Hospitals and healthcare
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section is intended to cover the following types of hereditament:
1.1 NHS hospitals
VOs will be familiar with these properties and they require no detailed description. They comprise a wide range of types and sizes, and normally contain buildings of various dates.
1.2 Ambulance stations
These are normally purpose built but can be adapted from existing buildings. They normally resemble small depots.
1.3 Outpatient clinics and trust health centres
These normally provide treatment and/or diagnostic services to patients who have been referred by General Practitioners. They may resemble category (d) health centres below - but may alternatively be purpose built and sui generis. Valuers concerned with surgeries and health centres as well as clinics and health centres occupied by health authorities and trusts should familiarise themselves with the RICS publication “The valuation of surgery premises used for medical or health services”. Valuation Information Paper 4.
1.4 Surgeries and health centres occupied by general practitioners
These are normally in the occupation of general practitioners rather than Health Authorities and comprise a range of types from the adapted dwelling to the purpose built group practice health centre.
1.5 Nursing homes, maternity homes, convalescent homes
This class of property ranges from converted dwelling houses to purpose built premises with all the facilities of a modern hospital. Nursing homes may be occupied by Health Authorities or privately by religious or other charitable organisations. They may be occupied for the care of the sick, the aged or the handicapped, or for the purposes of convalescence. They may be wholly domestic, composite, or wholly non-domestic.
1.6 Private hospitals and clinics
These include a variety of types of structure ranging from purpose built to adaptations of dwelling houses or of other institutional dwellings. Normally they will accommodate in-patients, although some private outpatient clinics are known to exist. Patients tend to be accommodated in single rooms and a high proportion of these may have private bathrooms/showers. Private hospitals tend to be significantly smaller than NHS Hospitals.
1.7 Private eye hospitals and clinics
The advancement in technology and the introduction and development of new procedures over the past 20 years has permitted a considerable widening in the scope and purpose of eye surgery. In particular the cost of laser surgery to improve the vision of persons otherwise requiring the wearing of spectacles or contact lenses has reduced substantially. This in turn has led to a substantial increase in the numbers of companies offering this and other eye related procedures, both by way of specialist departments within general private hospitals or by way of dedicated clinics, some of which refer to themselves as hospitals. The advice is concerned with the assessment of hereditaments occupied as dedicated eye clinics.
Some companies confine themselves to laser surgery and operate out of a number of relatively small specialist clinics throughout the UK, whereas others offer a full range of services which extend beyond laser surgery to include medical conditions such as glaucoma, cataracts and astigmatism. Some larger clinics will also offer cosmetic procedures designed to enhance the appearance of the eye. As referred to above some of the larger clinics (generally in excess of 1000m2 GIA) refer to themselves as hospitals, although they do not normally contain patient beds as the procedures and initial recovery are of a duration which will generally allow patients to return home on the day that surgery is carried out.
| List description | Primary description code | Scat | Suffix |
| Ambulance stations | MS2 | 010 | G |
| Hospitals and clinics (NHS) | MH2 | 134 | S |
| Hospitals and clinics (Private) | MH3 | 135 | S |
| Nursing homes (inc Old People Homes) | MR1 | 201 | G |
| Surgeries, clinics and health centres | MH and MH1 |
436 (contractors) 437 (rentals) |
G G |
Responsibility for the referencing and valuation of Ambulance Stations, Nursing Homes, Surgeries & Health Centres lies with the Regional Valuation Units (RVU’s)
Responsibility for the referencing and valuation of all hospitals lies with the National Valuation Unit (NVU) Civic and Specialist Property Inspection Teams.
Coordination is through the Primary Care Class Co-ordination team (CCT) and Hospital CCT which both report to the Valuation Panel (VP) 4.
There is no specific legal framework for these classes but caseworkers should be alert to correctly identifying the hereditament which can be particularly difficult within hospitals due to a number of let-outs. Reference should be made to the Rating Manual Section 3 Part 1 Hereditament.
6.1 NHS hereditaments
In referencing NHS hereditaments the basis of measurement prescribed in the VO Code of Measuring Practice for Rating Purposes should be followed. For all properties valued using the contractors basis the surveys should be made to GIA.
6.2 GPs surgeries/health centres
For hereditaments valued on the rentals method the basis of measurement is NIA as defined in the VO Code of Measuring Practice for Rating Purposes. Surgeries in shopping parades should be zoned.
For those specialised hereditaments which are valued using a contractor’s basis, the property should be measured to GIA.
6.3 Nursing homes/maternity homes/convalescent homes
The basis of measurement for this class is GIA, as defined in the VO Code of Measuring Practice for Rating Purposes. It is however necessary to apportion the GIA in respect of non-domestic property within composite hereditaments.
6.4 Private hospitals
The basis of measurement for this class is GIA, as defined in the VO Code of Measuring Practice for Rating Purposes.
6.5 Private eye hospitals and clinics
For the majority of clinics and hospitals which fall to be assessed on the rentals basis measurement should be to NIA in accordance with the VOA Code of measuring practice, but where exceptionally the contractors method is employed measurement to GIA will be required.
6.6 Plant and machinery
Hospitals are likely to feature items of rateable plant and machinery such as the heating system, fire protection, cooling and ventilating equipment, lifts and standby generators, but since valuation will be by reference to costs which include these items, they should not be separately valued. Because the quality of these items of P & M vary considerably, it is nevertheless important to ensure that full details of such plants are recorded in order that they may be properly reflected in the valuation of the hereditament.
Air conditioning systems vary in terms of the range of facilities offered, their performance, and the degree of environmental control offered. A basic air conditioning system will usually incorporate facilities for heating, cooling and ventilating. More complex systems will also control humidity, monitor the through-flow of air, filter, purify and de-odorise the re-circulated air, and offer localised control in different parts of the premises and even in different parts of an open plan floor. The following features should be noted: - type (for example VAV, fan coil etc) provision (for example cleaning, cooling, humidification) extent (note the areas served) and details of ducting.
Details of the heating system should include type of fuel, type of system (for example radiators, ducts, underfloor) and extent.
For lifts determine type (for example manual/automatic), goods/passenger, capacity, floors served.
If standby-generating plant is provided, referencers should note voltage, power, rpm and age.
Rating surveys should be captured on the Rating Support Application (RSA) where a rental approach is taken. For those valued on the contractors basis surveys should be stored in the Property Folder of Electronic Document and Records Management (EDRM) together with plans.
8.1 Hospitals and in-patient clinics
The Contractors Basis will normally be the principle method of valuation except where rental evidence exists. For those valued on the contractors basis guidance can be found within the respective NHS and Private hospital practice notes.
8.2 Ambulance stations
It will normally be possible to value by reference to commercial properties which are rebus sic stantibus similar and for which rental evidence exists. Where no such comparison can be made the contractors basis should be used and guidance on the application of this basis is provided in Rating Manual: section 6 part 3 - section 65.
8.3 NHS and private out-patient clinics and health centres (not occupied by general practitioners)
The involvement of the private sector in some mainstream hospital services have resulted in the growth of specialised diagnostic and treatment centres (such as dialysis and renal units). These hereditaments may be on or nearby existing hospital sites or stand alone. Full investigation should be made as to whether any arms-length rents can be evidenced. Where insufficient rental evidence is available they will fall to be valued on the contractor’s basis. A cost FOR VO 6065 should be instigated for any newly built facilities.
Consideration of the cost to be applied at stage 1 of the contractor’s basis should be referred to NVU.
8.4 Surgeries and health centres occupied by general practitioners
Where the premises occupied has been converted from its original purpose (such as residential or office) then rental evidence is normally available and the rental/comparative method is the normal approach to valuation. Reliable evidence relating to purpose built surgeries and health centres will be harder to find and thus valuation will generally be on the contractors basis. Further guidance is contained within the relevant Primary Care and Surgeries practice note.
8.5 Nursing homes, maternity homes, convalescent homes
Many nursing homes are likely to be wholly or predominantly domestic, but those receiving short stay patients, and in particular maternity/convalescent homes, are likely to be composite or wholly non-domestic.
The valuation of this type of property will normally fall to be made on either the rental method or the contractors basis. A profits basis of valuation will not be applicable.
The rental method should be adopted wherever there is sufficient evidence to provide a basis of valuation. It will be necessary to carefully examine the value derived from this method of valuation in order to be satisfied that it reasonably represents the rental value of the property and that assessments derived from the rental and contractors basis methods are not inconsistent with one another.
8.6 Private eye hospitals and clinics
Eye clinic/hospital operators will generally take either existing or new buildings and adapt them as necessary to make them fit for purpose. Many of these buildings particularly those located within town centres or on business parks will be taken on lease and rental evidence relating to the occupation will be available. As a consequence this class of property should, in the main, be valued by reference to the rentals method either directly by reference to passing rent (adjusted as necessary for tenants improvements, rent date etc) or by way of comparison. Exceptionally where there is no rent passing and the building is in such a location and of such a nature that comparison cannot be drawn with rented property in the same mode or category of use elsewhere then the contractors method may be utilised. Further advice on the adoption of the contractors method is given below.
Contractors method
Where, exceptionally, the contractors method is adopted regard should not be had to the guidance given in this practice note in relation to private hospitals. Reference should be made to the appropriate valuer in NVU in order to obtain guidance as to the costs to adopt and Rating Manual: section 4 part 3 for general advice and guidance on the application of the method.
The decapitalisation rate (decap rate) to be adopted within the valuation will differ according to the nature of the procedures carried out. In order to qualify for the lower decap rate the use must satisfy the provisions of “The Non –Domestic Rating (Miscellaneous Provisions (No 2) Amendment Regulations 1994 –SI1994” and in particular the definition of a healthcare hereditament set out in paragraph (6)
healthcare hereditament” means a hereditament constructed or adapted wholly or mainly either
-
a) for the reception or treatment of persons suffering from any illness, injury or infirmity, or
-
b) as a maternity home, and used for such a purpose
Laser eye surgery is mostly used to correct Myopia (Shortsightedness), it is a procedure that is not available on the NHS and is not considered to be an illness, injury or infirmity. Similarly cosmetic eye surgery used to enhance appearance is not treatment of an illness, injury or infirmity. Consequently the lower decap rate should not be employed when using the contractors method in the valuation of those clinics or hospitals where patients receiving laser eye or cosmetic surgery are in the majority. It is thought the majority of private eye clinics/hospitals will fall into this category although some may continue to concentrate on recognised medical conditions such as cataracts, glaucoma, optical nerve disorders, detached retinas etc and where these procedures are in the majority the application of the lower decap rate will be appropriate.
Further guidance can be obtained from the appropriate valuer in NVU.
This property is valued using the non-bulk server.
