Museums and art galleries
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This section applies to all museums and non-commercial art galleries. The approach to museums and non-commercial art galleries will be the same as when considered vacant and to let they are both spaces used for exhibiting artefacts.
1.2 Museums and non-commercial art galleries are part of a wide-ranging mode or category of occupation as determined in Stephen G Hughes (VO) v Exeter City Council [2019] RA 73, which followed Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 200 (LC). The mode or category for museums, historic properties and leisure attractions was considered at paras 45-48. The decision referred to Williams [2001] endorsing the use of general categories for the purposes of the reality principle, with a reminder that differences in categories of business may influence the valuation method used but valuation method does not determine the mode or category.
1.3 The Tribunal concluded at Para 204 that the VO’s approach:
“….focuses too narrowly upon what he acknowledges to be a broad spectrum of heritage assets”. The essential quality of such an asset is its cultural, artistic, historic or scientific value and significance. We do not think it is appropriate to categorise them too narrowly (and, at least in part, by inappropriate criteria) when undertaking a comparative exercise to see how they are valued in the market. We accept that differences between a specific museum such as RAMM and a specific visitor attraction such as Stonehenge may amount to relevant comparative factors, but we do not agree that there is a clear and material distinction between the two that warrants the one being, in effect, rendered ineligible to inform the type of broad analysis that is appropriate.”
1.4 Museums and non-commercial art galleries are a narrower part of this mode or category of occupation, and for the purposes of this section applies to properties where the analysis of the motivation for occupation, and balance of supply and demand, matches the museums in the York and Exeter decisions.
1.5 The core of properties to which this section applies are therefore museums and non-commercial art galleries which are primarily spaces used for exhibiting collections of artefacts. While they frequently occupy historic buildings, they do so as appropriate buildings in which to display their collection; occupation of a historic building may enhance the collection or the visitor experience but does not provide the main motive for occupation.
1.6 This covers a range of property types from purpose-built national and major city centre museums to small local museums run by volunteers in converted buildings.
1.7 Properties which may not be within the scope of this section include:
- Historic Properties occupied for preservation or conservation, including those typically occupied by the National Trust, English Heritage or CADW. These are dealt with in Rating Manual: section 5a - historic properties.
- Commercial art galleries, where the primary motive for occupation is the sale of art. Free public access to these is common, but no more so than in a shop. Many visitors will not intend to purchase, but the prime motivation of the occupation is to make the art available for its eventual sale.
- Archives, where the primary purpose is to store artifacts rather than exhibit them. Some archives allow public access, either to researchers by appointment, to the general public on restricted days, or even more generally. Museums routinely hold substantial collections not on display. The key point in differentiating between archives and museums will be the primary purpose of the use. They are covered in Rating Manual: section 5a – archives.
- Leisure Attractions. These can be defined as “A place that people visit for pleasure and interest, often while they are on holiday” and include tourist attractions, heritage railways, as well as miscellaneous leisure properties. They are covered in Rating Manual: section 5a – leisure attractions.
- Information / Visitor Centres, which provide information relating to a topic or topics with which the centre is associated. This can include geographic, historic, scientific, industrial or architectural topics. They will not primarily involve curatorial functions relating to preservation/conservation of exhibits. They are covered in Rating Manual: section 5a – Information / visitor centres.
1.8 Hybrid Approaches
1.9 Properties may be occupied for multiple purposes including that of a museum. Where this occurs, the primary use should be ascertained by considering the proportions of areas used, the time used for, and the overall motivation for occupation. Where a mix of distinct uses is identified it may be appropriate to apply different methods to different elements of the property.
1.10 Types of museums
1.11 Traditional museums are generally operated for socio-economic and cultural reasons. They can be run or funded by government departments, local authorities, charitable trusts or universities.
1.12 The types of buildings vary markedly and include iconic architect designed purpose-built and Victorian “statement” buildings of their era, the latter category being the most common in major towns and cities. They may also be housed in adapted buildings of historic interest with the museum collection being the main attraction but with some, albeit a minority, of artefacts related to and/or contemporary with the host historic building.
1.13 Many have been extended in their history and include substantial ancillaries for research/and or educational use. They house collections of importance for present and future generations. They meet a wide range of educational needs within the context of life-long learning. They may also use the collection as a basis for study and scholarship, by the museum’s own professional curatorial staff and by visiting scholars and students.
1.14 They divide into four main types:
a) National and Major City Museums
These museums will house collections of national or international significance. They will normally be situated in major regional cities or may be sited in development areas and thereby helping to revitalise the surrounding areas.
National museums are generally free to enter, although special exhibitions are often charged for.
b) Regional City and Large Town Museums
Purpose built or converted museums with significant local and regional collections including ancient and modern history, geology, archaeology, and natural history. Typically operated by local authorities, trust structures created by local authorities, or charities or not-for-profit organisations. Privately-owned museums are unusual at this level.
The occupation of these museums is usually for socio-economic, non-profit, reasons. There is a mix of free entry and admission charges. Gift shops and cafes may also generate some revenue and are typically in the control of the parent organisation, often through a separate trading company.
Revenues are usually used to off-set costs, not to attain a commercial level of profit. As a result many of these institutions merely break-even.
c) Local Museums in Smaller Towns
These museum types are many and varied. They usually have collections relating to local history, or personal collections of local significance, or minority interests. They may be in purpose-built buildings but the majority will occupy converted domestic, civic, commercial, or industrial buildings, housing collections of local significance. Those operated by local authorities or charities are unlikely to be operated commercially, and will either charge admission or be funded to provide free admission. Those that are run by families, individuals, or special interest groups will usually have an admission charge.
Revenues are usually used to off-set costs, not to attain a commercial level of profit. As a result many of these institutions merely break-even.
d) Transport, aviation, and military vehicle museums
These museums are often housed in former industrial units or former hangers, usually located on fairly large and sprawling sites with a range of building types and ages. The bigger sites will have well laid out parking facilities and admission charges are usually levied. These are often capable of producing operating surpluses.
2.1 Museums - Receipts and Expenditure
- List description: museum (or art gallery, or both) and premises
- SCAT code: 196
2.2 Museums – non-Receipts and Expenditure
- List description: museum (or art gallery, or both) and premises
- SCAT code: 195
3.1 This is a specialist class and responsibility for valuation will lie with the specialist teams within the National Valuation Unit (NVU). Queries of a complex nature arising from the valuation of individual properties should be referred to the NVU class facilitator via the class co-ordination team (CCT).
4.1 The CCT has overall responsibility for the co-ordination of this class.
4.2 The CCT is responsible for the accuracy and consistency of valuations of museums and art galleries and will produce practice notes outlining the valuation basis for revaluation and provide advice as necessary during the life of a rating list.
4.3 Caseworkers have a responsibility to:
- follow the advice in this section and in the relevant practice note
- not to depart from any subsequent advice given in relation to appeals or maintenance work during the life of a list without approval from the CCT or NVU technical advisor
- seek advice from the CCT or NVU technical advisor should issues arise which are not covered in this practice note
5.1 With such a wide range of properties within this class it is essential that all valuation methods are fully considered.
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Rental Comparison – The VO should at all times have regard to the principles laid down by the Court of Appeal in the case of Garton v Hunter (VO) 1969 RA 11, and where rental evidence is available, its significance should be weighed. Extremely limited rental information is available as there are a relatively small number of occupiers who compete with other mode or categories of occupation, agreeing the market rate.
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Assessment Comparison – where a tone of agreed or accepted assessments exists to value by comparison, this method can be used. Comparisons must take into account all the characteristics of the property.
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Receipts and Expenditure – following recent litigation this is likely to apply to the majority of museums as outlined within this guidance, including modifying this approach for free-to-enter museums to consider notional receipts.
