Banks, property and rental valuation methodology
11 May 2025(2025 May) – Any surveyor whose landlord clients own properties let to banks will know that the surveyors that act for banks at rent review reason that the market rent should be valued using zoning methodology as if a shop. The reason being that is the only way the banks’ surveyors can minimize their clients’ property costs. The reasoning sounds convincing and is often backed up with a Calderbank at nil increase and the threat of referral.
The fact that in many bank leases the permitted use and assumed use in the hypothetical lease is often more than A1 – extending to A2, A3,A4, B(1)(a) for example – is ignored, despite the assumption that the market rent would be based on the highest rent possible.
A bank is not a shop. Prior to Use Class E, a bank needed planning permission for change of use to A2.
I am acting for the landlord of a bank whose review in a reversionary lease is upward or downward. The review is to be determined by a third party. The bank’s surveyor is reasoning a substantial reduction on the passing rent, his case based entirely on comparison with shop rents and zoning.
But a bank is not a shop, so the premises should be valued overall; zoning methodology is wrong.
In my opinion, it is time to stand up against surveyors who one moment act as negotiators for their bank clients and next as expert witnesses on referral when it is obvious their job is to reduce their clients rents.
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