9.1 De-capitalisation rate in Contractor’s basis valuations
The decapitalisation rate to be used is set out in The Non-Domestic Rating (Miscellaneous Provisions) (No2) Regulations 1989 (as amended).
For hereditaments qualifying under the ‘healthcare’ definition the lower decapitalisation rate should be applied. Further guidance on the qualifying criteria should be sought from NVU.
9.2 Exemption - property used for the disabled
Under Para 16 Sch 5 LGFA 1988, property used for the disabled, including parts of a hereditament wholly used for qualifying purposes, are exempt. However in most instances within a hospital environment the service provision will include the provision of ‘treatment’ and exemption will not be applicable. Full guidance is available in the Rating Manual Section 6 Valuation Practice Part 6 Exemption Part A Property used for disabled persons. Areas of contention should be referred for technical advice.
9.3 Unoccupied NHS property
NHS bodies are not entitled to any special exemption from unoccupied property rate and enjoy only the same specific exemptions available to other ratepayers contained in the Non-Domestic Rating (Unoccupied Property) Regulations (SI 1989 No 2261).
There should be a prima facie assumption that mere vacation of premises has no effect on their RV. The only exception to this rule is where the property is of a specialised type for which no demand exists rebus sic stantibus, and where one or both of the following conditions apply:
-
a) if the premises were vacated on or before the AVD, have not subsequently been occupied, and are not being held for future occupation,
-
b) if occupancy ceases because of material changes of circumstances post AVD, eg the completion of alternative premises in the locality, which would have eliminated demand for the subject property at the AVD.
Where a or b apply and there is no demand for alternative uses for the hereditament as a whole, the unused property should be treated as of no value and should be excluded from costing. Where clinical space is unused for the purpose for which it was designed, and is used solely for storage, the relevant block or portion thereof should be costed as storage space, unless at AVD storage use was temporary and clinical use was to be resumed.
Care should be taken to avoid double counting where unused space has been reflected in obsolescence allowances.
9.4 The boundary between domestic and Non-Domestic property
9.4.1 Identifying domestic and Non-Domestic property
9.4.1.1 Ward areas
Property is domestic if it is used wholly for the purposes of living accommodation [LGFA 1988 s66 (1)(a)].
Following a review of the legal principles around the consideration of domestic property within a healthcare setting it is considered unlikely that ward accommodation within mainstream hospitals will qualify as domestic. This is due to the incidence of active treatment being administered to patients within hospital wards that determines that the accommodation is not used wholly for domestic purposes.
“Treatment” means treatment in its normal sense and therefore includes, but is not limited to, any medical intervention, diagnostic care or observation undertaken by professional staff in hospitals, including doctors, nurses, midwives, therapists and psychologists, designed to improve or modify patients’ physical and/or mental abilities and social functions. This includes, but is not limited to nursing (which includes aiding convalescence), psychological interventions, physiotherapy and other sorts of therapy including habilitation and rehabilitation.
A period of 60 days remains a fair determinant of short-stay accommodation. Therefore for hospital ward space to qualify as domestic property within s66 of the Local Government Finance Act 1988 it will be necessary to establish that patient stays are in excess of 60 days while not receiving “treatment” for that period or more. This is thought to be extremely unlikely.
There may be some exceptions within specialised institutions such as psychiatric hospitals, where treatment is not administered in certain areas such as a patient bedroom. Where that patient’s stay is in excess of 60 days, then the bedroom area should be taken as domestic and the hereditament will be composite. The domestic consideration may be extended to kitchen, dining or lounge areas provided that any non-domestic use of such areas does not extend beyond the de-minimis principle.
9.4.1.2 Permanent living accommodation for staff
Permanent living accommodation for staff should be considered domestic. On hospital sites care should be exercised to determine whether such accommodation is still in the rateable occupation of the hospital Trust, rather than vested in a third party. This would affect the identification of the hereditament and could influence the composite status.
Staff on-call accommodation will likely be non-domestic by virtue of s66(2) LGFA 1988.
9.4.1.3 Visitors accommodation
Some institutions provide accommodation for patients’ visitors. While in principle this should be regarded as non-domestic property, the de minimis rule should be applied so as to disregard any such non-domestic use where the hereditament is otherwise wholly domestic.
9.4.1.4 Accommodation for the terminally ill - respite care
Accommodation in hospices and other institutions which is provided for terminally ill patients should be treated as non-domestic.
9.4.2 Valuation by reference to general patterns of use
If the hereditament has been identified as comprising both domestic and non-domestic property, it is composite and should be valued on the basis of a notional distribution of uses. Since institutional hereditaments are not a bulk class, it is unlikely there will be sufficient information from other hereditaments on which to base a notional distribution of uses. Instead the objective should be to adopt the distribution of uses, which is the norm for the actual hereditament at the AVD; minor fluctuations in the proportion of non-domestic to domestic use and its distribution within the hereditament may therefore be ignored.
LGFA 1988 (Sch 6 para 2(1)A) provides that the RV of a composite shall be the amount which would reasonably be attributable to the non-domestic use of the property. In the case of non-domestic property within composite hereditaments, this may be taken to be full value of that property.
Areas wholly used for domestic purposes shall be assessed to Council Tax and be excluded from the non-domestic assessment. However it is important that the survey of the whole hereditament is captured and entered into any contractors valuation in order for the correct contract size adjustment to be calculated. The line entry and GIA of the domestic accommodation can then be identified and excluded from the valuation after the calculation of the CSA has been made. The hereditament (and thus both the non-domestic rating list entry and council tax entry) should be flagged as composite.
- Non-Bulk Server (NBS)
- Rating Support Application (RSA)
- Survaid
- Valuation Panel (VP4) and Class Co-ordination team (CCT) Members
- National Valuation Unit (NVU)
1. Market appraisal
The changes in the quality and specification of hospitals built since 2010 saw significant increases in costs. The limited evidence of wholly constructed hospitals demonstrates this level of quality and specification continues.
Health Care providers continue to seek efficiencies through strategic planning with specialist emergency care being provided centrally with patients remaining on site for a short period of time before moving to more local facilities. The provision of single en-suite bedrooms to reduce the risk of infection and improve the dignity of patients continues to be a feature.
The provisions of the Health and Social Care Act 2008 and subsequent associated regulations continue to see greater involvement of the private sector in NHS provision with some treatments and procedures now taking place in non NHS facilities.
2. Changes from the 2017 list practice note
2.1 The Stage 2 Obsolescence allowances and guidance notes for main hospital buildings has been revised.
2.2 The guidance on long stay within hospitals can now be found under the ‘Valuation Considerations’ at 9.4 of the Rating Manual section 840 that precedes this practice note.
3. Ratepayer discussions
Full discussions have taken place with Hospital Trusts representatives Avison Young, Montagu Evans, Deloitte LLP, GL Hearn, Gerald Eve and Cushman Wakefield as part of the Group Pre Challenge Review (GRCR) 34075436. This Memorandum of Agreement reflects in-depth cost analysis and consideration of all aspect of the contractors basis as it relates to the valuation of NHS hospitals in England and Wales for the 2017 rating list.
4. Method of valuation
4.1 Rentals Method
In the years preceding the AVD a number of small hospitals, normally forming part of comprehensive community hubs have been developed by 3rd party developers and leased to the Hospital Trust. Where such arrangements exist the lease and rent passing should be fully researched and where it can be demonstrated that the rent, adjusted as necessary, represents the value of the occupation to the occupier, the hospital should be assessed using the rentals method.
Other hospitals of similar age size and type in the locality may be assessed using the same method to the extent that comparability allows.
However it is expected that no rental evidence will exist to assist in the assessment of the majority of hospitals. With no profit motive in the majority of instances, the contractors basis should be applied in accordance with the following guidance.
4.2 The Contractors Basis
4.2.1 Stage 1
(i) Building Costs
The costs to be applied to the GIA of the accommodation blocks within the hospital will depend upon the type of facility under consideration and the standard of construction. The costs and associated guidance notes are contained in Appendix 1 to this practice note.
(ii) External Works
The cost of external works is to be added in accordance with Appendix 2.
(iii) Location Factors
Location factors should be applied in accordance with Appendix 3 replicated from the 2017 VOA Cost Guide.
(iv) Contract Size Adjustment
An adjustment for contract size is to be made to the building cost in accordance with Appendix 4, replicated from the 2017 VOA Cost Guide.
(iv) Professional Fees
Professional fees and charges are to be added for in accordance with Appendix 5
4.2.2 Stage 2
The age and obsolescence allowances to be applied to the individual building blocks after addition for external works and fees are dependent upon the building classification. The majority of hospital buildings should reference the scale within Table 1 of Appendix 6. Stand-alone Workshops and Stores should reference Table 2 and the scale for Temporary Buildings is found in Table 3. For the avoidance of doubt the age of the building is to be taken as the date the building was completed.
Adjustments to the main hospital buildings for age and obsolescence should be made in accordance with Table 1 and take into account the following salient points.
a. The revised age and obsolescence scale has been agreed to 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)
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, consideration should be given to applying an additional allowance.
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. Permanent system built structures should follow the same obsolescence scale as traditional buildings.
Flat roof allowance
Permanent buildings with a flat roof are to receive an additional allowance. The allowance is not to be applied to temporary buildings, stores, workshops or garages.
- £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 National Valuation Unit before proceeding.
Multi-Storey Building Allowances
This allowance is intended to reflect the operational difficulties of hospitals housed within multi-storey buildings. It reflects the advancement of modern lift provision and technology within a hospital setting and no allowance should be applied to buildings built in 2005 or thereafter.
On pre-2005 buildings the allowance should be applied to the footprint of multi-storey buildings only. Whilst it is recognised that operational difficulties may extend beyond the footprint areas on lower floors, equally upper floors put over to non-clinical/administrative purposes would not be unduly affected. This approach allows for a practical application over the current survey without recourse to use.
Table of allowances pre 2005 buildings:
| Floors | Percentage Deduction |
|
2 Main Floors |
Nil |
|
3 Main Floors |
5% overall |
|
4 Main Floors and above |
10% overall |
4.2.3 Stage 3
The value of the developed land and undeveloped land, apportioned in respect of the hospital hereditaments non- domestic use, shall be added in accordance with Appendix 7.
4.2.4 Stage 4
The lower statutory de-capitalisation rate shall be applied to the total of the ARC of the buildings and the adjusted land value to give an annual equivalent value.
4.2.5 Stage 5
Appropriate adjustments may be made to the annual equivalent value to take account of any disabilities or attributes not reflected in the previous 4 stages of the valuation to arrive at the rateable value. Guidance on the application of stage 5 allowances is contained in Appendix 8.