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Shortened approaches – analysis of agreed assessments or the results of other R&Es to aid in either the stand back and look stage for R&E, or comparing agreed assessments, is a valid approach.
- The Contractors Basis (CB) – following the York and Exeter decisions this will generally longer apply to museums covered by this section.
6.1 Valuation
6.2 Between 2017 and 2022 three cases at the Upper Tribunal (Lands Chamber) altered the valuation approach for museums. These were Stephen G Hughes (VO) v York Museums and Gallery Trust [2017] RA 20 (aka the York Museums case), Stephen G Hughes (VO) v Exeter City Council [2019] RA 73 (aka the Exeter Museum case), and Justin Allen (VO) v Tyne & Wear Archives and Museums [2022] UKUT 206 (LC) (aka the TWAM case).
6.3 These cases related to historic museums and galleries and considered whether a Receipts and Expenditure (R&E) approach or a Contractors Basis (CB) was appropriate. The York and Exeter Museum cases determined, on the facts of those cases, that the Receipts and Expenditure method of valuation should be used.
6.4 The TWAM case further considered the R&E method and determined that no adjustment should be made to the method to account for socio-economic benefits. Valuers must use all aides and tools available and consider a variety of approaches to inform their valuer judgement in arriving at the rateable value (see practice note for advice on practical application based on the facts and evidence).
6.5 Receipts and Expenditure method
6.6 In all 3 main museums cases, the UT(LC) applied an R&E approach to some or all of the properties considered, but where the museum was free to enter it adopted an addition of ‘notional receipts’. These notional receipts are added to the actual receipts in order to model an occupier adopting a paid-entry approach. This ensures that both free to enter and paid entry museums are considered in the same manner. Notional receipts may be calculated by considering the actual admissions to the museum under its free entry approach and applying a notional admission charge. Consideration should be given to whether the actual admission numbers would be altered by admission charges.
6.7 It may be necessary to consider how the adoption of notional receipts should alter other elements of the R&E.
6.8 A R&E valuation should follow the principles described in Rating Manual section 4: Valuation Methods Part 2: The receipts and expenditure method, and the Guidance Note produced by the Joint Professional Institutions’ Rating Valuation Forum “The Receipts and Expenditure Method of Valuation for Non-Domestic Rating” along with consideration of the three UT(LC) decisions. These are discussed in more detail in the appropriate Practice Note in this section.
6.9 Rental Approach
6.10 Rating Manual Section 2 Part 7 Appendix 2 explains the approach to evidence from different mode or categories of occupation following the case of Scottish and Newcastle Retail and Another v Williams (VO) LT [2000] RA119 CA [2001] RA 41
6.11 Museums may occupy a property which is physically similar to another class of property, that could be used for that mode or category of occupation. Examples would include a local museum in a retail unit, or a transport museum in an industrial property. If, following the guidance above, the works required to use those properties in another mode or category (such as shop or factory) is only ‘minor’ then rental evidence from that mode or category may be considered.
6.12 Unit of Assessment
6.13 Recent cases on unit of assessment may have particular relevance to museums. The case of Woolway (VO) v. Mazars [2015] UKSC 53 establishes the general principles of identifying the hereditament. The cases of Cardtronics UK Ltd & Ors. v Sykes (VO) and Ors. [2020] UKSC 21 and London Borough of Southwark v Ludgate House Limited [2020] EWCA Civ 1637 examined in more detail situations where there are potentially multiple rateable occupiers.
6.14 Shops, cafés or other commercial undertakings within a museum cannot be assumed to have the same occupier as the rest of the museum. Many museums are now managed by charitable trusts, and due to Charity Commission rules they often create a separate legal entity (a trading company) to undertake the commercial activity.
6.15 The unit of assessment should be considered following the guidance in Rating Manual Section 2 Part 2: The Hereditament, and Section 2 Part 1: Rateability. It may not be possible to identify a separate hereditament due to the layout of the museum (see paragraph 2.7 of the Rating Manual guidance on Hereditament). Where a potentially separate hereditament can be identified, particular note should be taken of the advice on paramount occupation, following the Cardtronics and Ludgate House decisions, in paragraph 2.8 of the Rating Manual guidance on hereditament and paragraph 3 of the Rating Manual guidance on rateability.
7.1 “Ability to Pay”, or affordability as it’s sometimes known, is a relevant consideration for any hereditament where the conceivable HTs are limited or amount to just one. The principle stems from the Court of Appeal’s (CoA) decision in Tomlinson (VO) v Plymouth Corporation and Plymouth Argyle Football Co Ltd and Plymouth City Council [1958] 51 R&IT 815. The CoA held that if the only conceivable HT of a hereditament has insufficient funds to pay the hypothetical rent the HL cannot extract any more rent than the funds will allow. Hence it forms part of the “reality principle” and allowances can range from 1% to 100%, depending on the facts and evidence.
7.2 Any ability to pay consideration must be investigated in detail. It is important to consider not only the revenue received by the incumbent occupier but also whether a HT might be able to increase that revenue by operating different working practices (see Marylebone Cricket Club v Morley (VO) [1960] 53 RandIT 150). All the available finances of the HT must be considered, along with the HT’s capacity to reduce costs. Where the HT is a Local Authority this enquiry may be substantial (see Eastbourne Borough Council and Wealdon Borough Council v Allen (VO) [2001] RA 273).
7.3 The principle featured in the Exeter decision, but the UTLC’s interest was relative to the valuation outcome achieved via a CB valuation and the operating costs of a historic property, both of which were considered to be very high.
7.4 In the TWAM decision, the UT(LC) found that the local authorities involved were not insolvent and therefore could have paid a rent.
7.5 Therefore if the valuation advice provided above is followed according to the facts of each case ability to pay is unlikely to be a consideration. Any such claim by a ratepayer or their representative must be evidenced.
8.1 Unit of Assessment
8.2 Before a museum can be valued the hereditament should be correctly identified. The exact legal identity of the occupier and their terms of occupation should be established. Where museums contain shops, cafés or other commercial undertakings enquiries should be made into the occupation or management arrangements, and where a separate occupier or operator is found, full details should be established.
Particular note should be made of:
- the legal identity of all occupiers and any corporate structure involved, such as separate commercial trading companies of charities, including obtaining leases, licences and management agreements
- the layout of any occupied spaces, to establish the demarcation between them and the wider museum
- the level of control in any relationship, both within the legal agreements and in practical terms, such as control over access, hours of trading, items sold or services to be provided
- the extent of the link between use of different areas, such as whether a shop or café is used by non-museum visitors
8.3 The unit of assessment should then be considered following the guidance in Rating Manual Section 2 Part 2: The Hereditament, and Section 2 Part 1: Rateability. It may not be possible to identify a separate hereditament due to the layout of the museum (see paragraph 2.7 of the Rating Manual guidance on hereditament). Where a potentially separate hereditament can be identified, particular note should be taken of the advice on paramount occupation, following the Cardtronics and Ludgate House decisions, in paragraph 2.8 of the Rating Manual guidance on Hereditament and paragraph 3 of the Rating Manual guidance on Rateability.
8.4 R&E based properties
8.5 The majority of valuations will be undertaken by reference to Receipts and Expenditure. However, where a museum is free to enter (in whole or in part) it will be necessary to consider the notional admission income as if the museum charged for those free entries. A substantial amount of information is required, and the CCT should be consulted as necessary. An inspection should be made to facilitate collecting this evidence.
- For museums, extra information is required on admission numbers, ideally split into categories such as adults and children. Record entry charges including details of any concessionary rates, yearly rates, free admissions.
- Where entry is free note should be made of entry charges for potentially comparable museums and other attractions in the locality.
- A pro-forma used to gather the required information can be acquired from the CCT. Simple accounts, especially of smaller museums, often do not include the required information, and care should be taken to ensure that the information gathered includes all relevant facts.
