Practice Notes

Approved for Publication 02.03.2006

MISCELLANEOUS PROPERTIES COMMITTEE

Practice Note 1

REVALUATION 2005

RENTAL ANALYSIS & VALUATION OF

SALMON FISHING RIGHTS

REVALUATION 2005

RENTAL ANALYSIS OF SALMON FISHING RIGHTS

INTRODUCTION

This Practice Note has been drafted to assist with the analysis of information and subsequent valuation of Salmon Fishing Rights where the Assessor has been requested to do so by a District Salmon Fishery Board.

PART 1

ROD FISHINGS

0. RETURN OF INFORMATION

All Assessors have issued similar Return of Particulars Forms and, accordingly, there should be commonality in the information received, albeit, the range of subjects covered will vary widely in quality.

1.1.0 Part A: Details of the Fishings

The information in this Section should enable the location and extent

of the Fishings to be clearly identified. Particular note should be made of any single bank Fishings, in order that the opposite bank can be identified, together with any reciprocal arrangements made for the practical use of the Fishings.

For example, it is common practice, where two opposite Fishings are in separate ownership, for the whole Fishings to be divided into upper and lower beats which are fished on alternate days. Therefore, each Fishing is essentially identical for valuation purposes.

1.1.1 Fishing Huts and Other Structures

At the request of a Clerk to a District Salmon Fishery Board, the Assessor is required to value and enter any Rights of Salmon Fishing in the Valuation Roll for the purposes of Fishery Assessment only. (Section 151 of the Local Government etc. (Scotland) Act 1994, Section 40 of the Salmon and Freshwater Fisheries (Consolidation)(Scotland) Act 2003).

Following the recent case of FIM Holdings Ltd v Assessor for Grampian it is necessary to consider the distinction between essential and non-essential items associated with Fishings. Lands and heritages that are not necessary for the exercise or enjoyment of the Fishing Rights (as they are exercised) should be considered as separate Valuation Roll entries e.g. Fishing Huts, Car Parks etc.

However, rights or structures which are considered essential to the operation of the Fishings, such as the embankment in a river fishing, the pond in an artificial fishing, access rights, and the right to control water, etc. should be deemed included in the valuation of the Fishing Rights. Further guidance between essential and non-essential items can be found in the Stair Memorial Encyclopaedia of the Laws of Scotland, vol 18, paragraphs 327-8. Accordingly, the valuer must be careful in carrying out his analysis that he does not include any value attributable to the Fishing Huts or other Lands and Heritages which may be occupied in connection with the Fishing Rights. For example, where Fishings are let to a tenant and the terms of agreement include the use of a Fishing Hut, a sum to reflect the additional benefit due to the hut must be discounted from the rent before any further analysis.

1.2.0 Part B: Fishings Let For Short Periods Or On Permits

The information gained in this Section should provide an indication as to the quality of the Fishings, together with the method of “letting”.

The nature of the fishing season results in particular periods being more sought after than others and, accordingly, attracting higher charges. Whilst superior Fishings are generally let by the week to individual “tenants”, less prestigious Fishings may be let by the day/rod or those in the occupation of Angling Associations, by seasonal permit.

The amounts noted in respect of the various options listed on the form may be used to cross-check the income declared in “Part D”.

Any restrictions imposed upon anglers should be examined to determine whether such may have any bearing on the valuation of the Fishings.

1.3.0 Part C: Tenancy Details

For the purposes of valuation, the primary evidence should come from those Fishings which are let for the full season to a single tenant and, therefore, careful note should be taken of any information contained in this section.

Further consideration in respect of such tenancy details is covered later in this Practice Note under the heading “Rental Analysis”.

1.4.0 Part D: Income and Expenses

As a SECONDARY method of arriving at a basic rate/unit of valuation, the analysis of income and expenditure may be adopted. Unfortunately, such revenue methods are fraught with difficulty and seldom result in a satisfactory answer. However, consideration is given to this matter later in the Practice Note under the heading “Rental Analysis”.

