The scope of this Practice Note is solely to ensure a consistent valuation approach for this property Class/ Subclass/ Type for Non Domestic Revaluation 2023 and subsequent entry in the new Valuation List which becomes effective on 1 April 2023.
The basis of valuation for new entries in the Valuation List, and Rating Revision cases after 1 April 2023, is Schedule 12 (2)(1) of the Rates (NI) Order 1977.
This Practice Note refers to property classified as:
Class: Caravan site, camp site, holiday chalet
Sub Class: Camp site, Caravan Park, Caravan/ Camp site
Type: Municipal, Private
Caravan and camp sites can be defined as an area of land where people can stay in a static caravan, fleet caravan, touring caravan, tents or pods.
This Practice Note deals with static and touring caravan pitches made available on caravan and camp sites, used for holiday accommodation.It does not deal with caravans used for the purposes outlined below or where chalets and apartments are the primary classification.
Traveller Sites - these sites are not valued under this property classification and should be valued as domestic hereditaments.
Touring in the Trees - touring sites with minimal touring facilities which are operated by DAERA and located in DAERA Forests.These sites will no longer be valued under this property class and should be valued by reference to the LPS Leisure Ground Forest Park Valuation Practice Note.
Chalets and Apartments - Leisure sites which are primarily chalets or apartments should be valued by reference to the LPS Self Catering (Holiday Establishment) Valuation practice Note.
Park Homes - Prefab mobile homes on a site of similar properties occupied on a permanent basis and therefore valued as domestic dwellings.
Schedule 12 Part 1 Paragraph 1 of the Rates (NI) Order 1977 applies.
“Subject to the provisions of this Order, the Net Annual Value of a hereditament shall be the rent for which, one year with another, the hereditament Shall, in its actual state, be reasonably expected to let from year to year, the probable average annual costs of repairs, insurance and other expenses (if any) necessary to maintain the hereditament in its actual state, and all rates, taxes or public charges (if any), being paid by the tenant”.
All caravan parks are required to be licensed by their local District Council under the Caravans Act (NI) 1963, see Appendix 2.
Caravan Act (NI) 2011
The Act regulates caravan sites classing them as “protected sites”. Owners of protected caravan sites are required by law, with effect from 16 September 2011, to provide resident occupiers with a written statement setting out the basis of the agreement between the site owner and the occupier of the caravan. Full details can be obtained on nidirect.
Valuation approach for 2023
The R&E method of valuation is to be retained as the approach for this type of hereditament.
Research by the Practice Note author concluded that there was insufficient rental evidence available to develop a comparative approach.
In the absence of rental evidence, or a suitable unit of comparison to permit such rental evidence to be reliably analysed, the preferred method of valuation may be either the R&E method or the Contractor’s basis.Where the nature of the occupation of the property is primarily concerned with achieving anticipated profit, and the tenant’s rental bid is, therefore, likely to be based upon a consideration of receipts and expenditure, then in the absence of reliable rental evidence, the R&E method may be the most appropriate method of valuation to adopt.
Source: The Receipts and Expenditure Method of Valuation for Non-Domestic Rating Guidance Note produced in 1997 by the Joint Professional Institutions' Rating Valuation Forum which consists of the RICS, the IRRV, the RSA, the SAA, the VLA and the VOA.
Gross Receipts will be determined by taking into account all income reasonably to be derived from occupation of the property.A period of three years accounts, prior to the AVD should give sufficient information to establish a fair and reasonable indication of the trading position.In the case of new ventures where trading accounts do not exist, refer to the accounts of similar ventures, or to the business plan prepared for the new occupier.
In general, receipts should include all income derived directly and indirectly from occupation of the property.
The proper Cost of Purchases made in order to produce those receipts should be deducted to determine the Gross Profit.Such costs relate only to those purchases which form part of the venture undertaken.
Deduct the Working Expenses from the Gross Profit to determine the Divisible Balance.Outgoings considered as allowable working expenses are those incurred as a result of the operation.For example, salaries, National Insurance payments, provision of services, insurance, phone bills, advertising, Head Office expenses.However, a mortgage payment, which is an expense of the business, is not an expense for a rating valuation.
