The strange tale of the District Valuer

[D'Artagnan 173]

http://www.heraldscotland.com/celtic-close-to-deal-over-disputed-land-1.851123

 

One can understand the ire of those in the east of Glasgow, being investigated by the EU with regard to a land deal which on the face of it, looks fairly straightforward.

 

But scraping below the surface of this deal perhaps offers an insight into why the negotiations referred to have been described by Mr Braiden as “often acrimonious”, and perhaps further as to why certain anomalies have caught the eye of EU investigators.

 

The District Valuer of course is not the Council’s own surveyor, but an executive agency of HM Revenue & Customs who provide a range of independent valuations and surveying services to public sector bodies.

 

On the 24th Novemeber, 2004, the District Valuer was tasked by Glasgow City Council to provide initial valuations for various Council owned sites ( though not all sites surveyed were those eventually sold to Celtic FC) including Westhorn Recreational Ground, which of course, as per The Glasgow Herald article, was subject of an eventual sale to Celtic FC.

 

The Disrict Valuer proceeded as instructed completing preliminary examinations and providing a preliminary report on 19th Janurary, 2005. The completed preliminary report however, took no cognisance of what is referred to as abnormal ground conditions which existed on the sites. This in itself is particularly odd as Glasgow City Council acknowledge abnormal conditions at various sites within this area.

 

“Outputs from high level desk studies for this area and the East End in general demonstrate that land is likely to be subject to significant abnormal development constraints that would require to be overcome during any development project. These include contamination from industrial activities, contamination from waste deposits and mining. As such the majority of land disposal transactions concluded by the Council in this area are subject to the consideration of abnormal costs”

 

The District Valuer was not instructed by the Council to provide any further valuation reports.

 

The negotiation of the sale of the various areas of land was carried out on behalf of the Council by one of its own Chartered Surveyors in accordance with the Council’s normal procedure, the Royal Institute of Chartered Surveyors’ guidance and the European Commission’s Communication on State aid elements in sales of land and buildings by public authorities (97/C 209/03).

 

The Council’s own chartered surveyor in conjunction with chartered surveyors appointed by Celitc FC negotiated the market value of the land being offered for sale.

 

Surprisingly, the preliminary, yet ostensibly incomplete District Valuer’s Report was then used as a starting point for negotiations on the sale of the land between the Council and Celtic FC

 

As they say in Penny Lane – Very strange.

[BrahimHemdani 1]

Perhaps I'm missing the point but if the "abnormal costs" were included wouldn't the District Valuer’s Report have reduced the value of the land and this given the Council a lower starting point in any negotiations?

 

Not including a deduction for the abnormal costs would leave that aspect for negotiation, which is surely a stronger position for the Council because they have given nothing away at the start.

[amms 0]

Yeah, I'm a wee bit lost this week too?

[D'Artagnan 173]

Perhaps I'm missing the point but if the "abnormal costs" were included wouldn't the District Valuer’s Report have reduced the value of the land and this given the Council a lower starting point in any negotiations?

 

Not including a deduction for the abnormal costs would leave that aspect for negotiation, which is surely a stronger position for the Council because they have given nothing away at the start.

 

That would be my understanding as well BH. But you have to ask why they employed the services of the DV in the first place, if they were going to ask him to prepare a report that did not properly reflect the value of the land ?

 

Why did they not provide the information on the abnormals of the land at the outset - and furthermore why did they dispense with the service of the DV after the preliminary report was prepared.

[BrahimHemdani 1]

That would be my understanding as well BH. But you have to ask why they employed the services of the DV in the first place' date=' if they were going to ask him to prepare a report that did not properly reflect the value of the land ?

 

Why did they not provide the information on the abnormals of the land at the outset - and furthermore why did they dispense with the service of the DV after the preliminary report was prepared.[/quote']

 

Well, I'm not starting from a good position this week what with 8 feet high basketball hoops and 8 feet wide goals but let me try.