In addition to providing assistance in the general analysis, the data contained in this section may be used in comparison with other adjoining Fisheries in an effort to determine relative quality etc.

1.5.0 Part E: Baskets For Seasons 1998-2002

In valuing Salmon Fishing Rights, the basic unit of valuation/ comparison must be fish caught and, therefore, the information contained within this section is crucial to the valuation.

In addition to providing an overall five year average, the general trend of catches may be considered both year on year and seasonally, to determine whether the Fishings are generally productive over a large part of the season or if catches are restricted to only a small part of the fishing season.

Additional consideration to this data in respect of the type of fish caught, number returned, recording of weights etc., is covered under the heading “The Basket”.

2.0.0 RENTAL ANALYSIS

2.1.0 SUBJECTS LET FOR A FULL SEASON

In analysing the rental evidence ingathered from the Return of Particulars Forms, a number of points require to be considered in order that these rents may be adjusted to a common norm.

2.1.1 The Amount of Rent

The rent should be net of any VAT which may be payable.

Peppercorn rents such as those often paid by Angling Associations to a benevolent landlord should be ignored.

2.1.2 Review Date

The tone date for valuation purposes is, of course, lst April 2003, however, as the rents being considered refer to fishing seasons they may be categorised by the year in which they were agreed, with prime importance being placed upon those relating to the 2002 season.

2.1.3 Duration of Lease

Leases in respect of Fishing Rights may be generally categorised as either annual agreements where the rent for the forthcoming season is agreed year to year or more formal leases where the rent is reviewed at three or five year intervals. It would appear that three yearly reviews are the most common, with five year reviews being restricted, in the main, to those leases granted by The Crown Estate.

2.1.4 District Salmon Fishery Board Levy

The levy charged by the District Salmon Fishery Board is a charge on the Fishery. (Section 44(2) of the Salmon and Freshwater Fisheries (Consolidation)(Scotland) Act 2003.)

For the purposes of analysis, where the tenant pays the District Salmon Fishery Board levy in addition to the rent, then no adjustment is required. However, if the landlord pays the levy, then this sum must be deducted from the rent paid to arrive at the net rent.

2.1.5 Relationship Between The Parties To The Lease

Any relationship between the parties to the lease must be considered, especially where this may influence the rent paid.

The question of whether to discount any rent is one for the valuer,

however, the mere fact that a relationship exists should not necessarily preclude use of the rent. For example, the circumstances of the relationship may ensure that any rent passing reflects the full open market value, for instance, trust/trustee. Therefore, some investigation may be required by the valuer in order to ascertain the relevant facts.

2.1.6 Restrictions Placed On The Tenant In The Use Of The Fishings

The terms of let will commonly apply restrictions as to the methods which anglers may use. For example, fly fishing only may be allowed, except for periods of exceptionally high water when spinning is permitted.

The placing of such restrictions do not, in themselves, merit adjustment to the rent paid, as it is likely that these are not burdensome but merely an indication as to the general “rules” which are applied to the Fishings in a particular river system or part of such river system.

Where a valuer considers that the restrictions placed upon the tenant are such that they would have affected the amount paid in rent then some adjustment to the figure may be warranted to equate to the norm. However, it must be emphasised that any adjustment given in respect of such restrictions should only be granted in extreme circumstances.

2.1.7 Fishing Rights Reserved By The Landlord

The terms of letting will commonly include a retention by the landlord of the right to fish a rod at any time. Whilst this may appear, at first, to be a significant restriction, further examination may reveal that this right is seldom, if ever, exercised and, therefore, cannot be considered to have any bearing on the rent paid. An examination of the division between landlord and tenant's catches should provide an indication.

Where such a right is exercised to a significant degree, or if the landlord excludes certain periods of the season for his exclusive use, the rent paid may require to be adjusted. Any adjustment can only be a matter of judgement, however, the ratio of fish caught by the relevant parties and the productivity of the periods fished should provide a guide to the degree of adjustment required.

