The implications of the Brooker Case on the misuse of Comparables in Rental Valuation

By | September 27, 2009

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 The implications of the Brooker Case on the misuse of Comparables in Rental Valuation

The Judge exposed the total inadequacy of the use and misuse of Comparables as a method of rental valuation.

If anyone is having a rental revaluation, Comparables will doubtless come into the equation, because of the ease that convenient information of other rents can be obtained by the larger Pub Co’s, it makes a relatively easy job for the Pub Co Valuer to assess a rent based on a pub that is owned by the Pub Co that he is working for, rather than one that requires in depth investigation which he has no prior knowledge.

However by a valuer Cherry Picking high rent pubs, ignoring the viability of those pubs and the one being reviewed, it effectively ratchets pub rents even higher which only serves the landlord not the tenant.

If every tenant/lessee consulted all the neighbouring pubs within a ten mile radius with a similar business and property, by doing the converse Cherry Picking the lowest rents it might just help in bring the rents down at any sort of mediation, avoid properties within the ownership of the landlord, unless you are sure that their rent is considerably lower than your own.

The failure by valuers to accept the current trading figures and true viability will always leave the system open to abuse and misuse.

The argument that the figures are not reliable or not available is a spurious one, VAT figures are always on record and any stocktaker worth his salt would give a very accurate record of viability and profitability in respect of the individual property.

I am as always extremely grateful to the learned Barry Gillham’s excellent presentation at the BII Rent Road Show which made me realise how  the RICS Valuation Guide Lines were being abused and misused and started my studies into these abuses, resulting in an extensive meeting with the RICS, which I hope we both found constructive.

I would also like to offer him the opportunity to be one of the first commercial property agents to be allowed to advertise his company on this site.

Returning to the issues of rental assessment, the continual failure by valuers to accept that business is finite  and not infinite will always cause problems. Any increase in business is at the cost of another business and not newly generated business, especially in these recessive times.

The BDM should, if he knows his business realise that any potential growth will be at the cost of possibly another of his businesses and should advise the valuer accordingly.

In fact logically speaking, if a valuer insists on raising a rent based on a perceived increase in future profitability, bearing in mind that all the available business is static and possibly falling, there should be an immediate reduction in rent in the nearby pubs that will be losing the supposed increase in business by the new assessment.

This will not happen but it could make a very interesting argument if all the pubs colluded together.

They are then in a position to Cherry Pick ones that suit their guesstimated assessment

One thought on “The implications of the Brooker Case on the misuse of Comparables in Rental Valuation

  1. Editor Post author

    As an RICS member acting mainly for Lessees, I generally start negotiations with BRMs who have been given a script and told to go and get a result. They usually have no idea whatsoever of any “rules” and will press as hard as they possibly dare to get a result satisfactory to their superiors, upon whom their job depends. The Brooker negotiations started in exactly the same way.Initially the BRM was told to get the £39k.Only way down the line did EI engage Peter Taylor who is ,like me, an FRICS.
    There are no detailed RICS rules as to how you compose the content of the Profits Test Rent valuation. The only recommendation by the RICS is that you use an appropriate method that stands up to scrutiny and logic. This what the Judge in Brooker criticized using the path of the RICS recommendations. He found for affordable logic and was very wary of the declining market which he considered would influence the hypothetical Lessee. If you are charged with a Corporate game plan that ignores that logic ,you get over renting on a massive scale (does this sound familiar ?). The judge has laid down a template that cannot now be ignored or swept under the Corporate carpet. The “rules” have always been there.Its how they are bent in a Corporate direction that counts. Brooker has massively redressed the balance.

    David Morgan FRICS

    Reply

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