5. Valuation Spreadsheet
Contractors based valuations of NHS Hospitals are to be completed exclusively on the dedicated valuation spreadsheet held on the VOA Non-Bulk Server. The spreadsheet incorporates considerable functionality to assist the valuation process.
Stage 1 Build Costs
| Item |
Cost Guide Ref |
£/m2 |
Remarks |
|
Acute Hospitals completed post 1/4/2010 |
98H001 |
£2750 |
See guidance notes below. |
|
Acute Hospitals built and completed prior to 1/4/2010 |
N/A |
£2000 |
|
|
Community Hospitals and Mental Health Units completed post 1/4/2010 |
98H002 |
£2200 |
See guidance note (10) below. |
|
Community Hospitals and Mental Health Units built and completed prior to 1/4/10 |
N/A |
£1600 |
|
|
Operating theatre within community hospitals |
98H003 |
£600 |
This is an additional sum to be added to the basic £/m2 applicable to the community hospital. It should be applied to the entire theatre suite including the recuperation ward not only the theatres themselves |
|
Education and nurse training buildings |
98H004 |
£1780 |
Not to be applied to post graduate facilities |
|
Temporary buildings- |
98H006 |
£684 |
|
|
Stores and other inferior buildings. (separate or distinct stores, plant rooms, workshops, offices of inferior construction and garages) |
98H007 |
£505 |
Plant rooms are to be cost at the hospital main rate unless separate and distinct buildings. Energy centres and large boiler houses should be cost at the main rate whether a stand- alone building or not. |
|
EMS (Second World War emergency medical services) buildings |
98H008 |
£496 |
|
|
Multi-storey car parks |
98H011 |
£458/m2 or £10300/space |
|
|
Basement car parks |
98H012 |
£786/m2 or £17669/space |
|
|
Single deck (steel) car parks |
|
£6350/space |
See guidance note (12) below |
Guidance Notes
1) Definition of Acute Hospital
There is no official definition within the NHS of an Acute Hospital. Typically a hospital coming within this description provides a wide range of specialist care and treatment for patients that may include routine, complex and life saving surgery and specialist diagnostic procedures and treatment. Although some consultations and treatments may be undertaken on an outpatient basis, an Acute Hospital will usually have a significant inpatient resource for observation, treatment and recovery. Acute Hospitals may also be teaching or university hospitals reflecting the opportunities they afford to provide medical training in general and specialist areas.
The distinguishing features of these hospitals usually include:
- major operating theatres, full A&E, ICU and HDU facilities
- of significant importance within the Trust
- substantial general wards
In most instances the status of a hospital will have been established in the 2005 List and is unlikely to have changed. In cases of doubt caseworkers should in the first instance refer NVU for further guidance.
2) Minor operation rooms /suites within non-acute hospitals which do not vary significantly as regards quality/specification from the remainder of the hospital, should be cost at the standard rather than operating theatre level. Where an operating theatre is of a standard commensurate with that expected in an acute hospital, the operating theatre cost should be applied to the area of the entire theatre suite.
3) Minor Out-buildings such as meter houses, bottle stores, small (i.e. less than 26 sq. ms) sheds and stores etc. should not be cost, as they are included within the external works addition. All other buildings should be cost as main buildings
4) Day surgery and minor operations units are rarely “free standing” and normally form part of a larger hospital in which case they would be cost on the appropriate scale.
5) Link blocks and subways that contain no areas that are used for any purpose other than for passage between adjoining blocks should be left out of the costing exercise. This omission is justified because their presence is dictated by the absence of a uniform design and denotes an attempt to reduce the drawbacks of dispersal that would not have arisen if the hospital had been designed as an integral whole. Exceptionally the GIA of link blocks or subways should be included where they are original components of a unified design.
6) Where plant rooms are located within the main envelope of the hospital building and the GIA of the floor space used for that purpose exceeds 10% of the total GIA of the hospital building, consideration should be given to the exclusion of the excess GIA from the valuation. Such an approach will only be appropriate where it is clear that the excess floor space is surplus to the current requirements of the hospital.
7) Roof top plant rooms which were part of the original design should be valued at the appropriate Stage 1 cost as applied to the remainder of the building, irrespective of construction type. However basic metal plant buildings which have been added retrospectively should be valued at the workshop rate.
8) Where an existing hospital built prior to 1/4/2010 is extended it is for the case worker to exercise judgement as to the appropriate cost to apply to that extension. Where for example the addition comprises a large new standalone facility then it would be appropriate to apply the higher post 1/4/2010 cost. However if a minor extension then it would be appropriate to apply the cost as applied to the existing facility.
9) Separate costs for permanent modular construction have been dispensed with for the purposes of this Memorandum of Agreement and the appropriate cost from the table within Appendix 1 should be applied, dependent upon the hospital classification.
10) It is recognised that some ‘system built’ construction methods have in the past delivered sub-standard buildings with an excessive repairing liability (i.e. Oxford method). On such buildings the appropriate Stage 1 cost should be reduced by 20%. Other types of system build should be considered on their merits but when it is evident that they are inferior to other buildings built typically within that period then the allowance should be considered. Note that ‘best-buy’ designed hospitals, which were built using traditional building methods and components, are not inferior construction and should not receive this allowance. However, where a ‘best-buy’ hospital suffers from the maintenance and safety problems associated with reinforced autoclaved aerated concrete (RAAC) panels to the roof and elevations for example, then the 20% deduction on the Stage 1 cost should be adopted. Areas of contention should be referred to NVU for advice.
11) Some community hospitals built post 1/4/2010 provide a significant number of facilities previously associated only with acute hospitals and are distinguished from acute hospitals only by scale. These hospitals should also be valued using the acute hospital costs.
12) Substantial multi-storey car parks should have a construction cost as per the above table. An additional cost code has been introduced to cover simple ‘meccano’ style car parks that consist of a single upper storey/deck. Consideration should be given to whether the cost should be applied to both the ground and upper deck. Where the single deck has been constructed over an existing concrete/tarmac car park with minimal alteration to the bottom storey then the cost should only be applied to the upper deck. In such circumstances the lower car park element will form part of the consideration to the external works addition.
External Works
The following additions are to be made to the location adjusted building costs in respect of external works.
| 2% |
Town centre or island site with 90% or greater building ratio, typically with 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% to 75% building ratio, some landscaping around buildings, secure boundary fencing, adequate staff parking, external lighting and landscaping with limited general parking within the hereditament and boundary fencing. |
|
7.5% |
As above, but typically with 25% to 50% building ratio, landscaping around buildings secure boundary fencing, external lighting, adequate parking within the hereditament which falls short of full requirements |
|
10% |
Site typically with 12.6% to 25% building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |
|
12.5% |
As above, but typically with 12.5% or less building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |
Guidance notes
-
Building ratio for this purpose should be taken to be aggregate total GIA (including domestic property within a composite hereditament) expressed as a percentage of total developed land area (excluding any surplus, unnecessary or unwanted land). Some hospitals that suffer from a fragmented layout including a number of minor low-rise buildings may have relatively low site ratios. This may result in artificially high additions for external works. In such circumstances a specific additional allowance will be required at Stage 5 of the valuation in order to eliminate the cost of any external features not required in a modern rationally planned substitute.
-
Where car-parking provision is below the standard stipulated above as typical for the building plot ratio the above percentages may be abated but to no less than the next lowest figure. Where parking provision is improved, without altering the building plot ratio, the percentages may be increased but to no more than the next highest figure.
Location factors
N.B. The regions referred to are administrative areas and are not significant boundaries.