2.1.8 Lodges Or Houses Let Along With The Fishings

The circumstances whereby a house or lodge is let in conjunction with the seasonal right to fish are rare and may be more commonly found in weekly lets where a sporting/holiday package is purchased.

In the event of a valuer encountering a subject where the whole Fishing Rights are let for a season, together with dwelling houses or other property, the comment made earlier in respect of Fishing Huts should be borne in mind. The rent paid must be adjusted to exclude any additional elements. The amount of any such adjustment must be a matter of valuer's judgement, but based upon such evidence as is available.

2.1.9 Services Provided By The Landlord To The Tenant

In addition to granting the tenant the right to fish, the landlord may undertake to provide certain services to the tenant. For example, the landlord may allow the tenant to make use of any employee for ghillieing or river watching duties or provide labour and equipment to maintain/improve river banks.

The nature of such services must be closely examined to determine whether any adjustment should be made to the rent paid to reflect the landlord's costs in providing such services. For example, the provision of these services by the landlord may be de minimis when compared to the scale of the whole operation and, indeed, the works undertaken may serve to maintain and improve his asset. Accordingly, no adjustment may be warranted. However, on the other hand, the service provided may be such that, whilst suiting both parties, there is a clearly quantifiable cost incurred by the landlord which should be deducted from the rent paid to arrive at a figure which reflects the rent paid solely in respect of the Fishing Rights.

2.1.10 Fishing Huts

As outlined earlier in this Practice Note, there are difficulties incurred in analysing the rents paid in respect of Fishings where the rights granted include the use of a Fishing Hut. Whilst, such differences may be similar to those encountered when lodges or houses are let with Fishings, there is, in fact, market evidence of annual rents which may be applied to these dwellings. No such market evidence exists for Fishing Huts.

In order to address this problem, it is hoped that sufficient rental evidence will be found in relation to Fisheries which do not have a Fishing Hut to determine a pure rate applicable only to the right to fish. Such may provide some assistance in deriving a value attributable to the Fishing Hut, however, it is probable that some other approach will be required in order to determine a reasonable method of valuation for Fishing Huts.

2.1.11

Summary of Steps Required in the

Analysis of Salmon Fishing Rights Let for a Full Season

2.2.0 ANALYSIS OF INCOME & EXPENDITURE TO ARRIVE AT A HYPOTHETICAL RENT

As mentioned earlier in the Practice Note, the analysis of income and expenditure to arrive at a hypothetical rent can be unreliable and must be considered secondary evidence to any derived from seasonal lets. However, in cases where there are no seasonal rents, there is little alternative.

The analysis of income and expenditure relies on the assumption that there is a divisible surplus remaining after deducting allowable expenditure from income. A portion of this surplus is then deducted as the hypothetical tenant's profit with the remaining balance being the amount which could reasonably be afforded by way of rent.

The problem arises once again, with regard to Fishing Huts, as where a Fishing Hut is situated on a beat then the income derived from the Fishings must be deemed to include an element for the additional “value” attributable to the hut. Accordingly, any rate derived from the analysis of income and expenditure must be deemed to cover the “rent” for the Fishing Rights and the additional right to occupy the Fishing Hut.

The conundrum relating to Fishing Huts cannot be addressed without separate consideration being given to their individual valuation. The beacon values provided in the appendix to this Practice Note are intended to provide assistance in calculating any required adjustments. However, it may be found that such difficulties are only encountered in a proportionately small number of subjects.

The Return of Particulars Form requests details of income and expenditure for the years 2001 and 2002. The “accounts” used should be those relating to 2002, however, comparison with the previous year's figures may highlight unusual expenditure which may require adjustment to a reasonable annual sum.

2.2.1 Income

Income should relate solely to that derived from the Fishings. The figures should be exclusive of any VAT.

2.2.2 Expenditure

Allowable expenditure is that which is reasonably spent in the management and letting of the Fishings, excluding capital items. The headings listed in the Return of Particulars Form outline the usual costs incurred in such subjects.

