Statutory Valuation-An owner has approached you regarding the valuation of a property they own. The owner was given a 2016/17 Valuation and Rate Notice with the following valuations

This assignment requires you to undertake research on the legislative definitions contained in the Valuation of Land Act 1960.  In order to complete the assignment, you will need to refer to the lecture material, legislation, recognized authoritative sources, and case law as well as draw on your knowledge of valuation methods.

 

TASK 1 (worth 30 marks): An owner has approached you regarding the valuation of a property they own. The owner was given a 2016/17 Valuation and Rate Notice with the following valuations: Site Value $800,000, Capital Improve Value $1,200,000 and NAV $75,000. To assist the owner provide a description in your own words the practical meaning of Site Value (SV), Capital Improved Value (CIV) and Net Annual Value (NAV) as defined in Section 2 of the Valuation of Land Act 1960. You are required to refer to at least one source for each definition to support your response.

Note:

  • For SV purposes also refer to the definition of Improvements contained in Section 2 and Section 2(2).
  • For Estimated Annual Value (EAV) purposes also refer to Section 2(2A) and Section 2A.

 

TASK 2 (worth 40 marks): PART A Calculate the SV, CIV, EAV and NAV as at 1 January 2016 for the owner in accordance with the Valuation of Land Act 1960 using the information, data and evidence provided (on page 3) by applying the Act and relevant valuation principles. You must set out all your workings and include supporting rationale, assumptions or considerations.

 

PART B The owner is aggrieved with the amount of rates payable of $4,000. Advise the owner on the basis (if any) and considerations (including outcomes from Task 2) that apply when lodging an objection, including prescribed grounds and times frames in accordance with the Valuation of Land Act 1960  (as applicable).

 

TASK 3 (worth 20 marks): Select any one of the definitions SV, CIV, EAV or NAV and with reference to one relevant case describe how the court has interpreted and applied the definition in valuation practice.

 

TASK 4 (worth 10 marks): The owner wants to know the difference/s and similarities (if any) between a valuation made for “market value” purposes and CIV that is made for the purposes of the Valuation of Land Act 1960. Explain to the owner in your own words and provide any supporting rationale to support your response.

 

Learning Outcomes

Upon successful completion of this assignment you will be able to:

  • Understand legislative definitions contained in the Valuation of Land Act 1960 and purpose for which they are made.
  • Demonstrate a clear understanding of how the courts have interpreted and applied the legislative definitions contained in the Valuation of Land Act 1960.
  • Distinguish between valuations produced in accordance with the definitions contained in the Valuation of Land Act 1960 and other type/s of valuation.
  • Interpret property data to produce a valuation in accordance with the definitions contained in the Valuation of Land Act 1960.

 

Electronic Submissions:  No hard copy required

Submit as one electronic file to the Blackboard site by the due date and time.

 

Submit the electronic file using the following name format:

FamilyName_FirstNameInitial Eg Smith_J

 

Reminder not to use an ipad / tablet or smart phone to submit as there can be compatibility issues.

 

If the file size is too large for submission (more than 12 kilobytes), please separate into 2 files, with the appendix as a separate file.

 

Marking Schedule

Below is the marking allocation for each Task, which will be used for this assignment.  Please note that for the “Tasks” (refer to the assignment brief) 10% of the marks allocated for each task will be tagged to your ability to communicate and logically structure your answers (for example for Task 1, which is worth 30 marks, 3 marks will be tagged to the communication and logical structure of your work).

 

Assessment Criteria Relevant Task Marks Allocated
Independent outline of definition/s used in The Valuation of Land Act 1960 that demonstrates understanding in practical terms. Task 1 30 marks
Applying the definitions in accordance with the Act, provide accurate full workings for each calculation and rationale that demonstrates understanding of application and process. Task 2 (30+10) 40 marks
Analysis of court precedent and understanding of application. Demonstrating the relevance from appropriate court precedent. Task 3 20 marks
Identification and explanation of difference/s between definitions. Drawing on distinction and similarities between the two definitions with supporting rationale. Task 4 10 marks
TOTAL MARKS   100 marks

 

Property Data – Task 2

Assessment No: 20172018

Address: 1 High Street, Melbourne

Land Area: 300m2

                    Net Lettable Area: 175 m2

Construction Material: Concrete

Construction Year (building): 2015

 

Costs to Construct by Owner

Building: $1,000,000

Site Works (draining & filling): $50,000 completed 2013

 

Lease Details

Passing Rent (pa): $100,000

Lease Start Date: 1 January 2016

Lease Term: 5 Years

Permitted Use: Retail Premises

 

Annual Expenses/Outgoings

Council Rates: $4,000

Water Rates:    $2,000

Land Tax:         $2,000

Insurance:        $2,000

Electricity:        $2,000

Security:           $1,000

Cleaning:          $1,000

Maintenance:    $1,500

Depreciation:    $   500

 

Valuation Evidence –Retail as at 1 January 2016

Land Values (from comparable vacant land sales): $2,000 per square metre

Rental Value (from comparable net market rental evidence): $600 per square metre

Capitalization Rate (from comparable improved sales): 6.0%

 

 

Note:

  • The definitions are contained in the Valuation of Land Act 1960. A copy of the Valuation of Land Act 1960 is available on the blackboard.   