8.6 Basis of measurement
8.7 Where an R&E based approach is adopted, in order to understand the extent and nature of activities to be included in the valuation it is essential that a site plan is provided which details all the features of the property and where practicable all buildings should be measured to Net Internal Area (NIA) in accordance with the VOA Code of Measuring Practice.
8.8 Where the rental/comparable method is the appropriate basis: the standard method of measurement to be adopted is Net Internal Area (NIA) or Gross Internal Area (GIA) dependent on the physical type of building (see VOA Code of Measuring Practice for Rating Purposes).
9.1 The final results of valuations should be entered on the Non-Bulk Server (NBS). Spreadsheet support for calculations is available via the CCT.
1. Market Appraisal
Nationally there appears to be a long-term upward trend in visitor numbers to museums.
The trend for museums to move outside of local authority control to operational Trusts continues. The move to charitable trusts may affect the manner of operation and unit of assessment. The trusts often create a separate enterprise company responsible for any retail and/or commercial arms (e.g. the museum shop and/or café).
2. Changes from the 2017 List Practice
The factors giving rise to the choice of method of valuation and application of the methods of valuation have not significantly changed from the 2017 Practice Note.
3. Ratepayer Discussions
No discussions have taken place.
4. Valuation Scheme
The selection of valuation method is a question of fact depending upon the particular attributes of the individual hereditament. It is for the case worker to use judgment to establish the most appropriate method given the guidance in the Rating Manual which must be read in full before a valuation is undertaken. Where the Contractor’s basis is selected, the case worker should follow the further guidance on its application in section 5 below.
4.1 Commercially Viable Museums
Full Receipts and Expenditure (R and E) valuations should be undertaken for commercially viable museums; i.e. museums for which the hypothetical tenant’s motive for occupation is solely to make a profit (NB profit, not a mere operating surplus). No other valuation method need be considered for hereditaments of this nature, which make up a tiny minority of the overall museum stock and are usually significantly smaller than the typical city centre institutional type museums.
In the absence of full accounts information such museums should be valued on the comparative approach, by reference to a percentage of Fair Maintainable Trade, net of VAT, in line with other Leisure attractions.
4.2 Non-commercially Viable Museums Occupying “Historic” Property
What constitutes “historic” property is a matter of judgement based on the facts; as such no prescriptive definition can be provided. It is likely to apply to a property which has listed building status as a product of the property’s historic importance, but other factors such as age, maintenance liability, the range of hypothetical tenants and reasons for its original provision should also be considered.
A range of possible valuation options is considered below (NB this is in no particular order, the weight given to any particular method is dependent on the facts and evidence).
4.2.1 Percentage of Gross Receipts Approach
For such museums which are clearly loss-making but have socio-economic value the valuer should consider a percentage of Gross Receipts approach, as commonly used for historic visitor attractions to reflect the socio-economic value to the occupier. This approach is a form of R and E “overbid” adjustment.
The Exeter decision held that these types of museums sit within the same mode or category as historic visitor attractions, such as ancestral residences, historic monuments and historic ships.
Where no admission charge is levied and thus no receipts are available, a level of notional receipts should be estimated by multiplying typical average annual visitor numbers by an assumed admission charge, the latter requiring comparison and valuer judgement. Gross receipts (actual/notional) indicate the level of use and popularity of the hereditament, along with reflecting locational advantages. The less tangible socio-economic benefits that can vary from one institution to another can be reflected in the level of percentage adopted. The range will typically be 2.5% minimum to 11% maximum, the choice being a matter of valuation judgement based on the facts. A typical non-commercial museum will commonly fall into a tighter range of 4%-8%. Exceptions to this could include properties with very limited appeal and/or significant operating liabilities, or properties with a highly commercial appeal and/or located in strong tourist areas.
4.2.2 Straight Overbid/LA Overbid Approach
A straight overbid approach may also be considered. This may be applicable where occupation is by a public body (e.g. a Local Authority), from which the method evolved through case law in the 1960s (see Morecambe and Heysham Borough Council v Robinson (VO) [1961] WLR 373).
An overbid is pure valuer judgement, partly informed by evidence but mostly informed by opinion relating to the less tangible and sometimes intangible socio-economic benefits of occupation. The Exeter decision does not preclude large overbid adjustments based on valuer judgement where large operating deficits exist, in fact it sees no problem with this.
There are a variety of means of estimating or evidencing the overbid adjustment including: using actual estimates of value to the wider economy, percentage estimates of social benefits or simply adopting a percentage of the operating deficit; all these possibilities are mentioned in the Exeter decision.
Online report material from national museum bodies can be useful in quantifying the wider economic benefits. The “social” benefits are harder to quantify because they encompass less tangible benefits such as contributions to art, culture, history and education, hence more valuer judgement is required here.
4.2.3 Storage Value (+) Approach
A minimum underpinning of value could be derived from a storage value (+) consideration. This is an analogous approach that is based on the fact that the hypothetical tenant (HT) holds a collection of artefacts and if he were to walk away from the deal with the hypothetical landlord (HL) he would have to pay rent to store these items somewhere else. Therefore, at a basic level it sets a minimum below which the rent for the museum would not likely fall.
The (+) element stems from the fact that some, if not all, of the HT’s chattels will be valuable; indeed, some may be priceless. That means the storage accommodation required may have to be secure and of excellent quality.
Therefore, comparable rental evidence for this purpose should be drawn from appropriate secure storage facilities of a size commensurate with storing (as opposed to displaying) the artefacts. Thus, valuer judgement may be needed in adjusting the evidence base used to underpin this method if it differs from the HT’s requirements.
4.2.4 Contractor’s Basis
It is unlikely that a CB valuation will be appropriate for museums under this head, but could be considered if the facts materially differ from those in the Exeter and York cases. The method should not therefore be automatically ruled out for this type of museum.
4.3 Non-commercially Viable Museums Occupying Modern Property
The contractor’s basis is likely to be the most appropriate valuation method to reflect value to occupier for modern museums, many of which are likely to be purpose-built. Clearly where a recent capital expenditure has been made and the property’s existence is not an historic accident or a burden due to its, age with commensurately high maintenance costs, then the CB analogy reflects value to occupier.
What constitutes a “modern” museum is a matter of judgement based on the facts. For example, many museums occupying “historic” property have had modern extensions erected. The fact and degree of such works is a material consideration in determining whether the hereditament as a whole is “modern” or “historic”.
Other valuation methods should not be ruled out for modern museums if the facts and evidence warrant it.
5 Contractors Basis of Valuation
5.1 Stage 1 Estimated Replacement Cost
Build Costs
The Estimated Replacement Cost (Stage 1) of the building(s) should be ascertained by applying the appropriate substitute building cost obtained from a consideration of Appendix A and the 2023 VOA Cost Guide (the Cost Guide) to the gross internal area (GIA). Areas within the building(s) that are not used at the antecedent valuation date and have no prospect of being used should be excluded from the GIA.
When considering actual costs, no account is to be taken of the receipt by the actual occupier of grant aid. (See Allen (VO) v English Sports Council/Sports Council Trust Company and Rating Manual - Section 4 Part 3.)
5.2 External Works
An addition for external works will be made in the case of museums and art galleries in accordance with the guidance in Appendix B.
5.3 Location factors
Where appropriate costs should be adjusted for location by reference to the Location Factors set down in the 2023 Rating Cost Guide and included at Appendix C.
5.4 Contract Size Adjustment
Contract size adjustments should be made in accordance with the guidance given in the 2023 Rating Cost Guide and included at Appendix D.
5.5 Professional Fees and Charges
Professional fees and charges are to be added for in accordance with the guidance given in the 2023 Cost Guide and included at Appendix E. The fee addition should have regard to the nature of the building under consideration. Many museums will attract the premium addition of 4%.