| **North East Region** | **North West Region** | ||||
| Durham County | 0.98 | Cheshire | 0.91 | ||
| Northumberland | 1.02 | Greater Manchester | 0.91 | ||
| Tees Valley | 1.01 | Lancashire | 0.91 | ||
| Tyne and Wear | 0.98 | Merseyside | 0.91 | ||
| Cumbria | 0.91 | ||||
| **Yorkshite and Humberside Region** | **South Western Region** | ||||
| East Riding and North Lincolnshire | 0.91 | Cornwall | 1.03 | ||
| North Yorkshire | 0.97 | Devon | 1.01 | ||
| South Yorkshire | 0.93 | Dorset | 1.03 | ||
| West Yorkshire | 0.91 | Gloucestershire | 1.02 | ||
| North Somerset | 1.01 | ||||
| Somerset | 1.00 | ||||
| Wiltshire | 1.02 | ||||
| **East Midlands Region** | **West Midlands Region** | ||||
| Derbyshire | 1.06 | Herefordshire | 0.91 | ||
| Leicestershire and Rutland | 1.04 | Shropshire | 0.93 | ||
| Lincolnshire | 1.05 | Staffordshire | 0.92 | ||
| Northamptonshire | 1.10 | Warwickshire | 0.96 | ||
| Nottinghamshire | 1.04 | West Midlands | 0.94 | ||
| Worcestershire | 0.96 | ||||
| **East of England Region** | **South East Region (Excl. London)** | ||||
| Bedfordshire | 1.03 | Berkshire | 1.12 | ||
| Cambridgeshire | 0.99 | Buckinghamshire | 1.11 | ||
| Essex | 1.04 | East Sussex | 1.14 | ||
| Hertfordshire | 1.07 | Hampshire | 1.09 | ||
| Norfolk | 0.96 | Isle of Wight | 1.08 | ||
| Suffolk | 0.98 | Kent | 1.13 | ||
| Oxfordshire | 1.08 | ||||
| Surrey | 1.17 | ||||
| West Sussex | 1.12 | ||||
| **Wales** | **Central London South** | ||||
| **North Wales** | Lambeth | 1.17 | |||
| Flintshire | 0.90 | Southwark | 1.17 | ||
| Conwy | 0.94 | Wandsworth | 1.19 | ||
| Denbighshire | 0.91 | ||||
| Gwynedd | 0.98 | **Greater London North East** | |||
| Isle of Anglesey | 0.96 | Hackney | 1.15 | ||
| Wrexham | 0.93 | Haringey | 1.18 | ||
| **Mid Wales** | Newham | 1.08 | |||
| Carmarthenshire | 0.98 | Tower Hamlets | 1.15 | ||
| Ceredigion | 1.01 | Barking and Dagenham | 1.06 | ||
| Powys | 0.99 | Enfield | 1.08 | ||
| Pembrokeshire | 0.93 | Havering | 0.98 | ||
| **South Wales** | Redbridge | 1.05 | |||
| Blaenau Gwent | 0.97 | Waltham Forest | 1.07 | ||
| Bridgend | 0.95 | ||||
| Caerphilly | 0.95 | **Greater London North West** | |||
| Cardiff | 0.96 | Barnet | 1.09 | ||
| Monmouthshire | 1.01 | Brent | 1.11 | ||
| Neath Port Talbot | 0.90 | Ealing | 1.16 | ||
| Newport | 0.96 | Harrow | 1.06 | ||
| Rhondda, Cynon, Taff | 0.94 | Hillingdon | 1.07 | ||
| Merthyr Tydfil | 0.95 | Hounslow | 1.06 | ||
| Swansea | 0.94 | ||||
| Torfaen | 0.94 | **Greater London South East** | |||
| Vale of Glamorgan | 0.98 | Bexley | 1.12 | ||
| Bromley | 1.09 | ||||
| Croydon | 1.12 | ||||
| **Central London North** | Greenwich | 1.13 | |||
| Camden | 1.19 | Lewisham | 1.10 | ||
| City of London | 1.11 | ||||
| Hammersmith and Fulham | 1.18 | **Greater London South West** | |||
| Islington | 1.16 | Kingston Upon Thames | 1.14 | ||
| Kensington and Chelsea | 1.23 | Merton | 1.13 | ||
| Westminster | 1.19 | Richmond Upon Thames | 1.12 | ||
| Sutton | 1.10 | ||||
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 |
+2% |
|
2.0 million |
+1% |
|
3.0 million |
ZERO |
|
4.0 million |
-1% |
|
5.0 million |
-2% |
|
7.0 million |
-3% |
|
10.0 million |
-4% |
|
15.0 million |
-5% |
|
18.0 million |
-6% |
|
20.0 million |
-7% |
|
25.0 million |
-8% |
|
35.0 million |
-9% |
|
Over 40.0 million |
- 10.0% MAX |
|
NB. Intermediate figures may be interpolated. |
|
Professional Fees and charges
|
Size of contract |
% Adjustment |
|
Sums up to £750,000 |
15% |
|
£750,000 to £1,499,000 |
14% |
|
£1,500,000 to £3,999,999 |
12.5% |
|
£4,000,000 to £7,499,999 |
11.5% |
|
£7,500,000 to £14,999,999 |
10.5% |
|
Over £15,000,000 |
10% |
Table 1: main hospital buildings obsolescence allowances
| Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1985 |
40.00% |
|
2016 |
0.75% |
1984 |
40.75% |
|
2015 |
1.50% |
1983 |
44.00% |
|
2014 |
2.50% |
1982 |
47.25% |
|
2013 |
3.50% |
1981 |
50.50% |
|
2012 |
4.75% |
1980 |
53.75% |
|
2011 |
6.00% |
1979 |
54.50% |
|
2010 |
7.25% |
1978 |
55.00% |
|
2009 |
8.50% |
1977 |
55.50% |
|
2008 |
10.00% |
1976 |
56.00% |
|
2007 |
11.25% |
1975 |
56.50% |
|
2006 |
12.75% |
1974 |
56.75% |
|
2005 |
14.25% |
1973 |
57.25% |
|
2004 |
15.75% |
1972 |
57.50% |
|
2003 |
17.25% |
1971 |
58.00% |
|
2002 |
18.75% |
1970 |
58.25% |
|
2001 |
20.25% |
1969 |
58.50% |
|
2000 |
21.75% |
1968 |
58.50% |
|
1999 |
23.25% |
1967 |
58.75% |
|
1998 |
24.50% |
1966 |
59.00% |
|
1997 |
26.00% |
1965 |
59.00% |
|
1996 |
27.50% |
1964 |
59.25% |
|
1995 |
28.75% |
1963 |
59.25% |
|
1994 |
30.00% |
1962 |
60.00% |
|
1993 |
31.25% |
1961 |
60.00% |
|
1992 |
32.50% |
1960 |
60.00% |
|
1991 |
33.75% |
1959 |
57.50% |
|
1990 |
35.00% |
1958 |
55.00% |
|
1989 |
36.00% |
1957 |
55.00% |
|
1988 |
37.00% |
1956 |
55.00% |
|
1987 |
38.00% |
1955 and earlier |
55.00% |
|
1986 |
39.00% |
|
|
Table 2: workshops and stores obsolescence allowances
|
Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1985 |
27.00% |
|
2016 |
0.50% |
1984 |
28.00% |
|
2015 |
1.00% |
1983 |
29.00% |
|
2014 |
1.50% |
1982 |
30.00% |
|
2013 |
2.00% |
1981 |
31.00% |
|
2012 |
2.50% |
1980 |
32.00% |
|
2011 |
3.00% |
1979 |
33.00% |
|
2010 |
3.50% |
1978 |
34.00% |
|
2009 |
4.00% |
1977 |
35.00% |
|
2008 |
4.50% |
1976 |
36.00% |
|
2007 |
5.00% |
1975 |
37.00% |
|
2006 |
6.00% |
1974 |
38.00% |
|
2005 |
7.00% |
1973 |
39.00% |
|
2004 |
8.00% |
1972 |
40.00% |
|
2003 |
9.00% |
1971 |
41.00% |
|
2002 |
10.00% |
1970 |
42.00% |
|
2001 |
11.00% |
1969 |
43.00% |
|
2000 |
12.00% |
1968 |
44.00% |
|
1999 |
13.00% |
1967 |
45.00% |
|
1998 |
14.00% |
1966 |
46.00% |
|
1997 |
15.00% |
1965 |
47.00% |
|
1996 |
16.00% |
1964 |
48.00% |
|
1995 |
17.00% |
1963 |
49.00% |
|
1994 |
18.00% |
1962 |
50.00% |
|
1993 |
19.00% |
1961 |
50.00% |
|
1992 |
20.00% |
1960 |
50.00% |
|
1991 |
21.00% |
1959 |
50.00% |
|
1990 |
22.00% |
1958 |
50.00% |
|
1989 |
23.00% |
1957 |
50.00% |
|
1988 |
24.00% |
1956 |
50.00% |
|
1987 |
25.00% |
1955 and earlier |
50.00% |
|
1986 |
26.00% |
|
|
Table 3: temporary buildings and huts obsolescence allowances
| Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1996 |
31.50% |
|
2016 |
1.50% |
1995 |
33.00% |
|
2015 |
3.00% |
1994 |
34.50% |
|
2014 |
4.50% |
1993 |
36.00% |
|
2013 |
6.00% |
1992 |
37.50% |
|
2012 |
7.50% |
1991 |
39.00% |
|
2011 |
9.00% |
1990 |
40.50% |
|
2010 |
10.50% |
1989 |
42.00% |
|
2009 |
12.00% |
1988 |
43.50% |
|
2008 |
13.50% |
1987 |
45.00% |
|
2007 |
15.00% |
1986 |
46.50% |
|
2006 |
16.50% |
1985 |
48.00% |
|
2005 |
18.00% |
1984 |
49.50% |
|
2004 |
19.50% |
1983 |
51.00% |
|
2003 |
21.00% |
1982 |
52.50% |
|
2002 |
22.50% |
1981 |
54.00% |
|
2001 |
24.00% |
1980 |
55.50% |
|
2000 |
25.50% |
1979 |
57.00% |
|
1999 |
27.00% |
1978 |
58.50% |
|
1998 |
28.50% |
1977 |
60.00% |
|
1997 |
30.00% |
Pre 1976 |
By agreement |
Developed Land Values
The value of the developed land, apportioned where appropriate in respect of its non-domestic/exempt use shall be taken to be the following percentages of the aggregate of the ARC of all buildings and external works:
|
Region |
Acute built post: 1 April 2010 |
Acute built pre: 1 April 2010 |
Non-acute built post: 1 April 2010 |
Non-acute built pre 1 April 2010 |
|
|
|
|
|
|
|
Central London N |
12.85% |
17.50% |
16.00% |
22.00% |
|
Central London S |
6.00% |
8.10% |
7.50% |
10.30% |
|
GLNW |
10.15% |
13.50% |
12.50% |
16.60% |
|
GLSW |
5.80% |
7.75% |
7.15% |
9.50% |
|
GLNE |
7.35% |
9.75% |
9.10% |
12.00% |
|
GLSE |
5.20% |
6.90% |
6.40% |
8.50% |
|
North East |
0.93% |
1.25% |
1.15% |
1.55% |
|
North West |
1.55% |
2.05% |
1.95% |
2.60% |
|
Yorkshire and Humberside |
1.45% |
1.95% |
1.80% |
2.40% |
|
East Midlands |
1.50% |
2.00% |
1.85% |
2.50% |
|
West Midlands |
1.90% |
2.45% |
2.30% |
3.10% |
|
East of England |
2.40% |
3.20% |
2.95% |
3.95% |
|
South East |
3.25% |
4.35% |
4.00% |
5.35% |
|
South West |
1.50% |
2.00% |
1.85% |
2.50% |
|
North Wales |
0.93% |
1.25% |
1.15% |
1.55% |
|
South Wales |
1.40% |
1.90% |
1.75% |
2.35% |
|
Cardiff |
1.90% |
2.50% |
2.35% |
3.15% |
Guidance note
The definition of the geographic areas referred to above can be found in the 2017 practice note: land values for Contractors Basis Valuations within the Rating Manual.
Undeveloped Land Value
Where present apply amenity land values as given in the 2017 practice note relating to land values.</p>
Stage 5 End Allowances
Problems associated with dispersal of blocks within a hereditament, piecemeal development and lack of integrated design should be addressed at this stage. The allowance to be made in respect of these features should not normally exceed 15%.
End allowances will always be a subjective judgement to be made by the caseworker dealing with a particular case. Only they will have inspected the hospital and be familiar with any disadvantages it may suffer. When making these judgements, caseworkers may wish to bear in mind the following factors which are considered to be amongst the most relevant:
- the total number of buildings on site
- the percentage of total floor area contained within any reasonably well designed central core building
- superfluity may need to be reflected where it can be identified
- general layout of the site from an operational viewpoint
- quality and convenience of links between buildings
- general arrangement and degree of dispersal of the buildings
- the site slopes noticeably
- disadvantages associated with a shared site and/or access
- there is a wide mix of ages of buildings (this can make maintenance and servicing more difficult)
- a particular cost arises solely due to fragmentation and dispersal for example, the cost of operating an in-site bus service due to the fragmented and/or steeply sloping nature of the site
- location may be relevant but only in fairly rare cases for example, where access is particularly poor or where security problems or other specific nuisances arise due to the particular locality in which the hospital is located and where those nuisances might not be expected to arise elsewhere within the catchment area that the hospital serves
- duplicated reception areas, and ancillaries, caused by dispersal (but bearing in mind that centralised reception areas are not a feature of larger hospitals, and that separate receptions for individual departments may be operationally required)
It should be noted that:
- it is not necessarily considered to be a disadvantage to have distinct single separate blocks for mental health units, EMI, paediatric care, maternity, workshops/boiler house/storage provided that where appropriate, these have good quality links with relevant blocks for example paediatric wards with operating theatres
- the presence of a number of dispersed small, low value ancillary buildings (for example Nissen huts) should have little impact on the overall percentage end allowance
- University Teaching Hospital sites will inevitably be split into various units of assessment to reflect shared and exclusive occupations by the respective hospital trust and University. Their co-location is of mutual benefit and should not result in end allowances for matters relating to shared use or fragmentation
It is considered that the following factors, when considered in isolation, will not usually warrant any end allowance:
- a hospital that is constructed on a gently sloping site
- where a hospital is “as designed”, where all buildings are linked and are of a similar age
- for large acute hospitals, piecemeal development up to 10 separate buildings (more extensive piecemeal development would however be likely to warrant an end allowance)
It should be emphasised that the above factors would only fail to attract an end allowance where they are present in isolation. A combination of any of the above factors may well warrant an end allowance.
