Property measurement, International standards, RICS, IPMS, Code of Measuring Practice, legal, business, shoosmiths
It incorporates the new International Property Measurement Standards (IPMS) for measuring offices and, for other asset classes, the relevant provisions from the 6th Edition of the Code of Measuring Practice.
The RICS says its use is mandatory unless the parties otherwise agree in writing to use an alternative measurement standard, which may be necessary where an existing lease requires the old code to be used for measurements.
The idea behind the new standards is that the measurement of a building in every country should produce the same floor area; previously, the figures would have differed (as much as 24% in some cases, we are told).
The new standards have been published for office buildings. Standards for residential, industrial and retail will follow over the next couple of years.
Change in the basis of measurement
Under the IPMS, all areas are included in the measurement process, not just directly useable areas. As a separate process, value needs to be attributed across the different types of area included in the measurements. The measurement process should therefore be more objective and separated from the process of valuing space compared with measurement under the old code.
For recently built buildings with open floor plates and few internal columns there may be a 1 or 2% increase in floor area measured under the new standards. For older buildings, where there are more internal columns and other areas where use is restricted, there may be a 5% or so increase in the floor area. There is only likely to be a significant increase in area where a tenant has the exclusive use of balconies or terraces.
This change in measurement ought not to affect rental or capital values. The fact that a building with a rent of £500,000 and a net internal area of 10,000 square feet measured under the old code now has a measurement of 10,400 square feet under the IPMS should not increase the rental or capital value.
What should happen is that the rental values attributed to different types of space within the building should change. Whether and how this will happen remains to be seen, it is too early to tell how practice is developing.
How does the change affect legal documents?
The change may affect legal documents. The time when you need to take care is when dealing with target floor areas in legal agreements. If the landlord has agreed to build to a target area and for the rent to be fixed at a price per square foot based on the final built floor area, how that area is calculated is important.
Whilst previous measurement standards have tended to measure only directly useable floor space and allocate one rental value to the whole space, the IMPS require all space to be measured and the different components of that floor space to then be allocated a value. If the tenant wants useable floor space of 10,000 square feet, it is no use the landlord producing floor space of 10,000 square feet if 600 square feet of that space comprises space where use is restricted.
Therefore, careful instructions will be needed from the client and its surveyor where the measurement of office space needs to be included in a legal agreement to ensure that the correct areas are measured and appropriately rentalised.