used as student accommodation for 120 students and had a large chapel on the first floor of the main block. However, this property doesn’t typically fall under the typical modern PBSA scheme, the first of which were constructed in the 1990’s.
Case Study question: 4.What is Fair Value?
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. Unlikely to differ from the Market Value as based on the same concept.
Case Study question: 5.How has the Red Book changed?
1) VPS5 - New content relating to valuation models. 4 key short sections stating valuers must ensure model is suitable for the valuation purpose using professional judgement. Can use AI in accordance with mandatory standards and should consult IVS 105 for further information.
2) Mandatory ESG reporting – Built into TOE, inspection, investigation, recording and reporting. valuers must request and record relevant and appropriate ESG and sustainability data and consider factors which might impact valuation. ‘Significant ESG factors used and considered’ in TOE. Report to include description of ESG in property, does it meet typical requirements in market and impact on value
3) Reinforcement of need for robust and comprehensive audit trail
4) Revised ordering of VPS’s to align with IVS
Case Study question: 6.What is the CRM system of the firm?
Client IQ is my firm’s internal Customer Relationship Management system, essential in tracking transactions, fees and information.
Case Study question: 7.How did you carry out a conflict of interest?
I searched my firm’s internal system to ensure there were no client or property conflicts. I also contacted my firm’s local office to confirm there had not been any commercial relationship.
Once I had confirmed there was no conflict, I issued the Terms of Engagement.
Case Study question: 8.What did you include on your TOE?
1) Identification and status of the responsible valuer
2) Identification of the client(s)
3) Identification of any other intended users
4) The asset(s) or liability(ies) being valued
5) Currency
6) Purpose of the valuation
7) Basis(es) of value adopted
8) Valuation date
9) Nature and extent of the valuer’s work, including investigations and any limitations
10) Nature and source(s) of information upon which the valuer will rely
11) All assumptions and special assumptions to be made
12) Format of the report
13) Restrictions on use, distribution and publication of the report
14) Confirmation that the valuation will be undertaken in accordance with IVS and/or RICS Red Book Global Standards
15) Basis on which the fee will be calculated
16) Where the firm is registered with RICS, reference to the firm’s complaints handling procedure, with a copy available on request
17) A statement that compliance with these standards may be subject to monitoring under RICS’ conduct and disciplinary regulations
18) Any limitations on liability agreed
19) Consideration of any significant environmental, social and governance (ESG) factors
Case Study question: 9.What did your due diligence consist of?
- Asbestos register
- Contamination
- Equality Act 2010 compliance
- Environmental matters (high voltage power lines, electricity sub-stations, telecoms masts etc)
- EPC rating if available
- Flooding (check the Environment Agency website)
- Fire safety compliance
- Health and safety compliance
- Highways (check if roads are adopted by local highways agency)
- Legal title and tenure (check the boundaries, ownership, any deeds of covenant, easements, rights of way, restrictive covenants, way-leaves etc.)
- Planning history and compliance (check any onerous planning conditions, whether the property is in a conservation area/listed and subject to a 106 agreement or CIL)
Case Study question: 10.What did your desktop risk assessment consist of?
Review site location, use, previous inspection notes, contamination, asbestos, access, weather conditions, equipment, lone working, health and safety policies and contingency plans.
Case Study question: 11. What was you looking out for on your inspection?
Given the inspection was for valuation purposes, I was looking for things that could affect value, such as location, form of construction, defects and condition.
I had regard to VPGA 8 - Valuation of real property interests.
Inspection included considering characteristics of the surrounding area, characteristics of the property (e.g. age, construction, state of repair, condition) and characteristics of the site (e.g. potential for redevelopment, hazards, contamination).
3.7. – ESG Considerations
Environmental:
- Type of energy
- PV panels
- Building certification
- Physical climate risk factors
- Materials used
Social:
- Location
- Mobility
- Building access (Approved Document M and DDA compliant)
- Community impact
Governance:
- Safety
- DEI (Approved Document M and DDA compliant)
- Planning
ESG inspection may require expertise of specialists
Case Study question: 12. What basis of measurement did you use?
Dual Reporting of IPMS 3C and Effective Floor Area.
Case Study question: 13. What is IPMS 3C and how does it differ to Effective Floor Area?
Area of exclusive occupation excluding floor area occupied by internal walls and columns, measured to IDF. Differs to EFA, which excludes interface adjustment, areas with less than 1.5m, toilets, balconies and roof terraces.
Case Study question: 14. How did you determine the build date?
I confirmed the built date with the client and verified this information using the planning history.
Case Study question: 15. What did you have consideration to on the inspection?
I was mindful of asbestos given the age of the property. I confirmed whether they had an asbestos register, management plan and survey in place. After reviewing with client, they had no asbestos.
Case Study question: 16. What is an Assured Shorthold Tenancy?
A common type of private tenancy agreement, which includes property, party details, rent, tenancy length and rights and responsibilities of both parties.
PBSA is exempt from the Renters Rights Bill.
Case Study question: 17. Are you sure the Property is held on a freehold interest?
The Property is held by way of a virtual freehold, which is a very long leasehold and on a peppercorn rent. For the ease of this case study, I stated that the Property was freehold as the leasehold structure didn’t have a material impact on the value.
Case Study question: 18. When would you use comparable methods of valuation to value?
If there was an identical property nearby. Situation where a developer has built 2 separate schemes that have the same characteristics. Unlikely and therefore would use market approach.
Case Study question: 19. What is Category B evidence?
General market data – E.g. indices, supply and demand data or historic evidence.
Case Study question: 20. What is the Hierarchy of Evidence?
Framework used to rank evidence.
Case Study question: 21. Is HESA and UCAS data reliable?
HESA data is collected through universities providing annual data. HESA work closely with the Department for Business. Leading data source for the industry/market.
UCAS data is through university applications. Voluntarily signed up for Code of Practice for Statistics to ensure statistics are high quality and of public value.
Case Study question: 22. What do you mean potentially may require it?
Roughly 90,000 students in Manchester. 30,000 living at home/own property. 30,000 PBSA beds. 30,000 students who may require it – not a true demand pool as some will want to live in HMO’s but impossible to track but gives indication.
Case Study question: 23. When was the moratorium stopped?
May 2023.
Case Study question: 24. What impact could the 9,000 consented bedspaces have?
It would result in an increase in the supply in the market, which could result in occupancy challenges and slowing down of rental growth. This would be incorporated in my yield, which is growth implicit.
