Tree Valuation St Ives Nov 2010


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Accompanied a presentation to CPD event for chartered surveyors at St Ives, Cambridgeshire, UK 25 November 2010.

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  • Introduce concept of RICS Guidance Note and stress relationship to Red Book
    Coverage 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
  • Red Book and its purpose, including recognition that the Red Book is international in application.
    Picture is of Chinese Red Book.
  • More on Red Book background – picture is Russian Red Book
  • 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.
  • Like the other methods, this starts with a Single Unit (a cost for CAVAT and CTLA, but only a measurement unit for Helliwell – cost is added later.
  • 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.
    “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.
  • This is one example of a number of wider valuation issues which are now beginning to emerge. In particular, studies have recently looked at the valuation of heritage assets, at how sustainability can be reflected in valuation. These may all have implications for the future development of valuation methods.
    It also emphasises the continuing importance of understanding the basis of a valuation: market value, fair value or worth.
  • Tree Valuation St Ives Nov 2010

    1. 1. Valuation of trees for amenity and related non-timber uses National Tree Safety Group RICS Practice Standards, UK Guidance Note Charles Cowap MBA MRICS FAAV MRAC Want to Know St Ives, 25 November 2010 November 2010
    2. 2. What? • RICS Guidance Note • Part of the Red Book suite • Guidance on the valuation of: – Trees – Groups of trees – As part of property – As separate asset • Scope: UK • Interest: worldwide!
    3. 3. The Red Book • RICS Valuation Standards • Suite of: – Practice Statements – Guidance Notes – Information Papers
    4. 4. Purpose of Red Book • Integrity, clarity, objectivity • Use of recognised bases of valuation • Valuers are qualified • Independence and objectivity • Conditions of engagement • Minimum Reporting Standards • Disclosure
    5. 5. • RICS first published Valuation Standards in 1974 • Now a Global set of standards • Compulsory for RICS members
    6. 6. Why? • The need to value trees for various requirements • Emergence of various methods • Need for guidance on their relationship to Red Book concepts like Market Value
    7. 7. How? Valuation Basics: • Methods • Skills and knowledge • Terms of engagement • Specific information which may be needed • Valuation Basis – Market Value – Worth – Fair Value – Existing Use Value
    8. 8. How? The Facts • Site and legal interest • Statutory designation and other forms of protection • Current and proposed site uses • Health and condition, signs of stress • Liability issues • Assumptions and special assumptions
    9. 9. METHODS
    10. 10. Tree valuation is big news Big figures are touted to end the chain saw massacre
    11. 11. 1. CAVAT Capital Asset Value for Amenity Trees Chris Neilan
    12. 12. CAVAT Capital Asset Value for Amenity Trees • Basic value: unit value x size • Community Tree Index Value: population, use, accessibility • Functional value • Adjusted value/amenity factors (+/-) • Full value/safe life expectancy 12
    13. 13. How CAVAT (probably) worked: Tree Diameter of 184 cm x Unit Value Factor of £13.18 £350,285 Community Tree Index Factor based on pop density of 84.4/ha and relative accessibility of 200% x 100% 2 Functionality based on crown size and condition of 100% 1 Amenity and appropriateness based on Townscape and visual importance + 10% Local Designation + 10% Veteran status + 30% (but total limit of +40%) 1.4 Safe useful life expectancy of 20 to 40 years: 80% .8 Total Tree Value £750,000 13
    14. 14. 2. Amenity Valuation of Trees & Woodlands DR Helliwell
    15. 15. Helliwell Unit value per individual tree, 1.6.08 £25 Size of crown, 200 sq m: score 8 (max) 8 Safe useful life expectancy, 40 – 100 yrs, (max score 4) 3 Importance in landscape: score 4 (max) 4 Presence of other trees: some (max score 2) 2 Suitability to setting: score 4 (max) 4 Form (thick stem): score 2 (max) 2 Total tree value (compared to a maximum Helliwell value of £57,600) £38,400 15
    16. 16. 3. Guide for Plant Appraisal CTLA
    17. 17. CTLA is not a method, but a body Publishing guidance on both Replacement Cost Methods…
    18. 18. …and Cost of Cure methods Value may be optimised without full replacement (cf Macklin)
    19. 19. 19
    20. 20. Establishing unit costs for UK Comparison of extrapolated and actual costs.
    21. 21. 21 Species X Condition X Location