1. Market appraisal
There has been little change to the main stream private healthcare market which continues to be dominated by the main providers, HCA, BMI, Spire (formed in 2007 out the sale of BUPA hospitals), Ramsey & Nuffield. So much so that the Competition and Markets Authority has reported that some hospitals within London face being sold off by HCA and BMI. Private healthcare market investigation Competition and Markets Authority case - GOV.UK.
- 80% of private hospital patients have medical insurance, usually through AXA, BUPA, PRU Health or Aviva.
- In addition to insurance backed patients there is a significant income stream from NHS patients which has shown steady growth over the past decade and accounts for in excess of a quarter of revenues. Possible reasons - In 2007 independent hospitals were included in the “Choose and Book” scheme open to NHS patients. The Health and Social Care Act 2012 brought about significant changes.
- In 2013 the Health & Social Care Act (2012) came into force and resulted in a huge change of the NHS structure. Primary Care Trusts were abolished and Clinical Commissioning Groups established to deliver the National Health Service. See BMA - Understanding the NHS reforms. The Act removed the limit on private profits being earned by NHS Trusts. Thus we are likely to see an increase in private wings on NHS sites and an increase in services provided by the private sector.
Specialist Care Private Hospitals
- These range from purpose built hospital to small converted dwellings dealing with specialist care centres providing behavioural and mental health services to various sectors of the population. Over the last few years there have been a consolidation in this sector with a number of mergers and acquisitions such that the leading providers now occupy multiple hospitals and specialist care homes cares.
2. Changes from the 2017 List practice note
2.1 The Stage 2 Obsolescence allowances and Guidance Notes for main hospital buildings has been revised.
2.2 The guidance on long stay within hospitals can now be found under the ‘Valuation Considerations’ at 9.4 of the Rating Manual section 840 that precedes this practice note.
3. Ratepayer discussions
Full discussions have taken place with representatives of the private hospital sector namely Altus Group, Avison Young, BGL Partners and Gerald Eve as part of the Group Pre Challenge Review (GRCR) 33446266. This Memorandum of Agreement reflects in-depth cost analysis and consideration of all aspect of the contractors basis as it relates to the valuation of Private hospitals in England & Wales for the 2017 rating list.
4. Method of Valuation
4.1 Rentals Method
In the years preceding the AVD a number of smaller specialised facilities have been built to treat both private patients and referred NHS patients sometimes within the confines of NHS hospitals. Some of these facilities have been developed by 3rd party developers and leased to the provider. Where such arrangements exist the lease and rent passing should be fully researched and where it can be demonstrated that the rent, adjusted as necessary, represents the value of the occupation to the occupier, the hospital should be assessed using the rentals method. Other hospitals of similar age size and type in the locality may be assessed using the same method to the extent that comparability allows. Eye hospitals and clinics should be assessed in accordance with the dedicated section of the Rating Manual.
Rental evidence of a broader nature including that relating to larger private hospitals may exist in central London and should be fully investigated and applied where appropriate.
However it is expected that no rental evidence will exist to assist in the assessment of the majority of hospitals where the Contractors basis should be applied in accordance with the following guidance.
4.2 The Contractors Basis
4.2.1 Stage 1
(i) Building Costs
The costs to be applied to the GIA of the accommodation blocks within the hospital will depend upon the type of facility under consideration and the standard of construction. The costs and associated guidance notes are contained in Appendix 1 to this practice note.
(ii) External Works
The cost of external works is to be added in accordance with Appendix 2.
(iii) Location Factors
Location factors should be applied in accordance with Appendix 3 replicated from the 2017 VOA Cost Guide.
(iv) Contract Size Adjustment
An adjustment for contract size is to be made to the building cost in accordance with Appendix 4, replicated from the 2017 VOA Cost Guide.
(iv) Professional Fees
Professional fees and charges are to be added for in accordance with Appendix 5.
4.2.2 Stage 2
The age and obsolescence allowances to be applied to the individual building blocks after addition for external works and fees are dependent upon the building classification. The majority of hospital buildings should reference the scale within Table 1 of Appendix 6. Stand-alone Workshops & Stores should reference Table 2 and the scale for Temporary Buildings is found in Table 3. For the avoidance of doubt the age of the building is to be taken as the date the building was completed.
Adjustments to the main hospital buildings for age and obsolescence should be made in accordance with Table 1 and take into account the following salient points;
a) the revised age and obsolescence scale has been agreed to 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).
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 & 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, consideration should be given to applying an additional allowance.
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) Permanent system built structures should follow the same obsolescence scale as traditional buildings.
Flat roof allowance
Permanent buildings with a flat roof are to receive an additional allowance. The allowance is not to be applied to temporary buildings, stores, workshops or garages.
- £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 National Valuation Unit before proceeding.
Multi-Storey Building Allowances
This allowance is intended to reflect the operational difficulties of hospitals housed within multi-storey buildings. It reflects the advancement of modern lift provision and technology within a hospital setting and no allowance should be applied to buildings built in 2005 or thereafter.
On pre-2005 buildings the allowance should be applied to the footprint of multi-storey buildings only. Whilst it is recognised that operational difficulties may extend beyond the footprint areas on lower floors, equally upper floors put over to non-clinical/administrative purposes would not be unduly affected. This approach allows for a practical application over the current survey without recourse to use.
Table of allowances pre 2005 buildings:
| Floors |
Percentage Deduction |
|
2 Main Floors |
Nil |
|
3 Main Floors |
5% overall |
|
4 Main Floors and above |
10% overall |
4.2.3 Stage 3
The value of the developed land and undeveloped land, apportioned in respect of the hospital hereditaments non- domestic use, shall be added in accordance with Appendix 7.
4.2.4 Stage 4 The lower statutory de-capitalisation rate shall be applied to the total of the ARC of the buildings and the adjusted land value to give an annual equivalent value.
**4.2.5 Stage 5
Appropriate adjustments may be made to the annual equivalent value to take account of any disabilities or attributes not reflected in the previous 4 stages of the valuation to arrive at the rateable value. Guidance on the application of stage 5 allowances is contained in Appendix 8.
5. Valuation Spreadsheet
Contractors based valuations of private hospitals are to be completed exclusively on the dedicated valuation spreadsheet held on the VOA Non-Bulk Server. The spreadsheet incorporates considerable functionality to assist the valuation process.
Appendix 1
Stage 1 Build Costs
|
Item |
Cost Guide Ref |
£/m2 |
Remarks |
|
Acute Hospitals completed post 1/4/2010 |
98H101 |
£2600 |
See guidance notes below. |
|
Acute Hospitals built and completed prior to 1/4/2010 |
N/A |
£1925 |
|
|
Non-Acute and Psychiatric Hospitals completed post 1/4/2010 |
98H102 |
£2200 |
|
|
Non-Acute and Psychiatric Hospitals completed prior to 1/4/2010 |
N/A |
£1650 |
|
|
Temporary buildings- |
98H104 |
£684 |
|
|
Stores and other inferior buildings. (separate or distinct stores, plant rooms, workshops, offices of inferior construction and garages) |
98H105 |
£505 |
Plant rooms are to be cost at the hospital main rate unless separate and distinct buildings. Energy centres and large boiler houses should be cost at the main rate whether a stand- alone building or not. |
|
Multi-storey car parks |
98H107 |
£458/m2 or £10300/space |
|
|
Basement car parks |
98H108 |
£786/m2 or £17669/space |
|
Guidance notes
1) Definition of Acute Hospital
Typically a hospital coming within this description provides a wide range of specialist care and treatment for patients that may include routine, complex and life saving surgery and specialist diagnostic procedures and treatment. Although some consultations and treatments may be undertaken on an outpatient basis, an Acute Hospital will usually have a significant inpatient resource for observation, treatment and recovery.
The distinguishing features of these hospitals usually include:
- Major operating theatres, ICU & HDU facilities
- Substantial general wards
In most instances the status of a hospital will have been established in the 2005 List and is unlikely to have changed. In cases of doubt caseworkers should in the first instance refer NVU for further guidance.
2) Minor Out-buildings such as meter houses, bottle stores, small (i.e. less than 26 sq. ms) sheds and stores etc. should not be cost, as they are included within the external works addition. All other buildings should be cost as main buildings
3) Day surgery and minor operations units are rarely “free standing” and normally form part of a larger hospital in which case they would be cost on the appropriate scale.
4) Link blocks and subways that contain no areas that are used for any purpose other than for passage between adjoining blocks should be left out of the costing exercise. This omission is justified because their presence is dictated by the absence of a uniform design and denotes an attempt to reduce the drawbacks of dispersal that would not have arisen if the hospital had been designed as an integral whole. Exceptionally the GIA of link blocks or subways should be included where they are original components of a unified design.
5) Where plant rooms are located within the main envelope of the hospital building and the GIA of the floor space used for that purpose exceeds 10% of the total GIA of the hospital building, consideration should be given to the exclusion of the excess GIA from the valuation. Such an approach will only be appropriate where it is clear that the excess floor space is surplus to the current requirements of the hospital.
6) Roof top plant rooms which were part of the original design should be valued at the appropriate Stage 1 cost as applied to the remainder of the building, irrespective of construction type. However basic metal plant buildings which have been added retrospectively should be valued at the workshop rate.
7) Where an existing hospital built prior to 1/4/2010 is extended it is for the case worker to exercise judgement as to the appropriate cost to apply to that extension. Where for example the addition comprises a large new standalone facility then it would be appropriate to apply the higher post 1/4/2010 cost. However if a minor extension then it would be appropriate to apply the cost as applied to the existing facility.