5.6 Stage 2 Age and Obsolescence (A and O) Allowances
The Estimated Replacement Cost (ERC) established at Stage 1 above is converted to Adjusted Replacement Cost (ARC) by applying an age and obsolescence allowance.
The standard age and obsolescence allowances (non–industrial) to be applied to the ERC of the individual blocks of permanent buildings are set out in Rating Manual: section 4 part 3 - the Contractor’s basis of valuation.
The scales contained in Appendix F take into account the following salient points:
a. The age and obsolescence scales set out in the rating manual represent the combined age-related physical depreciation along with functional obsolescence and technological redundancy exhibited by buildings of each age typical for their quality/specification and condition. It is anticipated that the stated allowances will be adopted in the majority of cases and only either moderated or increased in exceptional circumstances.
b. Extensions are to be given an allowance appropriate to their age unless of a lower specification than would be expected of a building of that age in which case the allowance should be increased to a level appropriate to reflect the specification of the building as a whole.
c. In respect of physical depreciation, the above scales are intended to reflect normal wear and tear and/or deterioration due to the age of the building. The scales assume an average degree of cyclical refurbishment work will have been undertaken, to include whole or partial renewal of building sub-components, most particularly relating to mechanical and electrical services and internal fit-out, but also including periodic renewal of roof coverings and windows.
d. It follows from the above that no adjustment away from the scales is required in the majority of cases where older buildings have been subject to modernisation and refurbishment works, as these are explicitly assumed to have occurred. An exception to this would be for a building taken back to shell and reconstructed with significant renewal of structural elements, where an abatement of age-related physical obsolescence may be required.
e. An example of a building requiring an abatement of the allowances provided by the scales (due to the mitigation of physical depreciation) would be where a major renovation has occurred utilising the original building foundations, frame (including upper floors) but with comprehensive replacement of the external envelope (walls, windows), a complete internal refit and wholescale replacement of mechanical and electrical services.
f. Conversely, the above scales will be insufficient to reflect physical obsolescence in cases where buildings are substantially un-modernised and in any case, the scales do not apply in instances where the hereditament is not repairable at reasonable cost and where it falls to be valued rebus sic stantibus.
g. To qualify as a substantially un-modernised building it is expected that the building will predominantly have the following:
- single glazed windows
- original internal layout
- original ceiling height, with no suspended ceilings
- original external walls
- pre 1980 internal finishes (flooring, ceiling and walls, internal doors and fixtures and fittings)
This is not intended to be applicable to prestige buildings that add character and esteem to the hereditament. This exception will apply to many museums, including ones where the building, although not a specific historic attraction, is of an age and character typical of many buildings used as museums and as such adds character and esteem to the museum use.
h. In respect of functional and technological obsolescence, for buildings that remain in operational use, the scales include adjustments to reflect functional and technological deficiencies observable in buildings typical of their original period of construction but taking account of the level of assumed cyclical refurbishment reflected in the physical depreciation element of the scales.
i. The type of functional and technological obsolescence factors already reflected in the scales include the following:
- poor energy efficiency and/or environmental sustainability
- inappropriate layout inhibiting flexible and efficient space utilization
- modern health and safety, fire or building regulations that preclude or limit the original purposes of the building
- dated design practices that restrict modern usage (such as lack of/or minimal floor and ceiling voids)
- the absence of modern space heating or air conditioning systems within a building
j. It follows that only where buildings display specific functional deficiencies or issues of technological redundancy, that are atypical for their age, the age-related allowances provided by the scales should be increased.
k. One indicator that additional functional obsolescence is present such that the allowance provided by the scales should be adjusted is the presence of new and/or replacement facilities making the existing building surplus. Such replacement or other material redundancy should be considered and may result in the total redundancy of the pre-existing building, i.e. 100% obsolescence.
l. If at the Antecedent Valuation Date, where there are buildings, or parts of buildings, that through an established pattern of use have been unused for a number of years the area of these buildings, or parts of buildings, is to be excluded from the GIA.
m. This adjustment takes into account deficiencies in the actual building from an occupational point of view, which is not reflected in the ERC.
5.6.1 Flat roof allowance
Permanent buildings built prior to 2005 with a flat roof are to receive an additional allowance. The allowance is not to be applied to temporary buildings, stores, workshops or garages.
- a) £80 per m2 ARC of the footprint of the flat roof for buildings constructed up to and including 2004.
b) No allowance for flat roofs constructed from 2005 and onwards
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Where a building has varying roof types a reasonable apportionment should be made to arrive at the allowance.
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What is flat as opposed to a pitched roof will generally be self-evident. Flat roofing allowances will automatically apply here to all types of flat roof. In instances where an allowance is sought for pitched roofing caseworkers should seek advice from the National Valuation Unit before proceeding.
The age and obsolescence allowance applied to the buildings should also be applied to the external works (averaged as necessary). The spreadsheet in the Non-Bulk server application will automatically do this.
5.7 Stage 3 Land Value
Land value should be arrived at by having regard to values prevailing in the locality. A reduction of up to 20% from the prevailing land use value may be appropriate to reflect the mode and category of use, but this should not be made where there is evidence of land being acquired for museum use at the full value for the prevailing use in the area.
Many municipal museums are located centrally in part to demonstrate ‘civic pride’ and it is unlikely that the hypothetical tenant would realistically envisage relocating to a fringe urban site. Some privately occupied museums may be centrally located as a consequence of historical decisions or accidental circumstances and where it is reasonable to suppose that the hypothetical tenant would consider a fringe site land value appropriate, please refer to the R2023 Land Value Practice Note.
Where the site area is considered excessive for the current requirements of the museum, a lower substitute site area, should be adopted. Extensive garden and play areas etc. should be added as undeveloped/amenity land. In all other cases the actual site area should be valued.
5.8 Stage 4 De-capitalisation Rate
The Adjusted Replacement Cost (ARC) of the hereditament shall be de-capitalised to an annual equivalent by taking the prescribed rate. Museums and art galleries should not be considered as “wholly or mainly” educational within the meaning of The Non-Domestic Rating (Miscellaneous Provisions) (No. 2) Regulations 1989 (as amended) As such they should attract the higher de-capitalisation rate.
5.9 Stage 5 End Adjustments (“Stand Back and Look”)
Any advantage or disadvantage, which might affect the rental value but not the capital cost should be reflected at this stage. An adjustment under this head should not duplicate adjustments made elsewhere.
6 Receipts and Expenditure Basis
Where the R and E method may be considered more appropriate, reference should be made to the main Rating Manual section.
7 IT Support
Where the Contractor’s basis is appropriate the standard generic contractor’s spreadsheet (museums and art galleries) within the Non-Bulk Server (NBS) should be used. For properties valued by way of the R and E method the generic R and E spreadsheet on the NBS should be used.
Appendix A
Building Costs
| Description | Actual | Substitute for | Cost Guide Reference | Cost(£/m2) |
|---|---|---|---|---|
| High Quality Museums | Modern State of the art, including Millennium Projects, ‘Trophy Architecture’ etc. | National Museums and Galleries | 63500A | £4,843 |
| Medium Quality | Simpler local authority and private museums. | Purpose built Victorian museums, local authority or private | 63500D | £4,149 |
| Basic Quality | Unlikely to find a recent example | 1950’s – 1970’s local authority museums, conversions of domestic or commercial premises to museum use where display areas are likely to be restricted in size | 63500E | £3,115 |
| Purpose built, non-specialist archives | Secure, air-conditioned storage facilities | As actual | 63500G | £2,783 |
| Bulk Storage | Modern aircraft hangars, automotive or rail storage | Former aircraft hangars, bus garages, engine sheds etc. | 63500J | £611 |
| Basic Storage | Storage of robust items such as agricultural machinery, archaeological or mineralogical items, maintenance huts etc. | Former barns, granaries, Nissen huts etc. | 63500L | £364 |
The application of the above costs should be considered having regard to the further guidance below:
Museums and Art Galleries occupy buildings of a wide physical diversity, but the demands of their collections will indicate the likely quality of a building which would provide a suitable substitute for the existing. In general, the more recently a museum was constructed, the more likely that appropriate adjustment of its actual building costs will approach those of the substitute.
