RICS are currently undertaking a review of The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales, 1st edition guidance note. Red Book Global Standards, including VPGA 4 Valuation of individual trade-related properties, remain the overarching professional standards. These incorporate International Valuation Standards (IVS).
Though much of the detail in this section remains relevant, it should be read in the context of the ongoing review, with valuers and other stakeholders reminded to familiarise themselves with current relevant statute and market practice. Valuers should only undertake professional work in respect of this sector where they have the relevant experience and competence. For more information on the pending review of public house valuation guidance, please contact firstname.lastname@example.org.
The public houses section covers the capital and rental valuation of public houses. The primary RICS professional guidance on this subject is VPGA 4 Valuation of individual trade related properties, and the more specific The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales. The object of the latter is to provide practical assistance to valuers dealing with public houses.
The underlying reason for the valuation of a public house will influence the type of research the valuer should undertake, and the type of calculation needed to formulate the valuation. Public houses in the main are acquired and run for profit, and so are valued by the profits method of valuation. RICS guidance emphasises that it is important that the valuer is regularly involved in the relevant market as practical knowledge of the factors affecting the market is essential to analysis of comparable transactions.
At the time of this update in early 2021, the UK, as with most of the world, is still in the midst of the COVID-19 pandemic. At various stages throughout 2020, the UK government introduced a series of measures to combat the outbreak. This has involved various lockdowns and the introduction of a system of measures that directly impact on public houses.
For the majority of the 2020 summer, most pubs were only able to sell takeaway food. Those without kitchen facilities generally remained closed. The introduction of tiered restrictions meant that those pubs in areas with higher levels of infection closed. In lower tiers, only those pubs able to serve ‘substantial meals’ were able to remain open.
The temporary closures and restricted trading have resulted in limited transactional activity during the majority of 2020. Valuers should adopt a cautious approach and consider the most recent level of restrictions and commentary on reopening, as this is changing on an almost daily basis.
In March 2021, the government introduced a ‘roadmap’, setting out the strategy to remove lockdown restrictions. As of 12 April, pubs are able to serve customers outdoors. From 17 May, customers can be served indoors and from 21 June, it is anticipated all restrictions will be lifted.
In the Valuation practice alert - COVID-19 dated 6 November 2020, RICS recommended valuers who continue to value incorporate a ‘material uncertainty clause’ into their valuation reports, as set out in VPS 3 and VPGA 10 of RICS Valuation – Global Standards. This is being kept under review until the market stabilises.
Related RICS standards and guidance: The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales
Related RICS standards and guidance: Comparable evidence in property valuation
Related RICS standards and guidance: RICS Red Book
Related template: Public houses valuation checklist