In cases where a portion of the Fishings or period of the season is retained by the proprietor for his own use, a share of these expenses may require to be set aside. The portion or amount of any cost to be set aside is one for the valuer to quantify, however, information given in Part B of the form may provide assistance in calculating a reasonable adjustment.

2.2.3 Ghillie's, Wages, Clothing, Telephone

The majority of better quality Fishings will employ a full-time ghillie to attend to the day-to-day running of the Fishery and provide expertise and assistance to the “fishing tenant”.

Allowable expenditure will include wages and ancillary associated costs borne by the proprietor.

On Fishings where the full-time services of a ghillie are not warranted, the “fishing tenant” is often advised of suitable persons who may be available to ghillie as required. Such services are generally paid for directly by the “fishing tenant” and are not, therefore, included in the analysis of income and expenditure.

2.2.4 Fishery Board Assessment

The Fishery Board Assessment is an allowable expense.

2.2.5 Boat Repairs and Maintenance

Boats are used on most of the beats located on the middle and lower reaches of the larger rivers, either for the purposes of ferrying anglers or to practice particular fishing methods, such as harling on the River Tay.

Costs incurred in the annual maintenance and repair of boats is allowable expenditure. However, care should be taken that any costs relating to the purchase of boats should be excluded.

2.2.6 Fuel and Motor Expenses

General vehicle running costs etc. are an allowable expense, however, care should be taken that such appear reasonable within the overall scale of the enterprise.

2.2.7 Maintenance of Riverbanks

In order to maintain the amenity and productivity of a Fishery, works may be undertaken to prevent erosion of riverbanks, improve water flow, create additional pools etc. Whilst some of this expenditure may be considered “allowable”, improvement works should be taken as capital items and, therefore, excluded. Another problem is that particular circumstances, such as a severe spate, may result in a substantial cost arising in one accounting period. In such cases a reasonable annual budgeting figure should be used in the analysis. Comparison between the two years' accounts may provide assistance in calculating such a figure.

2.2.8 Office Expenses

Office expenses should only be included as far as they relate to the Fishings. In many cases the Fishery may be part of a larger whole and, therefore, any figure included for office expenses should be examined to determine whether such appears reasonable when compared to the scale of the enterprise.

2.2.9 Insurance

Liability insurance, both in respect of employees and third parties is an allowable expense.

2.2.10 Rent, Rates, Council Tax

Property charges which are directly associated with the Fishings are an allowable expense. For example, where a full-time ghillie is provided with a house, then the opportunity cost of this, together with any Council Tax paid by the proprietor of the Fishings, would be an allowable expense.

Local Authority rates are not currently paid in respect of Salmon Fishing Rights, however, the comments made in respect of Fishery Board Assessment should be noted.

2.2.11 Depreciation on Boats, Motors, Vehicles

Depreciation is an allowable expense, however, again this is only in as much as the capital items to which the depreciation relates are used in connection with the Fishings. A valuer may require to use his/her judgement as to whether the figure entered for depreciation appears reasonable.

2.2.12 Letting Fees

Fishings are often let through an agent who charges a commission for services. Letting fees are an allowable expense.

2.2.13 Night Watching/Bailiffing Costs

At certain periods of the season, additional expense may be incurred in protecting the Fishings from the threat of poaching. However, the circumstances which warrant such activity tend to be localised and are probably the exception rather than the rule. These costs are allowable expenditure.

2.2.14 Miscellaneous

This is the catch all which appears in all accounts and are generally allowable expenses, however, any surprisingly large sums should be examined, if possible, to determine their relevance.

2.2.15 Calculating “Rental Value”

The procedure outlined below should be adopted in conjunction

with the preceding notes to determine the “Rental Value”.

