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 1st April 2023.
The basis of valuation for new entries in the Valuation List, and Rating Revision cases after 1st April 2023, is Schedule 12 (2)(1) of the Rates (NI) Order 1977.
This Practice Note refers to property classified as:
Class: Non-Sporting Rec Facility
Sub Class: Leisure Ground
Type: Forest Park, Park, Playground/ Area, Garden, Miscellaneous Leisure Grounds, Touring in the Trees
Public parks which are available for free and unrestricted use by members of the public are not rateable under Article 11 of the Rates (Amendment)(NI) Order 1996 (See Section entitled Legislative Background).
Hereditaments that are rateable under this Class are:
1. Department of Agriculture, Environment and Rural Affairs forest parks, parks, playgrounds and gardens where an admission charge is levied.
2. Parks, playgrounds and gardens, not provided by the Department of the Environment or District Councils, where an admission charge is levied.
3. Other miscellaneous hereditaments which fall under the category of leisure ground e.g. agricultural show grounds, paintball, quad biking, hover crafting, off-road driving facilities etc.
Schedule 12 Part 1 Paragraph 1 of the Rates (NI) Order 1977 applies.
“Subject to the provisions of this Schedule, for the purposes of this Order the Net Annual Value of a hereditament shall be the rent for which, one year with another, the hereditament might, 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”.
11A of the Rates (Northern Ireland) Order 1977, as amended by Article 11 of the Rates (Amendment) (NI) Order 1996, states that the following properties are not to be treated as hereditaments:
“….any park, recreation or pleasure ground, open space or public walk-
(a) which has been provided by a District Council or 2 or more District Councils acting jointly or by the Department of the Environment under Article 6 of the Nature Conservation and Amenity Lands (NI) Order 1985; and
(b) is available for free and unrestricted use by members of the public”.
The definition of agricultural land in Schedule 1(a) of the 1977 Order includes any land “….used for a plantation or a wood or for the growth of saleable underwood….”
Where a forest is used for the commercial production of timber, the forest and any ancillary buildings would be considered as agricultural and should not be valued.
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 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.
Working Expenses are deducted 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 50/50 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.
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.
One of the stated Objectives of Forest Service is “to maximise operational use and financial returns on the assets of the Forest Service estate through…the exploitation of commercial opportunities”. While the main aim is to promote access to and use of Northern Ireland forests, there is undoubtedly an element of profit motive in the occupation of the Forest Parks.
It is recommended that the Forest Parks be valued on the basis of a percentage of gross receipts. In line with the approach in England and Wales it is proposed to adopt what is commonly known as the ‘shorthand profits method’. A percentage figure is to be applied to the gross income to arrive at Net Annual Value. Any rental income from third party lettings should be excluded from the gross income if those properties are valued as separate hereditaments.
Some Forest Parks have caravan pitches and campsites. The income from these will be included in the Receipts & Expenditure valuation. Other income streams such as horse riding and wedding photograph venues would also be included in the Receipts & Expenditure valuation.
Parks, Playgrounds & Gardens
The majority of these types of property are provided by District Councils and the Department of Agriculture, Environment and Rural Affairs free of charge and are not rateable. Where a charge is levied it will be necessary to seek accounts. Ideally a full receipts and expenditure valuation should be carried out although in practice it may be sufficient to value by the ‘shorthand profits method’.
Miscellaneous Leisure Grounds
These properties can generally be valued on a comparative basis having regard to other similar hereditaments in the locality. This includes agricultural show grounds, paintball, quad biking, hover crafting, off-road driving facilities etc.
Touring in the Trees
Touring in the Trees is an exclusive network of small touring sites placed so that they can be used as bases from which to explore the forests and surrounding countryside. The forest sites are generally convenient to the main tourist routes but are reserved exclusively for permit holders. Facilities are minimal. Access to all 9 sites is granted once a permit is purchased, but normally you must not stay longer than three nights at a time on any one site. Accommodation is designed primarily for caravans although there is normally room for an awning.
A shorthand Receipts and Expenditure (R&E) valuation will be carried out to calculate a price per pitch. The nine sites are;
Ballypatrick Forest, Glenariff Forest Park, Castlewellan Forest Park, Rostrevor Forest, Florence Court Forest Park, Kesh Forest, Springwell Forest, Parkanaur Forest Park, Drum Manor Forest Park.
Five of the Touring in the Trees sites are located within Forest Parks. It will be important to avoid double counting when valuing the Forest Parks. These five are Glenariff, Castlewellan, Drum Manor, Ballypatrick and Florencecourt.
See Touring in the Trees booklet:
Rent and lease questionnaire
The Practice Note author contacted DAERA to request structured receipt and expenditure accounts for all Forest Parks where an admission fee is charged.
For advice on any aspect of this Practice Note contact LPS on 0300 200 7801