The Divisible Balance (or net profit) is the remaining sum available to be shared between the landlord, and the tenant.It comprises two main elements:
a. The Tenant’s Share – to provide a return on any tenant’s capital employed and a reward to the tenant for his venture reflecting the extent of the risk and the need for profit.It must be a proper and sufficient inducement, not merely a fraction of the divisible balance.A 60/40 split of the divisible balance is adopted as a last resort.This is deducted from the Divisible Balance to leave:
b. The Landlord’s Share – i.e. the amount available for the payment of rent and rates.
The above sets out the methodology for assessing a rent using the Receipts and Expenditure. It may also be possible to determine a ‘shorthand’ approach whereby a percentage is applied to the Gross Receipts to determine a rental value. The NAV can be devalued to an overall £/m2 for comparative purposes.
Application of the Practice Note will require an estimate to be made of the Fair Maintainable Trade (FMT) i.e. the likely level of trade [excluding VAT] considered to be maintainable at 1st October 2021, for each property.In assessing the FMT, some adjustments may be required to reflect the nature and type of business carried on at each establishment. (See Appendix 1).
Having arrived at an initial valuation it will be necessary to stand back and take an overview of the assessment to ensure relativity with other comparable premises.
Rent and Lease questionnaire
For this class of property RALQs were issued centrally by LPS and analyzed by the Practice Note author.
For advice on any aspect of this Practice Note contact LPS on 0300 200 7801.
Appendix 1: Fair Maintainable Trade (FMT)
Application of the scheme will require an estimate to be made of the likely level of trade [excluding VAT] considered to be maintainable at 1st October 2021 having regard to the physical nature of the caravan/camp site and its location.It should be assumed that a competent owner/tenant of a caravan/camp site responding to the normal trading practices and competition in the locality would proficiently carry out the business.This is known as the Fair Maintainable Trade (FMT) and should equate to the level of trade the hypothetical tenant would envisage when looking at the premises “vacant and to let”.
The estimate of FMT should, in the first instance, be based on actual receipts.These can usually be regarded as being representative of the trade of the hypothetical tenant.It will, however, be necessary to investigate all aspects of the trade in order to consider what should properly be taken into account in the hypothetical scenario.Where appropriate, adjustments should be made for over or under trading due to the personality and business acumen, or lack of it, of the actual occupier.
Rent and Lease Questionnaires will be used to assemble past trading figures.These should be analysed with care.As with public houses a diverse range of social and economic factors are at play in this sector of the market and past performance cannot necessarily be relied upon to gauge future performance.
It is important to differentiate between inherent and personal goodwill.The former reflects the trading potential that runs with the property by virtue of its design, construction, location etc.Personal goodwill is that which has been created in the business by the present occupier or management and which may not necessarily be maintainable by the hypothetical tenant.In estimating FMT the Valuer should exclude any turnover that is attributable solely or mainly to the personal skill, expertise and reputation of the existing occupier but include any latent potential that might be realised in the hands of an efficient operator.
Where trade is not disclosed, an estimate should be made by comparison with other similar properties in the area.Comparison should be on the basis FMT but care must be taken to ensure a true comparison is made both in terms of the physical characteristics of the properties and their business and trade mixes.
Having established the appropriate levels of FMT for each income stream, the next step in the valuation process is to apply differential percentages to establish NAV.
The choice of actual percentage is a matter of valuation judgement. At any level of trading, profitability will vary with the level of gross profit and the expenses required maintaining the property and the particular type of trade being carried on.
In selecting percentages, regard should be had to all positive and negative features of the premises and their trade and the significance of such features in relation to the level and sustainability of the FMT adopted. In essence, where factors exist which indicate higher levels of profitability then higher percentages should be applied and vice versa
Appendix 2: Accommodation rating
Caravan Parks can operate without accreditation from Tourism NI, however they do require a licence from the council.
This is a voluntary scheme. The Operator makes an application to the British Graded Holiday Parks Scheme.
Each park is awarded a star grade and is also given a description which describes to visitors what type of park to expect e.g. 'Holiday Park' for parks whose main business is letting holiday caravans.
The British Graded Holiday Parks Scheme is implemented in Northern Ireland by the Northern Ireland Caravan Liaison Committee.