For the family home the usual approach to value a residential property is the comparable method. Comparables may come from Agents, auction results or land registry.

Where a property is held as an investment the valuation will involve checking the passing rent (if any) or establishing the 'market rent' and applying a typical investment yield.

a common mistake of an informed Valuer is to value the building converted the sum of the individual flat values. The reason why this would be wrong is that the fact the property is held on a single Freehold title means that today it would not be possible to sell each Flat individually without:

• Granting 3 leases and paying Solicitors fees,
• Getting vacant possession of flats to achieve full value
• Finding 3 purchasers,
• Paying any Estate Agents fees, and
• Waiting the time it takes to find 3 purchasers.
• Carrying out any works to bring each unit up to the maximum value e.g, separating services, re-tiling bathrooms, kitchens, painting……

So it is clear that anyone undertaking all this would be an investor looking for a “profit” that reflects the risks (a) buying the property as a freehold lot, delays in getting vacant possession, (b) expertise in preparing the units for sale and (c) risk of the market falling during the “period he needs to hold the property” before the sale.

In addition there may be planning risk if the property has been converted ‘without planning permission’ until 4 years have passed and then a Certificate of Lawfulness on the basis of intensification of use could be obtained. And, if deemed to be an HMO type units there is a real risk of enforcement notice if fire alarms, means of escape or unit sizes are too small.

Investment comes with inherent risks e.g., rent arrears, extra repairs if the tenants don’t care for a property the way a home owner would, more move-in/move-out damage, and delays in getting possession through the Court and Bailiff processes.

The Valuers first task is to establish is whether an HMO is legal. Either, because the HMO has planning permission, or has or can obtain a 'certificate of lawful use'. British planning law allows for a 'certificate of lawfulness' to be obtained IF the use has been ongoing for 4 or more years for 'intensification of a residential user' (house to HMO) and 10 years for a 'change of used' from commercial to residential.

tenants with regulated tenancies have an indefinite right to stay (if contractual requirements are met) as does their spouse and children living with them unless the tenancy is ended on limited grounds, e.g., redevelopment in which case often 'suitable alternative accommodations' must be offered. Because a regulated tenant has an indefinite right to stay in occupation the Valuer has to apply a discount to the market value which will depend on, (a) the age of the regulated tenant, and (b) whether they have any children living with them that could succeed them.

Relevant legislation that assures regulated tenants security is the Rent Act 1977 and it was not until the Housing Act 1988 deregulated rents on new private sector lettings from 15 January 1989 that there was a decline in regulated tenants in the private rented sector.

Regulated tenancies are often on an internal repairing lease ‘IRL’ basis so the tenant holds the internal repairing responsibilities – a factor for the Valuer to take into account. Purchasers of dwellings with regulated tenancies are really buying the value of the vacant Flat once the regulated tenant has gone, so a discounted vacant possession basis or term and reversion basis is the usual valuation approach.

properties subject to a life tenancy e.g, in a family trust either 'rent free OR at below ‘market rent’ for their lifetime can only be valued on an investment valuation basis. Market rent x yield for life expectancy, so the valuation is the present value of the deferred vacant possession capital value.

Housing Act 1988 on 'a market rent' with reasonable protection from Eviction. They are valued on an investment valuation basis: market rent x yield.