Property Journal IN CO RP ORAT I N G T H E C O M M E R C I AL P R O P E RT Y J O URNA L, RESID E N T I A L P ROP ERT Y J O U R N A L A N D T HE A RTS S URV EYOR
The vital links between fuel poverty, energy efficiency and health 34 PG.
Healthy homes, healthy communities
COMMERCIAL
BIM and offices Has progress been made? PG.
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RESIDENTIAL
ARTS
Taking care with templates
A busy market requiring specialist skills
Party walls
PG.
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Valuing autographs
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November 2015 rics.org/journals
Residential valuation surveyors
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Enjoy living life! MRICS/FRICS Registered Valuers and Building Surveyors:
Arnold & Baldwin:
Join Arnold & Baldwin and you can work less hours during the week, giving you more time to do what you want to do! We have full time and part time positions available for qualified residential valuation surveyors to undertake mortgage valuations, Homebuyer Reports and Building Surveys.
Lifestyle benefits
As an owner managed business, here at Arnold & Baldwin we can offer you more. More than the rest. More than the corporates. Why? Because we want YOU and we will do whatever it takes to get the best talent on board. Some people are tempted by a shiny new car, others by an attractive bonus scheme on top of a competitive base salary. For some, the opportunity to work part-time and take things at their own pace may be enough to tempt them into making a career move. Arnold & Baldwin can offer all these things and more. Sound too good to be true? Well, it isn’t. We promise! We don’t have a board of shareholders to consider, or any restraints for that matter. Our success lies in attracting and retaining the very best talent in the industry. We look for honest, approachable experts and aim to treat them like royalty. After all, we wouldn’t have won the awards or be where we are today without our fantastic team. Still need convincing? Call Joe Arnold to find out more. We welcome confidential conversations from potential applicants and we will be as flexible as we can be to meet your individual needs. AssocRICS Surveyors: We are also searching for AssocRICS Surveyors who are looking to develop their careers and become MRICS qualified. Offering a structured and effective training plan, Arnold & Baldwin can help you achieve full MRICS accreditation.
• Shorter working hours • Award winning, friendly team • Attractive base salary and fantastic bonus structure • Latest mobile technology • Work from home or our fantastic office • 25 days holiday per annum • Birthdays & ‘duvet days’ given as additional leave • Work smarter, not harder!
CAll JOE On 077 650 33 650
To view the job description please visit arnoldandbaldwin.co.uk/jobs or call Joe Arnold on 077 650 33 650 to find out more.
UPF R O NT CONT ENTS
RI CS P RO PERTY JOUR NAL
contents C ON TACTS
UPFRO NT
COMMERCIAL
5 Opinion
Editor: Claudia Conway T +44 (0)20 7695 1605 E claudiaconway@rics.org
Tarrant Parsons asks whether sufficient thought has been given to the aftermath of an EU ‘Brexit’
Advisory group: Paul Bagust (RICS), Nicholas Cheffings (Hogan Lovells), Milton McIntosh (Excello Law), Nigel Sellars (RICS), Martin Francis (BNP Paribas), Simon Hooper (Edward Symmons), Lorraine Howells (RICS), Vivien King (Malcolm Hollis)
6 Update
RESIDENTIAL
Graham Stockey explains the work of the valuer registration review team, and how firms can ensure that they comply with the necessary standards
Editor: Jan Ambrose T +44 (0)20 7695 1554 E jambrose@rics.org Advisory group: Peter Bolton King (RICS), Andrew Bulmer (RICS), Paul Cutbill (Countrywide), Graham Ellis (RICS), Georgiana Hibberd (RICS), Chris Rispin (BlueBox Partners), Philip Santo (Philip Santo & Co), David Smith (Anthony Gold Solicitors)
ARTS Editor: Claudia Conway T +44 (0)20 7695 1605 E claudiaconway@rics.org
8 Going for gold
10 The key to the future
The advance of mobile technology is saving surveyors time and money, argues Ed Bartlett
12 Legal Q&A
Legal experts answer common queries
13 Invitation only
Vivien King considers liability issues when inspecting premises
14 The peril of two hats
Howard Jenkins explains the risks of chartered surveyors acting as expert advisers and expert witnesses in the same case
16 Can we talk about this?
Alan Langleben explains why all members need to know about the RICS Mediation guidance note
18 Taxing times
The effect of lower tax charge thresholds on residential property owned by companies will be felt across the UK, says Lorna Sizer, but some reliefs are available
Editorial adviser: Nigel Sellars Property Journal is available on annual subscription. All enquiries from non-RICS members for institutional or company subscriptions should be directed to: Proquest – Online Institutional Access E sales@proquest.co.uk T +44 (0)1223 215512 for online subscriptions or SWETS Print Institutional Access E info@uk.swets.com T +44 (0)1235 857500 for print subscriptions To take out a personal subscription, members and non-members should contact Licensing Manager Louise Weale E lweale@rics.org Published by: Royal Institution of Chartered Surveyors, Parliament Square, London SW1P 3AD T +44 (0)870 333 1600 T +44 (0)24 7686 8555 W www.rics.org ISSN: ISSN 2050-0106 (Print) ISSN 1759-3395 (Online) Editorial and production manager: Toni Gill Sub-editor: Gill Rastall Senior designer: Wasim Akande Creative director: Mark Parry Advertising: Emma Kennedy T +44 (0)20 7871 5734
E emmak@wearesunday.com
Design by: Redactive Media Group Printed by: Page Bros
Journals online Increasing numbers of members are choosing to view their journals as downloadable pdfs, instead of paper publications, by changing their member preferences on the RICS website. Regular emails inform members when the pdfs of the latest journals are available. While helping RICS to reduce its carbon footprint, viewing the journals online provides you with the same technical information in a format that is quick and convenient to read on screen.
C
CO MME RCI A L
20 The value of green
Andy Thornhill and Mark Heuff explain some of the unique issues in valuing renewable energy projects
22 Well worth doing
Sustainable workspaces have a distinct advantage in the market, says Rebecca Pearce
24 Best of health
Kerry Bourne offers a perspective on what the changing NHS property strategy could mean for the future of the public sector estate
26 Pathways to the future
Rob Partridge and David Illingworth review how BIM in office buildings has progressed in the past two years, and where development is still needed
30 Balance of power
Using commercial roof space for solar panels can be complicated, says Catherine Burke, but there may be ways to simplify the process to develop the market
To change your preferences, visit www.rics.org/mydetails
NOVEMBER 2015 3
RICS P ROP E RT Y JO URN A L
UPFRONT C O N TEN TS Property Journal INCORPORATING TH E COM M ERCIA L PROPERTY J OURNA L , RESIDENTIA L PROPERTY J OURNA L A ND TH E A RTS SURV E YOR
contents R
Jan Ambrose looks at research into the relationship between fuel poverty, energy efficiency and health
37 Words to the wise
Using party wall draft award templates requires care, warns Nick Isaac
PG.
Healthy homes, healthy communities
COMMERCIAL
BIM and offices Has progress been made? PG.
26
RESIDENTIAL
Party walls Taking care with templates PG.
37
ARTS
Valuing autographs
November 2015 rics.org/journals
A busy market requiring specialist skills PG.
50
Front cover: © Shutterstock
A
RESI DE NTI AL
34 Studying the links
The vital links between fuel poverty, energy efficiency and health 34
A RTS
44 Sealing the envelope
Chris Scivyer considers the impact of airtightness on indoor environments
46 Looking for clues
Chris Mahony explains why inspecting buildings is fundamental to the work of building surveyors
38 The whole story
Michael Parrett concludes his series on damp with the reminder that surveyors should take a holistic approach when diagnosing issues
42 Licensed to improve
Paul Broadhurst gives an overview of the Leeds Neighbourhood Approach
The sign off and email address at the end of A rotten thing to happen (p44, September/October edition) should read: Ross Allan is Development Director at Timberwise (UK) Ltd rossallan@timberwise.co.uk
50 Words of worth
Ania Hanrahan outlines the skills and knowledge required to value historical autographs
53 Avoiding the voidable loophole Milton Silverman explains the important difference between ‘voidable’ and ‘void’ when it comes to contracts
Property Journal is the journal of the Arts & Antiques, Commercial Property, Dispute Resolution, Facilities Management, Machinery & Business Assets, Management Consultancy, Residential Property and Valuation Professional Groups While every reasonable effort has been made to ensure the accuracy of all content in the journal, RICS will have no responsibility for any errors or omissions in the content. The views expressed in the journal are not necessarily those of RICS. RICS cannot accept any liability for any loss or damage suffered by any person as a result of the content and the opinions expressed in the journal, or by any person acting or refraining to act as a result of the material included in the journal. All rights in the journal, including full copyright or publishing rights, content and design, are owned by RICS, except where otherwise described. Any dispute arising out of the journal is subject to the law and jurisdiction of England and Wales. Crown copyright material is reproduced under the Open Government Licence v1.0 for public sector information: www.nationalarchives.gov.uk/doc/open-government-licence
4 NOVEMBER 2015
UPF R O NT OP I NI ON
RI CS P RO PERTY JOUR NAL
OPINION As a UK referendum on EU membership begins to cast a shadow, Tarrant Parsons asks whether sufficient thought has been given to the aftermath of a ‘Brexit’
N
Better in or out?
Now an in-out UK referendum is guaranteed by the end of 2017, many of the thorny issues surrounding Britain’s EU membership are being widely debated. Whatever the rhetoric, the truth is that the impact of a Brexit cannot be truly estimated until the terms of withdrawal are known. Attempts to assess the viable routes for separation can be made by looking at arrangements elsewhere on the continent. For instance, Norway and Switzerland (both outside the EU) are currently granted free access to the single market through membership of the European Free Trade Association, although important differences exist. Indeed, Norway is a member of the European Economic Area (EEA), meaning it actually has no choice but to apply EU laws. Switzerland, which rejected EEA membership in 1992, is spared EU regulatory obligations. Much attention has been focused on establishing what would happen to trade in
the case of a vote favouring exit. In 2014, 45% of total UK exports went to countries in the EU, while 53% of British imports were sourced from within the union. This would seem to imply the union as a whole benefits more directly from the free trade arrangement than the UK. Indeed, the UK trade deficit with the EU equalled £61bn last year.
Trade imbalance But it is worth bearing in mind that the largest trade imbalance is, perhaps predictably, with Germany, accounting for nearly 40% of the entire goods deficit. Significantly, it is driven by imports of vehicles, machinery and electrical equipment and clearly illustrates that a large slice of imports from the EU are in either essential production process inputs or integral to supply chains. It would appear disadvantageous to both parties if trade tariffs were explicitly imposed. As such, entering into a free trade agreement, much like the setup in Norway and Switzerland, would seem an obvious way forward in the event of a vote to leave. However, the idea that Brexit would result in the UK escaping what might be described as ‘growth restricting’ regulation from Brussels is a little misleading. Open Europe (a think tank
established to construct and campaign for reform in Europe) estimates that the 100 most expensive EU regulations cost the UK economy around £33bn a year. But they also judge that leaving the EU and opting to maintain free-trade, using the Norway example, would still require 93 of these 100 EU protocols to remain in place, equating to a cost of roughly £31bn. Given that this arrangement also comes without official voting powers in EU institutions, the UK would lose any ability to alter these rules and influence new laws. With respect to trade elsewhere, it is argued that being part of a group gives the UK greater leverage in negotiations. Certainly, if Britain were to leave the EU, it would miss out on the union’s two biggest trade agreements with the US and Canada, estimated to be worth over £10bn annually to UK GDP over the next decade. The UK could attempt to negotiate separate agreements; some would even say Britain could expand its trade with non-EU countries without the shackles enforced by other EU members, but discussions would be lengthy and may end in less favourable terms.
Immigration debate Perhaps inevitably, the economic arguments regarding EU membership have been overshadowed by the debate on immigration.
Entering into a free trade agreement would seem the obvious way forward Concerns have been raised about the negative impact of rapid migrant inflows and while questions of wage levels and strain on public services appear to have validity, the empirical evidence is far from overwhelming where it exists. In addition, the benefits of immigration are often overlooked. Whichever side you take, free movement of labour between countries is a fundamental, and likely unnegotiable, principle of the EU, so immigration will continue to be an issue even in the aftermath of a ‘no’ vote. Britain’s ties with Europe mean whatever happens on the continent will always have an impression domestically. Removing UK influence both within the EU and globally, in the hope of uncertain gains, seems like a leap into the dark. I would be eager to hear your thoughts on the subject. b Tarrant Parsons is an Economist at RICS tparsons@rics.org
NOVEMBER 2015 5
RICS P ROP E RT Y JO URN A L
UPFRONT U P DAT E
UPDATE Book now for the year’s key commercial property event The RICS flagship Commercial Property conference returns on 26 November at London’s Radisson Blu in Portman Square. With the current boom in the property market showing no sign of slowing it “comes at a crucial time”, according to Nigel Sellars, RICS Associate Director, Commercial Property. This conference aims to strengthen delegates’ understanding of the current economic outlook, latest occupier trends, growth opportunities and risks to the commercial property sector. For all those in retail, leisure or office sector, based in London
or the regions, relevant sessions are promised. A key theme running throughout the day is putting
Energy certificates pitched for commercial buildings Voluntary Display Energy Certificates are now available to clients in the commercial property sector. The non-profit scheme, developed by the National Energy Foundation and Phil Jones of Building Energy Solutions, was piloted with Legal & General Property. The certificates are designed to measure and highlight building energy performance. Based on the mandatory Display Energy Certificate methodology, the scheme is easy to understand but has enough
6 NOVEMBER 2015
information to target action to improve energy performance. During the pilot stage, they were shown to provide a range of benefits, addressing the issues associated with the landlord and tenant energy split and the lack of relevant benchmarks to measure and compare performance in a sensible and consistent way. The developers hope to extend the scheme into other sectors and to incorporate environmental issues such as waste and water. n http://voldec.com
the right strategies in place to survive and thrive. Highlights include: bb An analysis of how the
market will be affected by the current eurozone crisis and a potential Brexit. bb An update on market conditions in office, retail and leisure to understand how the new generation of occupiers are influencing trends in these sectors. bb A look ahead to the future and the opportunities and threats facing the industry. bb An interactive panel will discuss how best to meet the new demands of the occupier. Topics include short term vs long term leases, suitability of current stock for supplier demands and the rise of new trends. n There are special rates for ‘early birds’ and also for group bookings. Visit www.rics.org/ commercialconference
Move to block terror funding from antiquities Ten nations from across the Middle East and North Africa this summer pledged a coordinated response to stem terrorist plundering of antiquity sites. The aim is to limit terror groups’ capacity to profit on the cross-border sale of stolen artifacts, and to shine a spotlight on those who would purchase plundered goods, financing regional and global terrorism. The joint declaration came at the Cairo Conference on terrorism and culture, organised and co-hosted by the Antiquities Coalition and the Middle East Institute.
As a follow-up, the Antiquities Coalition is releasing a weekly series of brief videos, Culture under threat: terrorism and profiteering. These will offer insights, background, solutions and implementation strategies for slowing and ending the global crisis of looting and cultural destruction. n http://bit.ly/1TtuF1x
UPFRONT UPDATE
In brief... BPF seeks changes to late payment rules Changes made to bailiff regulation last year have made it easier for tenants to pay their rent late and remove valuable items from their premises ahead of debt collection, commercial landlords have claimed. The concerns were raised in the British Property Federation (BPF) submission to a Ministry of Justice (MoJ) review of the first year of the revised Commercial Rent Arrears Recovery (CRAR) regime. The CRAR legislation requires an enforcement agent (as bailiffs are now known) to serve a notice on a late-paying tenant giving a minimum of seven clear days for a debtor to pay before they are able to enforce on goods. This has led to a belief among landlords that some tenants are using the regime as a “cheap overdraft facility” to delay payment. The BPF has submitted evidence to show that some tenants have used this notice period to delay paying overdue rent on as many as 90 occasions across their stores over the year since the introduction of CRAR. This is particularly worrying for small landlords, who risk defaulting on their own loans if their rental payments are late. It has suggested that the statutory fee defined by the legislation to be charged by enforcement agents (£75
+ VAT, regardless of the level of rent outstanding) is not a sufficient deterrent. It recommends that the MoJ changes the fee to 2.5% of the debt at enforcement notice, to make it more proportionate. The BPF has also outlined further concerns that enforcement agents are no longer required to take an inventory when they serve notice. In some cases, this has led to tenants removing the contents of a store before agents arrive, who are then unable to prove that there were goods within a unit. Melanie Leech, BPF chief executive, commented: “While CRAR has not been problematic for every landlord, there are some simple steps that the MoJ could take to protect those who will struggle when they receive late rental payment. “Making the fee system more proportionate would both protect smaller landlords and act as a deterrent for tenants with particularly large arrears. Allowing time for an inventory check would add a further layer of protection for landlords, who are currently just relying on a tenant’s good nature.” To combat this, it has recommended that the MoJ allows 24-hour notice for an inventory check once notice is served. n www.bpf.org.uk
Training Web class Automated valuation models: opportunity or threat? 8 October, 9-10.30am
Automated valuation models (AVMs) are increasingly used by investors, because their potential applications are much wider than simply for mortgage valuations. This brings both risks and opportunities and this web class will help members recognise the current impact of AVMs on the residential valuation profession and equip them with knowledge to offer a more informed advice to their clients. n www.rics.org/avm
Courses Executive education: the International Certificate in Leadership for Real Estate Development Designed by RICS in conjunction with the industry, this course is tailored to professionals in the built environment, specifically those working in real estate development and looking to position themselves as future leaders. The technical
content for each of the five strands studied is underpinned by leadership work enabling executives to develop the necessary skills and a holistic view of the real estate life cycle. n www.rics.org/ executiveeducation
Certificate in Commercial Property Valuation Professional valuations are vital for a healthy property market and a stable economy, forming the basis of performance analysis, financing decisions, transactional or development advice, dispute resolution, taxation and various statutory applications. The Certificate in Commercial Property Valuation has been designed to provide the knowledge required to become a registered valuer, including the application of International Valuation Standards and in particular the RICS Red Book. It aims to build the skills required to prepare valuations of commercial property for purchase, sale, investment, rent review, lease renewal, mortgage lending and accounts. n www.rics.org/ certificatecpv
NOVEMBER 2015 7
RICS P ROP E RT Y JO URN A L
UPFRONT VAL UAT I O N
Graham Stockey explains the work of the valuer registration review team, and how firms can ensure they comply with the necessary standards
Going for gold
S
ince 2011, all UK practitioners carrying out Red Book valuations have been required to join RICS Valuer Registration (VR). For the VR review team at RICS Regulation, this means ensuring that members always meet and maintain the RICS global gold standard for valuation the measure that sets RICS members apart. The initiative is now mandatory for members in eight diverse countries across the world from the Cayman Islands to Hong Kong, with 14,770 Registered Valuers and 2,923 sponsoring firms at last count. Together, the twin arms of the Red Book and VR aim to raise confidence, and provide assurance to clients and recognised users alike that a valuation provided by an RICS qualified valuer anywhere in the world will be undertaken to the highest professional standards overall. Respectively, they are responsible for maintaining a global framework of standards and high level principles, and regulation, compliance, registration and monitoring. Calling on six regulatory review surveyors, the VR review team has visited some 950 firms worldwide, reviewed around 3,000 individual members’ work on site, inspecting more than 8,000 individual valuation case files. The broader regulation team has also carried out in excess of 2,000 desk-based reviews, while the review valuers have completed a further 200 off-site inspections.
