Dual rate is defunct? A review of dual rate valuation, its history and its irrelevance to today's UK leasehold market

Dual rate is defunct? A review of dual rate valuation, its history and its irrelevance to today's... Purpose – The purpose of this paper is to review the historic evolution of dual rate valuation practice in the UK from the nineteenth century to the present time. Design/methodology/approach – The paper is based on a review of published books, articles and letters dating from 1852. Findings – The study establishes the fact that single rate was the only method in use in the nineteenth century and notes the overlap of two methodologies and beliefs in the first half of the twentieth century. It confirms that by the late 1930s dual rate had replaced single rate and an “establishment opinion” on the essential need to value leaseholds dual rate on the basis of a set of commandments had emerged without any apparent disagreement. This position, with some debated refinements for the effect of tax and treatment of variable profit rents, is shown to continue through the twentieth century and is reaffirmed in standard textbook teaching at the start of the twenty‐first century. The review touches on the criticisms noted by academics in the latter part of twentieth century. It identifies as a key issue the continuing persistent misconception amongst UK valuers that there is a reinvestment assumption in the present value of £1 per annum. Originality/value – Dual rate principles are shown in the paper to be untenable and the profession is advised to remove the method from future training of valuers and to cease to make any use of the method in the valuation of leasehold investments. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

Dual rate is defunct? A review of dual rate valuation, its history and its irrelevance to today's UK leasehold market

Journal of Property Investment & Finance, Volume 26 (1): 16 – Feb 8, 2008

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1463-578X
DOI
10.1108/14635780810845172
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to review the historic evolution of dual rate valuation practice in the UK from the nineteenth century to the present time. Design/methodology/approach – The paper is based on a review of published books, articles and letters dating from 1852. Findings – The study establishes the fact that single rate was the only method in use in the nineteenth century and notes the overlap of two methodologies and beliefs in the first half of the twentieth century. It confirms that by the late 1930s dual rate had replaced single rate and an “establishment opinion” on the essential need to value leaseholds dual rate on the basis of a set of commandments had emerged without any apparent disagreement. This position, with some debated refinements for the effect of tax and treatment of variable profit rents, is shown to continue through the twentieth century and is reaffirmed in standard textbook teaching at the start of the twenty‐first century. The review touches on the criticisms noted by academics in the latter part of twentieth century. It identifies as a key issue the continuing persistent misconception amongst UK valuers that there is a reinvestment assumption in the present value of £1 per annum. Originality/value – Dual rate principles are shown in the paper to be untenable and the profession is advised to remove the method from future training of valuers and to cease to make any use of the method in the valuation of leasehold investments.

Journal

Journal of Property Investment & FinanceEmerald Publishing

Published: Feb 8, 2008

Keywords: Property; Rental value; Asset valuation; United Kingdom

References

  • Dual rate for leaseholds?
    Mackmin, D.H.

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