£

Total Income

less Total Allowable Expenses

­­­ ________________

Gross Profit

deduct half gross profit as an allowance

for tenant's profit

________________

Amount left for rent

===============

3.0.0 THE BASKET

Fishings are generally valued with a view to either a five or ten year average catch. For the purposes of analysis and arriving at a valuation for District Salmon Fishery Board purposes, a five year average is used to match the quinquennial period.

No differential has been made between salmon and grilse. Grilse are small salmon which have only spent one winter at sea, however, for valuation purposes, all “salmon” are assumed to be of equal value, i.e. a fish is a fish. This approach is supported by market practices in arriving at capital values.

Sea trout tend to be peculiar to certain river systems and where one river may have a substantial sea trout run, they may be almost absent from a neighbouring river. Sea trout only fall to be valued where their numbers warrant effort being spent in their sole pursuit. Sea trout fishing is highly sought after and is often undertaken during the hours of darkness, enabling the angler to pursue salmon during the day and sea trout at night. As a point of interest, there has been substantial publicity relating to the collapse of sea trout stocks in the majority of West coast rivers and, accordingly, this should be borne in mind in examining the catch returns provided.

The preferred unit should be a rate per fish, with a view to a rate per pound as a cross-check or as comparison with previously applied schemes (be aware that some proprietors may have completed the form in kilogrammes rather than pounds). When calculating the average number of fish caught, sea trout should be taken at one quarter, whilst in calculating the average weight, no adjustment is required as it may be assumed that sea trout will approximately average one quarter the weight of a salmon.

Care should be taken to ensure that all weights recorded are in pounds to match the questionnaire returns.

Due to generally falling stocks of salmon and sea trout, it is becoming increasingly common practice to release a proportion of the fish caught. Generally, such release is restricted to hen fish or fish caught later in the season which are approaching spawning condition. However, in some systems, the current levels of stock may be such that there is a voluntary agreement between the riparian owners that a much larger proportion of the catch is released. For example, there is an agreement in place on the Aberdeenshire Dee whereby anglers are restricted to keeping one fish and any subsequent fish caught must be returned.

For the purposes of valuation, the total number of fish taken, i.e. including those released, should be used in calculating the basic rate.

4.0.0 THE FINAL ANALYSIS

Having arrived at a basket of evidence relating to “rents” and associated catches, the final analysis should attempt to differentiate between the different classes of Fishings under consideration. For example, the main system may be divisible into upper, middle and lower reaches, while the tributaries may warrant separate consideration.

Of course, the degree to which such final analysis may be carried out depends upon the quality and quantity of the evidence.

PART 2

5.0.0 NET FISHINGS

Falling wild salmon stocks, together with increasing conservation concerns and competition from farmed salmon, have together resulted in a dramatic fall in the number of commercial Netting Stations remaining in operation. Accordingly, such evidence as may be of assistance in arriving at a unit rate for valuation is expected to be minimal.

In order to maximise the evidence available in determining rates applicable to Net Salmon Fishings, all returns received by Assessors should be copied to the Chair of the Caravan/Fishings Working Group of the Miscellaneous Properties Committee for analysis.

PART 3

6.0.0 VALUATION OF SALMON FISHING RIGHTS

Following the analysis of information received in respect of Salmon Fishing Rights, the matter of their valuation falls to be considered.

The derived rates should be applied to the average catch over the five year period given on the Return of Particulars. The resultant valuation should then be considered to determine whether any additions or allowances require to be made in order to arrive at a reasonable valuation of the Fishing Rights.

Any adjustment made to the valuation is a matter for the valuer, depending upon the circumstances affecting a particular Fishery and how such compares to those from which his evidence of value is derived. However, the following factors may be worthy of consideration;

Access: Vehicular/pedestrian

General Level of Catches: Is there any fall or increase in catch over the period of

the return which is not mirrored throughout the river?

Reciprocal Arrangements: If the fishings being valued have a reciprocal arrangement with a neighbouring or opposite fishing, do the valuations reflect the agreement?

Single Bank Fishings: Comparison of valuation with fishings on the opposite bank.