Monitoring process The results over the four-year active review programme have shown a process of continual improvement. In year one, 15% of firms of firms fell below an acceptable standard, with 4% of 8 NOVEMBER 2015
those failing at a level where significant and critical issues were apparent. In year two the results improved dramatically, with only 5% of the firms visited unable to meet an acceptable level of compliance and 1% viewed as presenting significant or critical compliance concerns. In years one and two, the selection criteria for a review visit was somewhat random but in years three and four a more risk-based approach was adopted with better use of information and intelligence held by RICS to maximise the review team’s resources. Control group random visits were supplemented by visits to firms where a significant risk had been identified through intelligence or thematic monitoring. The results remained encouraging, with the percentage of firms failing to reach an acceptable level of compliance sitting at around 11% and only 3% of firms inspected presenting failings where critical non-compliance was apparent. A range of disciplinary outcomes has been applied over the period for those firms that presented significant and serious failings, from Consent Orders, attendance at a disciplinary workshop to attending a Disciplinary Panel with accompanying sanctions.
How to comply The VR review team has sought to identify some simple measures that can help to ensure compliance with Red Book requirements. The key elements include: bb Create an audit trail in every file to support the valuation (see Figure 1). bb Create a key stage file checklist to ensure the content is complete. bb Ensure documents comply with Red Book mandatory content requirements. bb Create a suite of note templates for site inspection and the valuation process. bb Where possible employ an active peer review process.
bb Proactive quality assurance – set standards, ensure they are maintained through an active audit programme with sanctions for non-compliance.
Continued failings The valuer’s most fundamental requirement is to be able to demonstrate independence and qualification for task. Yet the review team still discovers evidence of inadequate processes to check for potential conflict of interest, and where the checks are carried out the failure to properly record the results. It is rare for a valuer to take on work without the ability to demonstrate qualification for task, but we do encounter people who operate on the margins of their competence in terms of location or specialist skills. This places stakeholder and clients at risk and is of major concern to lenders and PII underwriters. Agreed terms of engagement, including the contract letter to accompany RICS standard terms of engagement for Homebuyer reports, should be the valuer’s first line of defence in the face of a claim. Too often these documents are non-compliant, inadequate, non-case specific, or more worryingly missing from the file. Failure to issue and agree compliant terms of engagement places the firm client and stakeholders at risk, but bear in mind the two parties placed most at risk are the firm and one particular stakeholder – your PII underwriter. Even in today’s litigious climate, where it is essential that your file demonstrates an audit trail of information to support your valuation, we still encounter case files where site and valuation notes are: bb missing from the file entirely bb illegible, unstructured, insufficient or impossible to follow bb do not meet the requirements for scope of inspection.
UPFRONT VA LUATIO N
While it is rare to see no comparable evidence, it is not so uncommon for the valuation file to lack a structured comparable analysis, leading to a note of the key valuation inputs and principal supporting reasons – in effect your thought process, the valuation rationale. A few scribbled notes on a set of sales particulars or a comparable print out are not going to stand up in court.
Clear information One ongoing issue of significant concern is the treatment of information relied on to assess value. We regularly see files where there is no mention of the source, reliability and impact of the information relied on to formulate the valuation, or the consequences should it later prove inaccurate. The correct approach is to agree what is to be relied on in the terms of engagement, document in the file what was used, where it came from and your view of reliability. Then clearly state all the information in the report and make clear to the client the impact on the valuation if the information is proved false. If called on to defend a valuation, the first question the valuer will be asked is, “is the report fit for purpose?” The overall standard of reviewed material has improved considerably since early 2011. However, even four years on we still see in some cases: bb a failure to comply with the required content stated in VPS 3.1 of Red Book
bb an unclear or ambiguous purpose statement bb a failure to define extent, limitations and use of the report bb assumptions, special assumptions and scope of inspection not clearly explained bb poorly drafted, poorly written and difficult to understand report material. The advice we give valuers is to protect yourself. Make sure your report is Red Book compliant and is fully supported by a demonstrable audit trail of information in the case file; anything that is in the report should be in the case file. To assist smaller firms, template frameworks are available at http://bit.ly/1fGjs0C. A marked improvement in Red Book compliance has been demonstrated by members in the past four years in respect of: bb conflict checks and their recording on file bb the content of both terms of engagement and report documents bb improved site notes and valuation process recording bb providing a demonstrable audit trail.
Training A key element of the VR team’s role is providing training and technical guidance for the members: the team has delivered a programme of roadshows and workshops across the UK and in a range of other countries. In addition, numerous guidance articles have appeared in RICS
Figure 1 Demonstrating the audit trail All written valuations All written valuations where Red Book applies VPS 1 Content of terms of engagement
Am I qualified?
Am I competent?
Always issue terms of engagement
VPS 2 Scope of inspections investigations and file notes Does Red Book VPS 1-4 apply? VPS 3 Report content
Am I compromised?
VPS 4 Basis of value Assumptions Special assumptions
publications and more recently on the VR section at www.rics.org. One of the most popular and successful tools has been the VR online module, which is now being adapted to provide usable guidance to our international membership. As we move forward, we will develop content geared to more specialist task-specific training in a variety of delivery media.
Going forward To measure the success of valuer registration, we decided to conduct an end-to-end review. This comprehensive process includes workshops with staff from across RICS, the profession, lenders, insurers and panel managers. The review is telling us that VR: bb is recognised as raising standards bb offers a positive member experience bb has had a positive stakeholder impact bb has helped us gain recognition and mitigated the risk of statutory intervention bb enhanced the reputation of valuers in light of financial crisis bb is capable of global deployment. Areas identified for improvement are that our risk assessment capabilities can be more sophisticated, our regulatory toolkit more agile and stakeholders want us to move to a deeper focus on quality. We are improving our ability to take a risk-based approach, and improving our communications and guidance. It is our aim going forward to further raise stakeholder confidence through improved data sharing, better communications and increased visibility for the registered valuer. Better identification of risks will result in ability to better target underperforming members and firms, with improved compliance rates in the longer term leading to enhanced stakeholder perception of registered valuers. All these measures will provide a clear platform for further improvement and development of what has clearly been a very successful regulatory initiative. b Graham Stockey FRICS is Principal Surveyor, Regulation, RICS gstockey@rics.org
Related competencies include Valuation
NOVEMBER 2015 9
RICS P ROP E RT Y JO URN A L
UPFRONT EVO L U TI O N
The advance of mobile technology is saving surveyors time and money, argues Ed Bartlett
The key to the future
F
ollowing the success of an exclusive licence to produce RICS-approved mobile survey templates, software firm Kykloud has now extended its remit to support the residential surveying market with the launch of Kykloud Home Survey – a full suite of RICS home survey templates. Established in 2011 to provide an alternative to the expensive and inflexible options that were available to surveyors, Kykloud set about creating a secure, cloud-based software that would be cost-effective, easy to use and accessible across everyday mobile devices. Although at that time mobile phones and tablets had begun to transform people’s personal lives, there was a lot of debate as to whether they really had a place in the business world and particularly in the surveying industry, renowned for its traditions and late adoption of technology.
Explosion of technology But in three or four short years, there has been an explosion in the use of mobile technology among surveyors. The potential impact this presents to the residential market, whether working in a small firm of independents or as part of a large surveying practice, is monumental. Increasingly, surveyors are now turning to iPads, tablets and mobile phones with free and paid-for apps to carry out many elements of their jobs, often more quickly and efficiently than when using traditional methods. But until now, residential surveyors have been unable to benefit from access to approved mobile RICS HomeBuyer templates. 10 NOVEMBER 2015
RICS is committed to supporting this volume-driven, margin-squeezed section of the industry and its drive to encourage the use of mobile technology. It has awarded licence agreements to mobile technology providers so that residential surveyors can now produce RICS-approved reports direct from their iPads, resulting in significant time and cost savings and increased efficiencies.
Slow take-up Although surveying might well be considered a venerable profession, heavily reliant on pen and paper, many surveyors started adopting forms of technology to improve the surveying process as early as the 1980s. However, take-up has been quite sporadic and the vast majority of the industry has remained reticent about the arrival of new methods. It is little wonder. With a reliance on specialist hardware, surveyors were forced to purchase separate pieces of equipment to conduct different elements of the surveying process and often found they had invested in expensive, quickly obsolete devices. Thinking back to the earliest mobile data collection equipment, some surveyors may well remember or
In three or four short years, there has been an explosion in the use of mobile technology among surveyors
indeed have used the Psion. Launched in 1984, this was heralded as the world’s first handheld computer. Although adopted by some, the hefty £300 price tag and its small data storage facility put a lot of people off and it never really became a mainstream industry device. Then the digital camera arrived; until the mid-1990s, surveyors were still using analogue cameras and relying on film and processing labs for their photography – a far cry from the instant access to which we are now accustomed. Even the most reluctant surveyor soon recognised its benefits and a digital camera was one of the few technological advances to really cement its place among the profession. The next significant development did not really arrive until the early 2000s with the launch of devices such as the Compaq computer. With a 16MB memory and retailing at around £240, this was a more attractive prospect and take-up among the more technically savvy surveyors was quite high. But most surveyors felt that the Compaq never really delivered on its promises. The hardware and software were cumbersome and temperamental to say the least. It is fair to say that those
UPFRONT EVOLUTIO N
who did invest in one will probably have consigned it to the technology graveyard many years ago.
Cloud benefits So why is mobile technology or cloud computing, as it is often referred to, any different and why are so many surveyors beginning to appreciate its benefits? In 2011, RICS launched a report The role of cloud computing in commercial property (http://bit.ly/1HJTCDb) and acknowledged even then that it was the future of the industry, “providing the IT method of choice for the property sector”. In October 2014, The Independent reported that there are now more active mobile devices in the world (7.2bn) than there are people, and numbers are multiplying five times faster than the human race. That is not to say that every person in the world owns a device, but the latest Ofcom figures for 2014 show that the number of adults in the UK using tablets to go online doubled from 2012 to 2013 and 62% of adults now use a smartphone. I feel confident that a good number of those people are surveyors. The fact that mobile surveying technology relies on the handheld
devices that are used daily to conduct so many aspects of life is undoubtedly a key factor in its success. We are familiar with the devices and how they operate and do not need to invest in special equipment that risks becoming redundant in a flash. Likewise, we use the cloud in our daily lives – sometimes without even realising it – when we log on to eBay and Gmail, which are both cloud-based apps. Most of us are familiar with them and therefore now understand that our data is actually very safe and secure. But without a doubt, the main reason that mobile surveying is striking a chord with the profession is because apps have been designed specifically to meet the needs of surveyors and are providing a direct commercial impact. Mobile surveying strips out the non-income generating administration of the surveying process such as uploading and labelling photos and turning notes into written reports. This allows time for reflective thought; the surveyor can spend longer on the more valuable and skilled part of the process, such as surveying the building fabric, identifying defects and researching the valuation.
Kykloud Home Survey’s simple drop-down templates contain fully integrated RICS-approved standard phrase that can also be customised, help surveyors to ensure that no stone is accidentally left unturned and that every part of the survey is completed on site. This forces a level of consistency and quality assurance. At the same time, the technology encourages professional judgment and thought. Surveyors can mark-up defects on the actual photos, record voice notes and create a complete set of site notes with all the relevant evidence securely attached to each survey. What is clear is that surveyors spend less time on administration and more time surveying. Unlike technology that is only focused on a single survey and report, this focuses on the data knowing that surveyors have important compliance and insurance obligations. All too often, customers want their surveys carried out ‘yesterday’ and criticise surveyors who cannot turn reports around within 48 hours. Although speed cannot and should not stand in the way of producing a quality report, surveyors using mobile technology solutions can guarantee tight turnarounds, confident in their ability to deliver a high-quality survey, helping to retain business and attract new customers. It is fair to say that the introduction of mobile technology has the ability to save surveyors time and money while enhancing the quality of the end product. This is the reason why the profession is engaging in a way that has never been seen and why it plays such a key part in the future of surveying. b
More information > www.kycloud.com
Ed Bartlett MRICS is CEO of Kykloud and Kykloud Home Survey ed.bartlett@kykloud.com
NOVEMBER 2015 11
RICS P ROP E RT Y JO URN A L
UPFRONT L EGA L
Legal Q&A Tenants’ alterations at end of lease
Q
I have heard about landlords being unable to require tenants to reinstate alterations at the end of a tenancy as they did not take the correct steps – what do I need to check in the lease and when should I serve the relevant notices and schedules to make sure it’s done correctly and is enforceable?
> Faiza Ahmad
A
A commercial landlord’s dilapidations claim against its tenant will often also include an additional claim in relation to reinstatement of any alterations carried out by the tenant during the term of the lease. Both landlords and tenants are best advised to be clear at the outset, or at least early on, about what is to happen to any alterations carried out by the tenant during the term of the lease when the lease comes to an end. bb Will the tenant be required to reinstate its alterations? bb Does the landlord actually want all or some of the alterations to be reinstated at the end of the lease? bb If the landlord is entitled to require the tenant to reinstate, what steps does it need to take to ensure that happens and when must those steps be taken? bb Does the landlord want to keep certain valuable alterations such as air-conditioning? These are all questions that a landlord/tenant and their professional advisers need to be asking well before the lease comes to an end so that all necessary, often time-critical, steps can be taken in good time. Normally, reinstatement obligations will be found in the alteration provisions in the lease or in any licences for alterations and will, generally speaking, require any physical changes made by the tenant to be removed and the premises to be put back into the state they were before the changes were made. If there is no provision at all, the landlord will not be able to require any reinstatement and it may be saddled with an unlettable property at the end of the lease. Sometimes, a tenant is required to reinstate all alterations unless told otherwise, 12 NOVEMBER 2015
+info Faiza Ahmad is Partner at Hamlins LLP fahmad@hamlins. co.uk
but it is more normal for a tenant’s obligation to reinstate to be conditional on the landlord giving notice of the requirement to reinstate. A clause in a lease will usually provide that the tenant shall reinstate alterations at the end of the term “if the landlord reasonably so requires”. If the landlord fails to do so it may lose the right to require reinstatement at all – a potentially expensive mistake. Sometimes, the reinstatement clause will expressly require the landlord to serve a notice of reinstatement within a particular time. More often it will not, which, rather surprisingly, means that a landlord can serve a notice just hours before the lease comes to an end. The notice must however be served before the lease expires. There are arguments available as to whether a reasonable notice period needs to be given or if access must be provided to undertake works after the lease expires where a notice is served at the last moment. However, the best advice is to serve it in good time. A landlord will usually serve a notice of reinstatement at the same time as its schedule of dilapidations, although if lease expiry is imminent and there is insufficient time to prepare a detailed schedule a landlord can serve a separate notice to reinstate in accordance with any licence or the lease specifying the alterations which need reinstating. The schedule of dilapidations can follow later. Where a landlord fails to serve a notice to reinstate and therefore has to reinstate the alterations itself this can have a seriously detrimental effect on a landlord’s dilapidations claim (for example, if a landlord rather than a tenant were required to remove air conditioning this would prevent a landlord’s claim for the costs of undertaking any repairs rendered unnecessary by the reinstatement such as repair to a suspended ceiling). Although there is no guarantee a tenant will undertake works if a landlord wishes to reinstate its alterations it should give as much notice as possible. However, if the landlord would prefer to include the cost of reinstating alterations in a negotiated settlement this is best achieved by waiting to serve the notice until close to the lease expiry. For all the above reasons both legal and surveying advice should be obtained as long before lease expiry as possible. b
UPFRONT LEG AL
Vivien King considers liability issues when inspecting premises
Invitation only
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An invitation to a chartered surveyor to inspect premises may come from the property’s occupier or from another party, for instance a landlord or mortgagee. Either way, the invitation will give rise to various duties owed by one party to another, possibly pursuant to a particular contract but always under the law of tort. One is a duty of care by the occupier to (and not by) the visiting surveyor, regardless of who initiated the invitation. Hopefully, information concerning fire escapes (or lack of them) and dangerous substances including asbestos is provided before inspection, but other hazards may await. A glance at case law surrounding occupiers’ potential liability to persons visiting or even trespassing on their premises reveal examples, some of which are quirky. For instance, a 5.5ha lake created by flooding an old sand quarry in a public
A chartered surveyor is unlikely to trespass in order to conduct a survey and the occupier will usually have consented to the inspection
park; wooden grid piles standing proud of a harbour bed near a slipway or an electrically charged railway track or hotel refrigerator. The list goes on; poorly lit back stairs at a public house where the hand rail ended before the bottom of the stairs; a cracked and defective raft foundation under a housing development or the danger of a branch falling from a large, mature beech tree. Some dangers are obvious, others are not. But when is the occupier liable, what steps can they take, if any, to restrict liability and when are the actions of the visitor relevant?
