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1.1 This practice note deals with the rental adjustment stage of the?Revaluation ?process - it does not cover either of the subsequent stages of rental analysis and scheme creation. Any toning of rental evidence to the?antecedent valuation date (AVD) should be carried out at the scheme creation stage.

1.2 The correct adjustment and analysis of rental evidence are vital to the successful preparation and maintenance of a?rating list.

1.3 From the outset, it cannot be over-emphasised how important it is to exercise skill, care and caution in the performance of this work. If properly done, it should assist in the production of accurate valuations and will save many hours of effort when the assessments which are based on it come to be scrutinised by persons making proposals and appeals.

1.4 The theoretical background of the rating hypothesis, and the problems to be overcome in order to bring market evidence into line with it, will be explained to help the reader understand more clearly the reasons why we adjust in the way we do. The opportunity is also taken to consider the areas of dispute which may arise in respect of the VOAs approach to virtual rents and its application in the rating context.

1.5 The general guidance and background given here are not intended to provide specific answers to particular local problems: these will be covered, as necessary, by appropriate local instructions.

1.6 It must be emphasised that many agreements between landlords and tenants are extremely complex; in some cases, a completed Rent Return (FOR) or Rent and Lease Details (RALD) form may not cover all the facts relating to the rent. In such instances, as well as in cases where the FORs or RALDs have not been fully completed, supplementary questionnaires should be sent. It is not uncommon for the details of lease agreements to be covered by confidentiality clauses. Such clauses are personal to the parties. Occupiers and owners are not however exonerated from having to comply with the legal requirement to complete a Request for Information, Form of Return (FOR) or Rent and Lease Details (RALD) form.

1.7 Rents will vary greatly in their reliability, and it is essential that all rents be carefully considered before identifying those which will be relied upon to create the valuation schemes. As a rule, the more adjustment that is required, the less reliable the rent will be. It is important that low or high rents are not dismissed out of hand as unreliable without first having ensured that there is sufficient additional evidence to justify departure and prove the basis.

1.8 The VOA use the?RICS Valuation, Global Standards 2020 (also known as the RICS Red Book Global), which is effective from 31 January 2020. This supersedes the 2017 version of the same name. At paragraph 4.3 of the RICS Valuation - Global Standards 2020, it explains that, for a number of jurisdictions, RICS publishes national supplements to the Red Book global standards to assist members in the application of those standards in a local context. At the time of writing, the latest Red Book UK National Supplement is dated 2018 (effective 14 January 2019). This supersedes the?previous supplement, the RICS Valuation Professional Standards UK January 2014 (revised April 2015). Whilst the 2014 version contained UK Guidance Note 6 on Analysis of commercial lease transactions, the revised version does not, it having been withdrawn for revision and anticipated future publication. This means UKGN 6 is not attached to any of the current versions of the red book at the time of writing. However, it is still available (attached to the 2014 version of the UK Red Book supplement) and is considered to be of assistance until a note is eventually published. Therefore, anyone citing the guidance contained in UKGN 6 should take care to stress it is currently not included in the current version of the Red Book and under review. With that in mind, UKGN6 will continue be referred to in this note, in anticipation that on its re-release its guidance will remain broadly similar.

1.9 UK Guidance Note 6 on Analysis of commercial lease transactions (UKGN 6) of RICS Valuation - Professional Standards UK as attached to the superseded RICS Red Book 2014 is very useful, in particular when dealing with rent free periods. A valuation for rating is made within a statutory framework, and so is not bound by the Red Books valuation technical and performance standards. However, the mandatory requirements of professional standards PS1 (compliance) and PS2 (Ethics) in the RICS Red Book Global Standards 2020 must still be observed.

1.10 Whilst UKGN 6 is not mandatory for Valuation Officers making valuations for rating purposes, it is particularly relevant as it provides a real world best practice approach to the particular challenge of adjusting and analysing commercial lease transactions. It is recommended reading but must be considered in full and in context where it is cited in any dispute about the approaches to adjusting rents taken by Valuation Officers, interested persons or representatives of interested persons.

1.11 When aligning lease transaction to a common standard, UKGN 6 refers to rental analysis whereas the VOA describes this task as rental adjustment. In so doing, the VOA separates rental adjustment from the further rental analysis required where the adjusted rent is analysed (using areas etc.) to derive a means of comparison between adjusted rents and assist in the statutory requirements of rating. Correspondingly, the VOAs Rating Support Application (RSA) uses the term rental adjustment for what UKGN 6 refers to as rental analysis.