 

  • An extract of the relevant Valuation of Land Act 1960 provisions is attached to the assignment however you should refer to a full copy of the Valuation of Land Act 1960.

 

  • Relevant cases and materials is included on blackboard under Readings – Rating and Taxing Cases & Reading Material. You are not limited to these cases and can refer to other cases as long as you provide a proper citation (full name reference) of the case e.g. Challenger  Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184 (5 May 2011) or properly reference other sources.

 

  • Assignment Structure and Formatting: The word limit for your assignment is 2500 words (excluding calculations in Task 4 and excluding the reference section of your report); you must use the Harvard referencing style (not Footnotes); you must use Arial, 11pt, single spacing between lines and paragraphs.

 

 

EXTRACT– Relevant Definitions

Valuation of Land Act 1960 as at 16 November 2016

 

2        Definitions

 

capital improved value means the sum which land, if it were held for an estate in fee simple unencumbered by any lease, mortgage or other charge, might be expected to realize at the time of valuation if offered for sale on any reasonable terms and conditions which a genuine seller might in ordinary circumstances be expected to require;

 

estimated annual value of any land, means the rent at which the land might reasonably be expected to be let from year to year (free of all usual tenants’ rates and taxes) less—

(a)  the probable annual average cost of insurance and other expenses (if any) necessary to maintain the land in a state to command that rent (but not including the cost of rates and charges under the Local Government Act 1989); and

(b)  the land tax that would be payable if that land was the only land its owner owned;

 

                              improvements, for the purpose of ascertaining the site value of land,                     means all work actually done or material used on and for the benefit of                 the land, but in so far only as the effect of the work done or material used                   increases the value of the land and the benefit is unexhausted at the time                  of the valuation,

 

net annual value of any land, means—

(a)  except in the case of the lands described in paragraphs (b) and (c)—

(i)  the estimated annual value of the land; or

(ii)  five per centum of the capital improved value of the land—

(whichever is the greater); or

(b)  in the case of any rateable land which is—

(i)  farm land; or

(ii)  a house, flat or unit (other than an apartment house, lodging house or boarding house) in the exclusive occupation of the owner and used for residential purposes; or

(iii)  a house or unit (other than an apartment house, lodging house or boarding house) in the exclusive occupation of a tenant and used for residential purposes; or

(iv)  a residential unit in respect of which a residence right in a retirement village (as defined in the Retirement Villages Act 1986) exists—

five per centum of the capital improved value of the land; or

(c)  in the case of parklands, reserves or other lands owned by the Crown or any statutory authority, occupied (other than under any lease) for pastoral purposes only—the estimated annual value of it;

 

site value of land, means the sum which the land, if it were held for an estate in fee simple unencumbered by any lease, mortgage or other charge, might in ordinary circumstances be expected to realise at the time of the valuation if offered for sale on such reasonable terms and conditions as a genuine seller might be expected to require, and assuming that the improvements (if any) had not been made;

 

 

(2)                   In estimating the value of improvements on any land for the purpose of                ascertaining the site value of the land, the value of the improvements is                the sum by which the improvements upon the land are estimated to                 increase its value if offered for sale

(2A)               In determining the estimated annual value of any land, the rent at which the land might reasonably be expected to be let from year to year is to be taken to be the annual rent at which the land might reasonably be let at the usually prevailing terms and conditions.

 

2A         Determination of estimated annual value

(1)  Despite any law to the contrary, in determining the estimated annual value of any land for any valuation used by a rating authority for a rating period which commenced before, on or after 1 October 1995 no deduction is to be made for—

(a)  any provision, allowance or notional contribution to a sinking fund for the renewal or replacement of any building, fitting, fixture or other improvement on that land; or

(b)  any provision or allowance or setting aside of an amount for depreciation of any building, fitting, fixture or other improvement on that land.

(2)  Nothing in subsection (1) affects—

(a)  the rights or obligations of the parties in the proceeding known as The Shell Co. of Australia Limited and Number 1 Spring Street Pty. Ltd. v City of Melbourne (Number 5994 of 1994) in the Supreme Court of Victoria;

(b)  the determination of the estimated annual value of any land in any proceeding relating to an objection, or an objection requested to be treated as an appeal, to the valuation of that land for a rating period commencing before 1 October 1995 if—

(i)  the objection or appeal has been lodged before 18 October 1995; and

(ii)  the proceeding has not been finally determined before that time—

to the extent that the proceeding relates to the same rating period as the objection or appeal.

(3)  Nothing in this section applies to the determination of the estimated annual value of any land in relation to any rating period which commenced—

(a)  after the rating period which was the subject of the proceeding referred to in subsection (2)(a); or

(b)  after the rating period referred to in subsection (2)(b) which was the subject of the proceeding—

but before 1 October 1995 with respect to the parties in those proceedings.

 

 

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