Occupiers’ liability acts In relation to visitors, an occupier of premises (within the built environment or not) has “a duty to take such care as in all the circumstances of the case is reasonable to see that the visitor will be reasonably safe in using the premises for the purposes for which they are invited or permitted by the occupier to be there” (section 2, Occupiers’ Liability Act 1957). The occupier is also under a duty of care to anyone on site (including trespassers), not being a visitor, at potential risk of suffering injury from any danger due to the physical state of the premises or to things done or omitted to be done. However, in this instance, the occupier must be aware of the danger (or have reasonable grounds to believe it exists), knows or believes someone is in the vicinity of the danger and that they may reasonably be expected to offer some protection from the danger. This duty may be discharged by simply giving reasonable warning of the danger concerned (section 1, Occupiers Liability Act 1984). A chartered surveyor is unlikely to trespass in order to conduct a survey and the occupier will usually have consented to the inspection. Hence, generally speaking, the surveyor will be classed a visitor. The occupier, therefore, needs to make sure the surveyor will be reasonably safe while inspecting the
premises. However, as stated by the judge in Bowen v The National Trust [2011] EWHC 1992, there is no obligation on the occupier “to ensure the safety of visitors, merely to take reasonable care to provide reasonable safety”. In assuming safety, the occupier may rely on the advice of others so long as it is reasonable so to do.
The surveyor’s actions Nevertheless, inspecting surveyors need to take care. If they exceed the limitations of their ‘invitation’, they may become a trespasser and a mere warning of danger will suffice. The much-quoted phrase first used by Scrutton LJ in The Calgarth [1927] p93, “When you invite a person into your house to use the staircase, you do not invite them to slide down the banisters” makes the point. If invited to inspect the interior of the premises but not the exterior, the surveyor will act as a trespasser if they clamber, for instance, onto the roof. They also need to act reasonably. If asked by the occupier, for instance, not to conduct an inspection of manufacturing plant without first ensuring the equipment is switched off, they will exceed this invitation if the examination is done when the machinery is operating. So, check the invitation and in all cases, take care. b
More information > Visit isurv.com for practical guidance on all neighbourly matters
Vivien King is a Consultant to Malcolm Hollis vivien.king@malcolmhollis.com
Related competencies include Inspection
NOVEMBER 2015 13
RICS P ROP E RT Y JO URN A L
UPFRONT EX P E RT W I TN E S S ES
Howard Jenkins explains the risks of chartered surveyors acting as expert advisers and expert witnesses in the same case
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The peril of two hats
Many chartered surveyors are appointed as advisers by clients when their practices are in long-term relationships. They can also be appointed when clients simply require advice throughout projects or processes that have prolonged procurement periods. Such appointments are usually entered into without any indication of the potential for future dispute. If it then becomes apparent that there is a dispute, with litigation as a possible outcome, it is entirely understandable that these clients will want to instruct their trusted expert advisers (the surveyors) as their expert witnesses. This is because of their particular understanding and knowledge of the matter gained while acting as expert advisers, including the parties’ strategies, plans, costs, errors made along the way, hopes and expectations. When a dispute even seems a possibility, it is likely that these same surveyors will continue advising, well before they are appointed formally as expert witnesses, not least on the strengths and weakness of their clients’ cases. Now is the time to decide whether it is possible, practical and
14 NOVEMBER 2015
above all, safe, for surveyors to accept new instructions to change role to expert witness; but it may already be too late.
The expert witness Expert witnesses are usually instructed when a pre-action letter of claim or proceedings have been issued, meaning that a dispute has crystallised. They are then briefed by their appointor (instructing lawyer) and provided with any documentary information (the bundle) that they wish to put to the expert for consideration. Where this is not complete or fully helpful, more documents can be requested. Once the experts have all the documentation they need and have made the necessary inspection(s), they are usually in a position to opine to some degree.
Expert witnesses’ opinions are ultimately for the court This assessment process appears, initially at least, to be very similar to that of an expert adviser’s role. As an expert witness in a dilapidations matter, for example, irrespective of which side has instructed them the surveyor has to read the lease (and other relevant
documents), inspect the property/properties and rather than prepare a schedule of dilapidations or respond to one, assess the one prepared by the landlord’s surveyor and the tenant’s response to it and then determine, in their opinion, the landlord’s true loss. Inevitably, expert witnesses have less information than when acting as an expert adviser preparing or responding to a schedule. They certainly would not have been privy to all the meetings and discussions between the client and their advisers before preparation or response. Having reached their initial conclusions, at this stage they are likely to be instructed to report provisionally. It is to be stressed that by reporting their assessment, it is their role to give their opinion on the matters in dispute rather than advise those instructing them. Expert witnesses’ opinions are ultimately for the court. Having opined initially, an expert witnesses may well then be instructed to meet the expert witness for the other side to try to narrow issues that divide the parties. This is known as a joint meeting of experts. They meet without prejudice, without any external influences or other attendees to discuss whatever is considered relevant to their instructions. The outcome of the meeting is a joint statement setting out on what the experts
agreed and disagreed and most importantly, why they disagreed. The content of the discussions is not part of this document, only the outcome; the joint statement is issued to the parties and the court. During the joint meeting, there is no attempt by the expert witnesses to act as advocates; disagreement on a point is discussed and if it cannot be agreed, without any rancour or animosity, this is recorded and remains a disagreement. This would appear to be a very similar process to that undertaken by expert advisers when they meet to try to agree the landlords’ true loss. While they do not produce a joint statement for the court, they do of course record their agreement and disagreement on the schedule and then advise their clients. After the joint statement has been considered by the parties, although there is no obligation on them to accept the experts’ opinions, it is my experience that these documents can bring about agreement and early termination of disputes. This is because the parties start to understand what their expert witnesses will be stating in their expert witness reports and therefore the opinions that they will be giving to the court. If the parties are not persuaded to settle or at least make offers at this stage, the expert witnesses are likely
UPFRONT EXP ERT WI T NESSES
to be instructed to prepare their expert witness reports. These will be the summation of their input to date and will state their opinions on the issues. They will be cross-examined in court about their reports to flush out any weaknesses and biased views. In the final analysis, the judge makes a decision based on the expert evidence, assessing the witness’s credibility in terms of their honesty, transparency and integrity as well as their expression of understanding of the area of expertise under examination.
Accountability Although there seems to be little difference between the roles and functions of expert advisers and expert witnesses, their duties and responsibilities are very distinct. Expert advisers usually know more about the subject matter of the disputes than the expert witnesses who follow on behind them. Expert advisers advise their clients and although they must try to achieve the best outcome for them, they are not advocates. It is for the lawyers to argue the legal points, not least in court. By contrast, expert witnesses give their opinions to those instructing them and ultimately, to the court. Having done so, it is the judge who decides. Expert witnesses are instructed by the parties’ solicitors, mindful always of their responsibility to the
court and not those who have instructed them. Expert witnesses do not have immunity from suit after Jones v Kaney [2W011] but if they have acted impartially, independently and with integrity, uninfluenced by the exigencies of litigation, they should have no fears. Their only risk is not providing the service to the court that is required; for example, by not complying with a court order, or being partisan. An expert witness can only be liable if they have been negligent, not because the judge has preferred the opinions of the other expert. Expert witnesses owe no allegiance to those on whose behalf they act, unlike expert advisers, and must give their true and full opinions. In so doing, they must explain both parties’ strengths and weaknesses, exposing all that they have learned, good and bad, opine on these facts and frequently the human errors that may have brought about the dispute in the first place, irrespective of where that source may be; no one is spared their gaze. Often, when the true reality of the expert witness’ function is fully understood by the parties, the realisation of risk of their ‘secrets’ and ‘failings’ being put into the spotlight in court, delivers considerable gravitas and brings about more rational decision making. Unfortunately, for those parties that have already instructed their expert advisers as expert witnesses, it may be too late to change the outcome. b
Howard Jenkins FRICS is Principal of The Howard Jenkins Consultancy, an Assessor for the RICS Expert Witness Accreditation Scheme and Member of the RICS Dispute Resolution World Region Professional Group Board Howard.Jenkins@outlook.com
Related competencies include Dispute resolution
NOVEMBER 2015 15
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UPFRONT ADR
Can we talk about this? Alan Langleben explains why all members need to know about the RICS Mediation guidance note
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ICS members may well wonder why the Mediation guidance note (GN) is important, or even relevant to them. Is this not all part of the Civil Procedure Rules (CPR, http://bit.ly/1HGocx9) and so is the province of the legal profession? What has it got to do with surveyors? When I gave a presentation on mediation to members at a roadshow, I asked for a show of hands as to who had dealt with a property dispute without involving lawyers at any time. A significant number of people responded. 16â&#x20AC;&#x192; NOVEMBER 2015
In such cases, the only professional with whom your client is dealing to resolve their dispute isâ&#x20AC;Ś you. if you are blissfully unaware of the content of the GN, I believe you are at risk of a negligence action if your client has an adverse costs order made against them. I also asked for a show of hands to indicate whether members had come across a lawyer who may have made an error. Again, a large proportion said they had. This did not surprise me, as in my mediation practice, I have dealt with many cases of professional negligence by solicitors. So I hope you will now have a look at the GN, which I believe (as a
member of the committee responsible for its production) is easy to read and understand, and contains all the information chartered surveyors need. What types of cases are suitable for mediation? As residential surveyors, issues include: bb dilapidations bb boundary disputes bb rights of way bb rights of light bb enfranchisement bb service charges bb professional negligence. My colleagues and I deal with these kinds of disputes on a weekly basis.
UPFRONT ADR
The rules The GN helpfully sets out both the pre-action protocols and the rules contained in the CPR as they relate to mediation. Appendix 6 outlines the pre-action rules, and defines the court’s powers, particularly in any case management conferences (CMC). These form a fundamental part of the management of litigation in the UK, and are used by courts to: bb exercise their broad case management powers bb fix case management directions bb if necessary, review the litigants’ compliance with previous directions, with a view to making directions leading up to the trial. CPR 26.4 (2A) states: “If the court otherwise (i.e. even if the parties have not agreed) considers that a stay of the proceedings would be appropriate to enable mediation to take place, it will so direct and order a stay for one month or such other period as it considers appropriate.” I know that in many cases, judges are taking the initiative and doing just that, even against opposition from the parties’ solicitors. One solicitor told me he had appeared at a CMC and explained to the judge that mediation was not appropriate, he did not need four weeks but had given the matter four seconds’ consideration and the stay would just add delay. The judge was unmoved and ordered a one-month stay.
The PGF case What are the consequences of unreasonably refusing to mediate? The current leading case is known as the PGF case (PGF II SA v OMFS [2012] EWHC 83, visit http://bit.ly/1AcgQkD), which is set out in page 22 of the GN. This was a dilapidations case. In late 2012, the Court of Appeal penalised the lessee in costs after their solicitors failed (I do not know why) to respond to a letter from the lessor’s solicitors, suggesting mediation. The facts are quite extraordinary. A Part 36 offer made by the lessee many months earlier was accepted at the last moment by the lessor, so normally the lessee would expect all their costs. However, the Court of Appeal in effect said that a failure to respond to a mediation request trumped the Part 36 offer.
Statistics
The consequences of failing to deal correctly with a request by the other side to mediate could be catastrophic Unreasonable refusal Page 11 of the GN gives examples of cases where a party has refused an offer to mediate, which the court has not accepted as reasonable. They include: bb wanting your day in court bb having to accept guilt bb an earlier mediation between the same parties failed bb dislike and mistrust between the parties bb believing the case is watertight. Reasonable, in the court’s view, is where there is real urgency and an injunction is required, it is important to establish a principle, or clarify some wording, e.g. in a lease.
Mediation examples
1 There was a dispute between neighbours about a piece of land used for parking. The litigation could establish precisely who had what rights, but actually that was not the real issue. After some serious work at the mediation, the neighbours agreed they would form a joint venture to develop the piece of land to their mutual advantage. 2 There was a dispute between neighbours about rights of way, where exactly they were and whether or not they extended to vehicles. As a result of the mediation, the parties identified a possible way forward, with the party having the benefit of the rights of way making an offer to buy the other party’s house and land. 3 Some fields had been let in the distant past to a lessee, who had used them and other fields as well, and claimed adverse possession. Ultimately, the parties were able, with the help of a large-scale plan and surveyors who were at the mediation, to agree on a division of the property, giving each what they really needed, a result unimaginable to achieve in court.
About 75% of all cases settle, with a signed binding agreement, on the day they go to mediation. Of the remaining 25%, about half will settle within a week or two, or maybe a little longer, while the rest (12.5%] will either be abandoned or go to court. A 75% success rate is almost certainly better odds than most lawyers would give their clients, even in the strongest of cases. Indeed, I can still vividly recall a conference with eminent counsel that I attended in my youth. At the end, the client asked counsel what his chances were. The reply was that even in the strongest of cases, he never gave his clients a better than 60% chance of success.
Summary Whether or not you have a lawyer involved, ignorance of mediation cannot be excused after the GN has been published. The consequences of failing to deal correctly with a request by the other side to mediate could be catastrophic. Conversely, offering to mediate may be a good tactic for you. As previously stated, overall there is an 87% chance of settlement within a short period of time. Mediation can be arranged quickly, the costs are limited and known, and far less than the costs of litigation. There is always a litigation risk, but this is negated by settling. The parties are in control of the process and they decide whether or not to settle. b
More information > To download the guidance note, visit www.rics.org/mediationguidance
Alan Langleben is a Consultant and Founder Member of The Property Mediators a.langleben@ashfords.co.uk
Related competencies include Conflict avoidance management and dispute resolution procedures
NOVEMBER 2015 17
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UPFRONT TAX I N G T I M E S
TAXING TIMES
The effect of lower tax charge thresholds on residential property owned by companies will be felt across the UK, says Lorna Sizer, but reliefs are available
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hanges to the Annual Tax on Enveloped Dwellings (ATED), which concerns UK residential properties owned by a company or mixed partnership with a corporate member, are set to affect businesses across the country, not only in London. In the past, this tax did not kick in until the property was worth £2m, keeping many companies outside of traditional property hotspots in the South East of England, out of the loop. But since 6 April, the annual tax charge now applies to properties with a value of more than £1m and it is possible many more businesses, in many more locations, will find themselves caught in the tax net for the first time. The valuation to take into consideration is the market value of the individual property as at April 2012 or at the time of acquisition if later (the next valuation point is due to be April 2017). This is significant for those who have bought recently or who are considering a purchase because property values have risen so sharply in recent years. A report in the Sunday Times in February 2015 indicated that 400,000 homes across the country, in more than 10,000 streets, are now valued at more than £1m. More than half of those are in London, of course, where experts at Oxford Economics predict the average price of a home could reach £1m by 2030. But significantly, many other areas of the country have also seen big rises in property values, which means ATED is no longer an issue solely for the capital city. A Daily Telegraph report in May identified St Albans, Bath, Manchester, Cheshire and Edinburgh, for instance, as new £1m hotspots. In fact, there have been £1m sales right across the UK in 2015 – from Christchurch in Dorset and Cheltenham in Gloucestershire to Tynedale in Northumberland and Bradford in Yorkshire. 18 NOVEMBER 2015
Despite a recent slowdown around the general election, many experts continue to predict a rising market, some citing figures of up to a 40% increase over the next four years, so businesses that buy residential property need to be aware. The good news is that ATED only applies to residential properties, which means that commercial premises can be ignored. Properties owned within the company or mixed partnership can also be looked at individually unless there is an internal access between the two (for instance between flats in a single dwelling). Importantly, too, there are significant tax reliefs which can be claimed to reduce the tax charge to as little as nil even if the property is worth more than £1m. However, these reliefs must be claimed on an annual ATED return form and this should be actioned as soon as possible.