8) Separate costs for permanent modular construction have been dispensed with for the purposes of this Memorandum of Agreement and the appropriate cost from the table within Appendix 1 should be applied, dependent upon the hospital classification.
Appendix 2
External works
The following additions are to be made to the location adjusted building costs in respect of external works.
|
2% |
Town centre or island site with 90% or greater building ratio, typically with 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% to 75% building ratio, some landscaping around buildings, secure boundary fencing, adequate staff parking, external lighting and landscaping with limited general parking within the hereditament and boundary fencing. |
|
7.5% |
As above, but typically with 25% to 50% building ratio, landscaping around buildings secure boundary fencing, external lighting, adequate parking within the hereditament which falls short of full requirements |
|
10% |
Site typically with 12.6% to 25% building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |
|
12.5% |
As above, but typically with 12.5% or less building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking within the hereditament for all staff and other users. |
Guidance notes
- Building ratio for this purpose should be taken to be aggregate total GIA (including domestic property within a composite hereditament) expressed as a percentage of total developed land area (excluding any surplus, unnecessary or unwanted land). Some hospitals that suffer from a fragmented layout including a number of minor low-rise buildings may have relatively low site ratios. This may result in artificially high additions for external works. In such circumstances a specific additional allowance will be required at Stage 5 of the valuation in order to eliminate the cost of any external features not required in a modern rationally planned substitute.</li>
- Where car-parking provision is below the standard stipulated above as typical for the building plot ratio the above percentages may be abated but to no less than the next lowest figure. Where parking provision is improved, without altering the building plot ratio, the percentages may be increased but to no more than the next highest figure.
Appendix 3
Location factors
N.B. The Regions referred to are administrative areas and are not significant boundaries.
|
North East Region |
|
|
North West Region |
|
|
|
Durham County |
0.98 |
|
Cheshire |
0.91 |
|
|
Northumberland |
1.02 |
|
Greater Manchester |
0.91 |
|
|
Tees Valley |
1.01 |
|
Lancashire |
0.91 |
|
|
Tyne and Wear |
0.98 |
|
Merseyside |
0.91 |
|
|
|
|
|
Cumbria |
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yorkshire and Humberside Region |
|
South Western Region |
|||
|
East Riding and North Lincolnshire |
0.91 |
|
Cornwall |
1.03 |
|
|
North Yorkshire |
0.97 |
|
Devon |
1.01 |
|
|
South Yorkshire |
0.93 |
|
Dorset |
1.03 |
|
|
West Yorkshire |
0.91 |
|
Gloucestershire |
1.02 |
|
|
|
North Somerset |
1.01 |
|||
|
Somerset |
1.00 |
||||
|
Wiltshire |
1.02 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Midlands Region |
|
|
West Midlands Region |
|
|
|
Derbyshire |
1.06 |
|
Herefordshire |
0.91 |
|
|
Leicestershire and Rutland |
1.04 |
|
Shropshire |
0.93 |
|
|
Lincolnshire |
1.05 |
|
Staffordshire |
0.92 |
|
|
Northamptonshire |
1.10 |
|
Warwickshire |
0.96 |
|
|
Nottinghamshire |
1.04 |
|
West Midlands |
0.94 |
|
|
|
|
|
Worcestershire |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East of England Region |
|
|
South East Region (Excl. London) |
||
|
Bedfordshire |
1.03 |
|
Berkshire |
1.12 |
|
|
Cambridgeshire |
0.99 |
|
Buckinghamshire |
1.11 |
|
|
Essex |
1.04 |
|
East Sussex |
1.14 |
|
|
Hertfordshire |
1.07 |
|
Hampshire |
1.09 |
|
|
Norfolk |
0.96 |
|
Isle of Wight |
1.08 |
|
|
Suffolk |
0.98 |
|
Kent |
1.13 |
|
|
|
|
|
Oxfordshire |
1.08 |
|
|
|
|
|
Surrey |
1.17 |
|
|
|
|
|
West Sussex |
1.12 |
|
|
Wales |
|
|
Central London South |
||
|
North Wales |
|
|
Lambeth |
1.17 |
|
|
Flintshire |
0.90 |
|
Southwark |
1.17 |
|
|
Conwy |
0.94 |
|
Wandsworth |
1.19 |
|
|
Denbighshire |
0.91 |
|
|
|
|
|
Gwynedd |
0.98 |
|
Greater London North East |
||
|
Isle of Anglesey |
0.96 |
|
Hackney |
1.15 |
|
|
Wrexham |
0.93 |
|
Haringey |
1.18 |
|
|
Mid Wales |
|
|
Newham |
1.08 |
|
|
Carmarthenshire |
0.98 |
|
Tower Hamlets |
1.15 |
|
|
Ceredigion |
1.01 |
|
Barking and Dagenham |
1.06 |
|
|
Powys |
0.99 |
|
Enfield |
1.08 |
|
|
Pembrokeshire |
0.93 |
|
Havering |
0.98 |
|
|
South Wales |
|
|
Redbridge |
1.05 |
|
|
Blaenau Gwent |
0.97 |
|
Waltham Forest |
1.07 |
|
|
Bridgend |
0.95 |
|
|
|
|
|
Caerphilly |
0.95 |
|
Greater London North West |
||
|
Cardiff |
0.96 |
|
Barnet |
1.09 |
|
|
Monmouthshire |
1.01 |
|
Brent |
1.11 |
|
|
Neath Port Talbot |
0.90 |
|
Ealing |
1.16 |
|
|
Newport |
0.96 |
|
Harrow |
1.06 |
|
|
Rhondda, Cynon, Taff |
0.94 |
|
Hillingdon |
1.07 |
|
|
Merthyr Tydfil |
0.95 |
|
Hounslow |
1.06 |
|
|
Swansea |
0.94 |
|
|
|
|
|
Torfaen |
0.94 |
|
Greater London South East |
||
|
Vale of Glamorgan |
0.98 |
|
Bexley |
1.12 |
|
|
|
|
|
Bromley |
1.09 |
|
|
|
|
Croydon |
1.12 |
||
|
Central London North |
|
Greenwich |
1.13 |
||
|
Camden |
1.19 |
|
Lewisham |
1.10 |
|
|
City of London |
1.11 |
|
|
|
|
|
Hammersmith and Fulham |
1.18 |
|
Greater London South West |
||
|
Islington |
1.16 |
|
Kingston Upon Thames |
1.14 |
|
|
Kensington and Chelsea |
1.23 |
|
Merton |
1.13 |
|
|
Westminster |
1.19 |
|
Richmond Upon Thames |
1.12 |
|
|
|
|
|
Sutton |
1.10 |
|
Appendix 4
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 |
+2% |
|
2.0 million |
+1% |
|
3.0 million |
ZERO |
|
4.0 million |
-1% |
|
5.0 million |
-2% |
|
7.0 million |
-3% |
|
10.0 million |
-4% |
|
15.0 million |
-5% |
|
18.0 million |
-6% |
|
20.0 million |
-7% |
|
25.0 million |
-8% |
|
35.0 million |
-9% |
|
Over 40.0 million |
- 10.0% MAX |
|
NB. Intermediate figures may be interpolated. |
|
Appendix 5
Professional Fees and charges
|
Size of contract |
% Adjustment |
|
Sums up to £750,000 |
15% |
|
£750,000 to £1,499,000 |
14% |
|
£1,500,000 to £3,999,999 |
12.5% |
|
£4,000,000 to £7,499,999 |
11.5% |
|
£7,500,000 to £14,999,999 |
10.5% |
|
Over £15,000,000 |
10% |
Appendix 6 - Age and Obsolescence Allowances
Table 1: Main Hospital Buildings Obsolescence Allowances
|
Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1985 |
40.00% |
|
2016 |
0.75% |
1984 |
40.75% |
|
2015 |
1.50% |
1983 |
44.00% |
|
2014 |
2.50% |
1982 |
47.25% |
|
2013 |
3.50% |
1981 |
50.50% |
|
2012 |
4.75% |
1980 |
53.75% |
|
2011 |
6.00% |
1979 |
54.50% |
|
2010 |
7.25% |
1978 |
55.00% |
|
2009 |
8.50% |
1977 |
55.50% |
|
2008 |
10.00% |
1976 |
56.00% |
|
2007 |
11.25% |
1975 |
56.50% |
|
2006 |
12.75% |
1974 |
56.75% |
|
2005 |
14.25% |
1973 |
57.25% |
|
2004 |
15.75% |
1972 |
57.50% |
|
2003 |
17.25% |
1971 |
58.00% |
|
2002 |
18.75% |
1970 |
58.25% |
|
2001 |
20.25% |
1969 |
58.50% |
|
2000 |
21.75% |
1968 |
58.50% |
|
1999 |
23.25% |
1967 |
58.75% |
|
1998 |
24.50% |
1966 |
59.00% |
|
1997 |
26.00% |
1965 |
59.00% |
|
1996 |
27.50% |
1964 |
59.25% |
|
1995 |
28.75% |
1963 |
59.25% |
|
1994 |
30.00% |
1962 |
60.00% |
|
1993 |
31.25% |
1961 |
60.00% |
|
1992 |
32.50% |
1960 |
60.00% |
|
1991 |
33.75% |
1959 |
57.50% |
|
1990 |
35.00% |
1958 |
55.00% |
|
1989 |
36.00% |
1957 |
55.00% |
|
1988 |
37.00% |
1956 |
55.00% |
|
1987 |
38.00% |
1955 and earlier |
55.00% |
|
1986 |
39.00% |
|
|
Table 2: Workshops and Stores Obsolescence Allowances
|
Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1985 |
27.00% |
|
2016 |
0.50% |
1984 |
28.00% |
|
2015 |
1.00% |
1983 |
29.00% |
|
2014 |
1.50% |
1982 |
30.00% |
|
2013 |
2.00% |
1981 |
31.00% |
|
2012 |
2.50% |
1980 |
32.00% |
|
2011 |
3.00% |
1979 |
33.00% |
|
2010 |
3.50% |
1978 |
34.00% |
|
2009 |
4.00% |
1977 |
35.00% |
|
2008 |
4.50% |
1976 |
36.00% |
|
2007 |
5.00% |
1975 |
37.00% |
|
2006 |
6.00% |
1974 |
38.00% |
|
2005 |
7.00% |
1973 |
39.00% |
|
2004 |
8.00% |
1972 |
40.00% |
|
2003 |
9.00% |
1971 |
41.00% |
|
2002 |
10.00% |
1970 |
42.00% |
|
2001 |
11.00% |
1969 |
43.00% |
|
2000 |
12.00% |
1968 |
44.00% |
|
1999 |
13.00% |
1967 |
45.00% |
|
1998 |
14.00% |
1966 |
46.00% |
|
1997 |
15.00% |
1965 |
47.00% |
|
1996 |
16.00% |
1964 |
48.00% |
|
1995 |
17.00% |
1963 |
49.00% |
|
1994 |
18.00% |
1962 |
50.00% |
|
1993 |
19.00% |
1961 |
50.00% |
|
1992 |
20.00% |
1960 |
50.00% |
|
1991 |
21.00% |
1959 |
50.00% |
|
1990 |
22.00% |
1958 |
50.00% |
|
1989 |
23.00% |
1957 |
50.00% |
|
1988 |
24.00% |
1956 |
50.00% |
|
1987 |
25.00% |
1955 and earlier |
50.00% |
|
1986 |
26.00% |
|
|
Table 3: Temporary Buildings and Huts Obsolescence Allowances
| Age |
% Obsolescence |
Age |
% Obsolescence |
|
2017 |
0.00% |
1996 |
31.50% |
|
2016 |
1.50% |
1995 |
33.00% |
|
2015 |
3.00% |
1994 |
34.50% |
|
2014 |
4.50% |
1993 |
36.00% |
|
2013 |
6.00% |
1992 |
37.50% |
|
2012 |
7.50% |
1991 |
39.00% |
|
2011 |
9.00% |
1990 |
40.50% |
|
2010 |
10.50% |
1989 |
42.00% |
|
2009 |
12.00% |
1988 |
43.50% |
|
2008 |
13.50% |
1987 |
45.00% |
|
2007 |
15.00% |
1986 |
46.50% |
|
2006 |
16.50% |
1985 |
48.00% |
|
2005 |
18.00% |
1984 |
49.50% |
|
2004 |
19.50% |
1983 |
51.00% |
|
2003 |
21.00% |
1982 |
52.50% |
|
2002 |
22.50% |
1981 |
54.00% |
|
2001 |
24.00% |
1980 |
55.50% |
|
2000 |
25.50% |
1979 |
57.00% |
|
1999 |
27.00% |
1978 |
58.50% |
|
1998 |
28.50% |
1977 |
60.00% |
|
1997 |
30.00% |
Pre 1976 |
By Agreement |
Appendix 7
Developed Land Values
The value of the developed land, apportioned where appropriate in respect of its non-domestic/exempt use shall be taken to be the following percentages of the aggregate of the ARC of all buildings and external works:
Where £/ha is shown for the London Regions then apply residential land values less 20% as stated in the 2017 Land Value Practice Note.
