The Valuation Office use a number of valuation schemes to arrive at values for bulk class properties such as shops, offices, warehouses and factories and these typically account for around 80% of businesses or commercial properties within a Local Authority. In the past there have been a multitude of valuation schemes deployed to address this but as resources dwindle and in an attempt to make things easier to manage, the VOA now have a more generic set of schemes in place that define values across these property classes.
A broad approach to valuation scheme assembly
The knock-on effect of this more generic approach and what we are finding at Wilks Head & Eve is that a number of different properties are being lumped into the same valuation scheme and not necessarily the right one. For example a warehouse in a certain area in a scheme may be listed as anything from £50 per sqm upto £140 per sqm, and there is nothing in the scheme that outlines what price it attaches to what type of building or why a logistics warehouse may be listed at £100 sqm as opposed to £50, £60, £70 or even £140 per sqm.
The valuation schemes have become so broad that they are not very transparent for the ratepayer and as a result are unhelpful. The VOA under Challenge when providing the evidence on which a scheme is based in often appears not to follow the evidence, so how the scheme has been assembled remains a mystery.
So what does this mean for Billing Authorities?
Life gets that little bit more complicated trying to unravel the intricacies and variables applied to each valuation scheme. With there being a lack of transparency as to the methodologies used behind the schemes it makes it impossible for Billing Authorities to identity if the scheme has been applied appropriately. Basically unless you’re a ratepayer you can’t get access to the finer detail of how the VOA have arrived at their calculations. This can potentially lead to loss of income and back-dated refunds if Billing Authorities can’t keep on top of this or factor it into their calculations and annual budgeting.
Managing the risk associated with valuation scheme adjustments
At Wilks Head & Eve we find that most of our forecasting work is based around identifying properties at risk of appeal. We look at the valuation applied by the VOA based on the rate per sqm and look at evidence of rental values for that type of property, if that rate does not match we red flag it to identify something is wrong with the rate assigned by the VOA and the scheme applied.
Due to practices like this the VOA apply and publish bi-monthly refreshes of rating list entries incorporating new, old, altered and deleted hereditaments as well as information on valuation scheme adjustments where they have found evidence of factors that should be included in a scheme. This can typically then impact every property contained within a scheme and you may find that all valuations within a scheme are reduced by 5% with Councils being initially unaware that this has happened. It is very difficult for Councils to keep on top of this particularly if you don’t know what properties are assigned to what valuation scheme in the first instance, which is often the case.
The scheme valuation methodology is effectively a blunt instrument, it takes a generic approach and carries significant risk of properties being applied to the wrong scheme and so being valued incorrectly. This obviously increases the risk of appeal and means that our clients need to make a provision for these possible losses. Our line by line approach enables us to identify these risks for our clients and ensures that our clients have all the information to produce the most accurate forecast for losses on appeal.
If you want to find out more about how Wilks Head & Eve can help you factor in valuation scheme adjustments into your appeals forecasting, contact email@example.com or call 0207 907 7897 to discuss further.