Tax relief Relief could be available on: bb property rental businesses where the property is not occupied by anyone connected with the owner of the company bb farmhouses bb property acquired to develop and sell on, which is not occupied by anyone connected with the owner of the company
bb dwellings open to the public for at least 28 days a year bb property provided for the use of employees of the company, where the employees do not own more than 10% of the share capital or more than 10% of the partnership. Now is the time for all companies affected – or those who fear they could be affected in future – to act by seeking advice and getting their tax house in order. Tax return forms for 2015-16 have to be filed by 1 October 2015 and any tax payable will be due by 31 October 2015. Remember, too, that if the tax return form is missed there will be a £100 penalty charge even where there is no tax payable. Companies in all areas should keep a close eye on ATED in future, too, because there are certain to be further changes ahead. We already know that the limit will be reduced from £1m to £500,000 with effect from 1 April 2016, affecting more businesses as property prices continue to rise. Preparing early for those changes and seeking good advice is the key to tax efficiency. b Lorna Sizer is Senior Manager at Knill James lornas@knilljames.co.uk
RICS P ROP E RT Y JO URN A L
COMMERCIAL
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com mer cial NOVEMBER 2015 19
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COMMERCIAL VAL UAT I O N
Andy Thornhill and Mark Heuff explain some of the unique issues in valuing renewable energy projects
The value of green
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ith more than £30bn invested in renewables in the past few years and a further £50bn spending needed by 2020 to achieve binding EU energy targets, the sector is experiencing sustained growth. This presents opportunities for the valuation profession, which must consider the most suitable methodology in light of the inherent risks of valuing these complex projects. Renewable energy has already become a significant part of the UK’s energy mix, with 19% of electricity generated from renewable sources last year. This equates to a total of 64.4 terrawatt hours, enough to power more than 15 million homes. In financial terms, this has been achieved through the investment of around £7bn per annum since 2010. As projects evolve through their development life cycle, key milestones are reached, de-risking and making them more attractive, to lower costs of capital driving the need for an opinion of market value. For example, the receipt of planning consent and the commencement of operations are two customary points when a project’s market value significantly increases and owners look to external funders. As the renewable energy market matures, the requirement for valuations has increased to support funding solutions such as the injection of project finance or partial disposal. There is also an emerging secondary market for the disposal of operational assets driving further demand for valuations. Finally, the emergence of listed renewable energy funds has created a demand for ongoing 2 0 NOVEMBER 2015
valuations of their portfolios, together with complex reports on market value for compliance with the Initial Public Offering regulations. In contrast to the property industry, the renewables industry is a relatively closed market, with the majority of acquisitions and disposals being off market and not widely publicised. As a result, the valuation of renewable energy projects is a niche area requiring transactional insight and technical understanding to be able to give a reliable view of market value.
Project structure A renewable energy project is typically owned by a special purpose vehicle (SPV) having the benefit of a long-term lease on the underlying land and relevant contracts and permits for the construction and operation of the project assets (see Figure 1). The projects are usually subject to a
time-limited planning permission and must revert the land to its original condition on expiry. As a result, it is normal to be asked to value the business of energy production that the SPV will undertake over the life of the planning consent, or the assumed useful economic life of the technology used in the project if shorter. The UK has seen rapid deployment of onshore and offshore wind, ground-mounted and rooftop solar photovoltaic, biomass, and energy from waste. All of these technologies have reached a sufficient scale to constitute an active market in the UK.
Valuation methodology In our experience, when valuing a renewable energy project it is normally the SPV that is the focus, not the underlying freehold. As a result, the valuation is of a project SPV rather than an interest in land and this important distinction should always be clarified and confirmed at the start of any instruction. There are a number of traditional valuation methodologies, as highlighted in the 2012 RICS Valuation of renewable energy installations information paper. These include the direct comparison, investment method, profits method, depreciated replacement cost, residual method and discounted cash flow methodologies. Careful selection, justification, application and adaptation of methods is required, but it is our experience of interacting with clients that the discounted cash flow method is most applicable for the valuation of renewable energy projects and is used by the majority of market participants. The principal reasons for this include: bb Individual projects vary widely due to the underlying specifics such as the
C O MME RCIAL VA LUATIO N
Figure 1 Special purpose vehicle structure Operation and maintenance agreement
Utility Power purchase agreement for sales Land owner
Lease
Rent
Renewable energy project SPV
k Flow of funds (blue) and contractual
Operation and maintenance partner
Income
Operating costs Capital expenditure
EPC wrap
Construction/ technology supplier
arrangements (grey)
sale of electricity. Estimating the future price of electricity is difficult and while expert advisers issue forward pricing curves, these have not proved completely accurate in the long term. There have been unpredictable shocks to the industry such as the recent crash in oil prices and the announcement in the Budget of a cessation of Levy Exemption Certificates for renewable energy generation. However, it should be noted that it is common practice to use these curves in assessing the market value of a project in a typical arm’s length acquisition and so their use is appropriate to inform the open market value of a project.
Energy yield subsidy regime under which they are commissioned, the natural resource they use and the technology deployed. bb Timelines are also extremely project-specific and, importantly, limited in length. For example, the life of support mechanisms the project can access, the useful life of different technologies, the term of the project’s planning consent. However, it should be noted that there are still weaknesses with this approach. Most significantly, this concerns the reliance on forecast assumptions, which need to be thoroughly verified and explained. The assumptions required can be broken down as: Project level: bb Factual assumptions: contracted revenue and cost items such as capital expenditure. bb Forecast assumptions: variable assumptions requiring expert advice such as energy yield. Market level: bb Market influenced project assumptions: variable assumptions affected by wider economic influences such as future power prices. bb Return assumptions: investor appetite for renewable energy projects influenced by micro and macro factors such as industry and country risk, alternative investment returns and interest rates. bb Government support: revenue subsidy mechanisms available for renewable energy projects differ in life and calculation. Those with a market element, such as the Renewable Obligation, require expert forecasting. The necessary assumptions vary by technology, but the core risks
are universal. Three in particular can impact significantly on the outcome of a valuation.
Government subsidy Projects receive a government revenue subsidy on commissioning that remains in place for the remainder of their life. In other European countries, retrospective changes to tariffs have reduced the revenue support offered at commissioning. While the UK government has historically been steadfast in its policy of ‘grandfathering’ subsidy mechanisms once awarded to a project, it should be noted that market values in operational renewable energy projects in Italy and Spain were radically reduced as a result of these unforeseen tariff changes. In the UK, the constantly evolving political landscape means that there is a risk that the subsidy mechanism that a pre-operational project is targeting could change and this therefore impacts the market value of unbuilt projects. Energy market reform is a hot topic and with the new government seeking to address manifesto pledges around renewable energy deployment this uncertainty has risen significantly. For example, the onshore wind industry is facing a very uncertain period following announcements of the early closure of the Renewable Obligation and the expected withdrawal of future subsidies. As a result, many consented and unconsented projects are seeing their future becoming increasingly uncertain. This potentially has a significant impact on their market value.
Electricity prices Projects derive a proportion of their income, some more than others, from the
Energy yield (i.e. the volume of electricity produced by a renewable energy project) is another assumption that requires expert advice and is subject to inaccuracies, especially for weather dependent energy generation. Long-term energy yield assessments are produced by industry experts, are site-specific and usually based on long onsite monitoring. Care must be given to ensure that the energy yield has been derived from sufficient on site data and been calculated by an experienced adviser. Once the site conditions are understood, the energy yield will vary significantly depending on the specific technology deployed at a project. The renewable energy industry is growing and has a considerable need for independent valuation services. With recurring changes in government revenue support mechanisms, new classes of investor entering later in the project’s life cycle and advancements in technology, specialist valuers are required to be industry experts. It is essential to understand a renewable energy project and the inherent risks of the assumptions needed to predict the long-term cash flows. This understanding, together with attaining visibility of investor return expectations in a closed market makes the valuation of renewable energy projects difficult but achievable, if the practitioner has the necessary niche experience and market insight. C
Mark Heuff is a Director and Andy Thornhill an Associate Director at JLL Renewable Energy Capital Andy.Thornhill@eu.jll.com
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COMMERCIAL S U STAI N AB I L I TY
Occupiers may not appear to be choosing buildings for their green credentials, but sustainable workspaces have a distinct advantage in the market, says Rebecca Pearce
Well worth doing
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egislation around energy efficiency and climate change is driving owners and investors to manage and mitigate new risks in their property portfolios. The adoption of responsible property management strategies is now more common, from sustainability due diligence at acquisition stage to detailed audits of existing portfolios. For investors and ratings agencies, the management of environmental, social and governance risk is increasingly seen as an essential part of good fund management. Occupiers are not exempt from the legislation pipeline. The EU’s Energy Efficiency Directive requires all large companies to audit and highlight opportunities to increase energy efficiency. In the UK, this is being driven through the Energy Savings and Opportunities Scheme with most EU member states having similar requirements (see Property Journal May/June, p24). There is anecdotal evidence of property values being impaired where sustainability performance is poor (the ‘brown discount’) and while we await hard evidence of enhanced rents and values being achieved for more sustainable buildings, there are certainly instances of price chipping where buildings fall short of standards. For example, where buildings fall below the UK’s future Minimum Energy Performance Standards, transaction price reductions have already been observed to take in the cost of upgrading. This reflects the fact that from 2018 it will be unlawful to lease most spaces with F and G rated Energy Performance Certificates, with an impact on rental income and value. In some instances, the reductions are greater than the likely cost 2 2 NOVEMBER 2015
of upgrade works, perhaps building in inconvenience and reputation impacts of non-compliance.
Occupier priorities The CBRE 2015 EMEA Investor Intentions Survey revealed that for 70% of respondents, sustainability is either ‘critical’, ‘one of the most important criteria’, or ‘definitely matters’ in the asset selection process (see Figure 1). Results are even more pronounced when considering responses from the ‘institutional investors’, a group traditionally more focused on long term performance and with a greater risk awareness – over 85% of responses were in these three categories. In contrast, the results of CBRE’s 2014 European Occupier Survey showed occupiers ranking sustainability lower than previously in the criteria used to make property decisions. However, this needs to be considered in conjunction with other results. Some 67% of respondents reported that their workplace strategy was primarily driven by the need to attract and retain talent – moving above cost savings as the key driver. The second most important criterion expressed by 46% of respondents was the desire to increase employee productivity. The survey revealed that 65% of companies look for quality office space with excellent transport accessibility and proximity to amenities such as shops, restaurants and gyms. These are all attributes of green or sustainable buildings, so is it really the case that occupiers are focusing on the aspects of sustainability that impact their bottom line? Interest in sustainability and associated features may also vary with the type of occupier and their location. CBRE, with Kingsley Associates, undertakes annual satisfaction surveys of occupiers in premier properties – iconic buildings that
adopt premium property management services and are often occupied by high-profile companies. When asked about sustainable property management practices, 50% of respondents noted that green practices were a high or very high priority as they search for space, and 39% noted that green certifications were valuable or very valuable (see Figure 2). Interestingly, 25% of occupiers noted that they were likely or very likely to co-invest in sustainability improvements with landlords. This could indicate that with the right engagement, and the right projects, the split incentive that has long been a barrier to investment in building improvements may become a thing of the past. Multinational companies with well developed corporate responsibility programmes and public sustainability commitments are often the most active in conversations about asset level sustainability, perhaps reflecting the resource available to address the issue and benefits due to their higher energy costs from larger footprints. Equally, smaller, younger companies can also be keen participants as staff members act seek to align ‘responsible business’ values with their physical environment.
Enabling staff performance The high correlation between the indoor environment, e.g. air quality, lighting, acoustic qualities and thermal comfort, and human performance means that buildings that provide enhanced surroundings will be in demand. Human resources generally make up 80%-90% of a company’s operating costs, whereas utility consumption (energy and water) is less than 10%. Investing in improvements for human performance and productivity will therefore have a much greater overall impact. Clever companies are choosing buildings that provide good air quality,
C O MME RCIAL S USTA I NAB ILITY
Figure 3: CBRE employee survey
Figure 1: Investor Intentions Survey Which of the following statements most closely describes your approach to sustainability in asset selection? We will not even consider buildings that do not meet strict criteria
>70%
It is one of the most important criteria in determining the properties we buy Other considerations are most important but sustainability definitely matters to us We sometimes reject buildings for reasons of sustainability
83%
feel more productive
92%
said the new space has created a positive effect on their health and wellbeing
87%
said that the new environment has helped generate business
94%
said that the new space has a positive impact on their business performance
90%
of respondents would recommend the Workplace360 approach to colleagues and friends
89%
of employees said Workplace360 has enabled them to work from anywhere, anytime
93%
say they are able to easily access their digitised files off-site or from handheld devices such as a tablet or smartphone
Institutional investors Others
Sustainability considerations tip the balance between possible options if other factors are equal Sustainability is not a significant consideration in selecting assets to buy 0%
10%
20%
30%
40%
50%
51%
of employees utilise the sit/ stand desks in the space, either standing the majority of the day or alternating between sitting and standing
74%
say that the new space has had a positive impact on their business performance
93%
of respondents say that they are able to more easily collaborate with others
74%
report using the stairs rather than elevators the majority of the time
89%
of employees felt they had ample access to focus or private space when needed
60%
Source: CBRE Research
Figure 2: Premier property priorities Priorty of green in space search France Australia China Netherlands UK USA Ireland Hong Kong
82% 72% 58% 52% 49% 41% 40% 13%
access to natural light and views, facilities that promote physical activity and proximity to public transport. These ‘green’ features are all recognised by building certification labels such as BREEAM, LEED, DGNB and HQE as advantageous. So in fact, occupiers are not ignoring sustainability, but have simply become more sophisticated in their demands, focusing on the way buildings can sustain and enhance the performance of their people.
WELL standard The emergence of the WELL Building Standard from the US further highlights this shift in focus. Developed by Delos and the Well Building Institute with input from design and healthcare professionals, the standard addresses seven key concepts – air, water, nourishment, light, fitness, comfort and mind. Minimum ‘preconditions’, performance criteria and testing requirements are set out with for certification by accredited auditors with an overview by the Green Business Certification Inc – the same body that oversees LEED certifications. While BREEAM and LEED include expectations and credits for health and wellbeing in the various certification tools, the WELL standard is solely
Value of green certifications 29% 61% 67% 48% 31% 36% 40% 25%
focused on these issues and does not include broader construction and operational aspects such as energy and construction waste. CBRE piloted the WELL standard during the creation of a new workplace at its Los Angeles headquarters. This refurbishment involved a move to agile working and concurrently achieved a LEED Gold certification for Commercial Interiors. Post occupancy reviews report that 83% of employees feel more productive and 92% said the space has created a positive effect on their health and wellbeing (see Figure 3). It may be difficult to assign causality to these results, but the same survey revealed that 74% reported using stairs the majority of the time (as opposed to elevators) and 51% use the sit/stand adjustable desks – both initiatives recommended to avoid detrimental workplace health impacts. In London, the developers of 22 Bishopsgate are using the WELL principles to guide the choice and performance of mechanical, electrical and plumbing systems alongside the BREEAM Excellent goal for the development. The supply side needs to respond to this evolving occupier need but not at the
Likelihood of jointly investing in green initiatives 35% 28% 41% 26% 23% 15% 40% 50%
expense of more commonly recognised sustainability measures. Operating costs and corporate responsibility reporting are still important factors. The skill required of designers and building managers today is to balance the people-centric features of a sustainable building with energy and resource efficiency through the use of technology and maintenance practices. This applies equally to new and existing buildings. A holistic approach to refurbishment, for example, can achieve good environmental performance, regulatory compliance and renewed occupier appeal, creating a truly sustainable asset. The convergence of human wellbeing, increased productivity and government policy on energy efficiency and carbon emissions leads us closer to the point where sustainability in property is synonymous with quality. C Rebecca Pearce is Head of Sustainability at CBRE Rebecca.Pearce@cbre.com
Related competencies include Sustainability, Real estate consultancy
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COMMERCIAL P U B L I C S E C TO R P R O P ERT Y
Kerry Bourne offers a perspective on how the NHS is changing its property strategy, and what this could mean for the future of the public sector estate
Best of health
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he pressure on the NHS to deliver world-class services at the same time as achieving ever greater efficiencies has never been more intense. In this context, the efficient use of the £30bn estate owned and managed by the NHS has a vital role to play. There is a clear acceptance among many trusts that a fresh approach is needed to ensure that decisions around property are no longer viewed in isolation. Instead, there is an acknowledgment that they must be fully integrated into their financial, clinical and investment strategy. Rather than an inflexible ‘straightjacket’ that they simply have to accept and work within, the view is that property needs to be thought about in a completely new way as a flexible and powerful asset for leverage. A number of trusts are already embracing this challenge with some innovative thinking, for instance at Barts Health NHS Trust. Serving a population of 2.5 million people in east London, the trust includes six main hospitals as well as a number of 24 NOVEMBER 2015
community buildings. Such a complex and fragmented portfolio that is centred in a prime London property area presents an obvious opportunity for either a one-off capital gain or a continued revenue stream through redevelopment. Working with Barts, Essentia reviewed the trust’s whole estate strategy and quickly identified that not all its buildings were suitable for providing high-quality clinical care for patients. Consolidating assets on the main acute hospital sites facilitated the disposal of underused areas of the estate that were outdated and unsuitable for modern healthcare. For example, the London Chest Hospital was a highly prized opportunity for residential redevelopment. When placed under offer in spring 2015, it generated tens of millions of pounds for Barts to invest in modern facilities and new services. This is just one of a number of opportunities being worked through. Another example is the work Essentia has been doing at Guy’s and St Thomas’ NHS Foundation Trust. As one of the country’s largest hospital trusts, it had a large portfolio of mainly leasehold office accommodation that was fragmented and varied greatly in quality. A full property
review was undertaken to allow more informed decisions to be taken on how to manage its property more efficiently, harnessing the power of IT and therefore reducing square metre footprint costs. Elsewhere, the approach taken by a mental health trust in the Home Counties shows how the adoption of an innovative approach to property management can benefit patients and the trust. Encouraging patients to live as independently as possible resulted in long-stay accommodation and care homes becoming redundant. Disposing of these properties freed up £70m of funds for the creation of a modern, comfortable and non-clinical mental health hub – the first such purpose-built facility in the area.