 

If I was Celtic FC or some other organisation trying to buy the subject land then I might feel pretty aggrieved that the District Valuer, who I assume is supposed to be more or less neutral, ostensibly over-valued the land because he didn't factor in the "abnormal costs".

 

I assume that the Council would employ the District Valuer either because they are so required by law or because they didn’t want to be accused of fixing an inflated value or hiring an outside valuer whose judgement might be called into question, if let’s say, it was later found that he had a season ticket at Ibrox; or all of these considerations.

 

It’s not clear to me from the article that the Council “did not provide the information on the abnormals of the land at the outset”. That is not stated one way or the other.

 

It’s also not clear to me from the article whether the Surveyor noted the abnormal ground conditions but didn’t take cognisance of them in his valuation, which would seem perfectly fine to me; if it is being suggested that he was negligent by not noting them at all; or worse still that he knew but didn’t mention in his report.

 

“why did they dispense with the service of the DV after the preliminary report was prepared” – perhaps because he had done the work they asked him to do?

 

I regard myself as a fairly experienced negotiator and I certainly wouldn’t give anything away at the outset that I didn’t have to.

 

Perhaps the costs are something for a prospective purchaser to discover? And might they not be different depending on the use of the land?

 

If the Council were saying – here’s some land that we’d like to sell, this is the value placed on that land by the independent District Valuer but you need to be aware that you might face abnormal costs in developing that land because of previous use; then I don’t see that there is anything “surprising” or “strange” about their position.

[D'Artagnan 173]

Well, I'm not starting from a good position this week what with 8 feet high basketball hoops and 8 feet wide goals but let me try.

 

If I was Celtic FC or some other organisation trying to buy the subject land then I might feel pretty aggrieved that the District Valuer, who I assume is supposed to be more or less neutral, ostensibly over-valued the land because he didn't factor in the "abnormal costs".

 

I assume that the Council would employ the District Valuer either because they are so required by law or because they didn’t want to be accused of fixing an inflated value or hiring an outside valuer whose judgement might be called into question, if let’s say, it was later found that he had a season ticket at Ibrox; or all of these considerations.

 

It’s not clear to me from the article that the Council “did not provide the information on the abnormals of the land at the outset”. That is not stated one way or the other.

 

It’s also not clear to me from the article whether the Surveyor noted the abnormal ground conditions but didn’t take cognisance of them in his valuation, which would seem perfectly fine to me; if it is being suggested that he was negligent by not noting them at all; or worse still that he knew but didn’t mention in his report.

 

“why did they dispense with the service of the DV after the preliminary report was prepared” – perhaps because he had done the work they asked him to do?

 

I regard myself as a fairly experienced negotiator and I certainly wouldn’t give anything away at the outset that I didn’t have to.

 

Perhaps the costs are something for a prospective purchaser to discover? And might they not be different depending on the use of the land?

 

If the Council were saying – here’s some land that we’d like to sell, this is the value placed on that land by the independent District Valuer but you need to be aware that you might face abnormal costs in developing that land because of previous use; then I don’t see that there is anything “surprising” or “strange” about their position.

 

BH

 

The District Valuer is not required by law but is available to public sector bodies who wish to avail themselves of their services. The DV has not over-valued the land but placed a value upon it prior to the costs for abnormals and ground conditions being agreed and full inspections of the properties being carried out.

 

It is normal practice to consider abnormals in any valuation; this reflects the Royal Institute of Chartered Surveyors ("RI CS") Red Book requirements. For example:

 

"10.1.2 Where the client has expressly instructed or agreed that contamination is to be disregarded, it falls to the valuer in preparing valuations of contaminated land to exercise his or her judgement in reflecting the effect of contamination on the property to be valued.

 

10.1.3 Unless the aforementioned exception applies, it is necessary for the valuer, in preparing the valuation, to take account of all the relevant factors and their inter*relationship. The valuer needs to be able to access the advice of other professionals as to the type and extent of contamination, as well as the scope for remediation and the associated costs."

 

In any valuation, the valuer first produces a gross valuation followed by normal and reasonable deductions, including for abnormals. This requires a geotechnical team to advise on the most cost effective way to remediate the site.

