The Royal Institute of Chartered Surveyors has recently published the Sixth Edition of the Code of Measuring Practice. The Code has been updated to reflect changes in the law that have occurred since the publication of the Fifth Edition as well as changes in practice.
The purpose of the Code
In the introduction to the Code, the RICS define its purpose as being:
"to provide succinct, precise definitions to permit the accurate measurement of buildings and land, the calculation of the sizes (areas and volumes) and the description or specification of land and buildings on a common and consistent basis"
When measuring a building or land there can often be differences as to how that particular area should be measured and what should be included in such measurements. These can have an effect for example, on the extent floor area that a property is deemed to have which in turn affects the amount of rent a tenant pays and ultimately the capital value of a property.
The Code of Measuring Practice aims to provide a set of guidelines by which buildings and land should be measured to avoid any disputes arising. It is a guide to good practice, and it is important that parties agree in advance the basis on which a building or land is to be measured.
Status of the Code
It is important to note that the Code does not represent a set of hard and fast rules that must be followed by the property and construction industry. The authors of the Code, the RICS Property Measurement Group, have made no attempt to define everyday words and phrases in their writing of the text and this reflects the non-binding nature of the Code. The authors' view is that to define all the terms used in the Code would be to go beyond its purpose. The Group wished more emphasis to be given to common-sense interpretations and definitions rather than relying on semantics when interpreting the Code. However, the Code does include a number of defined terms including Net Internal Area, Gross Internal Area and Gross External Area in order to make the Code easier to use and to promote standard definitions and practice.
The Code only deals with standard measurement practice and does not deal with valuation, and is distinct from that relating to the Standard Method of Measurement of Building Works (SMM) that is commonly used in the construction industry and published by the RICS and the Construction Confederation. The authors of the Code hope that it can be of use to the construction industry and be used alongside and to complement the Code relating to SMM. However when using the Code of Measuring Practice it is important to remember that its purpose is to be a Code of Measuring Practice and nothing else.
A New Feature of the Sixth Edition
One of the main changes in the Sixth Edition of the Code is the addition to the definition of "Net Internal Area". The definition that the "useable area within a building measured to the internal face of the perimeter walls at each floor level" has been expanded on, with the Code now providing that "an area is useable if it can be used for any sensible purpose in connection with the purposes for which the premises are to be used".
The RICS Property Measurement Group has taken the publication of the Sixth Edition of the Code as an opportunity to incorporate a recent judicial guidance in the case of Kilmartin SCI (Hulton House) Ltd v Safeway Stores plc [2006] EWHC 60 (Ch) [2006] 1 EGLR 59, which produced this meaning of "useable area".
Dispute over Net Internal Area
The case between Kilmartin and Safeway arose as a result of a claim for specific performance by Kilmartin of an Agreement for Lease entered into with the proposed tenant, Safeway. The premises for the proposed Lease which were to be developed by Kilmartin as part of a major refurbishment of a whole building, extended to the ground and basement floors of the building and were to be leased at an initial premium of £1,000,000 as well as an initial rent of £600,000 per annum, subject to review for 25 year term.
Safeway sought to walk away from the Agreement as part of a different commercial decision, but based their ability to do so on the fact that in their view the premises refurbished by Kilmartin for the purposes of the Lease were not of a sufficient size to meet the specified minimum Net Internal Area as set out in the Agreement for Lease. In terms of the Agreement, Safeway were entitled to terminate the Agreement in such an instance.
Kilmartin were of the view that the premises did meet the specified minimum. The basis of the dispute settled around five particular areas forming part of the premises, and whether or not these areas correctly formed part of the premises for the purposes of measuring the Net Internal Area, taking account of the terms of the Agreement and, as per the Agreement, the Fifth Edition of the RCIS Code of Measuring Practice. On the basis of the facts and circumstances before him, Mr Justice Warren concluded that the Net Internal Area of the premises was in excess of the minimum area specified in the Agreement and accordingly Kilmartin's claim for specific performance of the Agreement for Lease succeeded.
Judicial Guidance on "useable area"
The five disputed areas included (i) the area taken up by the lifts, (ii) the adjoining area which formed part of the delivery area, (iii) an area at the shop front which was referred to as the front sloping area, (iv) a basement ramp at the rear of the basement part of the premises, and (v) two areas towards the front of the basement referred to as the front plinths. The Net Internal Area of the premises was to be determined at the time of the grant of the Certificate of Practical Completion. The Agreement provided that in the event of dispute any matter relating to the Net Internal Area was to be resolved by an independent measuring surveyor acting as an expert. There was debate in the case in relation to the five disputed areas as to the meaning of "useable area" which was not otherwise defined, and whether or not "useable area" was to be restricted to areas of "floor". If it was, many of the disputed areas would not be included in the measurement of the Net Internal Area.
Neither side had a clear method of applying this criteria and the Judge's decision was that an area is useable if it could be used for any sensible purpose in connection with the purposes for which the premises are to be used whether or not it is floor. The Court decided that the slopping area, the basement ramp and the front plinths could all be included in the Net Internal Area but those areas occupied by the lifts and the adjoining area should be excluded from the measurement. Each area was separately decided upon, on the basis of whether or not it was capable of use, and the resulting measurement concluded that the Net Internal Area was three square metres in excess of the minimum area required in terms of the Agreement for Lease.
Implications of using the new approach must be borne in mind
This case has led to an extended definition being incorporated in the Sixth Edition of the Code. Although generally speaking this is regarded as a welcome addition, it will raise a new debate as to whether floor space that contains plant and equipment and cannot therefore be used for other purposes is to be excluded from any measurement of the Net Internal Area of a property.
In light of this new edition of the Code of Measuring Practice, it is also important that if parties are going to refer to the use of the Code, that they agree which edition will be referred to. The amended definition of Net Internal Area contained in the Sixth Edition could affect the amount of floor area of the space in question, which could ultimately affect rental value and capital value of the property.
We have already mentioned that there will be some impact on the standard method of measurement of building works used by the construction industry. It is thought that the Code will also have an impact on the Code of Measuring Practice used by the Valuation Office to calculate rateable values. There may be more of an impact on older buildings with bulkier plant and equipment which may occupy more floor space than more modern versions. This factor requires to be taken into consideration in the case of any future development of any existing buildings.
It is not yet known how wide the impact will be of this new definition or indeed whether generally such a definition was already being applied to calculate the Net Internal Area. In this case had there not been other commercial reasons to dispute the Net Internal Area such an approach may have been used. The parties involved had been endeavouring to agree a Net Internal Area that was fair and reasonable to both parties and might otherwise have reached a compromise on the meaning behind the words "useable area" along the lines of the definition provided by the Court.
The text of the decision in the case of Kilmartin SCI (Hulton House) Ltd v Safeway Stores plc is available from the BAILII website at: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Ch/2006/60.html