Practical steps So, best practice is emerging, but truly integrating a trust’s property with the wider organisational strategy is still uncharted territory for many. What advice is there for those looking to achieve this? bb Challenge the status quo and ask whether the property portfolio suits the current configuration of clinical services: Because they have grown
C O MME RCIAL P UBLI C S ECTOR P RO PERTY
We need to think about the public sector estate as a whole landlocked sites to share healthcare facilities from other providers We need to think about the public sector estate as a whole. This means the facilities occupied by local councils, not just hospitals. Stakeholders should look at the optimal configuration that meets the needs of the catchment area, including population growth. Services can then be located in the most appropriate places, for instance a public library could be the ideal location for a dialysis clinic or a library could be co-located within a hospital. While integrating the public sector estate makes sense, it is by no means an easy thing to do. However, a more joined-up approach is crucial if the outcome is to deliver a sustainable and ‘future-proof’ trust.
A fresh approach organically over many years, clinical services can be spread over multiple locations. Consider clinical need first and property second. Can property be provided or shared with other organisations or would new models of ownership could be more appropriate? bb Don’t bite off more than you can chew: If you are faced with a very large, complex estate, break it up into small chunks – do not try to tackle the whole estate in one go. bb Consider whether your property could be used to release funds: This would allow investment in clinical services, either through sale or joint venture. bb Capitalise on current demand for housing: Given the government’s focus on housebuilding, repurpose property that is better suited to housing stock, e.g. Victorian buildings, and raise funds for more appropriate clinical facilities. Encourage planning authorities to support clinical development through planning consent. bb Think holistically about your property needs: Break down traditional silos between clinical and non-clinical management to plan your requirements.
This will enable the most efficient estate footprint to match clinical needs. bb Ownership isn’t everything: Be mindful that it is not always necessary to own the entire property estate. In the changing face of healthcare, flexibility is key so be prepared to consider renting facilities where this could be more cost effective and efficient. bb Harness the power of technology: Enable remote working, which can reduce your property requirements.
Integrating sectors With the recent introduction of the Department of Health’s Local estates strategies: a framework for commissioners (http://bit.ly/1HxGoCr), more emphasis is being placed on collaboration between acute, primary, mental health and social care to ensure greater efficiencies and, more importantly, higher quality of care for patients. Strategic estates management will play a crucial role. For instance, to be better integrated, trusts need to analyse their property portfolios and identify sites suitable for sharing and those that should be released for sale. Such collaboration allows trusts unable to expand due to
The demands on the health system are continuously expanding and trusts’ approach to property and the planning and management of their estates has to change quickly – as many are already demonstrating. By integrating their property strategies into their wider business and investment strategy, trusts will achieve greater operational efficiency and deliver better, more sustainable patient care, where it is needed most. This means seeing beyond the immediate constraints of the property legacy they have inherited, being prepared to ‘throw away the rule book’ and to adopt new and different solutions. This may involve partnering with the ‘unusual suspects’ such as other parts of the public sector, as well as property developers and other parts of the private sector. C Kerry Bourne is Director of Property Consultancy at Essentia kerry.bourne@essentia.uk.com
Related competencies include Corporate real estate management
NOVEMBER 2015 25
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COMMERCIAL BIM
Rob Partridge and David Illingworth review how BIM in office buildings has progressed in the past two years, and where development is still needed
Pathways to the future
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De-risking construction
In 2013, the British Council for Offices (BCO) published Building information modelling for commercial office buildings. This report aimed to identify where value could be created through the use of BIM, define the beneficiary, and assess what steps needed to be taken to unlock this value. Interviews and case studies were combined with a review of existing research. Analysis was carried out, acknowledging the current technological, contractual and legal constraints as well as industry best practice, to build up a sector-specific understanding of how BIM could be implemented and improved. The analysis identified five Pathways as offering a potential benefit.
26â&#x20AC;&#x192; NOVEMBER 2015
This was identified as the most developed of the pathways because the link between the beneficiaries and the implementers is close and the feedback loop the shortest. Progress in this area was initially led by suppliers, which use attributed models to coordinate, cost and programme projects, closely followed by a surge in adoption in the main contractor arena. The report concluded that design teams and developers have, on the whole, started to recognise this potential of BIM, although it argued that the developer may not be seeing the full benefit of associated risk reduction. Interdisciplinary coordination is key to de-risking the design and construction process, and although many consultants are well versed in coordination within a 3D environment, the process has traditionally been uncontrolled. In recent years, the take-up of BIM in the industry has meant that there is far more strategic thinking at the start of a project to set up a coordination system appropriate to the project and the consultants. Thus clash detection is fast becoming
k BIM coordination on the White Collar Factory developed by Derwent London an established part of any design programme. However, this process must be passed down the supply chain and ultimately to the end users, otherwise any benefits will be lost. Again, this is becoming more common, with contractors and design teams discussing the specifics of data transfer at the start of contract talks, such that a smooth transition of the project BIM strategy is achieved. Therefore, the efficiencies of BIM coordination can be realised as all the building packages combine to produce the integrated end product. Although certain packages have been modelled in 3D for years (primary steelwork for example), other trades are now catching up as they understand the direction of the industry. Main contractors are pushing this, and in many
cases where subcontractors still work on a 2D platform, main contractors will model their information in 3D to form a complete model. It is inevitable that the most turbulent period of a project is from procurement to handover, when the pressures of cost and programme can sometimes dilute design quality. Advocates of BIM must be aware of this risk and help to smooth transitions.
Building performance This is defined as a measure of how well a building fulfils its brief using as little material or energy as possible. Examples did not just relate to whole-life cycle energy consumption but included detailed coordination of back of house spaces to increase net internal area and embodied carbon auditing,
C O MME RCIAL B IM
which may be subsumed into a 5D BIM model. The research found that as the industry becomes more accustomed to the links between different software packages, the world of BIM begins to extend to more focused consultant workflows that can be linked to a central model. For example, in structural engineering, analysis models are often set up to ‘talk’ to the BIM model, such that the traditional long-winded iterations of re-analysis can be achieved at the touch of a button. The efficiency achieved saves not only time, but produces an inherent streamlining in terms of material (and thus energy), moving away from the traditional conservatism of engineering of the past. Examples have been found across more complex
typologies, the cost of buildings with complicated geometry has been reduced in terms of material, fabrication and construction. The same is true in environmental engineering, with consultants starting to link thermal modelling and energy analysis to the BIM model, thus taking into account all components of a building. There is no doubt that this pathway will continue to gather pace, with more design teams understanding the power of adopting an approach where engineering is integrated into the model as well as coordination.
Operations and maintenance BIM has long been seen as a benefit to asset management and maintenance scheduling, but the 2013 report found little evidence of its use in reality. Most of the data that benefits the facilities management (FM) team is of limited use to the construction team, so the developer must make the collection of this data specific and included in the building contract. The government’s BIM strategy identifies this need and the information required is being developed. The report concluded that the cost of
It is inevitable that the most turbulent period of a project is from procurement to handover images © Derwent London
this exercise is expected to drop as product libraries are expanded, but for this pathway to truly progress it will require clients to see the information as an asset and adding value to their portfolio. There have been significant advances in this area in other sectors (such as education and research) in the past few years, where clients have proactively begun BIM and FM discussions at the appropriate time. We are therefore beginning to see the handover of fully coordinated models to end users that contain all the data necessary for a full building maintenance regime. We are also seeing the development of automated systems, where live monitoring can be used to predict failure and instigate the replacement process. It is likely this will gain traction over the n coming years. NOVEMBER 2015 27
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COMMERCIAL BIM
In the office sector, although many clients understand this potential, others ask for the BIM model at handover without fully knowing why. Design team members experienced in BIM need to discuss the benefits with clients at the outset of the project to ensure they are maximised.
Interdisciplinary coordination is key to de-risking the design and construction process
Agent’s areas and transactions The report defined this as the principle that BIM allows a more detailed understanding by the prospective tenant of the agent’s offering. This should allow earlier lettings, with associated benefits to financing for the developer. It not only allows greater visualisation of the building and spaces, but for design teams/agents to develop test fits and for tenant enhancements to be developed and confirmed earlier on the design and construction programme, with savings for both parties. Little use of BIM was reported by agents, with traditional plans and still visualisations being common. For this pathway to develop, agents need to see whether they can achieve a competitive advantage, possibly by proving energy efficiency and flexibility. Discussions confirmed this, with little interest from agents regarding engaging in BIM or requesting specific functionality. However, more engagement of the agent teams during design is being seen, with many clients initiating early dialogue. At these sessions, BIM is being used (albeit by the design team) to test options with the agents, so it may only require a small step change to implement it within this area.
Project finance The hypothesis was that the reduced risk that BIM can 28 NOVEMBER 2015
k Data-rich BIM model, from the Francis Crick Institute
provide should see benefits with clients trying to secure funding. There were examples in the 2013 report, and it was felt this pathway was of greater benefit to overseas investors, who had little knowledge of the market they were investing in. The report concluded that there may be development in very early modelling of projects focusing on key risks and that BIM may start to play a role in whether funding is achieved. Until other aspects of BIM can be proven through track record to show time, cost and quality benefits, there will be little impact on project finance. Limited evidence was again found during this review, although examples were highlighted where clients use BIM to give a contractor sufficient confidence in fixing a price at RIBA stage 3. This was not directly project financing but demonstrates that BIM is being used earlier in the design process to assist procurement and cost. Recent evidence has found that many consultants use various forms of modelling early on in the design process for initial visualisations, analysis or coordination. Furthermore, this modelling is being carried out with parametric function, such that defined variables can be linked as a project’s form and
massing evolves in the early stages of design. This process can not only save time, but allow design teams to evaluate many different permutations, making the optimum solution for a given site and brief far more likely. We are seeing evidence of these tools being recognised by clients in the early stages of design, which are indirectly informing developer teams that maximum value is being extracted from a particular asset or site.
Greater understanding With all developing technologies, it is research, training, dissemination of ideas and discussions that will determine the direction and speed of change. The development of BIM is inevitable and there will be winners and losers in the market. With companies currently increasing investment in training and
software, this should see the standard rise. It is still the case that further development in data presentation is required so it can be used by all software. There also needs to be greater understanding of BIM by all within the property industry, with engagement to identify benefits and influence up or down the chain. Project gestation can be a number of years and it requires strategic thinking by stakeholders to engage in BIM, especially in new areas. It also takes rigour to ensure that a full appraisal of the process is carried out, so that successes and failures can be identified and promoted or improved on. A number of recurring discussions remain. Who should take the lead: architect or third party? Do the RIBA design stages need to be reworked to align with the process or should the detail in BIM strategies align more realistically with the stages? What is clear is that architects are starting to see the benefits, with one leading practice stating that all projects will use BIM to a greater extent going forward. With architects on board and key developers interested, we can expect the rate of change to increase. C
Rob Partridge is Director and David Illingworth is Associate Director at AKT II
Related competencies include Building information modelling, Data management
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Head of UK Investment Management, Internos Global Investors
RICS Commercial Property Conference 26 November 2015 Radisson Blu Portman, 22 Portman Square, London, W1H7BG The RICS flagship Commercial Property conference returns in 2015, bigger and better than ever. With the current boom in the property market and no sign of momentum easing, our conference comes at a crucial time. Topics on the day will include market updates on office, retail, industrial and leisure assets as well as the investment outlook for London, the Eurozone and other regions. Attendees will also strengthen their understanding of the current economic outlook, latest occupier trends, growth opportunities and risks to the commercial property sector. In Association with:
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COMMERCIAL S O L A R P OW ER
Using commercial roof space for solar panels can be a complicated matter, explains Catherine Burke, but there may be ways to simplify the process and encourage the market to develop
Balance of power
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easing a field to install a groundmounted solar photovoltaic (PV) system is relatively simple. The property ownership does not tend to be complex and developers will generally be dealing with an individual landlord or family. There may be a mortgagee whose consent is required, third parties with rights over the site that need to be released, or issues around the title, but these tend to be solved through insurance or appropriate contractual mechanisms. Commercial buildings, however, are a different prospect. There is likely to be a complex web of ownership and occupation and a developer could waste a great deal of time speaking to the wrong person. To take an example: bb ABC plc is the freehold owner of a four-storey building, Building A.
30â&#x20AC;&#x192; NOVEMBER 2015
bb ABC has granted a 10-year lease of the ground floor to tenant 1 who trades from that part. Tenant 1 has granted an underlease of part of the ground floor to subtenant 1, who trades from that part. bb ABC has granted a 20-year lease of the second and third floors to tenant 2 for office space. bb ABC has granted a 15-year lease of the fourth floor including the roof (and therefore the airspace above it), to tenant 3 for office space. Developer X wishes to investigate the possibility of taking a lease of the airspace above the roof at Building A for a 21-year term (the 20 years of support they will obtain under the feed-in tariff or Renewables Obligation plus a period to install and decommission). The developer approaches tenant 1 and/or subtenant 1, who think it is a great idea
because they will benefit from cheaper electricity. After a few weeks of discussing the power purchase agreement with them, the developer starts talking about leasing the airspace above the roof, only to be told that tenant 1 and subtenant 1 are not related to ABC plc, tenant 2 or tenant 3 and cannot give any rights over the roof. Frustrated, the developer checks the title to Building A and realises that ABC plc owns the freehold. It therefore contacts ABC estate department in an attempt to find the right person to talk to. Realising also that the roof has been leased to tenant 3 it starts discussions with Tenant
3, ignoring tenant 2 for the time being. Even if things go well and ABC and all the tenants and subtenants at the building are in agreement, it is likely that the following will be required: bb since the unexpired terms of tenant 3â&#x20AC;&#x2122;s lease is less than the period required by Developer X, either the roof will have to be removed from tenant 3â&#x20AC;&#x2122;s demise, which will be complicated (there will need to be a surrender and re-grant with time and cost implications including liability for stamp duty land tax), or tenant 3 will grant a lease for the remainder of its term and the landlord grants a lease for the balance of the period required by the developer
It will almost always pay dividends to do due diligence on the property ownership
C O MME RCIAL S OLA R POW ER
bb since access through parts of the building will be required and works will be carried out in parts of the building other than on the roof, the formal consent of all of the tenants and subtenants is likely to be required bb ABC and all or some of the tenants and subtenants at the building may have granted charges or mortgages, and the consent of any chargees and mortgagees will be required bb usually for a rooftop scheme to be viable, the power must be consumed and paid for onsite. One of the parties must therefore preferably commit to taking the power for the duration of Developer X’s lease. ABC may be unwilling to do so because it is not in occupation and it may not want the management responsibility of recharging the tenants. Since none of the tenants’ leases are for a sufficient duration to commit to take the power for 20 years, there is a risk that there will be times when the power is not purchased by anyone in the building. It would be possible for the landlord to be obliged to grant future leases that require the tenant to enter into a power purchase agreement with Developer X, but the landlord may feel that this could make the building less attractive. For a relatively small rooftop system, the cost, complexity and time to complete the legal documentation may outweigh the benefits to the developer. It will almost always pay dividends to do due diligence on the property ownership structure before spending too
long talking to people who may not be able to grant the rights required. Although there may be some cost associated with this, it may well end up being money well spent.
Licence alternative? A lease gives the tenant a right in the property which, if longer than seven years is registrable at the Land Registry. This is to make third parties aware of the rights granted, which are enforceable against anyone with a later claim to the property. A lease gives an exclusive right to occupy the premises, subject to any rights that the landlord may have reserved in the lease. An alternative approach, often used with public sector buildings such as council offices, schools and hospitals, is to enter into a licence. A licence is a contractual right to remain in occupation and is only enforceable against the party granting the licence. It does not give an exclusive right to occupy the premises, so is inherently less secure than a lease and poses a greater risk in terms of access to the PV system. A licence cannot be registered at the Land Registry and a third party acquiring the property – a purchaser or a mortgagee – would not necessarily be bound by its terms. It would be unwise to enter into a licence except in very
limited circumstances. A funder is unlikely to accept a licence as good security for a loan even if the terms include provisions that oblige the party granting the licence to fully compensate the developer for its losses in the event it was terminated early. This is because such an obligation is only as good as the financial strength of the party granting the licence or its guarantor.
Other options This is the situation from a developer/installer point of view. However, if you are a property owner or occupier looking to install a PV system on a building, in addition to the lease and licence structures (in both cases the developer/installer owns the equipment and claims the financial support) a property owner/occupier could (subject to any necessary consents): bb purchase a system outright, in which case the terms of the supply and installation contract are key, together with any consents required from other persons with an interest in the property bb acquire a system on a lease basis. Some developers in the market have teamed up with providers of finance so that when the system has been installed, the finance provider pays the installer and
leases the system on a hire purchase or conditional sale basis to the property owner or occupier. A person leasing the solar PV generating equipment is able to claim the feed-in tariffs.