    22. 22. CTLA Installed cost for 184 cm diameter tree @ £12.55/sq cm (unit rate) £333,541 Environmental adaptability: v suitable @ 100% 1.0 Growth characteristics: an average of scores for size, longevity and maintenance: 100, 50 and 70% respectively 1.0 Pest and disease susceptibility 0.9 0.96 Condition (90%) and Age / Asset Life (70%) 0.6 Location, based on site rating (100%) x frequency (65%) x dominance (65%) x placement (100%) 0.4 Value £75,000 22
    23. 23. One Tree • 3 Values? • £38,400 • £75,000 • £750,000 23
    24. 24. • Helliwell: Visual Amenity Valuation • CAVAT: Management of trees as public assets rather than liabilities, value directly related to public benefits • CTLA: Depreciated Replacement Cost: asset valuation – amenity value 24
    25. 25. COMPARISON • A standard unit is weighted (multiplied) for various factors • Nil value is possible • Negative value is impossible without further deductions • All are intrinsically capped • Scope for substantially different figures • No, or little, explicit recognition of land value itself – See Lindsay and Lindsay • No Basis of Valuation in terms easily reconciled with Red Book • DRC approaches – Do the assumptions really work with trees?
    26. 26. APPLICATION? • Assessment of Worth (investment value) • Compensation claims – Damages – Compensation on compulsory purchase
    27. 27. FORMING A VIEW • The need to ‘stand back’ and judge ‘reasonableness’ • Bryant and Macklin (2005) – Cost of replacement (DRC): £190,000 – Diminution of freehold value: £25,000 – Cost of replacement with young whips: £44,500 • With regard to: – Likely behaviour of property owner – Overall context of property market value
    28. 28. WIDER VALUATION ISSUES ..... • Sustainability …. • Valuation of heritage assets ….. • Worth and Value in Use v Market Value and Value in Exchange v Fair Value • Valuation and other appraisal methods
    29. 29. The National Tree Safety Group (NTSG) was formed in August 2007. The purpose of this group was to develop a nationally recognised approach to tree safety management and to provide guidance that is proportionate to the actual risks from trees. Its membership is open to all interested stakeholder organisations and groups. Royal Institution of Chartered Surveyors Institute of Chartered Foresters Country Land and Business Association London Tree Officers Association National Trust Woodland Trust Arboricultural Association Ancient Tree Forum The Tree Council ConFor Forestry Commission English Heritage NTSG Management Committee National Tree Safety Group
    30. 30. “The NTSG believes that one fundamental concept should underlie the management of risks from trees. ‘The evaluation of what is reasonable should be based upon a balance between benefit and risk. This calculation can only be undertaken in local context, since trees provide may different types of benefit in a range of different circumstances’.” National Tree Safety Group Position Statement
    31. 31. National Tree Safety Group The Guidance document is based on a set of five basic principles developed by the NTSG for considering and managing tree safety in the public interest. The overall approach is that a balance should be struck between risks and benefits.
    32. 32. National Tree Safety Group The Guidance Document consultation period closed in June 2010. Publication of the Guidance is expected in early 2011 Principles: •Trees provide a wide variety of benefits to society •Trees are living organisms and naturally lose branches or fall •The risk to human safety is extremely low •Tree owners have a legal duty of care •Tree owners should take a balanced and proportionate approach to tree safety management “Safety is but one of many goals to which we aspire and so the mistake that is often made is to focus on safety as if it is the only goal.” Professor David Ball Centre for Decision Analysis and Risk Management, Middlesex University
    33. 33. Streamlining TPO’s: DCLG Consultation Proposals – a potted view • Simplify all existing TPOs: alignment with a New Model Order • New simpler Model Order – List of trees – Map • New TPOs to have immediate provisional effect – Scraps requirement for separate direction to provide urgent protection • Reduced publicity requirements – Owners, occupiers – Others with right to cut or fell
    34. 34. • One system for work consents and revocations • Consents for regular work to protected trees – Save need for repeated consent applications • Conditions to cover replacement woodland planting – Instead of Directions • Align all compensation provisions with 1991 Regulations – Removes anomaly that allowed LPAs to avoid claims for compensation
    35. 35. Find out more ….. Download for members: e.aspx?pressreleaseID=193 Charles Cowap: Tree Safety: John Lockhart TPO Consultation: s/planningandbuilding/treestreamlining consult These slides:
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