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Rural Jigsaw: conventional and unconventional valuations of amenity trees, renewable energy and new challenges for land agents
 

Rural Jigsaw: conventional and unconventional valuations of amenity trees, renewable energy and new challenges for land agents

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Slides for RICS Wales Rural Conference at Llandrindod Wells on 4 December 2012. Covers Vauation of trees for amenity purposes, valuation of renewable energy installations and the importance of ...

Slides for RICS Wales Rural Conference at Llandrindod Wells on 4 December 2012. Covers Vauation of trees for amenity purposes, valuation of renewable energy installations and the importance of Ecosystem Services (and their valuation) to future rural professional practice

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  • Introduce concept of RICS Guidance Note and stress relationship to Red BookCoverage of valuation of trees and groups of trees.Although the scope of the published guidance is the UK, it has attracted interest from abroad, notably USA.
  • Reminder of what the Red Book is
  • RICS has prepared new guidance note because trees have to be considered in relation to property value in a variety of situations.Against this background, various methods have emerged in recent years.But the relationship between these methods and long-established principles and methods of property valuation is far from clear. The Guidance Note therefore seeks to bridge this gap.
  • Guidance note addresses some basic points that apply to all property valuations, as listed.In particular, the need to establish the purpose and BASIS of valuation.Also note the comments in the guidance on skills and knowledge. Red Book PS 1.5 requires valuer to have the necessary skills and knowledge.These would cover knowledge of tree spp, habitat preferences, growth characteristics, timber characteristics, longevity, structural integrity, landscape character, industry standard methods of measurement.Terms of engagement will also have to be considered carefully where trees are a significant component for consideration in the valuation, including for example: identify the trees concerned, purpose of valuation, information to be made available to the valuer, specific research which the valuer may need to undertake, assumptions and special assumptions which might be applicable – see PS 2.1 and 2.2 for special assumptions.Reminder of the need to agree acceptable basis of valuation.
  • Three methods have come into prominence in UK recently.Will be explained by reference to a particular tree valuation which had caught the headlines at the start of this project.
  • CAVAT was the method used to arrive at the high valuation reported for the Berkeley Square plane tree.It has been developed by members of the London Tree Officers Association and its main focus has been on asset management considerations and in particular claims which arise against local authorities when trees are blamed for subsidence in nearby buildings. There is some evidence from practice that CAVAT is being accepted by insurers as the basis for settlements in such cases.
  • This is how a CAVAT valuation is built up. The following example should make it clearer.
  • Published guidance from CAVAT shows how these factors are built up.The Berkeley Square plane tree is large, so its initial value is large. Essentially, this is a replacement cost, factored for the size of the existing tree.Community Tree Index reflects population density and accessibility – both factors are high for this central London site.Functionality is based on crown size and condition, both good in this case.Various ‘add ons’ follow for amenity value. Although the total available for each of the three points is 50%, the maximum add on allowed is 40%.As an older tree, the Plane has a limited life expectancy and this has reduced the value slightly, to 80%.Hence the total valuation of £750,000.CAVAT has been criticised for not adequately reflecting depreciation.
  • Helliwell method was one of first to be used in UK.
  • Taking the same tree, Helliwell would look like this.Again it starts with a unit value per individual tree and adjustments are made.The adjustments are all on a fixed scale. In this case, the maximum of the scale has been used for each factor except life expectancy – 3 rather than 4.The maximum Helliwell valuation would therefore be £57,600, but in this case is £38,400.Much lower than CAVAT – but are they valuing the same thing in our terms?
  • 3rd and final method: CTLA an American based organisation which leads the publication of plant appraisal methodologies. The US Guidance has recently been adapted/developed for use in UK conditions.
  • CTLA publishes guidance on a range of methods, but Replacement Cost Methods are the ones which have crossed the Atlantic.
  • CTLA also considers a number of other approaches, eg cost of cure, or remedy.
  • Adam Hollis has prepared guidance notes on the use of DRC for amenity tree valuation, adapting the US guidance to UK conditions.
  • The basic approach is Species x Condition x Location
  • The DRC approach to the Plane Tree would have looked like this.Adjustments are then made for environmental suitability, growth characteristics and pest and disease susceptibility.Further adjustements are made for condition and age, site, frequency, dominance and placement.Total: £75,000 – again quite different from the previous valuations!
  • This shows the different emphases of the methods. CAVAT specifically excludes any measure of exteranl liability associated with a tree, which would need to be a ‘special assumption’ in Red Book terms.
  • Standard unit is a cost for two of the methods and a simple unit for the other (Helliwell).Lindsay v Lindsay: LT case. Claim included separate items for land value and the trees upon it (Helliwell). LT considered that the figures used for the land value already reflected the present of trees and rejected the separate claim for their value. Underlines the importance of correct identification and categorisation of assets under consideration, and importance of handling and analysing transactional evidence.
  • Leads to question of circumstances in which these methods might be worth considering.Assessment of Worth is basically worth to the individual client and, provided the client understands the basis on which the valuation has been prepared, one or other of these methods may be helpful.The methods have also been used in compensation claims, both general and on CP&C, successfully despite Lindsay v Lindsay.
  • Bryant and Macklin: CA case.Wilful destruction of trees by neighbour.Reasonableness:“The judge must stand back, when he has done his arithmetic, and ask himself whether the figure achieved by his findings is fair both to the plaintiff and to the defendants” (Chadwick LJ quoting Russell LJ in Farmer Giles Ltd v Wessex Water Authority and another.£44,500 awarded. Per Chadwick LJ“That represents less than ten percent of the value of the property in question. In my view it is impossible to say that a reasonable person with ample funds at his disposal would not think it reasonable to lay out that sum in restoring an amenity to his home; provided, of course, that the expenditure would lead to a benefit worth having. Mr Gilbert thought it would; and the judge made no finding that it would not. It is important to keep in mind that Mr and Mrs Bryant want to continue living in their property. They do not want to sell up and move on. I find it difficult to accept that they would not think that the prospect of restoring trees to their boundaries – even if that would take some time – was not a benefit worth having. The alternative – to do nothing – would, I think, be rightly rejected as unacceptable.” Emphasising the need to stand back, have regard to the value of trees in the context of the property as a whole and with regard to the likely actions and motivations of real owners.

Rural Jigsaw: conventional and unconventional valuations of amenity trees, renewable energy and new challenges for land agents Rural Jigsaw: conventional and unconventional valuations of amenity trees, renewable energy and new challenges for land agents Presentation Transcript