A rooftop market? The rooftop market works on relatively small margins. It requires high volume and low transaction costs. It is therefore important to have in place a process that is, to the extent possible, standard. This should include: bb a process for qualifying sites from a legal complexity point of view bb early, limited due diligence on property ownership to ensure that you are speaking to the right stakeholders bb standard form documents (lease or licence and power purchase agreement) that are fairly drafted to reduce the potential for negotiations (almost a ‘take it or leave it’ approach but recognising that some properties have greater potential and so are worth some limited negotiation) bb a smooth and efficient process for reporting on title, execution of leases and registering leases at the Land Registry. C Catherine Burke is a Partner and Head of Renewable Energy at Freeths LLP Catherine.Burke@freeths. co.uk
Related competencies include Sustainability
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Jan Ambrose looks at ground-breaking research into the relationship between fuel poverty, energy efficiency and health
Studying the links
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he University of Exeter Medical Schoolâ&#x20AC;&#x2122;s European Centre for Environment and Human Health has conducted comprehensive research into energy efficiency, fuel poverty, indoor air quality and health. Its findings have been published in various medical and environmental journals. The modern energy-efficiency mantra dictates that we build new homes to increasingly stringent regulations. Additionally, retrofitting existing properties is now a key strategy in the UK to meet energy and climate change targets, as well as protecting against cold-related illnesses. Greater insulation and sealing properties to prevent heat loss can help those in fuel poverty, particularly, which is a public health problem affecting around 2.4 million homes in the UK.
Undeniable benefits Although insulating homes has undeniable benefits for heating bills and CO2 emissions, the Exeter report questions the impact on the indoor environment where such factors as heating, ventilation, peopleâ&#x20AC;&#x2122;s behaviour
and the type, orientation and geographic location of a property, all affect air quality. It argues that over recent years, there has been a rise in allergic diseases that cannot be explained by factors such as genetic changes alone. One in three people in industrialised countries is now suffering from allergies. The UK has one of the highest occurrences of asthma in the world, with the disease presenting substantial economic and societal pressures. There is now an increasing focus on indoor air quality to explain this. Evidence suggests that rates of allergic and respiratory disease are linked to poor indoor housing conditions and lack of ventilation. Yet no study has been able to assess how increasing household energy efficiency may impact the health and wellbeing of people living in homes with inadequate ventilation and mould growth. The report critically reviewed the findings from 17 studies in eight different countries and found the presence of several types of mould can lead to breathing problems in asthma sufferers, significantly worsening their symptoms. Although research in this area is still in its infancy, it looks as though mould may actually trigger the development and exacerbation of asthma. With more than 10 varieties found in a typical home, most people may not be aware that moulds
Efforts to prevent heat loss by reducing ventilation have led to undesired consequences for indoor air quality 34â&#x20AC;&#x192; NOVEMBER 2015
are abundant in outdoor and indoor environments. Where a house or flat suffers from damp (such as condensation and penetrating damp), there is an increasing incidence of mould.
Causes The structural integrity and architectural design of a (typically old) building can often lead to water making its way inside. Lack of ventilation and heating can then increase the indoor humidity, with this moisture ultimately condensing on cold surfaces and promoting the growth of mould. Increased household energy efficiency can benefit health and make heating a property more affordable. However, efforts to prevent heat loss by reducing ventilation have led to undesired consequences for indoor air quality, increasing indoor dampness and the risk of fungal contamination, which currently affects around 16% of European dwellings. The extent to which a home is heated and ventilated is largely controlled by the habits of its occupants, and the way they live varies hugely. For example, some dry their washing on indoor racks, some shower with the window closed, and many keep their windows and doors closed as much as possible in winter. All these behaviours can increase the humidity and dampness in a home, with poorer families in particular less likely to maintain adequate ventilation in winter, often failing to heat the whole building. Crucially, little is known about how these behavioural factors contribute to damp and mould in homes that have been retrofitted to make them more energy efficient. This is an increasingly important
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k Dr Richard Sharpe, research author, and Mark England, Head of Technical Services at housing association Coastline Housing discuss the exterior wall of a property issue as huge swathes of old housing stock are revamped.
Working together The research has highlighted the need for housing providers, residents and healthcare professionals to work together to assess the impact of changes in housing quality and occupant behaviour; the team collaborated with a social housing provider to understand how new building practices intended to reduce energy use and fuel poverty, such as improved insulation and energy efficiency, can affect occupant health. It then conducted a study based on 700 social housing properties in Cornwall to examine how poor air quality and dampness can affect the health of people living in energy-efficient homes, and the potential impact occupant behaviours and fuel poverty may have on the indoor environment. It found that greater household energy efficiency represented a higher risk of asthma, but at the same time lowered problems with indoor mould contamination. There are a number of potential explanations for these findings, but the research team believes that a failure to heat and ventilate the home is likely to
lead to exposure to dampness-related pollutants. The study pointed to other possible factors that can affect health in homes with high humidity, such as different types of moulds, house-dust mites and bacteria, as well as biological, chemical and physical pollutants not assessed in this study. While greater insulation in energy-efficient homes reduces the risk of condensation, this may be impacted by fuel poverty where people may make choices about the way they heat and ventilate the home to reduce fuel bills.
The extent to which a home is heated and ventilated is largely controlled by the habits of its occupants, and the way they live varies
Fuel-poverty behaviours An additional analysis focusing on fuel-poverty behaviours found that around a third of the study population did not heat the home due to the cost of fuel, which resulted in an increased risk of damp and mould contamination. These remained, despite occupantsâ&#x20AC;&#x2122; perception of the potential health risks resulting from living in mouldy homes and their heating and ventilation practices. It also found that participant age, occupancy, socio-economic status, pets, drying washing indoors, geographic location, architectural design/age of the property, levels of insulation and
type of heating regulated risk of mould contamination. Further work is required to assess the complex interaction between occupant behaviours, risk perception, the built environment and the effective use of heating and ventilation practices. The complexity of the relationship between indoor environmental exposures and resultant impact on health was also evident in another study focusing on a representative sample of the US population. Here, the researchers found that exposure to a mouldy home represented a risk factor for people suffering from eczema, allergy and NOVEMBER 2015â&#x20AC;&#x192; 35
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asthma. However, the study also found that allergic sensitisation may play a different role in children and adults who are exposed to indoor moulds, and that exposure to multiple allergens (pet, moulds, house-dust mite and endotoxin) may reduce the risk of atopic disease in some populations. These findings support the notion that differences in lifestyle characteristics, communities and their interaction with the natural and built environment are important in regulating health status at the population level.
Complex factors The researchers also collected data from residents and conducted detailed sampling of homes in an attempt to shed light on the many complex factors that affect indoor dampness and to reduce the presence of mould. Cornish company Carnego Systems is assisting the team by using its digital monitoring tools to collect real-time data (such as temperature and humidity) on the indoor environment. Other partners will also be involved, including independent energy specialists, Community Energy Plus and the Met Office; the latter will be providing historical weather data to determine how external weather can affect indoor air conditions. The studies, published in the journal Environment International and Clinical and Experimental Allergy in 2015, raises questions about the way energy efficiency improvements are made and the importance of ventilation in UK and US populations. It represents the first time detailed asset management data has been combined with information about occupant behaviour and health, 36â&#x20AC;&#x192; NOVEMBER 2015
to assess the factors likely to contribute to asthma. There are still many questions to address. It is vital that the energy efficiency of homes continues to be improved, thus making them more affordable to heat and reducing the carbon footprint of the domestic sector. However, there remains a need to address the effectiveness of current ventilation methods and the role of occupant behaviours. For example, future work needs to consider how ventilation systems cope with the requirements of different types of buildings (e.g. houses versus flats), fluctuating occupancy rates and changes in behaviours, which may include the use of different types of mechanical ventilation systems. Focusing on social housing enabled the team to explore a wide range of buildings, from traditionally stone-built properties through to retrofitted homes and newbuilds. It was unable to explore homes with a SAP rating of >88, which should be assessed in future work. A better definition of energy efficiency is needed to overcome some of the limitations of current work.
step in the evolution of the countryâ&#x20AC;&#x2122;s housing stock, but the implications for dampness, mould, house-dust mites and allergic conditions have been overlooked. Hopefully, ultimately the research findings will inform housing policies and health intervention work aimed at reducing the costs associated with maintaining the built environment, and improve the wellbeing of UK residents. R
More information > European Centre for Environment and Human Health www.ecehh.org Health and housing http://bit.ly/1FSWoaN Higher energy efficient homes are associated with increased risk of doctor diagnosed asthma in a UK subpopulation http://1.usa.gov/1GAmDl3 Indoor fungal diversity and asthma: a meta-analysis and systematic review of risk factors http://bit.ly/1LCwdmT Fuel poverty increases risk of mould contamination, regardless of adult risk perception and ventilation in social housing properties http://1.usa.gov/1fD4I26 Variable risk of atopic disease due to indoor fungal exposure in NHANES 2005-2006 http://1.usa.gov/1NG81n4 Modifiable factors governing indoor fungal diversity and risk of asthma http://1.usa.gov/1hYkGFY
SAP methodology The current SAP methodology does not account for variations in occupant behaviours and the actual day-to-day performance of a property is likely to differ from its predicted energy efficiency. Consideration should be given to the type of ventilation system installed, which can increase indoor humidity. This problem may be worsened by the type of heating system and the energy-efficient method used to seal cracks and gaps. Without doubt, energy-efficient homes have been an incredibly positive
Jan Ambrose is Editor of the Residential section of the Property Journal jambrose@rics.org
Related competencies include Health and safety, Housing management and policy
R R ESIDENTIA L I NS P ECT I ONS
RI CS P RO PERTY JOUR NAL
Using party wall draft award templates requires care, warns Nick Isaac
Words to the wise
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Surveyors appointed as party wall surveyors under the Party Wall etc. Act 1996 are required to make an award under the Act in order to resolve whatever actual or deemed party wall dispute may exist between building owner and adjoining owner. Although there is no prescribed form for such an award, a number of templates have been produced, the most commonly used being that annexed to the 6th edition of the RICS guidance note Party wall legislation and procedure. Such templates are designed to save appointed surveyors a great deal of time, firstly by including provisions that are applicable and relevant to most party wall awards and secondly by using wording that has been carefully formulated by experienced surveyors and lawyers and has the benefit of established use. In effect, surveyors using a template can simply fill in the
key sections individual to the dispute they are resolving, and a comprehensive and valid party wall award is the result. Or at least, that is the theory. In practice, surveyors need to be more careful in their use of templates in the production of awards. This extends not only to ensuring that only those elements of an award that are both applicable to, and necessary for, the resolution of the dispute in question are included, but also to looking critically at the wording of the standard form templates themselves.
Check the clauses The first thing to consider is to only include what it is necessary. There is always a temptation when using a template to include all the comprehensive provisions listed. In fact, it is far more sensible to adopt an ‘if in doubt, leave it out’ approach. Only where you can see what purpose a clause serves, and why it needs to be included in the award in question should you leave it in. Do not assume the template writers are correct. By its nature, a template is generic, attempting to cover a wide range of possible scenarios. Not only does this lead to a tendency to include provisions ‘just in case’, but it is easy to lose sight of the
primary purpose of the award – the resolution of a specific dispute under section 10 of the Act. The RICS standard form template includes at least half a dozen provisions that are arguably wrong, unlawful or both. When using a template, reassure yourself that everything included within it complies with the requirements of the Act. If you do not understand the purpose of a provision, leave it out. For example, the RICS standard form template includes a recital dealing with whether the wall in question is a boundary wall, party wall, party structure or party fence wall. Why is it necessary to recite this or make a determination as to this point? It is rarely if ever necessary. Make sure the words used explain the job you want them to do. The RICS standard form award recites that attached drawings form part of the award. But this does not imbue those drawings with
any function. If you want to attach drawings to the award because they provide a detailed description of the works and how they are to be carried out, say so in the award. Rely on the Act rather than repeat it. Many templates have a tendency to more or less (but not entirely accurately) quote from the Act. It is almost universal, for example, for awards to recite that the building owner will compensate the owner for any loss or damage caused by the awarded works. If the Act provides for an obligation anyway, there is no need to repeat this in the award – if you feel the need to advise your appointing owner of this right/obligation, do so in a letter of advice. And if you absolutely must repeat a provision of the Act in an award, quote it accurately. Do not stop using templates, but please do not do so unthinkingly. R
Nick Isaac is a Property Litigator specialising in party walls at Tanfield Chambers nickisaac@tanfieldchambers.co.uk
Related competencies include Conflict avoidance management and dispute resolution procedures, Property management
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Michael Parrett concludes his series on damp and reminds surveyors to take a holistic approach when diagnosing issues
The whole story
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ast-iron gutters and rainwater pipes, prevalent through the Victorian and Edwardian periods, need paint protection. Unfortunately, painting schemes may miss the inside faces of these goods, which then corrode. Similar problems occur with internal cast-iron service pipes, such as soil stacks. Connections are vulnerable where flat-roof rainwater outlets meet internal pipes, which often suffer blockages from airborne detritus. In winter, pooling water freezes and can crack the outlet. Either problem may cause water to leak outside the drainage area down the outside of the internal pipe. Surveying cast-iron goods can be tricky due to restricted access. I use a mirror on a telescopic pole to check the rear of pipes and gutters, but this may be insufficient if problems are beyond the reach of a 3m surveyor’s ladder. These issues are greater in tower blocks, which require safe working access. When installing PVCU systems, allowing for linear expansion is often missed, causing them to buckle. Expansion is needed on all elevations, especially when south-facing, but following manufacturer’s instructions should mean guttering, pipes and connections are cut appropriately. Guttering alignment is critical, but falls are often incorrect, causing flows away from the outlet and spillages over the gutter. Some modern systems can be laid 38 NOVEMBER 2015
level, with outlets designed to create a vortex to draw water out of the gutter. Drainage design on buildings is vital to properly discharge rainwater. I have investigated spectacular failures where the design has been ‘hydraulically short’ and size, spacing or number of rainwater pipes insufficient. The calculations for correct designs are complex, because they consider factors such as rainfall intensity, roof area, roof angle and parapet wall height. Images © Michael Parrett
I saw an example of this on a sports centre, which had a shallow-pitched roof surrounded by a high parapet wall. Unable to discharge water effectively, the box gutters filled, causing water ingress into the building. This was exacerbated by blocked outlets from stray sports balls. Roof access also required a safe working platform but the cost limited regular maintenance. Tree and leaf litter obviously cause blockages. I know of examples
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1 Broken collar and corroded section of cast iron rainwater pipe. The defects occurred due to a lack of paint protection and subsequent wetting and frost action. Often when painting cast-iron pipes, the rust is not properly removed, which will cause paint rejection and failure 2 In this flat-roof to pitch conversion, the original rainwater downpipe is still routed integrally through the building. However, the new section of rainwater pipe from the gutter external to the building was defective, allowing rainwater to leak down the outer face of the building and cause water staining, which was not visible during dry periods 3 Birds drop seeds onto roofs that collect in gutters and eventually grow, blocking them and leading to an overspill of water, soaking into the walls of the building below the eaves. Rainwater penetration into the habital space will occur where the external walls are solid
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4 Leaking water main supply pipe under a timber suspended floor causing extensive wet rot decay. The defective section of water main was underneath kitchen cupboards. Detection was possible using a hygrometer probe and endoscope solved by replacing or repairing rainwater goods. Owners may be reluctant to change the lowest section of a cast-iron rainwater pipe because it is resilient; bicycles may be chained to them, for example. In reality, if the upper sections are defective then so will lower parts, which should be replaced (possibly using modern cast-iron versions). Cast-iron pipes can let directly into an underground branch drain, often overlooked in replacement programmes. But if this is defective, water can seep into the ground and building at low level. Branch drains should be part of survey and renewal programmes as they often fail through blockages or frost action.
