Sample Assignment on Economics in Uk

ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
(i) Details of property and of major clauses of leases.................................................................1
(ii) Details of transactions on other properties..........................................................................14
(iii) Details of rating scheme.....................................................................................................24
CONCLUSION..............................................................................................................................27
REFERNCES.................................................................................................................................28

INTRODUCTION
In way of allowing the periodical adjustment of all the commercial properties available in
market level at the current date of review as agreed by landlord and tenant notified in rent review
clause in commercial lease will be known to as rent review (Dolan and et.al., 2016). Although
before this it will be very much essential to value that rental property that too at fair market price
at time of renting. So the practitioners of United Kingdom for market valuation will not be
practicing contemporary approach and rather utilising conventional one. In 3rd quarter of 2017
the value of commercial properties of UK at its prime location increased on an average of 0.7%.
These movements which are the upward and downward slope will be mostly depended upon the
performance of industrial sector. While the all shop sector recorded a fall down of rents of prime
locations by -0.3% in the 1st quarter of 2018.
So in this particular assignment discussion will be done on major clause of lease that are
all available in UK with details given from the property and other situated near by with that of
rating scheme as well. Under this project brief discussion will be made on how properties are
valued and how their rents are calculated given their rent review period and present conditions as
well.
MAIN BODY
(i) Details of property and of major clauses of leases
Under this assessments there are majorly 2 of the prime and main properties and both of
them need to be valued in order to take out the actual and current rent of them (Kavetsos,
Dimitriadou and Dolan, 2014). Both the two properties are in the main shopping street
surrounded by 4 other comparable properties on this street. So the details and valuation of both
subject properties are as follows:
Subject property 1: 72 High Street
This particular is a three storey building including basement, ground and first floor which
was built in 1900. The subject property is mainly occupied by ladies wear shop as it is in main
shopping street of provincial market town which also has store rooms, other accommodation but
in this valuation area of toilet will not be included. The overall internal and external premises of
this particular building are very much shabby and untidy which will be calling for further clean
up. All the work by tenant on this building was renewed on timely bases which were entirely
done only after taking prior written consent of the landlord (Reeves and et.al., 2017). Like about
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25 years ago rear of ground floor of the building premises was extended with about 6.15 meter
till the present depth of over 29.03 meter. This property’s current lease is 42 years ago which is
too old and not as per the current or modern transactions so its valuation is very much necessary.
The other terms of lease will be including like that of the current rent of this building is £60000
p.a. with the terms for 99 years. This rent will be reviewed every 14 years value of rent will be
£2000 p.a. higher than that of market value (Ringø and et.al., 2016). It was also included in the
lease terms that all internal repairs and insurance will be responsibility of tenant only while
landlord will be answerable for exterior and structural repairs and maintenance.
VALUATIONS: CONVENTIONAL, DCF, REAL
DATA
ERV £62,000
Rent £60,000
Years to review 14
Equivalent/initial yield 6.80%
Risk free rate 1.32%
Bond premium 1.00%
Property premium 2.00%
Fixed rent return 2.32%
Required return 3.32%
Overage risk premium 1.00%
Rent review period 99
Purchase costs 6.50%
Void Period 0
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