house sold.jpg

Having a property valuation is seen by many as an inconvenience and an unnecessary expense when they are actually the cornerstone of most property transactions. Whether you are preparing to take on a commercial lease, intending to sell your property or simply complete annual company accounts, here are six situations where an accurate, current valuation can be an invaluable document to have.

Calculating Stamp Duty

If you are purchasing your commercial property outright for £150,000 or more, the Inland Revenue will require Stamp Duty Land Tax (SDLT) to be paid. The exact amount of SDLT will depend on how much you actually pay, so having a valuation carried out before making an offer will help you make a more informed decision in regards to these extra expenses.

Calculating end of lease repairs

On the other hand, if you have chosen to lease your business premises, your landlord will inspect the property’s condition upon your final departure. If the building or land has been modified or damaged over the duration of your lease, the landlord may make a claim against you for any repairs, or ‘dilapidations’. The details of your liability for these will be documented in the lease contract.

There is a limit to the amount they can claim, which is stipulated in Section 18 (1) of the Landlord and Tenant’s Act 1927. The law says that landlords may not claim for a higher value than by which the property has decreased; if repairs are quoted at £8,000 but the damage has only caused the value of the property to drop by £6,000, the claim is limited to £6,000.

Valuing the property when the lease commences and when its term ends can be beneficial for both freehold landlords and tenants. By calculating the maximum possible claim value, both parties can be sure that a decrease in value actually exists and that the claimed damages are given an appropriate value.

Company account purposes

If and when your company is required to submit the value of its assets, having an up-to-date property valuation will be extremely useful. Unlike other assets that tend to be documented at their purchase price, buildings and land will need to be valued to their current worth.

In the event of a buyout or a change in shareholders or directorship, having a recent valuation to hand can prevent unnecessary delays in negotiations. Even when simply submitting your annual accounts, an accurate property valuation will make the process easier.

Securing loans

When arranging funding from a bank or other financial institution, you will almost certainly be securing your loan against your business premises. Similar to a residential mortgage, the bank will instruct a qualified valuer to carry out a valuation survey of the property to ensure that it is appropriate collateral for the value of the loan.

Before this is carried out, your lender may ask if you are aware of the property’s current market value. Not knowing this figure (or providing a value that is wildly inaccurate) is likely to put you on the back foot and may cause delays later down the line, which can have substantial consequences if you are waiting for your funds to be cleared.

Speaking to a surveyor about the value of your property ahead of approaching the bank will allow you to move forward with your loan process confidently and prove that you have come fully prepared.

Applying for insurance

It makes sense that most insurance providers will need to know the full value (often referred to as ‘the reinstatement cost’) of your building in order to offer an accurate quote. What doesn’t make sense is that many commercial landlords and tenants simply guess this figure or use past valuations.

In some cases, people overestimate the value of their property and end up paying higher premiums than they need to. On the flip-side, some estimate the value of their building to be much lower than it actually is, which is even worse.

In the event of a claim, most insurers reserve the right to only pay out an equivalent percentage to what the building is insured for. For example, if a building is worth £1,000,000, but is only insured for £800,000 (80%), in the event that a claim is made for £200,000, the insurer will only pay out £160,000 (80%).

Protect your company finances from both scenarios by simply having a qualified surveyor provide you with an accurate market value whenever applying for new insurance – and make sure this is updated to reflect market trends each year.

Capital Gains Tax

When the time comes to sell the premises, you will need to know its market value in order to pay Inland Revenue any Capital Gains Tax that is due. The process will require a formal written valuation to ensure the tax is calculated correctly.

Hopefully these examples demonstrate which situations can be made simpler by obtaining an up-to-date valuation of your property, and explain why they’re far from an unnecessary inconvenience.