Case workers should feel free to adopt a range of costs where the museum provides a wide variety of building types within the hereditament, but a cost level should be applied to a whole building rather than its constituent parts (i.e. if there are various uses within a building, the mix should be related to a price which would be appropriate to the whole if reconstructed). Also, any space which is clearly surplus to requirements due to adaptation from a different use should be excluded from the modern simple substitute to be cost, as should any areas unused due to Fire Regulations, Health and Safety requirements etc.
High Quality Museums
This will include recent projects built to the highest standards. Similarly National Museums and anything else where the replacement building would be of the highest quality will be costed at the same price with appropriate allowance for obsolescence.
Most Art Galleries will fall within this bracket due to the need to provide sufficient viewing space, lighting conditions etc. as well as secure climate-controlled housing for the paintings.
Also included will be modern open-plan museum types, typically steel frame with profiled metal sheeting, mostly open space internally except for administrative areas.
Only those museums built on or after 01 April 2021 should be based on actual costs adjusted to AVD.
Medium Quality Museums
The most recognisable type within this bracket will be the Victorian museums within large towns, often close to or part of a substantial town hall. Smaller towns will have similar, but less grand, museums of this type. Few non-purpose-built museums will fall in this bracket unless the conversion works indicate that substantial improvements have been made to accommodate the change of use to a museum.
Low Quality Museums
It is unlikely that a modern example will be found for this level of value. It will however accommodate museums converted from houses or commercial premises, particularly where the size of the galleries is restricted by the physical construction of the original property. The poorest purpose-built museums will also fall in this category and are likely to be those built since the last war and before the 1970’s fuel crisis, probably of reinforced concrete, with flat roofs and poor insulation.
Purpose built, non-specialist archives
The best buildings, which may come close to archive specification, may well also have climate control and will be well insulated. In some instances there may be public viewing, but it will not be the primary use for the building, and internal finishes will be to a lower standard than the above categories.
Medium Quality Storage
Includes primarily those buildings used to store large artefacts, where both overall size and height are paramount, but the artefacts are not so temperature/humidity sensitive. Typical of the range will be modern hangars or warehousing at the top end, to the wartime hangars of the most basic construction at the bottom. It is still possible that there is some public viewing within these buildings.
Basic Storage
At the lowest end will be Nissen Huts or small barns, often still with earth floors, which may be open on one side. These types are likely to be restricted in both height and overall size, thus limiting the size of collection items to tools, smaller agricultural machinery, single cars etc. Public viewing may be limited by access, and the building itself is quite likely to form part of the collection (e.g. open-air museums).
Appendix B
Addition for External Works
An addition for external works will be made in the case of museums and art galleries within the range of 2.0% - 12.5%. The following percentages would typically apply but are not intended to be prescriptive.
| % Addition | Building ratio*/description |
|---|---|
| 2% | Town centre or island site typically with an 90% or greater building ratio, no more than a small yard or garden area, and either no car parking, or a very limited number of spaces within the hereditament. |
| 2.5% | As above, but typically with an 80% to 90% building ratio, limited parking, external lighting and landscaping and some boundary fencing. |
| 5% | Site typically with 50%/75% building ratio, some landscaping around buildings, secure boundary fencing, adequate parking, external lighting and landscaping with limited general parking within the hereditament and boundary fencing. |
| 7.5% | As above, but typically with 25%/50% building ratio, landscaping around buildings, secure boundary fencing, external lighting, adequate parking within the hereditament which falls short of full requirements. |
| 12.5% | Site typically with about 25% building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |
Appendix C
Location adjustment
N.B. The Regions referred to are administrative areas and are not significant boundaries.
| NORTH EAST REGION | NORTH WEST REGION | ||
|---|---|---|---|
| Durham County | 0.91 | Cheshire | 0.97 |
| Northumberland | 0.95 | Greater Manchester | 0.97 |
| Tees Valley | 0.94 | Lancashire | 0.97 |
| Tyne and Wear | 0.91 | Merseyside | 0.97 |
| Cumbria | 0.98 | ||
| YORKSHIRE and HUMBERSIDE REGION | SOUTH WESTERN REGION | ||
| East Riding and North Lincolnshire | 0.92 | Cornwall | 1.05 |
| North Yorkshire | 0.98 | Devon | 1.01 |
| South Yorkshire | 0.94 | Dorset | 1.04 |
| West Yorkshire | 0.92 | Gloucestershire | 1.03 |
| North Somerset | 1.02 | ||
| Somerset | 1.01 | ||
| Wiltshire | 1.03 | ||
| EAST MIDLANDS REGION | WEST MIDLANDS REGION | ||
| Derbyshire | 1.05 | Herefordshire | 0.92 |
| Leicestershire and Rutland | 1.04 | Shropshire | 0.95 |
| Lincolnshire | 1.03 | Staffordshire | 0.94 |
| Northamptonshire | 1.09 | Warwickshire | 0.98 |
| Nottinghamshire | 1.03 | West Midlands | 0.95 |
| Worcestershire | 0.98 | ||
| EAST OF ENGLAND REGION | SOUTH EAST REGION (EXCL. LONDON) | ||
| Bedfordshire | 1.04 | Berkshire | 1.08 |
| Cambridgeshire | 1.00 | Buckinghamshire | 1.07 |
| Essex | 1.03 | East Sussex | 1.09 |
| Hertfordshire | 1.07 | Hampshire | 1.05 |
| Norfolk | 0.96 | Isle of Wight | 1.05 |
| Suffolk | 0.97 | Kent | 1.09 |
| Oxfordshire | 1.04 | ||
| Surrey | 1.13 | ||
| West Sussex | 1.08 | ||
| WALES | CENTRAL LONDON SOUTH | ||
| North Wales | Lambeth | 1.28 | |
| Flintshire | 0.89 | Southwark | 1.28 |
| Conwy | 0.93 | Wsworth | 1.30 |
| Denbighshire | 0.90 | ||
| Gwynedd | 0.97 | GREATER LONDON NORTH EAST | |
| Isle of Anglesey | 0.95 | Hackney | 1.25 |
| Wrexham | 0.91 | Haringey | 1.31 |
| Newham | 1.18 | ||
| Mid Wales | Tower Hamlets | 1.26 | |
| Carmarthenshire | 0.98 | Barking Dagenham | 1.18 |
| Ceredigion | 0.99 | Enfield | 1.18 |
| Powys | 0.97 | Havering | 1.09 |
| Pembrokeshire | 0.92 | Redbridge | 1.15 |
| Waltham Forest | 1.18 | ||
| South Wales | GREATER LONDON NORTH WEST | ||
| Blaenau Gwent | 0.96 | Barnet | 1.23 |
| Bridgend | 0.93 | Brent | 1.22 |
| Caerphilly | 0.93 | Ealing | 1.27 |
| Cardiff | 0.94 | Harrow | 1.18 |
| Monmouthshire | 0.99 | Hillingdon | 1.16 |
| Neath Port Talbot | 0.88 | Hounslow | 1.16 |
| Newport | |||
| Rhondda, Cynon, Taff | 0.93 | GREATER LONDON SOUTH EAST | |
| Swansea | Bexley | 1.25 | |
| Torfaen | Bromley | 1.21 | |
| Vale of Glamorgan | Croydon | 1.24 | |
| Greenwich | 1.24 | ||
| CENTRAL LONDON NORTH | Lewisham | 1.21 | |
| Camden | 1.32 | ||
| City of London | 1.24 | GREATER LONDON SOUTH WEST | |
| Hammersmith and Fulham | 1.32 | Kingston Upon Thames | 1.26 |
| Islington | 1.29 | Merton | 1.24 |
| Kensington and Chelsea | 1.34 | Richmond Upon Thames | 1.22 |
| Westminster | 1.30 | Sutton | 1.20 |
Appendix D
Contract Size Adjustment
The adjustment for contract size should be made having regard to the total ERC (after adjustment for location but before the addition for fees) in accordance with the following scales:
| ERC £ | % Adjustment |
|---|---|
| Up to 0.25 million | + 10% max |
| 0.5 million | 8% |
| 0.75 million | 6% |
| 1.0 million | 4% |
| 1.5 million | 3% |
| 2.0 million | 2% |
| 3.0 million | 1% |
| 4.0 million | 0% |
| 5.0 million | -0.5% |
| 6.0 million | -1% |
| 8.0 million | -1.5% |
| 10.0 million | -2% |
| 15.0 million | -3% |
| 18.0 million | -4% |
| 20.0 million | -5% |
| 25.0 million | -6% |
| 35.0 million | -9% |
| Over 40.0 million | - 10% MAX |
NB. Intermediate figures may be interpolated.
