In undertaking a market rent valuation, a valuer is
permitted to take into account events, which the market understands
may impact the rent being paid for leased premises.
In brief: In undertaking a market rent
valuation, a valuer is permitted to take into account events (such
as a major tunnel project), which the market understands may impact
the rent being paid for leased premises.
What you need to know
If you are conducting a market rent review, and it is common
market knowledge that future events may impact upon the rent, you
are entitled to make reference to those future events and to adjust
the rent accordingly.
If there is a change to legislation, or substantial works that
will impact upon the leased premises, you are entitled to take such
matters into account in determining the market rent.
In the Serene Holdings case, VCAT relevantly stated the
"One can think of many hypothetical examples
when knowledge of a likely or possible future event will
undoubtedly have a bearing on the rent obtainable in the open
market between a willing Landlord and a willing Tenant. That the
forecast future event may or may not occur is beside the point.
What is relevant is the effect that market knowledge of a possible
future event, as assessed by a valuer, may have on the rent
obtainable in an open market. In my view, section 37 (2) does not
prohibit the consideration of possible future
Currently, in Melbourne, valuers will be aware of the Metro
Tunnel Project (the Project), which may have an effect on various
retail businesses in Melbourne's CBD, particularly along
Swanston Street. As such, it is permissible for a valuer, in
determining a market rent, to take into account the effect of the
Project on any rent being paid under a lease affected by the
Project. However, the market has been aware of the Project for some
time and, if a valuer is taking into account comparable rents that
were negotiated since the Project was announced, it may not be
appropriate to then adjust the market rent for the premises
affected by the Project.
In undertaking a market rent valuation for premises affected by
a future event, it is permissible to make reference to the future
event and the likely effect it will have upon the market rent for
the leased premises. However, care must be taken to ensure whether
the rent being paid for comparable premises has already taken into
account the effect of the future event. If the rent being paid for
the comparable premises was determined prior to the announcement of
the future event, then it is proper for the valuer to adjust the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.Madgwicks is a member
of Meritas, one of the world's largest law firm
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
If an owner wants to remove a caveat, issuing a lapsing notice is a quick and easy way to shift the problem to the caveator.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).