Value Module M, Coefficient RM and Amendment of the Statement of Values

Module M, Coefficient RM and Statement of Values

Cadastral Value, Market Value and Individualized Value

Spanish Law 39/1998, regulating local treasuries, states that the Cadastral Value of the real property must be determined by reference to its Market Value. In order to give effect to that reference, the Cadastral Valuation procedure uses two main tools:

• value Module M, which aims to capture the variations in the Market Value of the urban real estate, according to market analysis made by the General Directorate of Spanish Cadastre, by fixing the value of the real estate product and by serving as a basis for the values of the land and the construction
• coefficient of Market Relationship (RM), which acts on the individualized valuation of the goods resulting from the Statement of Values, in order to ensure uniform reference to Market Values.

A change in the value of the module M does not alter the relationship between Cadastral Values and Market Values.

Individualized Value Resulting from the Statement of Values

The individualized value resulting from the Statement of Values is obtained by adding the value of the land in the plot and the replacement value of the building. Both values and their sum must be corrected in accordance with the provisions of the Valuation Technical Regulations. If the building is completed, the result must also receive the application of a coefficient relating the costs and benefits of the development.

Application of the Coefficient RM

The application of the coefficient of Market Relationship (RM) requires that the Statement of Values affects all the urban properties of the municipality. The coefficient is applicable to the individualized values resulting from the amendment procedures of the Statement.

Amendment of the Statement of Values

The amendment of a Statement of Values requires to adopt:

• the criteria and guidelines for the National Coordination of Values under which the Statement of Values was approved
• the homogeneous economic areas, modules, bands of coefficients and weightings contained in the Statement of Values
• the conversion factors that may be applicable to the Cadastral Values resulting from the Statement of Values.

The amendment process requires all the documents needed to define the scope of the amendment. It must state the new values for the streets or street sections. Where appropriate, it must establish the new delimitation of urban land. Every amendment to a State of Values should be justified by analysis and conclusions contained in market studies on the affected territory.

Architect Daniel Trujillano
http://www.arquitectotrujillano.com/valuation/home.html
Valuation Reports for Properties in Spain

Weightings for the Cadastral Valuation of Land and Buildings in Spain

Weightings for the Valuation of Land and Buildings in Spain

Appreciation, Depreciation and Compatibility

Properties have certain characteristics that affect both the land and the building, so the weightings related to those characteristics should be applied to the value of both. These coefficients are:

• coefficient J: functional depreciation or inadequacy, applicable in cases of improper construction, design, installation or use (0.80)
• coefficient K: dwellings and shops considered interior, applicable in cases where all windows are located around courtyards (0.75)
• coefficient L: properties affected by singular conditions, such as being part of officially declared historical or artistic environments, or being included in special protection planning, applicable unless the complete demolition is allowed (0.70 for total protection, 0.80 for structural protection, or 0.90 for environmental protection)
• coefficient M: properties affected by extrinsic special situations, such as future roads, lack in urban planning definition, expropriation, land subdivision or compensation procedures, or out-of-planning building use, applicable while such situations persist, which must be justified every year (0.80 unless the special situation has already been taken into account in the Statement of Values)
• coefficient N: economic depreciation or appreciation, applicable only when justified in the Statement of Values, and only if approved by the Technical Territorial Board of Urban Properties Coordination (between 1 and 1.8 for apprecitation situations, and 1 in depreciation situations).

The scope of the coefficients must be defined in the Statement of Values. If two or more coefficients appear to be applicable, only one will be allowed, unless one of them is J or N, which are compatible between them and with any other. In any other concurrency case, the coefficient to select will be the one which causes greater decrease in value. While valuating undeveloped land and in cases of land valuation using unit values, the application of coefficient M is incompatible with the application of coeficient F (temporary building prohibition).

The coefficient of economic depreciation of appreciation

Coefficient N, of economic appreciation or depreciation, is applied to adapt the results to the reality of the real estate market, by assessing over-pricing or under-pricing cases within certain specific areas, which can be defined by considering building types or building uses. Over-pricing cases can be caused by:

• high demand
• absence of similar products
• high quality construction features.

And under-pricing cases can be caused by:

• low demand
• product obsolescence.