Appendix E
The addition for fees
Fees should be added at the percentages shown in the VOA published Cost Guide at Section 7. For convenience these are shown below inclusive of the 2% complexity addition which represents the mid-range addition, however the fee addition should have regard to the nature of the building under consideration. Many museums will attract the premium addition of 4%. Note that minimum fees may apply to counter inversion.
| Size of Contract | % Adjustment |
|---|---|
| Sums up to £750,000 | 14% |
| £750,000 to £1,499,000 | 13.5% |
| £1,500,000 to £3,999,999 | 11.5% |
| £4,000,000 to £7,499,999 | 10.5% |
| £7,500,000 to £14,999,999 | 9.5% |
| Over £15,000,000 | 9% |
Appendix F
Age and obsolescence scales
Table 1: Civic Buildings Obsolescence Allowances – Museums and Art Galleries
| Age | % Obsolescence | Age | % Obsolescence |
|---|---|---|---|
| 2023 | 0.00% | 1986 | 43.75% |
| 2022 | 0.75% | 1985 | 44.50% |
| 2021 | 1.50% | 1984 | 45.00% |
| 2020 | 2.50% | 1983 | 48.00% |
| 2019 | 3.50% | 1982 | 51.00% |
| 2018 | 4.75% | 1981 | 54.00% |
| 2017 | 6.00% | 1980 | 56.75% |
| 2016 | 7.25% | 1979 | 57.25% |
| 2015 | 8.50% | 1978 | 57.50% |
| 2014 | 10.00% | 1977 | 58.00% |
| 2013 | 11.25% | 1976 | 58.25% |
| 2012 | 12.75% | 1975 | 58.50% |
| 2011 | 14.25% | 1974 | 58.50% |
| 2010 | 15.75% | 1973 | 58.75% |
| 2009 | 17.25% | 1972 | 59.00% |
| 2008 | 18.75% | 1971 | 59.00% |
| 2007 | 20.25% | 1970 | 59.25% |
| 2006 | 21.75% | 1969 | 59.25% |
| 2005 | 23.25% | 1968 | 60.00% |
| 2004 | 24.50% | 1967 | 60.00% |
| 2003 | 26.00% | 1966 | 60.00% |
| 2002 | 27.50% | 1965 | 60.00% |
| 2001 | 28.75% | 1964 | 60.00% |
| 2000 | 30.00% | 1963 | 60.00% |
| 1999 | 31.25% | 1962 | 60.00% |
| 1998 | 32.50% | 1961 | 60.00% |
| 1997 | 33.75% | 1960 | 60.00% |
| 1996 | 35.00% | 1959 | 57.50% |
| 1995 | 36.00% | 1958 | 55.00% |
| 1994 | 37.00% | 1957 | 55.00% |
| 1993 | 38.00% | 1956 | 55.00% |
| 1992 | 39.00% | 1955 | 55% |
| 1991 | 40.00% | 1954 | 55% |
| 1990 | 40.75% | 1953 and earlier | 55% |
| 1989 | 41.50% | ||
| 1988 | 42.25% | ||
| 1987 | 43.00% |
1. Market Appraisal
Nationally visitor numbers continues to increase, however in line with public spending generally funding from Central Government is decreasing and local authorities are having to prioritise their spending accordingly. Consequently employed staff, hours of opening and number of exhibitions mounted have been reduced and more volunteers taken on.
To reduce overheads, many local authorities have created operational Trusts. This may affect the manner of operation and unit of assessment. The Museum Association’s report of July 2011 stated that 48% of local authorities surveyed are considering or have implemented a move to trust status.
The trusts often create a separate enterprise company responsible for any retail and/or commercial arms (e.g. the museum shop and/or café).
Notable new developments can be found using online sources.
2. Changes from the previous practice note
Following the Upper Tribunal (Lands Chamber) (UTLC) decisions in Stephen G Hughes (VO) v York Museums and Gallery Trust [2017] RA 20 and Stephen G Hughes (VO) v Exeter City Council [2019] RA 73 it is necessary to provide revised guidance on the valuation of museums and art galleries (hereafter referred to generically as “museums”).
The UTLC in both decisions endorse a bespoke approach relative to the material facts of each individual hereditament, facts which vary markedly in one of the least homogenous of all rating classes. The facts and circumstances of Exeter were described by the tribunal as being highly unusual and the “historic” nature of the property combined with the hereditament’s provision having been an accident of history rather than design appear to be factors which weighed heavily in the tribunal’s reasoning. The tribunal also endorse the use of valuer judgement to overcome valuation difficulties where present and prefer a range of valuation options to be considered.
As such there is no “one size fits all” valuation solution to museums and only broad, general, guidance can be provided in this practice note.
Both decisions should be read by the valuer before attempting a valuation in this class. The Exeter decision, which found for a £1 RV, held that the York decision was correctly decided and soundly reasoned. The York decision found for positive RVs on three of the four subject matter hereditaments, also of a “historic” nature. A fourth hereditament occupying “historic” property was held to be £1 RV.
Where the £1 RVs are concerned there is clear inference from the Exeter decision that this was the product of the tribunal having been given limited valuation alternatives by the parties, from para 278:
We do not say the hypothetical tenant would necessarily be unable to pay any rent at all, because the parties did not explore the possibility of refinements of the R & E method such as a percentage of gross receipts or an overbid.
Therefore while a £1 value cannot be ruled out in any instance and should be adopted if the facts and evidence support such an outcome, it should not be automatically adopted for hereditaments which are occupied for purpose and appear to provide a benefit in occupation. All possible valuation options should be explored in conjunction with the facts and evidence.
3. Valuation Scheme
It is for the valuer to exercise judgment to establish the most appropriate method given the guidance in the Rating Manual which must be read in full before a valuation is undertaken.
3.1 Commercially Viable Museums
Full R&E valuations should be undertaken for commercially viable museums; i.e. museums for which the hypothetical tenant’s motive for occupation is solely to make a profit (NB profit, not a mere operating surplus). No other valuation method need be considered for hereditaments of this nature, which make up a tiny minority of the overall museum stock and are usually significantly smaller than the typical city centre institutional type museums. In the absence of full accounts information such museums should be valued on the comparative approach, by reference to a percentage of Fair Maintainable Trade, net of VAT, in line with other Leisure attractions.
3.2 Non-commercially Viable Museums Occupying “Historic” Property
What constitutes “historic” property is a matter of judgement based on the facts; as such no prescriptive definition can be provided. It is likely to apply to a property which has listed building status as a product of the property’s historic importance, but other factors such as age, maintenance liability, the range of hypothetical tenants and reasons for its original provision should also be considered.
