Obsolescence and the lender

Article Abstract:

The useful life of specialised buildings can be very short and it is recognised that there may be only one use for buildings such as sewage plants, shipyards and dairies. The one main reason for such obsolescence is lack of demand. If the building cannot be adapted to another use, or if the use it was originally constructed for is no longer required, it becomes obsolescent and its value is downgraded. Building construction should take into account future use and potential demand. Valuations of specialist buildings for loan security purposes are difficult and valuers should take into account the obsolescence factor when valuing buildings for bank clients.

Practice, Commercial buildings, Industrial buildings

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Post-review valuations

Article Abstract:

A case heard in the UK courts concerned a rent-review where the independent valuer did not take into consideration events which happened after the rent-review date. The judge felt the valuer should have taken into consideration similar transactions which were agreed following the rent-review. Although if the transactions happen a long time after the rent-review they would become less relevant as evidence. In a second case the judge suggested occurrences which influence market rents, such as economic changes, should also be taken into consideration after a review.

Cases, Rents (Property)

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Red book comes under fire

Article Abstract:

Property appraisers in the UK should be aware of both the worth and value of a property purchased for investment, yet the Appraisal and Valuation Manual produced by the RICS calls for the use of the market-led spot price. It is very important that the worth of a building is calculated in addition to the spot price. Banks may prefer that an open market value is taken into consideration when a loan is being negotiated. The Royal Bank of Scotland has changed its procedures for valuation of property in order to achieve some consistency.

Investment Banking and Securities Dealing, Investment Banking, Security brokers and dealers, Methods, Banking industry, Investment banks, Investments, Bank investments

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