Coefficient N can be applied in order to meet different market situations within a single property. It's compatible with any other coefficient which may be considered applicable to the property.

Daniel Trujillano, Architect

http://www.arquitectotrujillano.com/valuation/home.html 

Property Valuation Reports in Spain

Weightings for the Cadastral Value of Buildings in Spain

Coefficients for the Value of Buildings in Spain

Antiquity and Condition

Seven specific weightings are used in the valuation of the land, but for the valuation of buildings we use only two: 'H' and 'I'. The scope of both coefficients should be defined in the Statement of Values.

Coefficient H: Antiquity

The value of a building should be corrected by applying a coefficient that weights its antiquity and considers the predominant building use and the construction quality. The calculation of this coefficient requires all following parameters:

• t: full years since the finishing of the construction, reconstruction or complete rehabilitation works, until January 1 of the year following the approval of the Statement of Values
• u: predominant building use, which can be Use 1 (residential, offices and landmark buildings), Use 2 (non-manufacturing industrial, commercial, sportive, leisure, hospitality, touristic, health, charity, cultural and religious) or Use 3 (factories and entertainment)
• c: construction quality, which can adopt values between 1 (best quality) and 9 (worst quality).

H can adopt values between 0.17 (buildings in which 't' is 90 years or more, 'u' is Use 3 and 'c' is 7, 8 or 9) and 1 (buildings in which 't' does not exceed 4 years, regardless the value of 'u' and 'c').

Coefficient I: Condition

Coefficient 'I' can adopt the following values, depending on the condition of the building:

• 1.00 if the condition is normal (buildings which, despite their age, do not require major repairs)
• 0.85 if the building has permanent faults, but not compromising normal living conditions or stability
• 0.50 if the condition is deficient (buildings needing repairs of some importance, in which normal living conditions or stability are compomised)
• 0.00 if the building is a ruin (manifestly uninhabitable buildings, or in legally declared state of ruin).

Daniel Trujillano, Architect

http://www.arquitectotrujillano.com/valuation/home.html 

Property Valuation Reports in Spain

Weightings for the Cadastral Valuation of the Land in Spain

Coefficients for the Value of the Land in Spain

Definition and Application

While calculating the value of the land we should apply, where appropriate, the following weightings:

• Coefficient A: for plots with two or more facades, shaping one or more corners (1.10 for two facades, 1.15 if three or more)
• Coefficient B: for plots where the length of the facade is less than the minimum allowed by the urban planning (the higher value between 0.60 and L/LM, where L is the actual length of the facade and LM is the minimum length allowed by the urban planning or, where appropriate, by the Statement of Values)
• Coefficient C: for plots irregular in shape, if this circumstance prevents or hinders obtaining the exploitation assigned by the urban planning (0.85)
• Coefficient D: for plots with excess of depth in relation with the depth which allows to complete the buildable Gross Floor Area allowed by the urban planning or, if applicable, whith the depth which is considered normal in the city, applicable where the assigned building typology is closed block (1/n + 1, where n is the allowed number of storeys)
• Coefficient E: for plots where the area is different than the minimum size allowed by the urban planning or, where appropriate, by the local custom, applicable where the assigned building typology is open building (0.80 if S/SM is less than 1, 0.70 if S/SM is bigger than 2, and 1.00 in all other cases, where S is the area of the plot and SM is the allowed minimum area)
• Coefficient F: for plots where the building activity is not allowed, due to temporary or partial circumstances in relation with the urban planning or with the law, applicable to the affected part of the undeveloped plot while that condition persists, and provided that has not already been considered in the Statement of Values (0.60)
• Coefficient G: for plots assigned for the construction of houses under official protection, or under other public protection arrangements, applicable to undeveloped plots (0.70).

Application of the Coefficients for the Value of the Land

Since the Impact Value already considers most of the circumstances conditioning the value of the real estate product, when we use the Impact Method for the valuation of the land we can only apply Coefficients A and B. However, when we use the Unit Method, all coefficients are applicable, where appropriate as a result of those features of the land that make it specific within the overall real estate market. In any case, the scope of the weightings should be defined in the Statement of Values.

Daniel Trujillano, Architect

http://www.arquitectotrujillano.com/valuation/home.html 

Property Valuation Reports in Spain