Leaking water pipes where the bottom section of pipes (particularly when entering a branch drain) was completely blocked and heavy rain caused spraying of water from each joint. Warning signs: Leaks onto outside walls are difficult to detect, particularly on solid walls when dampness may only be noticed when it has penetrated. There may be no internal signs on a cavity wall. If the cavity is not blocked, leaks may stay undetected for a long period. A
good way of spotting leaks is to conduct a survey in heavy rain. On north-facing elevations there may be algae under a leaking gutter joint, but on sunny south-facing elevations, leaks are more difficult to see, although there may be staining. One sign is if water falls straight to the ground causing rain splash, especially noticeable if it extends onto flowerbeds. Solutions: Clearing gutters regularly is essential and problems can usually be
In the 1960s and 1970s, it was common to run copper heating and other water pipes through solid floors. Denso tape or fibrous wrapping were often not used or poorly applied to protect the bare copper from acidic cementitious floor screeds; as a result they corroded and caused leaks. When mixed metals were joined, i.e. copper and steel, this caused an electrolytic reaction that accelerated corrosion. Gun metal was once used NOVEMBER 2015 39
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n for joints because it is neutral and breaks these corrosive forces. In the 1920s, some water mains were made of lead, but galvanised barrel pipes were later often laid, many without wrapping protection. The galvanised zinc coating acted as a ‘sacrificial anode’ in aggressive soils to leave bare steel. The National Physical Laboratory has mapped UK soil types to show those containing metal-eating microbes, which is useful when assessing the likelihood of corrosion. Tree roots and desiccation can also disturb water mains. Warning signs: A common cause of dampness is leaking water mains. These may undermine foundations or cause overhydration to create heave, especially in areas of London clay. When investigating a property, it is useful to know how mains are routed in different building genres. In Victorian and Edwardian properties, lead water mains and drains often went under the house (mostly from the front, but sometimes the rear) from the isolation valve outside the curtilage. Leaks could soak into the fender wall of fire hearths (that do not have damp-proof courses) and wick up the chimney breast creating rising damp (but not requiring a retrofit damp-proof course to resolve it). During the inter-war years, large ‘cottage estates’ were developed after slum clearances. Because these houses were publicly owned, one water main and isolation valve typically served a terrace of four, six or eight properties. Mains would normally be routed alongside the buildings (through a mid-terrace walkway or at the end of the row), through back gardens and then teed-off into the properties. Solutions: Responsibility for leaks was complicated by the Housing Act 1980, which allowed tenants to buy their council home. The result is mixed terraces of public and privately owned properties with shared water mains. Resolving repair responsibilities can be difficult, because costs are shared between the owners, who blame each other. Knowing the location and problems of these mains is important, because millions of ex-local authority properties 40 NOVEMBER 2015
5 5 In this Victorian property, there was
dampness to the timber suspended flooring in contact with the fender wall of the hearth, wicking dampness from the oversite into the timber flooring. The discovery warranted further investigation to check for water escape from the lead mains water supply pipe, underground drainage failure, high water table, blocked sub-floor air vents and/or rubble and arisings piled up under the floor
6 Leaking integral rainwater pipe to a block of flats. A cracked swan neck section of the pipe connecting to the flat roof drainage outlet caused rainwater to penetrate down the outside of the cast-iron pipe soaking into the surrounding ducting and part of the floor slab by way of the inter-floor fireproofing material. Integral cast-iron pipes are prone to corrosion from condensate forming on the outer surface
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7 Copper water pipes in a solid floor screed
corroded and leaked due to poorly applied plastic wrapping. This exposed sections of the pipe to the cementitious floor material leading to its perforation within eight years of being laid
8 Plastic rainwater pipe with ‘rodding eye’ access removed. The pipe was completely blocked with a mixture of silt and rust from the connected cast-iron drainage outlets to a podium roof directly above are now held privately. Surveyors may recommend that owners apply to their water provider to install their own separate water main and isolation valve to avoid this shared scenario. Once armed with knowledge of the building genre, water main routes and any shared supplies, a surveyor can check whether a leak exists. After the usual internal reconnaissance of timbers, a key question is whether an immediate neighbour has also complained of dampness or any sudden drop in water pressure. If so, a leaking water main must be suspected, but where? A surveyor may suggest that a leak is investigated by the water company. An inspector will visit the site at night (when water use is low) and use a listening stick on isolation valves. They might ‘hear’ a leak and then use a leak correlator, an electronic sounding device, to pinpoint the location. Another check is the syphon test. After closing the water main, put the
spout of the kitchen sink tap in a full glass of water. If the tap starts to suck the water out of the glass, there is a leaking water main because the water is being pulled back through the tap by an escape of water underground. Defective water mains are often just locally repaired. However, old pipes leaking in one section may well begin to leak in another. Best practice suggests renewing the whole length of pipe.
Chimneys Chimney breasts are generally wholly internal (on a party wall, usually back-to-back with a neighbour’s); three-sided (wholly internal with the fourth side on an external wall) and projected (three sides standing out from the building). A chimney stack projecting through a roof, where the roof slope terminates at the stack, is one of the most vulnerable parts of a construction. Chimney stacks are usually the highest point of a building, so are very exposed to the elements but often overlooked because they are difficult to survey. A future article will focus on identifying problems associated with chimneys and possible solutions.
Drainage Sudden dampness can usually be related to a defective drainage system, Images © Michael Parrett
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out, using a special attachment to allow relining. With severe blockages, a pneumatic steel arrowhead can be pushed through to shatter the pipe; a new channel can be bored and a drainage pipe pulled through. Excavation and complete renewal may be the only other option.
A surveyorâ&#x20AC;&#x2122;s approach
7 caused by tree root penetration, blockages and physical defects. Any leaks can raise the humidity in a building and cause dampness, especially under suspended floors. Tree root penetration is a massive threat to underground pipes, particularly vitrified, salt-glazed clay pipes but also modern systems (some claim their interconnecting joints are impenetrable to tree roots, but I have yet to see this). Roots may disturb drainage pipes and alter their alignment. Desiccation may unsettle drainage during long dry periods and cause the ground to move. A water main leaking near a drainage pipe might cause overhydration and heave. In either scenario, where each section of pipe once neatly and smoothly abutted the next, pipes will either split or be misaligned, causing material to collect on these ledges and create blockages. Underground drainage systems constructed before October 1939 combined foul and surface water all into a single drain, but these sources have or should have been separated. In older properties, everything therefore goes through one drain. Increasing rainfall intensity, bad habits of occupants (such as disposing of plastic nappy liners down toilets) and larger buildings converted into separate flats all
8 mean higher demands on these antiquated systems. Warning signs: Common indications include a ground collapse or dampness. In Victorian properties where the drainage system runs under the building, there will be foul smells (usually every time a toilet is used) and often high ammonia. These problems often arise suddenly and tend to suggest something has changed in a short space of time. There may also be localised flooding from blocked drains, particularly in back inlet gullies next to the external walls, where rainwater pipes terminate. Blockages can mean back surges with sewage appearing in the bath, hand basins and toilets. There may even be a contaminated flood to the ground floor. Often, blockages occur in interceptor chambers and foul water will bubble out of the top of the chamber, regardless of its depth, together with foul smells. Solutions: Occupiers should be educated about the impact of putting waste into the drainage system. Other preventative actions include improving the refuse system to allow people to dispose of rubbish more easily. CCTV camera surveys are becoming increasingly important to understand the state of drainage and identify problems. If tree roots are present inside drainage pipes, all but the severest can be bored
Surveying buildings for dampness should be a holistic process and surveyors should move from recognising a symptom to diagnosing its cause and source. This series on common causes of dampness illustrates that a failed damp-proof course should be the last thing suspected. It will usually be any one or a combination of these other causes. Achieving a professional opinion on the source of dampness means improving knowledge and understanding of building failures through the various building genres, and the techniques and equipment used as part of an overall process that is called building pathology. R
More information > BS EN 12056:3-2000 Rainwater drainage design http://bit.ly/1KgLgFo Diagnosing damp. Ralph Burkinshaw and Mike Parrett http://bit.ly/1G2tEsb Mike Parrettâ&#x20AC;&#x2122;s guide to building pathology http://bit.ly/1zeIO7X
Michael Parrett is a Building Pathologist, Chartered Building Surveyor and Founder of Michael Parrett Associates. He is an Eminent Fellow of RICS info@dampbuster.com www.michaelparrett.co.uk
Related competencies include Health and safety, Inspection, Building pathology
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Paul Broadhurst gives an overview of the Leeds Neighbourhood Approach
Licensed to improve
I In 2009, the Secretary of State for the Department for Communities and Local Government approved a selective licensing scheme for landlords and managers of privately rented properties in two areas of Leeds, to improve living conditions for residents and the surrounding community. While proving to be successful in regeneration efforts, following a review of the scheme the council decided not to instigate a new area but to take a more flexible targeted approach on a smaller street by street basis involving closer partnership working. In October 2012, Leeds City Council’s Executive Board announced an investment package of around £40m for housing in the city, £1m of 42 NOVEMBER 2015
k Community days are held with all partners of the team available to identify which was funded by the New Homes Bonus to establish a new method of tackling empty homes and standards in the private rented sector (PRS) in some of the areas of poorest housing. Some of the investment has been used to create a team of officers and draw in a range of partners to support the improvements to housing and environmental conditions. This is known as the Leeds Neighbourhood Approach (LNA), which allows proactive targeting of small geographical areas with a high level of empty homes and concentrations of poor-quality private sector housing. The remainder of the funding was used to create empty home loans and undertake compulsory purchase. The aim of the LNA is to encourage landlords to work with the council and its partners to improve the
area, quality of the stock and management of their tenancies. To achieve this, the council offers landlords a six-week amnesty to come forward and work with them, after which it will use its formal powers to address property standards and take appropriate actions to encourage owners to return their homes to a fit state for occupation. Where owners of empty homes fail to implement any actions to improve accommodation, the council will use compulsory purchase powers.
Benefits This scheme is not just about bricks and mortar, but also about the people living in the area. By working in a small focused location for nine to 12 months, the team is able to build up a profile of the area and work with residents to address
Changing lives for the better is a key objective of the project Images © Paul Broadhurst
their problems though partners, including: bb the police bb West Yorkshire Fire and Rescue Service bb Leeds City Credit Union bb the Council’s Employment and Skills and Benefits Services. In this way, the team can address residents’ concerns with crime and security, fire safety and financial exclusion. It can give access to training and employment opportunities, health services and ensure that people maximise their income. Community days are held, with all partners going from door to door to identify issues, offer assistance and build trust. A major benefit of the LNA is that it offers a consistent and dedicated resource. This enables quick responses to such issues as fly-tipping or anti-social behaviour. It also means residents can have their concerns addressed in their own homes rather than through the usual council contact routes. All issues are monitored until they are resolved, thus building trust within the community. This has allowed the police to
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issues, offer assistance and build trust receive and act on information about criminal behaviour, which, together with advice on security through the Darker Nights initiative (http://bit.ly/1S0bb6K), has led to a reduction in crime levels. So far, three areas have been targeted since the LNA started in May 2013, covering a total of 278 properties. These included 252 privately rented homes, of which 92 were empty. So far, there have been 533 inspections and revisits to properties of all tenures, 88 units of accommodation being returned to occupation and 557 referrals to partners. Some 166 privately rented properties have been improved and now fully comply with the legislation, and work is ongoing in 86 homes, which are still subject to action plans. Currently, four compulsory purchase orders are being pursued, where owners of empty homes have failed to engage with the council.
Improving lives Changing lives for the better is a key objective of the project. Working with Employment and Skills in areas of high unemployment means hard to reach communities can be
k Before and after: improving stock is one of the aims of the LNA helped. One family worked with the service and their employers to increase their hours, which meant they could afford to remain in their home, maintaining their support network. In addition, the children could stay at the same school, thereby helping to improve attendance, educational attainment and their life chances. Another family required more intensive one-to-one engagement to address mental health, numeracy and literacy issues and a lack of lifestyle skills. Without officers targeting such properties, the family would not have been identified and offered help.
Feedback A review of the first area was undertaken to learn lessons for future working, involving interviews with councillors, the community, residents and partners. The perception of the residents and community was that there had been a reduction in crime and anti-social behaviour, properties had been improved and empty homes brought back into use. They appreciated the partnership approach and felt their individual concerns
were being listened to and addressed. Landlords and managing agents were generally positive, with 71% of owners of private properties coming forward within the initial six weeks and dealt with on an informal basis. There were concerns that property owners in the wider neighbourhood were not being targeted. Councillors and partners were positive about the improvements from the intense management and work in the area. The willingness of all partners to support those in need, visit them at their homes and not rely on them coming to the services was vital; this ‘buy in’ was a great success, enhancing communication and reducing role duplication. The review highlighted concerns about the ending of the dedicated resources and
the potential for the area to regress. An exit strategy was agreed with partners and the community, which includes regular ‘checkpoint’ meetings and continuing regular visits. Work within the third area to the south of the city has now commenced. As part of the continuing developments to the model, a local landlords’ forum has been created, which aims to better engage with all public and private housing providers. This way of working is intelligence-led. It is based on stock condition, levels of empty homes, the number or lack of complaints to the council, benefit and fire data, and crime figures. It allows the council to operate flexibly, based on local needs and to target poor privately rented accommodation without the restriction of discretionary licensing. R
Paul Broadhurst is Deputy Service Manager at Leeds Neighbourhood Team paul.broadhurst@leeds.gov.uk
Related competencies include Leasing/letting, Investment management, Property management
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Chris Scivyer considers the impact of airtightness on indoor environments
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Sealing the envelope
ver the past 20 years, there has been a steady drive to make new buildings more airtight and reduce the leakiness of existing structures. The principal motive behind this has always been to improve energy efficiency. By reducing heat loss and cold-air ingress through leaky construction, a building will require less heating, which results in lower energy use and significant savings. This might be considered to be good airtightness, where the occupier sees reduced heating bills coupled with improved indoor comfort levels. To encourage improvements, airtightness guidance was introduced into the Building Regulations within Approved Document L (AD L), together with air permeability testing to demonstrate compliance. The test results are used in the AD L energy assessment calculations, which consider a building’s thermal insulation and energy use. It is fair to say that the requirement to test buildings for air permeability has focused minds across the construction industry. As a consequence, we have seen improvements in design and coordination across different trades and in the quality of workmanship on site. To pass the test, it is no longer possible to adopt an ‘out of sight, out of mind’ approach towards gaps in construction. Following trades must not damage finished works and must identify potential leakage paths before hiding them behind non-airtight finishes. The air permeability test itself is relatively straightforward and usually undertaken when the external envelope is 4 4 NOVEMBER 2015
complete, immediately prior to handover. For a dwelling, it involves connecting a fan to a suitable aperture in the building envelope, usually the front door opening (see Figure 1) and subjecting it to a range of pressures. The fan speed is increased in steps up to a maximum and then decreased in the same manner. Air-volume flow rate through the fan (equal to the air leaking through the building envelope) and the pressure difference across the building envelope are recorded at each fan speed. In calculating air permeability, corrections are made for temperature and barometric pressure. If the property does not achieve the airtightness level required, an air leakage audit is carried out. This usually involves running the fan so that the property is under pressure and using a smoke pencil to locate leakage paths. Once the leaks are sealed, the property can be retested.
Growing evidence suggests overheating is occurring, with serious health implications in modern UK dwellings Improved airtightness does not necessarily mean increased costs for construction. Initially, much of the improvement was achieved by getting contractors to build correctly what was already being specified. As the targets become tighter, designers have had to focus more on identifying the line of
construction that forms the air barrier within the building. This is often marked on drawings as a red line. The principal aim is to separate conditioned (heated or chilled) spaces from unconditioned spaces. For a dwelling, this usually means separating indoors from outdoors so that the external envelope forms the line of the air barrier. This would comprise the ground floor, external walls and the ceiling to the top floor (assuming the roof space is not occupied). Where the construction is made up of several layers, as with an external wall, consideration needs to be given to where the air barrier lies. There are two aspects to this: the first considers which material offers the best level of airtightness while being cost effective to install, and the second involves the thermal implications for the building. The latter is often overlooked, resulting in comfort problems and reduced energy efficiency. An example of this is where leaky masonry construction is finished with internal dry-lining on dabs and the dry-lining is considered to be the line of airtightness. In winter, cold outdoor air can pass through the leaky masonry and any insulation to reach the back of the dry-lining, resulting in the adjacent room feeling cold. Having identified the material that is to form the air barrier, it is important to minimise any penetrations through the barrier. This includes openings for doors and windows, and service openings for ventilation, pipes and cables. Where these cannot be avoided, the barrier needs to be sealed back to the penetrating construction. A variety of sleeves, tapes and sealants have been developed to simplify this process. Seals must be robust, because airtightness has to last for the life of the building, not just long enough to pass the test. Although it is not common today, in
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Figure 1 Air permeability test rig mounted in the front entrance to a dwelling
the future, building retesting a year or so after construction might be introduced to check airtightness performance as part of the regular maintenance of energy efficient mechanical ventilation and heat recovery (MVHR) systems.
Ventilation In addition to airtightness and thermal insulation, the level of air permeability also impacts on other indoor environment issues, such as ventilation. From the outset, BRE was acutely aware that airtightness must be considered alongside building ventilation. The phrase ‘build tight, ventilate right’ was coined to emphasise this. A building cannot be too airtight but it can be under-ventilated. Continuing improvements over time mean that designers need to consider the implications of very airtight buildings, which might be called ‘bad airtightness’. In some cases, buildings are more airtight than they really need to be. This can arise from designers failing to realise the capability of different construction systems and materials, but can happen where contractors will incur a financial penalty if the target is not achieved. To protect themselves, the contractor applies an even tighter figure than specified. Quite often, they achieve the revised target, and the contractor is not penalised but the building is now tighter than the design team intended. Over the past few years, BRE has noticed an increase in complaints about indoor air quality including smells, mould and condensation in homes built or refurbished to higher levels of airtightness without improving the ventilation provision. Often ventilation and heating has been correctly specified and installed, but no advice is given to the occupiers; in rented properties, tenants often switch off mechanical ventilation systems to reduce energy bills. MVHR systems can resolve the conflict of balancing airtightness with ventilation, as long as they are correctly specified.
Overheating/heat rejection These issues were covered by my colleague, Dr Michael Swainson in Images © C Sciyver
Property Journal September/October 2014 (see p32, Comfort zones). Overheating may be defined as the temperature within a building that is too high for comfort. There is a growing body of evidence that suggests overheating is occurring in a range of modern UK dwellings and the health implications may be serious for vulnerable groups in society, such as the elderly. The key to minimising it is to understand and reduce the excessive heat to a building. This can be from sources such as external solar gains and outside air temperature from the urban heat island effect, micro-climate and climate change, and internal gains from occupants and their activities, electric appliances and domestic hot water services. Heat rejection becomes an issue in naturally ventilated buildings; thermal mass has been introduced to attenuate the peaks in temperature, because the heat must be rejected each night, and across the hours of peak air temperature outside. The issue is more acute in dwellings, because they are occupied overnight, when the cool outside air could be used to remove heat that has built up the preceding day. However, it is the ability
to effectively reject heat at night while the building is occupied that is now largely missing from many modern UK dwellings. The problem has increased in recent times with requirements for enhanced airtightness, while not fully considering ventilation needs. R
More information > Jaggs M and Scivyer C. Achieving airtightness, BRE Good Building Guide http://bit.ly/1HLkFQo Scivyer C Airtightness in commercial and public buildings, BRE Report FB35 (2011) http://bit.ly/1J1kUr1 Dengel A and Swainson M. Overheating in new homes: a review of the evidence NHBC Foundation Research Review NF 46 http://bit.ly/VBWUEP
Chris Scivyer is Principal Consultant at Building Technology Group, BRE scivyerc@bre.co.uk
Related competencies include Health and safety, Building pathology, Sustainability
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Chris Mahony explains why inspecting buildings is fundamental to the work of residential surveyors
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Looking for clues
nspecting buildings, for whatever reason, is synonymous with residential surveying. The two go hand in hand. Looking back at the end of each month, it can sometimes come as a surprise just how many times we get onto site, into somebody else’s house, office block, factory, church or school or up onto flat roofs. Last year I presented four evening seminars on inspecting buildings, and movement in buildings. The audiences were mixed but included a high proportion of building and general practice surveyors.