A range of possible valuation options is considered below (NB this is in no particular order, the weight given to any particular method is dependent on the facts and evidence):
3.2.1 Percentage of Gross Receipts Approach
For such museums which are clearly loss-making but have socio-economic value the valuer should consider a percentage of Gross Receipts approach, as commonly used for historic visitor attractions to reflect the socio-economic value to the occupier. This approach is a form of R&E “overbid” adjustment.
The Exeter decision held that these types of museums sit within the same mode or category as historic visitor attractions, such as ancestral residences, historic monuments and historic ships.
Where no admission charge is levied and thus no receipts are available, a level of notional receipts should be estimated by multiplying typical average annual visitor numbers by an assumed admission charge, the latter requiring comparison and valuer judgement. Gross receipts (actual/notional) indicate the level of use and popularity of the hereditament, along with reflecting locational advantages. The less tangible socio-economic benefits that can vary from one institution to another can be reflected in the level of percentage adopted. The range will typically be 2.5% minimum to 11% maximum, the choice being a matter of valuation judgement based on the facts.
3.2.2 Straight Overbid/LA Overbid Approach
A straight overbid approach may also be considered. This may be applicable where occupation is by a public body (for example a Local Authority), from which the method evolved through case law in the 1960s (see Morecambe and Heysham Borough Council v Robinson (VO) [1961] WLR 373).
An overbid is pure valuer judgement, partly informed by evidence but mostly informed by opinion relating to the less tangible and sometimes intangible socio-economic benefits of occupation. The Exeter decision does not preclude large overbid adjustments based on valuer judgement where large operating deficits exist, in fact it sees no problem with this.
There are a variety of means of estimating or evidencing the overbid adjustment including: using actual estimates of value to the wider economy, percentage estimates of social benefits or simply adopting a percentage of the operating deficit; all these possibilities are mentioned in the Exeter decision.
Online report material from national museum bodies can be useful in quantifying the wider economic benefits. The “social” benefits are harder to quantify because they encompass less tangible benefits such as contributions to art, culture, history and education, hence more valuer judgement is required here.
3.2.3 Storage Value (+) Approach
A minimum underpinning of value could be derived from a storage value (+) consideration. This is an analogous approach that is based on the fact that the hypothetical tenant (HT) holds a collection of artefacts and if he were to walk away from the deal with the hypothetical landlord (HL) he would have to pay rent to store these items somewhere else. Therefore at a basic level it sets a minimum below which the rent for the museum would not likely fall.
The (+) element stems from the fact that some, if not all, of the HT’s chattels will be valuable; indeed some may be priceless. That means the storage accommodation required would have to be secure and of excellent quality. Therefore comparable rental evidence for this purpose should be drawn from top quality secure storage facilities of a size commensurate with storing (as opposed to displaying) the artefacts. Thus valuer judgement may be needed in adjusting the evidence base used to underpin this method if it differs from the HT’s requirements.
There is no mode or category conflict in the use of this method, the valuer is still valuing the subject museum building. Storage (+) is merely a proxy for that value, effectively valuation by analogy based on the facts and circumstances that exist in reality. There is some support for this view in the Exeter decision:
Para 45 – “ The parties are agreed that the mode or category of occupation of the hereditament is that of “museum and premises”. They agree that it follows, in accordance with the decision of the Lands Tribunal in Allied Domecq Retailing Limited v Williams [2000] RA 119, that the hypothetical landlord may only let the hereditament for museum purposes and any prospective change of use from those purposes is to be disregarded [p.152]. However, the Tribunal made it clear that that rule does not prevent regard being had to rental evidence or assessments on other properties in a different mode or category of occupation in so far as that is relevant to the hereditament.”
3.2.4 Contractor’s Basis
It is unlikely that a CB valuation will be appropriate for museums under this head, but could be considered if the facts materially differ from those in the Exeter and York cases. The method should not therefore be automatically ruled out for this type of museum.
Many public bodies conduct asset valuations of their specialist property via a depreciated replacement cost approach which is similar to CB. Obtaining this data can help to sense check the outcome of a CB or possibly lend additional weight to its use for rating purposes.
3.3 Non-commercially Viable Museums Occupying Modern Property
The contractor’s basis is likely to be the most appropriate valuation method to reflect value to occupier for modern museums, many of which are likely to be purpose-built. Clearly where a recent capital expenditure has been made and the property’s existence is not an historic accident or a burden due to its, age with commensurately high maintenance costs, then the CB analogy reflects value to occupier. (NB the point in 3.2.4 above in respect of asset valuation data).
The Exeter decision endorsed the RICS Contractor’s Basis Guidance Note in that the further the valuer strays from reality the less weight can be attached to the resultant valuation. In this respect para 247 confirms the use of the existing GIA, rejecting the respondent’s expert’s adoption of a much reduced GIA for the modern substitute. This is supported by reality in that museums seldom reduce in size as artefacts do not generally lose their importance or value as they get older. Consequently many museums look to extend their existing accommodation and/or acquire off-site storage facilities.
What constitutes a “modern” museum is a matter of judgement based on the facts. For example, many museums occupying “historic” property have had modern extensions erected. The fact and degree of such works is a material consideration in determining whether the hereditament as a whole is “modern” or “historic”.
Other valuation methods should not be ruled out for modern museums if the facts and evidence warrant it.
4. Ability to Pay Considerations
“Ability to Pay”, or affordability as it’s sometimes known, is a relevant consideration for any hereditament where the conceivable HTs are limited or amount to just one. The principle stems from the Court of Appeal’s (CoA) decision in Tomlinson (VO) v Plymouth Corporation and Plymouth Argyle Football Co Ltd and Plymouth City Council [1958] 51 R&IT 815. The CoA held that if the only conceivable HT of a hereditament has insufficient funds to pay the hypothetical rent the HL cannot extract any more rent than the funds will allow. Hence the doctrine forms part of the “reality principle” and allowances can range from 1% to 100%, depending on the facts and evidence.
Any ability to pay consideration must be investigated in detail. It is important to consider not only the revenue received by the incumbent occupier but also whether a HT might be able to increase that revenue by operating different working practices (see Marylebone Cricket Club v Morley (VO) [1960] 53 R&IT 150). All the available finances of the HT must be considered, along with the HT’s capacity to reduce costs. Where the HT is a Local Authority this enquiry may be substantial (see Eastbourne Borough Council and Wealdon Borough Council v Allen (VO) [2001] RA 273).
The principle featured in the Exeter decision, but the UTLC’s interest was relative to the valuation outcome achieved via a CB valuation and the operating costs of a historic property, both of which were considered to be very high.
Therefore if the valuation advice provided above is followed according to the facts of each case ability to pay is unlikely to be a consideration. Any such claim by a ratepayer or their representative must be evidenced.