Surprisingly High/ Low Catch: Does the catch return fall in line with that achieved on similar beats? This is in order that account is taken of stretches which are intensively fished, and of stretches which are under fished.

Catch Return: Does the catch being valued represent the total catch, i.e. Landlord's, Tenant's and any returned fish?

APPENDIX I

FISHING HUTS

In order to ensure a common approach to the treatment of Fishing Huts for Rental Analysis purposes, the available evidence has been examined in an attempt to draft some guidelines for their valuation.

There is no rental evidence for Fishing Huts let separately from an associated right to fish. Accordingly, the "beacon values" offered as a guide, have been calculated with an eye to the cost tempered with the view that these subjects only exist to serve the Fishings during the open season.

From an examination of the evidence, this class of subject ranges from simple shelters or huts through a range of temporary or adapted buildings to more substantial log-cabin style structures enjoying full services.

For the purpose of Rental Analysis the very minor type of Fishing Huts may be discounted as their existence is of little added benefit or value to the Fishings. However, a sum to reflect the value of more substantial huts will require to be deducted from any rent paid in respect of the right to fish and use the hut in order that a sum may be isolated to reflect solely the value attributable to the right to fish.

The following examples have been selected from a range of traditional style Fishing Huts which have been erected within recent years. Suggested values have been calculated to reflect the seasonal nature of the use of these subjects, together with their value being inextricably linked to the use of the adjoining Fishing Rights. It should be noted, the suggested valuations are intended to be inclusive of associated car parking areas etc. Obviously, valuers will encounter other subjects, occupied as Fishing Huts, but differing significantly from the examples offered. In these circumstances, it is suggested that the facilities and accommodation offered by the examples given is used as a basis of comparison with the valuer making such other allowances as is necessary to arrive at a reasonable value.

With regard to allowances to be used in such valuations, matters such as vehicular access, age and condition and similar elements should be considered. Consideration should also be given to the level of value applied to similar huts, sheds, and bothies etc. in the area.

Beacon No.1

Example photos and layout can be seen in the pdf file

Basic fishing hut, erected 1998. Timber weatherboard construction with felt roof and timber floor.

Situated approx. 500 metres from public road with car access via unmade track. No improvement made to surrounding area for car parking.

Typical Area: 14.75 sq m

Suggested valuation, £60

Beacon No.2

Example photos and layout can be seen in the pdf file

Simple fishing hut constructed by estate labour.

No services.

Typical Areas: Interior 11.80 sq m

Covered veranda 3.90 sq m

Suggested valuation, £150

Beacon No.3

Example photos and layout can be seen in the pdf file

Purpose built fishing hut erected circa 1992 for use by anglers.

Subject comprises a log cabin with a single room, together with adjacent WC. The building rests upon a concrete slab with walls constructed of 5” interlocking logs. The roof is turf sitting on a PVC membrane.

Heating is provided by a woodburning stove. A private water supply and septic tank serve the WC. No mains electricity, although the subject is wired to accommodate a portable generator.

There is an adjacent car park with a hardcore surface.

The subject is situated approx. one mile from the public road, accessed via an unmetalled track.

Typical Areas; Sitting room, WC 28 sq m

Covered veranda 10 sq m

Suggested valuation, £720

Beacon No.4

Example photos and layout can be seen in the pdf file

Fishing hut constructed of pre-formed 5” logs, erected on concrete floor slab with slate roof.

Services: Water & septic tank (private), mains electricity

Typical Areas: Internal sitting room, rod room etc. 40.00 sq m

Covered veranda 20.00 sq m

Suggested valuation, £1050

Beacon No.5

Example photos and layout can be seen in the pdf file

Fishing hut erected 1998. Timber weatherboard construction with profile steel sheeted roof. Private water supply and drainage to septic tank. Mains electricity supply.

Accessed via an unmade road with gravelled hardstanding for car parking.

Typical Areas; Sitting are/kitchen, rod store, WC 59.00

Covered veranda 12.00

Suggested valuation, £1400

Beacon No.6