|
Region |
Acute Built Post-1/4/10 |
Acute Built Pre-1/4/10 |
Non-acute Built Post-1/4/10 |
Non-acute Built Pre-1/4/10 |
|
Central London N |
£/ha |
£/ha |
£/ha |
£/ha |
|
Central London S |
£/ha |
£/ha |
£/ha |
£/ha |
|
GLNW |
£/ha |
£/ha |
£/ha |
£/ha |
|
GLSW |
£/ha |
£/ha |
£/ha |
£/ha |
|
GLNE |
£/ha |
£/ha |
£/ha |
£/ha |
|
GLSE |
£/ha |
£/ha |
£/ha |
£/ha |
|
North East |
3.40% |
4.45% |
4.00% |
5.20% |
|
North West |
7.35% |
9.50% |
8.60% |
11.20% |
|
Yorkshire and Humberside |
6.25% |
8.10% |
7.35% |
9.50% |
|
East Midlands |
3.45% |
4.45% |
4.05% |
5.25% |
|
West Midlands |
6.10% |
7.85% |
7.10% |
9.25% |
|
East of England |
11.50% |
14.90% |
13.55% |
17.60% |
|
South East |
10.95% |
14.15% |
12.85% |
16.70% |
|
South West |
7.80% |
10.10% |
9.15% |
11.90% |
|
North Wales |
5.05% |
6.55% |
5.95% |
7.70% |
|
South Wales |
6.60% |
8.50% |
7.75% |
10.05% |
|
Cardiff |
16.50% |
21.30% |
19.35% |
25.15% |
Guidance note
The definition of the geographic areas referred to above can be found in the 2017 Practice Note: Land Values for Contractors Basis Valuations within the Rating Manual.
Undeveloped Land Value Where present apply amenity land values as given in the 2017 Practice Note relating to land values.
Appendix 8
Stage 5 End Allowances
Where a hospital is particularly poorly located, either by way of access or the general environment in which it is sited it may be appropriate to incorporate a stage 5 allowance within the valuation. Examples would be hospitals with access through an industrial estate or poor housing development or those located on the sites of NHS Hospitals where the NHS facility is itself located in an area where a private facility would not normally be sited. Similarly an allowance maybe appropriate where it can be demonstrated that a hospital is so remote from the main road network or areas of population that it has a bearing on the ability of the hospital to attract patients.
Likewise problems associated with dispersal of blocks within a hereditament, piecemeal development and lack of integrated design should be addressed at this stage. The allowance to be made in respect of these features should not normally exceed 10%. Allowances conceded during negotiations on the 2010 List should normally be maintained into the 2017 List where the circumstances justifying the concession can clearly still be seen to apply, subject to the comments below.
Over the past two decades there has been a considerable rise in the use of day care surgery and the average length of stay in hospital following many other procedures has fallen. These factors impact in two ways on the valuation of private hospitals.
Firstly previous measures used for measuring the performance of private hospitals occupancy of bed spaces at midnight may no longer be an accurate yardstick of performance, since a bed may be used by more than one patient during the day, yet generating no overnight stays.
Secondly these two factors have impacted on the likely design of new hospitals, in that it is likely that a lower proportion of ward space required in new hospitals, than in existing hospitals built during the rapid expansion of the sector in the 1980s or earlier. This point is accepted and is therefore reflected in the higher age and obsolescence rates for buildings constructed prior to 1995. It follows that hospitals constructed in 1995 or later are likely to be of a design reflecting modern requirements.
Both these points should be taken into account when considering end allowances.
Overall the performance of a particular hospital will need to be judged over at least a 12-month period so as to eliminate the disproportionate effect of holiday periods where the private sector is normally quiet.
1. Market appraisal
Successive Governments since the 1960’s have provided financial assistance to GP’s to encourage the development of better quality, better equipped premises to enable more front line services to be delivered away from hospital. Although there are still some smaller single General Practice (GP) surgeries in converted dwelling houses, the trend has been towards the construction of large purpose-built GP surgeries or health centres that provide a wide range of services. These may include one or more GP practice, dentistry, midwifery, psychiatric services, treatment areas for minor surgical procedures, administration offices and a pharmacy.
The delivery of planned changes in health provision is a central element of the Health and Social Care Act 2012 which introduced significant changes to the structure of the NHS in England. As of 1 April 2013, primary care trusts and strategic health authorities ceased to exist, and have been replaced with a new infrastructure of commissioners and support units. Clinical commissioning groups (CCGs) and NHS England have taken on commissioning responsibilities, with public health commissioning being transferred to local government. Across England there were 207 CCGs responsible for the NHS commissioning budget (2017 figures). The aim was to transfer responsibility for commissioning decisions to GPs at a local level to improve healthcare services for their patients. CCG boards are predominantly made up of GP members, along with at least one member from secondary care, nursing and the general public.
All GP practices must be members of the CCG in their geographical area. Services commissioned by the CCGs include planned hospital care, rehabilitative care, emergency care, community health and mental health. The former PCT real estate functions now come under the umbrella of NHS Property Services Ltd which is a limited company wholly owned by the Secretary of State for Health. The company was created to take that part of primary care trust and strategic health authority estate not transferring to National Health Service providers on 1 April 2013. NHS Property Services Ltd has one of the biggest property portfolios in Europe and their role is to manage, maintain and improve NHS properties and facilities, working in partnership with the NHS. NHS England’s remit includes a responsibility for business rate issues in respect of GP surgeries and Health Centres.
In Wales, seven Local Health Boards are responsible for planning and delivery of healthcare services together with three NHS Trusts.
2. Changes from the 2010 practice note
For contractor based valuations the Stage 2 obsolescence allowances and guidance notes have been revised following extensive discussions and agreement on other specialist classes. Full details can be found at 4.2 below. The allowances for inferior construction have been dispensed with as these are reflected in the revised age related scale. True exceptions that fall outside the scale are to be considered on merit.
3. Ratepayer discussions
Discussions have taken place with GL Hearn (who represent NHS Property Services, NHS England and Community Health Partnerships, who operate the majority of primary care premises in England) and Avison Young (who represent all 7 Welsh Health Boards who operate all of the primary care estate in Wales). The Memorandum below reflects the in-depth cost analysis of 28 primary care projects throughout England and Wales.
4. Valuation scheme
4.1 The method of valuation employed will be determined by the reliability of the rental evidence available in respect of the type of Primary Care Centre or Drs Surgery under consideration.
4.2 Rentals basis
4.2.1 GP surgeries and primary care centres converted from buildings previously used for other purposes(e.g. residential/office) should generally be assessed on a rentals basis subject to their being sufficient rental evidence by way of lettings to other D1 users in the locality (e.g. dentists, chiropractors ,vets ,private medical practitioners etc. ) to formulate an opinion of value. Where in a particular locality there is a dearth of evidence relating to D1 use but evidence from other nearby localities suggests a relationship with office levels of value then that same relationship can be applied in the locality in question to derive a basis of valuation.
4.2.2 Following the Upper Tribunal decision in Gallagher (VO) v Dr M Read & Partners & Dr J Poyser and Partners (RA/31/2012), rents derived from the Doctors’ Rent and Rates Scheme ‘Current Market Rent’, whether on converted or purpose built GP Surgeries, are unreliable for rating valuation purposes as they do not accord with the rating hypothesis. This includes lease rents on GP Surgeries, lease rents on Primary Care Health Centres and lease rents on other healthcare uses in shared premises where it is evident that they too are affected by the DRRS.
4.2.3 Rents relating to LIFT building are of no assistance.
4.2.4 There is evidence of an increasing involvement within the primary care sector of the NHS of private sector providers. Such providers may occupy premises akin to purpose built NHS surgeries and clinics and where leased the providers may pay a market rent. Full details of the rent and lease are to be obtained by way of FOR and notified to the appropriate valuer in NVU. In these circumstances consideration should be given to applying the rental method of valuation.
4.3 The Contractors Basis
The costs shown in this section are for ease of reference. In all cases where a cost guide code is shown it is this that which must be input into the NBS template, not the costs shown here. Where the cost guide code shows options, the costs shown in this practice note should be used to aid selection. Should the cost guide show different costs to those shown in a current version of this practice note, please refer to the CCT.
