The sector
The recent rise in ‘staycations’ has increased the popularity of caravan parks. We currently value over 8,500 sites across England and Wales. This includes holiday parks and sites for touring caravans and tents. We also value a growing number of ‘glamping’ sites, where guests can stay in pods, domes and treehouses.
Caravan sites vary greatly. The smallest are usually grass fields which can operate without a license. Holiday parks are the largest sites we value. These parks can have swimming pools, family entertainment and restaurants, as well as hundreds of static caravans.
The valuation method we use
We value caravan sites using the receipts and expenditure method. This method involves analysing income and expenditure to work out what a reasonable rent might be.
To estimate a reasonable rent, we calculate the gross profit of each site by deducting costs of purchases and working expenses from the gross receipts. This profit is then split into a fair income for the individual who operates the site and a remainder. The remainder is considered to be a reasonable rent.
It wouldn’t be possible to analyse the full accounts of every site in England and Wales, so we take a representative sample of caravan sites to analyse in full. After calculating a reasonable rent, we compare this figure to the gross receipts of the hotel, which gives us a percentage.
For example, if the gross receipts of a site were £500,000, and the remainder was £50,000, we can predict that the rent of a similar site would be 10% of its total receipts.
Doing this analysis gives us a range of percentages that we can apply to the gross receipts of any caravan site to work out a fair open market rental value.
Examples of how we categorise caravan sites and the percentages we apply can be found in the sector’s practice note. The practice note explains the valuation method in full, but broadly speaking, we categorise sites by type and then by the range of facilities available.
For example, the percentage applied to a static park with extensive facilities (such as a pool) would be different to a touring park with basic facilities. This ensures that we take all outgoings into account when making our valuations.
This is called the shortened receipts method. The rateable value is calculated by applying a set percentage to the Fair Maintainable Trade (FMT) of the caravan site.
FMT means the trading potential of the property. Most of the time, FMT reflects the actual gross receipts of a caravan site. However, sometimes a site may be over or under-trading compared to physically similar properties. We take over and under-trading into account to make sure we value the site - not the business model.
A complex assessment
Unlike most other properties we value, caravans are not buildings or land. A caravan is classed as a ‘chattel’, which means it is moveable property. Despite this, static caravans are rateable, along with the pitch on which they stand.
Unusually, the owner of a static caravan is not the rateable occupier (the person responsible for paying business rates). By law, the site operator is the rateable occupier of any private static caravans.
This means that privately-owned caravans that are sited at a holiday park are not valued separately. So, if there are any private static caravans included in the valuation, we are required by law to serve a notice to the site operator. This notice lets the operator know how many private caravans have been included in the valuation, and what effect this has had on the site’s rateable value.
The notice also helps site operators to calculate the licence fee for the privately occupied static caravan pitch, which will typically include a service charge.
If a caravan is occupied as a sole or main residence, it is not included in the overall site valuation. Instead, it is assessed for Council Tax.
Any caravans owned by a charity are assessed separately to the rest of the site.
Industry discussions
We have discussed and agreed this valuation method with representatives of the industry over several revaluations.
These discussions help us to understand changes in the way that sites operate over time, any successes and issues, and how they impact on profitability. We can then make adjustments to the way we value to take this into account.