[BrahimHemdani 1]

BH

 

The District Valuer is not required by law but is available to public sector bodies who wish to avail themselves of their services. The DV has not over-valued the land but placed a value upon it prior to the costs for abnormals and ground conditions being agreed and full inspections of the properties being carried out.

 

It is normal practice to consider abnormals in any valuation; this reflects the Royal Institute of Chartered Surveyors ("RI CS") Red Book requirements. For example:

 

"10.1.2 Where the client has expressly instructed or agreed that contamination is to be disregarded' date=' it falls to the valuer in preparing valuations of contaminated land to exercise his or her judgement in reflecting the effect of contamination on the property to be valued.

 

10.1.3 Unless the aforementioned exception applies, it is necessary for the valuer, in preparing the valuation, to take account of all the relevant factors and their inter*relationship. The valuer needs to be able to access the advice of other professionals as to the type and extent of contamination, as well as the scope for remediation and the associated costs."

 

In any valuation, the valuer first produces a gross valuation followed by normal and reasonable deductions, including for abnormals. This requires a geotechnical team to advise on the most cost effective way to remediate the site.[/quote']

 

Thanks for that, I should have added that I'm not a surveyor!

 

But if the valuer didn't follow normal practice then surely any prospective purchaser would have cause for complaint?

 

"Where the client has expressly instructed or agreed that contamination is to be disregarded, it falls to the valuer in preparing valuations of contaminated land to exercise his or her judgement in reflecting the effect of contamination on the property to be valued." How can the effect at once be disregarded and then reflected as part of the same instructions?

[D'Artagnan 173]

Nor am I I may add - just sifting through screeds of FOI requests & responses.

 

But here is one which will be up your street BH - and is taken from elsewhere in response to this article.

 

Hypothetically, an incomplete but government backed valuation could be used for mortgage valuation with a lower locally arranged survey value used for purchase value.

 

Not illegal in any way, hypothetically.

 

Any thoughts on that "hypothetical" BH ?

[BrahimHemdani 1]

Nor am I I may add - just sifting through screeds of FOI requests & responses.

 

But here is one which will be up your street BH - and is taken from elsewhere in response to this article.

 

 

 

Any thoughts on that "hypothetical" BH ?

 

I have a lot of mortgage experience both in this country and the US but most of it was domestic and it is a great many years since I was involved in commercial mortgages. The experience I had in that area was with pubs' date=' hotels and once even a Buck Rogers Burger Bar!

 

Hypothetically I think it is[i'] possible[/i] but highly unlikely in practice. The reason I say that is that most lenders will insist on their own survey or at least that you use a surveyor on their "panel". The reason for that is to avoid collusion. I don't have any experience of this type of deal so I really don't know if the District Valuer's survey would be acceptable for mortgage puposes but I doubt it, simply because it was instructed by the seller. Back in the day when a certain bank was keen to lend commercial finance it was well known in Glasgow that if you used a particular surveyor you would get a "good" valuation and that it would be acceptable to the bank but I very much doubt that the DV would come in to that category.

 

In any event a mortgage is usually based on the lower of the valuation or purchase price (on the basis that the true value is what someone/you will pay for it) so the valuation will only come into play in reality if you pay more to secure the land/property. Clearly there would be an issue if as you suggest the valuation failed to disclose a material fact upon which the lender might otherwise rely.

 

It really doesn't matter what "evidence" you use in your negotiations, you could produce a letter from your aunty fanny and it might help you a bit but at the end of the day the purchase value is what you are prepared to pay and what the seller is prepared to accept. Usually I find in negotiations each side will set out with a best price, a target price and a bottom line price and that's as true when you are upgrading your mobile phone is it is buying some derelict land in the East End of Glasgow.

Edited January 16, 2014 by BrahimHemdani
typo

[Steve1872 4]

Celtic State Aid ‏@CelticStateAid4m

GCC discounted Westhorn site by £3.5m for Celtic on basis of a geotechnical report that they refuse to release under FOI.