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One question asked was: “If you were undertaking a pre-acquisition survey of a building prior to purchase, is there a correct way to inspect?” In simple terms I asked the audiences what they did – the outside first then the inside, top down, or bottom up? After going through all the considerations about whether it is raining, or whether the property is occupied, a show of hands indicated that most prefer to inspect the outside first, and when inside, to go from the bottom up. The reasons were all good ones. For example, it allows problems to be observed that can then be checked internally and it gives the surveyor an overall impression of the building and the opportunity to look at the internal construction as they go up through it. The audiences found this discussion stimulating, because it gave them the
opportunity to think about their own work. There is no right or a wrong way, but I went on to explain the way I do it.
What to look for My approach is to walk around the outside without taking written notes or photographs, to take in the scale and the age of construction and look at features that are likely to be problematic. I look in particular at areas subject to rainwater shedding. I then start my main inspection and note taking inside, working top down, from a flat roof if there is safe access, or from the roof void if there is one. Roof voids are like looking at old plans, because little is hidden and the way in which the roof structure works can be understood. I often rely on a simple principle that everything you look at is there for a reason. In pitched roofs, whether timber or steel, they are usually transferring loads down, bracing, or propping and stiffening something else, or preventing other parts from moving away from each other. What I am working out is where these loads are being supported, i.e. what is holding them up in the rooms below. It is an important question, especially if it is obvious, or you are suspicious that timbers or other supports may have been removed. The other issue I am trying to determine is the building’s original use, and whether this has this changed or is likely to change. It is important because introducing concentrated loads, or dynamic loads (ones that move) might be problematic. ‘Everything is built for a reason’ is a great saying for chimney stacks. Setting aside the modern use of metal or fibreglass GRP fake chimneys on modern housing, chimney stacks are there to take smoke and gases away from open fires or boilers. If there is a chimney stack on the roof, it must be supported on the way down, including in the roof void, the walls or on the outside of the building.
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Checking the chimney breast is still there is therefore important. Old timber cut roofs often take midspan support. A concentration of timbers in a roof void will necessitate a look in the room below to see what is supporting it. Surveyors, by the very nature of what they do, need to be inquisitive and observant. Faint parallel lines on ceilings, about 120mm or so apart, continuing down the walls says to me that someone has removed a wall. If the wall supported the roof above, what is holding the roof up? As your inspection takes you close to the ground and possible basement, the path of these loads could be tracked and drawn in your notebook. All of the loads go into the ground, even if they pass into an adjoining building. The path the load takes clearly takes the same direction of gravity, another reason to inspect top down.
Dating buildings Dating buildings is difficult but important. If you know the approximate age, it helps to understand what materials might have been used, and from this what defects might occur or be hidden. The other important observation is understanding the form of construction. Framed buildings act differently to load-bearing masonry buildings. Panelised buildings delivered to site from a lorry are held together differently than cavity construction. We are not good at maintaining buildings in the UK, and some are more difficult and costly to maintain than others. Just look up to see the rooftop gardens of grass and trees growing from gutters, hopper heads and roofs. If the property is next to a footpath, access is often even more difficult and expensive because of highways restrictions and the problems of segregating traffic and pedestrians. Access from an adjoining owner’s property can also be problematic,
if a neighbour is unwilling to allow access and the occupier is reluctant to use the Access to Neighbouring Land Act to do so. In summary, take a note externally of issues that might arise, but come back to the defects after you have got to grips with the form of construction, its age and materials. Schedules of condition are by their very nature a snapshot in time, and are often only referred to when something else ceases e.g. construction work (when attached to party wall awards) or leases if they allow. For party wall matters, often it is the surveyors undertaking the schedule who will check it later, but for leases, the chances are it will be another surveyor. So it is useful to say to yourself, this schedule is for someone else to look at again in three, five, or 10 years’ time, if they can find it. A number of mistakes are sometimes made by surveyors: bb inserting photographs with no reference points; the surveyor in the future will not thank you for it bb inserting blurred photographs bb not binding the photographs to the written schedule properly, so that in time they become separated, photocopied in black and white on the poorest quality photocopier, then paper-clipped to the lease bb being tempted to undertake a photographic schedule only; although helpful, it is not as good as a written schedule plus photographs. bb inserting photographs of cracks that you cannot see. Most digital cameras struggle to focus on cracks on light backgrounds—put your pen or hand next to the crack, or even better a crack gauge, to give a sense of scale. We are also asked to inspect buildings under construction, usually in a monitoring role. Understanding the form of construction is essential. For
example, apartment balconies need to be waterproof, usable and drain water effectively. The way this can be achieved varies, but in principle many act like a swimming pool, i.e. the waterproof membrane is laid and lapped up the edges of the walls, often beneath balcony doors and into a parapet wall. Where it is dressed in should coincide with the position of a damp proof course or cavity tray. If it rains it should fill up, and water either pass out through the wall—which in itself may have a cavity tray—back into the building, or straight down a pipe which itself punctures the covering. Understanding how this will work on paper is challenging, especially when the component parts may be designed by several specialist contractors. Although rare, catastrophic failure of buildings can happen after serious adverse weather conditions or from overloading or gas explosions. However, there have been several serious collapses of freestanding walls. Inspections should therefore include verticality, cracking, height, width compared to height, number of piers and movement joints, the location of trees and exposure. The depth and type of foundation is unknowable unless you have a spade and permission to dig a hole, but assuming all is well in the ground, the wall itself needs a careful inspection. R
Chris Mahony is a Director of Cloud Surveyors and Chairman of RICS Building Pathology Working Group chrism@cloudsurveyors.com
Related competencies include Inspection, Building pathology
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Plenty of people are now discovering the Landmark difference… But we’re still looking for qualified residential surveyors both experienced and recently qualified as well as surveyors from other RICS disciplines wishing to re-train to carry out residential mortgage valuations, homebuyer surveys and building surveys in the following locations: • London North • London East • London South
• Camberley • Dorking • Bristol/Bath
• Leicester • Plymouth/Torbay • Slough/Uxbridge
For the right people we will consider any location in England and Wales. If, for you, quality comes ahead of quantity and you like the idea of working with us in a culture of partnership, please email your CV to our Operations Manager, Jon Charlesworth, FRICS jcharlesworth@landmarksurveyors.co.uk or give him a call on 07825 634137 for an initial chat.
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Ania Hanrahan explains the skills and knowledge required to value historical autographs
Words of worth
W
hile the signature of today’s top movie stars may sell for the price of the cinema ticket to see their latest film, the other end of the spectrum sees items selling for thousands or even millions of pounds. Autographs can have many forms: letters, on official documents, sketches or drawings, musical scores, mathematical calculations – anything that is handwritten. They can be ancient spanning scripts or signed sportswear, a philosophical treatise or a shopping list, signed or unsigned and can be found in archives, libraries, museums and sometimes even in somebody’s loft. A favourite Victorian pastime, autograph collecting soon turned into a trade. The 20th century saw professional dealers grow and gain reputation for their ability to spot, value and sell genuine handwritten gems. The market also matured as autographs were no longer sold alongside rare books but offered as well cultivated, complete collections. The market fluctuates like all others, and is sensitive to such factors as supply, demand, and the general health of the economy. The supply side differs because the production of material stops after the person’s death. In the past 15 years we have seen geographic boundaries disappear through the growth of the internet, which facilitated a major boost in trading overall. Trading has moved from private homes and mail order catalogues to major auction houses, with a online presence reaching every corner of the globe. We have seen a significant growth in the number of collectors and, consequently, a rise in prices. 50 NOVEMBER 2015
Authenticity is key “How do you know it is authentic?” This is the most common question that industry specialists are asked. Get it wrong, and you have thrown your money away. The market is swamped with fakes, sold by fraudulent dealers and self-pronounced ‘forensic experts’. The knowledge of paper types and the chronology of their use, ink and pens is important when authenticating autographs. It is possible to come across an early 19th century letter forged on a 20th century paper. Valuers will also be familiar with a person’s handwriting and how it changed over time. Some forgeries were fully authorised. For example, busy people (John F Kennedy included) used an autopen, which created authorised copies of their signatures. They were popular among astronauts, who received an overwhelming number of requests for signed photographs. Autopen autographs can be recognised by a trained eye, because they usually have a shaky line ending with a dot. Other authorised forgeries include secretarially signed items (JFK again), stamped autographs (wooden stamp used by Henry VIII) and facsimiles (Winston Churchill). It is also common to come across traced-over writing, mistaken identities and intentional
Trading has moved from private homes and mail order catalogues to major auction houses
forgeries. Some of the latter can become collectible as happened with William Ireland, a 17-year-old boy, who in order to please his father — a collector — created some of the most famous forgeries of Shakespeare’s works. Today, these can fetch thousands of pounds. Unfortunately, there is no formal way to learn how to authenticate and value autographs and manuscripts. Assessing desirability and other factors can be tricky and requires an intuitive sense of connoisseurship, which only comes from experience. For many valuers, learning their profession is a lifetime journey from auction room porters through to specialist valuers, auctioneers or dealers. Others turn their collecting hobby into a profession. Auction records, online sales databases and reference books are helpful, but it is the years of handling material that train the eye. Many factors contribute to an autograph’s value; therefore it is difficult to make generalisations. The fact that every autograph is unique is what makes pricing so challenging.
Setting a price Once an item is established to be genuine, the valuer considers six factors: Content and association: Content is what can give an autograph blue-chip status. Most collectors search for letters in which the writer describes an event that is closely associated with their fame. Consequently, letters by Napoleon about preparing for battle, Mozart on composing an opera, or Einstein discussing the theory of relativity are highly sought after. The name of the recipient of a letter can also significantly increase the value of an item. Letters between famous individuals are very desirable among
ARTS AUTOGR APH S
An autograph manuscript of Mozart’s Serenade in D major, K. 185
archives. Another aspect of this is that many private collectors have philanthropic interests, and end up donating their collections to institutions. All of this prevents these collectibles from appearing in the public market, sometimes for centuries. The saleability of an item is also key to the demand and pricing. Even where autographs are not the least rare, the signers are so iconic that interest is intense, which therefore increases the value. Einstein is an excellent example: a letter to his first wife, Mileva, regarding details of their divorce, doubled in value within a year of the first sale. Condition: An item is generally undesirable when it is in poor condition, but the standards will change depending on the signer. Extremely rare items are accepted even if restored or partially illegible, but when the supply is generous the collectors become more scrupulous about what they buy. A thorough knowledge of a particular autograph’s standard will help assess the potential for sale. Provenance: The value of a manuscript may be enhanced if the history of its ownership can be tracked. Items that once belonged to a famous collection or used as a facsimile in a well-known reference book draw more interest among collectors.
k Charles Darwin: an autograph letter to Sir Edwin Ray Lankester
k Albert Einstein: an autograph page with mathematical quotations
collectors. For example, a letter from Albert Einstein to Franklin D Roosevelt, warning him of the potential for the “construction of extremely powerful bombs” through nuclear fusion was: bb purchased by Malcolm Forbes in 1986 for $200,000 bb estimated to sell for $800,000 to $1.2m bb sold in 2003 for $1.9m. Rarity: In the collectibles industry, we often hear that an autograph is ‘rare’, but what exactly does that mean? A good example of extreme rarity is William Shakespeare, from whom there is almost no writing in his hand. Some autographs are rare in a particular form. Napoleon sent lots of letters, but most were written by secretaries and only signed by him. Letters entirely in his hand are very rare and while an average secretarial letter sells for anything from £800, a love letter to Josephine sold for £276,000 in 2007.
Some autographs are considered to be rare in one country, but are easily accessible in another. For example, Johann Wolfgang von Goethe — German writer and politician — is considered to be rare in the US, but can be found relatively easily in Germany. Some autographs are just unheard of. Nobody has ever come across a handwritten piece by Dante Alighieri. If one ever came up for sale, it would be extremely hard to put a price on it. Knowing the ins and outs of a particular personality is key to pricing accurately. The right combination of quality and uniqueness guarantee higher value. Supply and demand: Historical documents are often unique and their supply is limited, not only because the figures are gone, but because the remaining documents are continually sourced by libraries, museums and
Market context: The market for manuscripts and autographs can be sensitive to outside factors. An important anniversary, publication or republication of a book, or a new movie, not to mention the general state of economy, can give prices a boost. Current tendencies and interests as well as records of previous sales of similar pieces are taken into consideration when pricing an item. As illustrated, valuing an autograph can be a complex process. Many individuals attempt to do it without professional help while selling or insuring their objects, but it is extremely easy to slip over a detail. To ensure that the best sale price is achieved, it is best to leave it to a reputable and experienced valuer. A Ania Hanrahan is Business Development Executive at Dreweatts and Bloomsbury Auctions ahanrahan@bloomsburyauctions.com
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Milton Silverman explains the important difference between ‘voidable’ and ‘void’ when it comes to contracts
Avoiding the voidable loophole
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A certain section of the Sale of Goods Act was being deployed in a case in which I was involved, with potentially dramatic effect. The problem was believed to be a ripple effect from the now infamous case in New York of Galfara Rosales, who admitted defrauding two Manhattan galleries of more than $30m with 63 fake art pieces. This collection was supposed to include apparently unknown works by artists, which included Mark Rothko and Jackson Pollock. They were then sold on to unsuspecting buyers for more than $80m. Rosales pleaded guilty to a number of charges and admitted that the works “were actually fakes created by an individual residing in Queens”. Rightly or wrongly in the case before me, one insider believed that the artist
involved in the Rosales case may well have been the guiding light with this one. In any event, fakes are what this case is about, whether they originated in New York or elsewhere.
Part-exchange deal The proprietor of an English gallery whose focus was Old Masters was visited by a New York dealer whose main area
of expertise was Modern art. The two got on well and eventually they did a partexchange deal. The gallerist exchanged two of his works for a relatively small amount of cash and two Modern works of art. Very shortly afterwards the New York dealer sold on the two Old Masters. Subsequently, a colleague in the trade and friend of the
English gallery owner saw one of the works he had received from the New York dealer and wondered aloud whether this was quite right. This put the gallery owner on inquiry and he investigated further. After a number of opinions from others who knew this area a lot better than he did, it became quite clear that the pictures he had received from the New Yorker were fakes. More than anything else he wanted his Old Masters back rather than money, but among a host of other complications, Section 23 of the Sale of Goods Act reared its head. A brief word, first of all, on some legal concepts. If a contract is ‘void’, then it means that it is treated as if it never existed at all and the court would try to place the parties straight back to square one, before the time when the contract was entered into. If, however, a contract is ‘voidable’, then it remains in existence until one of the parties does something to actually nullify it. Section 23 states: “Sale under voidable title: When the seller of goods has a voidable
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The English gallery owner had no chance of arguing that the contract with the New York dealer was void title to them, but his title has not be avoided at the time of the sale, the buyer acquires good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.” Examples of when a contract, or title, may be voidable are where there has been fraud, misrepresentation, non-disclosure, duress or undue influence. It is much more difficult to claim that a contract is void. This would apply, for example, where there has been a case of mistaken identity, where the goods did not even exist,
unknown to either party, or where they have been stolen.
A question of title On the facts of the present case, the English gallery owner had no chance of arguing that the contract with the New York dealer was void. However, undoubtedly, the dealer was indeed the ‘seller of goods’ (to the buyer who bought the Old Masters from him) with, it was argued, a “voidable title to them” because at the very least, he had made misrepresentations, maybe fraudulently, to the English gallery owner.
The problem was, however, that the duped English gallery owner had to change the New York dealer’s ‘voidable title’ to the Old Masters to the position where the title was ‘avoided at the time of the sale’ (i.e. to the purchasers from the New York dealer). Otherwise ‘the buyer’ from the New York dealer “acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s (i.e. the New York dealer) defect of title”. To make the voidable title void, the English gallery owner needed to have given notice, before the New York dealer’s onward sale or, alternatively – as it has been said in one Court of Appeal case – to the police. Unfortunately, through no fault of his own, because he had no knowledge at the time of the onward sale, the English gallery owner did not give any such notice before
the New York dealer had indeed sold on to an innocent individual who had purchased the Old Masters “in good faith and without notice of the seller’s defect of title”. The position was, therefore, that the innocent purchaser looked like he had a good chance of getting good title to the Old Masters and the English dealer would be left suing the New York dealer for damages. This, of course, is not nearly as helpful as a simple return of the valuable Old Masters from whence they came. If recovery of funds against the New York dealer proved impossible, the English gallery owner would be the ultimate loser. A
Milton Silverman is Senior Commercial Dispute Resolution partner at Streathers Solicitors LLP mcsilverman@streathers.co.uk
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