4.3.1 Stage 1 -Estimated Replacement Cost
(i) Building costs
With the exception of areas that are not used at the AVD and have no prospect of being used, the actual GIA of the surgery/health centre should be used to calculate the Estimated Replacement Cost (Stage 1) of the hereditament in accordance with Appendix A.
(ii) External works
The cost of external works is to be added in accordance with Appendix B.
(iii) Location factors
Location factors should be applied in accordance with Appendix C, replicated from the 2017 VOA Cost Guide.
(iv) Contract size Adjustment
An adjustment for contract size is to be made to the building cost in accordance with Appendix D, replicated from the 2017 VOA Cost Guide.
(v) Professional Fees and Charges
Professional fees and charges are to be added for in accordance with Appendix E.
4.2 Stage 2 - Age and Obsolescence
Adjustments for age and obsolescence should be made in accordance with the scales contained in Appendix F, which have been agreed for other specialist classes of property following extensive research and discussion between Agents and the VO. Allowances in Appendix F take into account the following salient points;
a) The revised age and obsolescence scale has been agreed to 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)
-
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, consideration should be given to applying an additional allowance.
-
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.
4.3 Stage 3-Land Value
The value of the developed land should be added in accordance with Appendix G.
4.4 Stage 4-Decapitalisation rate
Generally the lower statutory decapitalisation rate should be applied when valuing GP surgeries and health centres. Any concerns regarding the qualification as a ‘healthcare hereditament’ as defined in The Non-Domestic Rating (Miscellaneous Provisions) (No. 2) (Amendment) Regulations 1994 should be referred to NVU.
4.5 Stage 5- End Adjustments
Any advantage or disadvantage which might affect the value of the occupation of the hereditament as a whole should be reflected at this last stage. An adjustment under this head should not duplicate adjustments made elsewhere. Most buildings will not warrant further allowances at this stage and where allowances are appropriate, it is expected that they should not normally exceed 15%.
4.5.1 Flat roof allowance
Permanent buildings with a flat roof are to receive an end allowance. The allowance is not to be applied to temporary buildings, stores, workshops or garages.
- £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 National Valuation Unit before proceeding.
4.5.2 Heating allowance
Oil, LP Gas or Electric Central Heating
Where the property has oil, LPG fired central heating or electrical heating, an end allowance of 5% shall be applied to the valuation.
Appendix A
Building costs
|
Size |
Cost |
Health centre / group practice surgery |
GIA up to 2650m2 |
£1,525 |
Health centre / group practice surgery |
GIA > 2650m2 |
£2175 |
Temporary building |
All |
£ 684 |
Separate stores, garages and workshops |
All |
£505 |
Appendix B
Additions for external works
The following additions are to be made to the location adjusted building costs in respect of external works
2% |
Town centre or island site with 90% or greater building ratio, typically with 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 staff parking, external lighting and landscaping with limited general parking within the hereditament</a> and boundary fencing. |
7.5% |
As above, but typically with 25%to 50% building ratio, landscaping around buildings secure boundary fencing, external lighting, adequate parking within the hereditament</a> 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</a> for all staff and other users. |
Appendix C
Location factors
N.B. The Regions referred to are administrative areas and are not significant boundaries.
North East Region |
|
|
Durham County |
0.98 |
|
Northumberland |
1.02 |
|
Tees Valley |
1.01 |
|
Tyne and Wear |
0.98 |
|
Yorkshire and Humberside Region |
||
East Riding and North Lincolnshire |
0.91 |
|
North Yorkshire |
0.97 |
|
South Yorkshire |
0.93 |
|
West Yorkshire |
0.91 |
|
East Midlands Region |
|
Derbyshire |
1.06 |
Leicestershire and Rutland |
1.04 |
Lincolnshire |
1.05 |
Northamptonshire |
1.10 |
Nottinghamshire |
1.04 |
East of England Region |
|
Bedfordshire |
1.03 |
Cambridgeshire |
0.99 |
Essex |
1.04 |
Hertfordshire |
1.07 |
Norfolk |
0.96 |
Suffolk |
0.98 |
North West Region |
|
Cheshire |
0.91 |
Greater Manchester |
0.91 |
Lancashire |
0.91 |
Merseyside |
0.91 |
Cumbria |
0.91 |
South Western Region |
|
Cornwall |
1.03 |
Devon |
1.01 |
Dorset |
1.03 |
Gloucestershire |
1.02 |
North Somerset |
1.01 |
Somerset |
1.00 |
Wiltshire |
1.02 |
West Midlands Region |
|
Herefordshire |
0.91 |
Shropshire |
0.93 |
Staffordshire |
0.92 |
Warwickshire |
0.96 |
West Midlands |
0.94 |
Worcestershire |
0.96 |
South East Region (Excluding London) |
|
Berkshire |
1.12 |
Buckinghamshire |
1.11 |
East Sussex |
1.14 |
Hampshire |
1.09 |
Isle of Wight |
1.08 |
Kent |
1.13 |
Oxfordshire |
1.08 |
Surrey |
1.17 |
West Sussex |
1.12 |
Wales |
|
North Wales |
|
Flintshire |
0.90 |
Conwy |
0.94 |
Denbighshire |
0.91 |
Gwynedd |
0.98 |
Isle of Anglesey |
0.96 |
Wrexham |
0.93 |
Mid Wales |
|
Carmarthenshire |
0.98 |
Ceredigion |
1.01 |
Powys |
0.99 |
Pembrokeshire |
0.93 |
South Wales |
|
Blaenau Gwent |
0.97 |
Bridgend |
0.95 |
Caerphilly |
0.95 |
Cardiff |
0.96 |
Monmouthshire |
1.01 |
Neath Port Talbot |
0.90 |
Newport |
0.96 |
Rhondda, Cynon, Taff |
0.94 |
Merthyr Tydfil |
0.95 |
Swansea |
0.94 |
Torfaen |
0.94 |
Vale of Glamorgan |
0.98 |
Central London North |
|
Camden |
1.19 |
City of London |
1.11 |
Hammersmith and Fulham |
1.18 |
Islington |
1.16 |
Kensington and Chelsea |
1.23 |
Westminster |
1.19 |
Central London South |
||
Lambeth |
1.17 |
|
Southwark |
1.17 |
|
Wandsworth |
1.19 |
|
Greater London North East |
||
Hackney |
1.15 |
|
Haringey |
1.18 |
|
Newham |
1.08 |
|
Tower Hamlets |
1.15 |
|
Barking and Dagenham |
1.06 |
|
Enfield |
1.08 |
|
Havering |
0.98 |
|
Redbridge |
1.05 |
|
Waltham Forest |
1.07 |
|
Greater London North West |
||
Barnet |
1.09 |
|
Brent |
1.11 |
|
Ealing |
1.16 |
|
Harrow |
1.06 |
|
Hillingdon |
1.07 |
|
Hounslow |
1.06 |
|
Greater London South East |
||
Bexley |
1.12 |
|
Bromley |
1.09 |
|
Croydon |
1.12 |
|
Greenwich |
1.13 |
|
Lewisham |
1.10 |
|
Greater London South West |
||
Kingston Upon Thames |
1.14 |
|
Merton |
1.13 |
|
Richmond Upon Thames |
1.12 |
|
Sutton |
1.10 |
|
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 |
+2% |
2.0 million |
+1% |
3.0 million |
ZERO |
4.0 million |
-1% |
5.0 million |
-2% |
7.0 million |
-3% |
10.0 million |
-4% |
15.0 million |
-5% |
18.0 million |
-6% |
20.0 million |
-7% |
25.0 million |
-8% |
35.0 million |
-9% |
Over 40.0 million |
- 10.0% MAX |
NB. Intermediate figures may be interpolated. |
|
Appendix E
Professional Fees and charges
Size of Contract |
% Adjustment |
Sums up to £750,000 |
14% |
£750,000 to £1,499,000 |
13% |
£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
Obsolescence Allowances - main buildings
Age |
% Obsolescence |
Age |
% Obsolescence |
2017 |
0% |
1985 |
40% |
2016 |
0.75% |
1984 |
40.75% |
2015 |
1.50% |
1983 |
44.00% |
2014 |
2.50% |
1982 |
47.25% |
2013 |
3.50% |
1981 |
50.50% |
2012 |
4.75% |
1980 |
53.75% |
2011 |
6.00% |
1979 |
54.50% |
2010 |
7.25% |
1978 |
55.00% |
2009 |
8.50% |
1977 |
55.50% |
2008 |
10.00% |
1976 |
56.00% |
2007 |
11.25% |
1975 |
56.50% |
2006 |
12.75% |
1974 |
56.75% |
2005 |
14.25% |
1973 |
57.25% |
2004 |
15.75% |
1972 |
57.50% |
2003 |
17.25% |
1971 |
58.00% |
2002 |
18.75% |
1970 |
58.25% |
2001 |
20.25% |
1969 |
58.50% |
2000 |
21.75% |
1968 |
58.50% |
1999 |
23.25% |
1967 |
58.75% |
1998 |
24.50% |
1966 |
59.00% |
1997 |
26.00% |
1965 |
59.00% |
1996 |
27.50% |
1964 |
59.25% |
1995 |
28.75% |
1963 |
59.25% |
1994 |
30.00% |
1962 |
60.00% |
1993 |
31.25% |
1961 |
60.00% |
1992 |
32.50% |
1960 |
60.00% |
1991 |
33.75% |
1959 |
57.50% |
1990 |
35.00% |
1958 |
55.00% |
1989 |
36.00% |
1957 |
55.00% |
1988 |
37.00% |
1956 |
55.00% |
1987 |
38.00% |
1955 and earlier |
55.00% |
1986 |
39.00% |
|
|
Appendix G
Land Value Additions – Developed Land
The locations referred to below are defined within R2017 Land Values for Contractors Basis Valuations in the Rating Manual section 6 part 3: Valuation of all property classes: Section 1200
Location |
Percentage addition (GIA up to £2650m2) |
Percentage addition (GIA > 2650m2) |
Central London N |
50.25% |
36.25% |
Central London S |
19.00% |
13.75% |
GLNW |
15.50% |
11.25% |
GLSW |
37.25% |
26.75% |
GLNE |
23.00% |
16.50% |
GLSE |
28.75% |
20.50% |
North East |
4.50% |
3.25% |
North West |
9.75% |
7.00% |
Yorkshire and Humberside |
8.25% |
6.00% |
East Midlands |
4.50% |
3.25% |
West Midlands |
8.00% |
5.75% |
East of England |
15.25% |
11.00% |
South East |
14.50% |
10.50% |
South West |
10.50% |
7.50% |
North Wales |
6.75% |
4.75% |
South Wales |
8.75% |
6.25% |
Cardiff |
22.00% |
15.75% |