5. Contractors Basis of Valuation
a) Stage 1 Estimated Replacement Cost
i) Build Costs
The Estimated Replacement Cost (Stage 1) of the building(s) should be ascertained by applying the appropriate substitute building cost obtained from a consideration of Appendix 1 and the 2017 VOA Cost Guide (the Cost Guide) to the gross internal area (GIA). Areas within the building (s) that are not used at the antecedent valuation date and have no prospect of being used should be excluded from the GIA.
ii) External Works
An addition for external works will be made in the case of museums in accordance with the guidance in Appendix 2.
iii) Contract Size Adjustment
To be applied in accordance with the Cost Guide.
iv) Location factors
To be applied in accordance with the guidance contained in the Cost Guide.
v) Fees
Guidance on the amount to be added for fees is provided in the Cost Guide. The fee addition should have regard to the nature of the building under consideration. Many museums will attract the premium addition of 4%.
b) Stage 2 Age and Obsolescence (A&O) Allowances
Age and obsolescence allowances should be applied in accordance with the appropriate scale in the Rating Manual Volume 4 Section 7. Where a museum has been the subject of a scheme of refurbishment then the allowance should be amended to reflect the improvements particularly where internal re-modelling has taken place to enhance the functional aspects of the museum. Where a museum is of a particularly poor quality of construction and has not been subsequently improved additional allowances can be given subject to a maximum allowance for A & O of 65%. This may be appropriate for some 1960/70s buildings but is expected to be the exception rather than the norm. Before giving additional allowances approval should be obtained from the Class Coordination Team (CCT) lead for museums.
c) Stage 3 Land Value
Land value should be arrived at by having regard to values prevailing in the locality, in accordance with Rating Manual Section 4 Section 3. A reduction of up to 20% from the prevailing land use value may be appropriate to reflect the mode and category of use, but this should not be made where there is evidence of land being acquired for museum use at the full value for the prevailing use in the area.
Assistance on the level of value to apply can be found in the land value practice note
Where the site area is considered excessive for the current requirements of the museum, a lower site area, should be adopted. Extensive garden and play areas etc. should be added as undeveloped/amenity land. In all other cases the actual site area should be valued.
d) Stage 4 De-capitalisation Rate
The Adjusted Replacement Cost (ARC) of the hereditament shall be de-capitalised to an annual equivalent by taking the prescribed rate. Museums and art galleries should not be considered as “wholly or mainly” educational within the meaning of The Non-Domestic Rating (Miscellaneous Provisions) (No. 2) Regulations 1989 (as amended) As such they should attract the higher de-capitalisation rate.
e) Stage 5 End Adjustments (“Stand Back and Look”)
Any advantage or disadvantage, which might affect the value of the hereditament as a whole but which may not be reflected in the capital cost should be reflected at this stage. An adjustment under this head should not duplicate adjustments made elsewhere. Only in the very exceptional circumstances outlined in Rating Manual Section 4 Part 3 Appendix 2 should any account be taken of grant funding.
Specific End Adjustment
Buildings with a flat roof are to receive an end allowance.
- £80m2 ARC of the footprint of the flat roof for buildings constructed up to and including 2004.
- £60m2 ARC of the footprint of the flat roof for buildings constructed after 2004.
Where a building has varying roof types a reasonable apportionment should be made to arrive at the allowance.
What is flat as opposed to a pitched roof will generally be self-evident. In instances where an allowance is sought for pitched roofing caseworkers should seek advice from the CCT lead before proceeding.
6. IT Support
Where CB is appropriate the standard generic contractor’s spreadsheet (museums and art galleries) within the Non-Bulk Server (NBS) should be used. For properties valued by way of the R &E method the generic R&E spreadsheet on the NBS should be used.
Appendix 1: Building Costs
Description |
Actual |
Substitute for |
Cost Guide Reference |
Cost(£/m2) |
High Quality Museums |
Modern State of the art, including Millennium Projects, ‘Trophy Architecture’ etc. |
Modern purpose built facility |
63500A |
From £3530 to £4120 |
Medium Quality |
Simpler local authority and private museums. |
Purpose built modern museums, local authority or private |
63500D |
From £2650 to £3529 |
Basic Quality |
Purpose built modern facility |
63500E |
To £2649 |
|
High Quality Storage |
Secure, air conditioned storage facilities |
As actual |
63500G |
£2200 |
|
Modern aircraft hangars, automotive or rail storage |
Purpose built modern facility |
63500J |
£520 |
Basic Storage |
Storage of robust items such as agricultural machinery, archaeological or mineralogical items, maintenance huts etc. |
Purpose built modern facility |
63500L |
£310 |
The application of the above costs should be considered having regard to the further guidance below:
Museums occupy buildings of a wide physical diversity, but the demands of their collections will indicate the likely quality of a building which would provide a suitable substitute for the existing. In general, the more recently a museum was constructed, the more likely that appropriate adjustment of its actual building costs will approach those of the substitute.
Case workers should feel free to adopt a range of costs where the museum provides a wide variety of building types within the hereditament, but a cost level should be applied to a whole building rather than its constituent parts (i.e. if there are various uses within a building, the mix should be related to a price which would be appropriate to the whole if reconstructed). Also any space which is clearly surplus to requirements due to adaptation from a different use should be excluded from the modern simple substitute to be cost, as should any areas unused due to Fire Regulations, Health and Safety requirements etc.
High Quality Museums
It should be expected that recent projects built to the highest standards (e.g. Imperial War Museum North, Lowry etc.) will be cost at the top of the range Similarly National Museums and anything else where the replacement building would be of the highest quality (e.g. V&A, Science Museum, Tate Britain) will be cost at the same price with appropriate allowance for obsolescence.
Most Art Galleries will fall within this bracket due to the need to provide sufficient viewing space, lighting conditions etc. as well as secure climate controlled housing for the paintings.
At the lower end of the bracket will be the more basic museum types, steel frame with profiled metal sheeting is typical, mostly open space internally except for administrative areas.
Only those museums built on or after 01 April 2015 should be based on actual costs adjusted to AVD.
Medium Quality Museums
The most recognisable type within this bracket will be the Victorian museums within large towns, often close to or part of a substantial town hall. They should be cost at the higher end of the range. Smaller towns will have similar, but less grand, museums of this type and these will be cost towards the lower end of the range. Few non-purpose built museums will fall in this bracket unless the conversion works indicate that substantial improvements have been made to accommodate the change of use to a museum.
Low Quality Museums
It is unlikely that a modern example will be found for this level of value. The range will however accommodate museums converted from houses or commercial premises, particularly where the size of the galleries is restricted by the physical construction of the original property. The poorest purpose built museums will also fall in this category and are likely to be those built since the last war and before the 1970’s fuel crisis, probably of reinforced concrete, with flat roofs and poor insulation. The appropriate level of value within the range will depend on the size of the galleries and how readily they can accommodate modern museum display techniques.
High Quality Storage
The best buildings, which may come close to archive specification, may well also have climate control and will be well insulated. In some instances there may be public viewing, but it will not be the primary use for the building, and internal finishes will be to a lower standard than the above categories.
Medium Quality Storage
Includes primarily those buildings used to store large artefacts, where both overall size and height are paramount, but the artefacts are not so temperature/humidity sensitive. Typical of the range will be modern hangars or warehousing at the top end, to the wartime hangars of the most basic construction at the bottom. It is still possible that there is some public viewing within these buildings.
Basic Storage
At the lowest end will be Nissen Huts or small barns, often still with earth floors, which may be open on one side. These types are likely to be restricted in both height and overall size, thus limiting the size of collection items to tools, smaller agricultural machinery, single cars etc. Public viewing may be limited by access, and the building itself is quite likely to form part of the collection (e.g. open air museums).
Appendix 2: Addition for External Works
An addition for external works will be made in the case of museums and art galleries within the range of 2.0% - 12.5%. The following percentages would typically apply but are not intended to be prescriptive.
| % Addition | Building ratio*/description |
| 2% | Town centre or island site typically with n 90% or greater building ratio, no more than a small yard or garden area, and either no car parking, or a very limited number of spaces within the hereditament. |
| 2.5% | As above, but typically with an 80% to 90% building ratio, limited parking, external lighting and landscaping and some boundary fencing. |
| 5% | Site typically with 50%/75% building ratio, some landscaping around buildings, secure boundary fencing, adequate parking, external lighting and landscaping with limited general parking within the hereditament and boundary fencing. |
| 7.5% | As above, but typically with 25%/50% building ratio, landscaping around buildings, secure boundary fencing, external lighting, adequate parking within the hereditament which falls short of full requirements. |
| 12.5% | Site typically with about 25% building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |