Anglesey, Conwy and Gwynedd and Denbighshire, Flintshire and Wrexham Local Ratepayer Valuation Forum Meeting

Meetings held

13th January at the Celtic Royal Hotel Caernarfon

14th January at the Changing Rooms Restaurant, Wrexham Football Club

From the Valuation Office Agency (VOA)

Mary Hardman - (Group Valuation Officer)
Jean Jones - (Group Customer Services Manager)
Tony Welsby - (Business Rates Team Leader)
Ann Thomas - (Revaluation 2005 Team)
Tony Capp - (National & Local Ratepayer Forum Project Manager)
Yvonne Simmonds - (Caernarfon meeting)
Hayley Williams - (Wrexham meeting)

GUEST SPEAKERS AT BOTH MEETINGS

David Fletcher – Welsh Assembly Government
Ken Williams – Storey: SSP

What follows is a summary of the presentations given at both meetings – which were similar, and the questions asked and responses made. Whilst these differed between the meetings they have been amalgamated in the minutes for ease of reading and to better inform all participants. Handouts of the presentations were distributed to all attendees on the day and are available electronically on request.

Mary Hardman welcomed all attendees, thanking those who had participated previously and expressed the hope that those who were attending for the first time would find it interesting and informative. She then gave a brief summary of what was discussed at the last meeting, in particular an overview of the Rating System, Revaluation 2005 – what it involves, Update on National Ratepayer Valuation Forums (NRVFs) and the Council Tax Revaluation 2005. She also highlighted the main issues that arose from the meetings which were: - Changes in Rural Rate Relief and associated reliefs, Valuation of Licensed Properties, Valuation of Town Centres, Procedural Matters on Appeals and Effect on Value of ‘Declining ‘Town Centres

MINUTES OF LAST MEETING
These were agreed

TONY WELSBY(VOA) gave a presentation on Business Rates – How do we arrive at the valuations.
He took the members through the various stages, explaining the basis of ‘rental value’ and the different methods of assessing a property i.e. rentals method, receipts and expenditure basis and contractor’s basis. He also gave a broad outline of a public house valuation.

QUESTIONS
You state that you do not value the business, but you request the turnover on the Form of Return for pubs and hotels?
In requesting information we are always trying to arrive at the rental value of the property. We ask for income generated on certain properties as it is usually a good guide to the rent that someone would be willing to pay for the property, and therefore of its rateable value.

Does this mean that the more successful the business is, the more we are penalised?

No. We try to identify the reasonable rent that would be paid for the property with an average occupier and there is no question of penalising a ratepayer for being a very successful hardworking businessman/woman.

Do the repairs and renewals come under the expenditure of the business?
Yes.

If part repair is entered on the Form Of Return, is this classed as full repair?
No – the system allows for the diversity of repairing covenants and Leases; they will all be adjusted accordingly.

Are the accounts looked at every year?
We ask for the accounts over a three year period in order to provide a reasonable picture of trade from the property.

If you take into account tourism in a city, rural or seaside areas and take into account the turnover, the expenses occurred are completely different between cities, seaside and rural communities.
Seasonal trade is taken into account. The values of properties on the coastline are subject to the effects of tourism, which may be seasonal, whereas pubs and hotels are open all year round in cities. This will be adjusted and all these factors will be looked at. Turnover generally reflects the position of the property. Some businesses are doing much better than others because of efforts of the occupiers, but we look at fair maintainable trade. On the VO website (www.voa.gov.uk) there is an approved guide to licensed properties.

If rates are normally based on rental system can you appeal on gross profits ?
When dealing with shops etc., rental evidence is usually available and in such cases we will consider the rents paid for these properties rather than turnover. We are not valuing the business. Profit type valuations are used when the market place determines that profit levels influence to a great extent the rent that would be paid, such as licensed/leisure properties.

Do you use that method for restaurants?
We usually have rental evidence available for restaurants.

How do you decide on rates for small businesses for small towns such as Ruthin & Denbigh as most businesses are family run and not large national multiples and chain stores, the rents are not realistic?
Rateable Values in Ruthin and Denbigh have been reduced recently to reflect the rents paid. National multiples may sometimes pay more but we don’t just use that evidence. We will weight it and use all the rents that we have available.

How do you value living accommodation in properties such as pubs?
These are what as known as composite hereditaments (properties). The property is valued as a whole and then the value of the living accommodation is apportioned accordingly. The living accommodation would be valued in Council Tax and the band would usually be relatively low.

Revaluation 2005 - Shops

ANN THOMAS (VOA) then gave a presentation to both forums on how the revaluation of shops is being carried out. She used examples, pertinent to each forum from the towns of Bangor and Wrexham. She described how shops were usually ‘zoned’ in terms of zone A, B, C and ancillary accommodation She explained how the VO obtained evidence for rental values from Rent Returns. These are forms which the VO send out during the normal course of its work, especially when we are aware a lease is up for renewal, a rent review has taken place, when a new property is rented and also leading up to each revaluation.

She highlighted some of the questions on the form and explained their significance. Information is also gathered from Particulars Delivered (these give information on leases and sales), auction particulars, newspapers, and agents (normally through the negotiation process). Ann also explained that she is the Valuation Office Ratepayers Contact (VORC) dealing with the frozen food firm, Iceland. She is provided with the rents of all Iceland shops throughout the country and then provides the information relevant to other Valuation Offices throughout the network.

Will the rateable value (RV) be different if the owner does part of his repairs?
The aim is to arrive at a rent in terms of Rateable Value and we therefore adjust the rents accordingly. If the landlord carries out the internal repairs and the tenant the external, for example, this will be adjusted accordingly.

If you calculate the repair cost higher, will the RV be less?
This can be the case. We will consider the age and nature of the property and adjust accordingly for repair.

Are historical buildings e.g. CADW rated differently or are the same thought processes used?
In all cases we are trying to arrive at a rateable (rental) Value and must have regard to the age and character of the building in question. However rental information is not always available for such properties

Is the rateable value affected by the size of the property?
Yes. We sometimes find that a tenant would pay less per square metre for a larger property and the opposite can be true for small properties such as kiosks where the tenant pays more per m2 than for a normal sized property. This will be reflected in the rateable value..

What happens when you have not got sufficient evidence?
We strive to obtain as much evidence as we can, including pursuing the return of Rent Return forms. We also check various publications such as Estates Gazette who publish information on properties for lease. . .

A shop was occupied for 6 weeks over the Christmas period, how is the RV worked out and the rates collected?
Gwynedd County Council provided the following response – We have officers monitoring the situation, looking out for vacant properties that are occupied for short periods over Christmas. These short-term occupiers are then issued with a bill.

Some occupiers tend to occupy the premises for only 6 months, are they susceptible to paying higher rents?
We look at all rents paid; we wouldn’t rely solely on individual rents. Less weight would be placed on exceptionally high and low rents. We would look at the sustainable rental level.

If you are expecting a national average increase of 20% for the 2005 Revaluation - Wrexham seems above average at 30%.
National average is just that. Averages do vary from location to location. Wrexham has seen some major changes since the last list. There has been much more growth in the town centre. Hope Street is showing an increase, but the top end of Regent Street is lower. Wrexham secondary and tertiary are staying the same. The Henblas Street development and Island Green may account for the increases. We would follow the general trend. Summary Valuations (examples of which are in the handouts) will be sent out to ratepayers.

Will summary valuations be sent out to all properties?
They will be sent out to ‘bulk’ properties. These are shops, offices, warehouses factories etc.

Will you keep Billing Authority informed as to when the Summary Valuations are sent out as this may have an impact on number telephone calls they may receive?
Yes

Are Rent Returns being sent out to all towns?
We continually send Rent Returns and over the last 7 months we have been looking at every town centre in North Wales. If anyone has more information they think would be helpful to us, please advise us

Would forum members be willing for their email addresses to be passed around to other members to enable discussions to take place between meetings?
VO will ask all members for their permission

GUEST SPEAKER – DAVID FLETCHER, WELSH ASSEMBLY GOVERNMENT

David Fletcher, Head of Local Taxation Policy at the Welsh Assembly Government then went on to talk to the forum about the work of the Assembly in the area of local taxation.

He outlined some of the relevant provisions of the Local Government Act 2003 (LGA 2003) explaining that the Assembly worked closely with Westminster in the area of legislation but that regulations covering Wales were issued directly by the Assembly.

He took the forums through the main clauses of the Act and then covered the areas of the Small Business Relief proposals and Business Improvement Districts (BIDS) in more details.

In respect of Small business relief David explained that this would apply in England in 2005 but the position in Wales was still under consideration. Currently the Rural Rate relief scheme, which Small Business Relief would replace, costs the Assembly £12 million. The Small Business Relief scheme as proposed would cost £17 million pounds. However there was no current research or evidence as to the effectiveness of either the current or the proposed scheme as it affected Welsh businesses. The assembly wanted to look at the benefits of the existing scheme before it made a decision as to whether to go ahead with the Small business relief scheme. The Rural Rate relief scheme would therefore continue until the end of March 2005.

He also went on to talk about Transitional Relief for the 2005 Rating List. The assembly did not see transitional relief as a permanent feature of revaluations. They would want to look at how values had moved between the 2000 and the 2005 revaluations before they made a decision as to whether there would be a scheme to phase in increases – and decreases - and if do to what type and size of businesses it should be applied.

Q: Had the Assembly considered the potential effect on the competitiveness of small hotels and guest houses if there is a transitional scheme in England and none in Wales
A: David Fletcher said that this was appreciated and he would take this back. He added that Rateable Values were generally lower in Wales and that UBR was also lower than England

Q: What is a small business for the purposes of Small Business Relief ?
A: David will investigate the precise definition and feed this back via Jean Jones.

Q: The LGA looks at amendment to extend agricultural relief to flexible farming – how does this work?
A: It was explained that these are aimed at certain farming practices such as share farming, contract farming and machinery rings, which previously did not benefit from the exemption provision.

Q: Farm Buildings – ‘Buxted Chicken’ where does the limit come in?
A: Under Schedule 5 of the Act agricultural buildings are exempt. The Lands Tribunal have held that buildings occupied with several farms can be exempt. A Farm shop selling farm produce could be exempt. When the VO is looking at agricultural properties, generally if produce is brought in from outside, it is rateable.

Q: Transitional Relief TR) – will we know the new regulations by the time the draft list comes into force (September/October 2004), will it go completely?
A: The assembly is of the view that it should not be a permanent feature, but any changes will have to go through the proper channels

Q: If in Wrexham I do not have TR but they do in Chester, wouldn’t I be better off moving to Chester? Why should there be a difference?
A: In Wales we have power – devolution. We look at what is best for Wales. Some people will benefit some will not. At the moment the rate in the pound (UBR) is lower in Wales than in England therefore Wrexham businesses are already better off than those in Chester.

David then went on to explain the history and concept behind Business Improvement Districts (BIDS)
These are areas where businesses identify that they would like to make improvements and work in partnership with the Local Authority to fund and carry out these improvements.
He explained that the regulations and the guidance notes would be out in Spring/Summer this year. The Assembly appreciated that in many cases the BID process would be too expensive and the guidance notes had been framed to enable ratepayers to get advice and to take forward improvements schemes using the guidance but outside of the BIDS process.
Q: BIDS – Times Square is always quoted when BIDS is discussed. I am worried that it will not be used for regeneration and the Billing Authorities (BA) will allow it to ahead when rates are already high
A: BIDS can be for anything, tourism for example. If you are going to pay for something, you want to benefit from it. It should be for something over and above what the BAs are already providing. To get an idea of BIDS look at the regeneration /tidy up of downtown areas in the USA – a perfect example is Times Square in New York. Our pilot scheme is taking place in Swansea. It is about a better service to the ratepayer and what they think would be a benefit to them e.g. CCTV cameras. All businesses within an area will be contacted and told about the scheme and asked if they will be willing to pay extra over a five year period. It will be the majority who decide whether the scheme will go ahead or not.

GUEST SPEAKER – KEN WILLIAMS STOREY SSP
Ken gave a talk on unscrupulous rating agents and highlighted what he thought were the three main types of agent.

• A RICS Chartered Surveyor who specialises in Rating. There have been many changes in Rating legislation and RICS Chartered Surveyors continually keep up to date. They know the pitfalls e.g. Transitional Relief, a reduction can be obtained but the bill, because of TR, could go up rather than down. A RICS Chartered Surveyor would know when it would be best not to agree a reduction.
  
• A RICS qualified Surveyor, does not have the specialist knowledge of above, but does deal with a small amount of rating work.
  
• Non-qualified surveyor. Ken gave an example of how a firm had a marketing strategy, which achieved £8 to 10 million pounds per year. The small print in contracts stated that a charge would be made even if a reduction was not obtained. They were convicted of fraud in 1997. Unqualified firms operate by cold calling, making extravagant promises. They can walk into a property and say they can obtain a reduction, without knowing the size or the rateable value. A member of RICS could not do that!

He gave an example of how an old lady was charged £500 (the average charged by unscrupulous agents) when her rateable value was only £1500. He felt that she would never re-coup the fee even if a reduction was obtained.

The unscrupulous agent may charge a fee if their appeal is accepted by the VO. This is not difficult as all valid appeals are required to be acknowledged by the VO.

Some firms do have RICS members, but if you have paid £500 at the front end, what is the incentive for them to carry on? In his view up front fees are simply not necessary. Storey SSP only charge if a reduction is obtained.

Some agents contact ratepayers and tell them that they have had an appeal in the ‘system’ for two years, but that they can sort it out, sometimes even indicating that the original agent dealing with the appeal has gone out of business.

Be warned of an agent who promises that he can pre-agree rating assessment before the 2005 List comes into force. This can only be done for specialist properties such as Advertising Rights.

Ken went on to explain that a degree of protection by RICS and IRRV for ratepayers would be available when the Consultancy Practice Agreement comes into force on the 15 January 2004. Storey SSP were involved in the setting up of this agreement. Full details of the Practice Statement will be circulated to members. And can be viewed on the RICS website at - http://www.rics.org/val/rating_code.html

In summary, Ken said that many non-professional agents often exploit clients. But it could often be cheaper if you employed a Chartered Surveyor and they would also have to comply with the Consultancy Practice Statement.
For any impartial advice Ken suggested contacting the RICS helpline on 0870 3331600 and they would supply a list of qualified agents. The IRRV offers a similar service 0207 831 3505.

JEAN JONES
LRVF CO-ORDINATOR