In brief: Rents determined after the relevant market review date may be taken into account by valuers in determining a rent at a market review date. However, should a valuer's rent be challenged, a Court must not have regard to rents that have been determined after the relevant market review date.
What you need to know:
- You should exercise caution in considering rents determined after the market review date. If the rent you are considering is very close to the market review date, then there should be no issue in taking into account that rent, particularly where there is insufficient rental evidence.
- However, if the rent you are considering is well after the market review date (say 12 months or more) extreme caution should be exercised in using that rent. In such circumstances, you should clearly specify why that later rent is being utilised, such as there being insufficient rental evidence.
Background
In 2012, the Federal Court of Australia considered the matter in Propel National Valuers (W.A.) Pty Ltd v Australian Executor Trustees Limited. In that case, the court was considering a valuation of the market value of a property, in circumstances, where the valuer was accused of being negligent and engaging in misleading and deceptive conduct. For the purposes of such a proceeding, the Court determined that it was inappropriate to have regard to sales after the date of the valuation. However, in undertaking a valuation, the Court recited the 1943 case know as in Daandine Pastoral Company, which effectively states that in undertaking a valuation, subsequent sales can be taken into account if they are comparable and as long as no supervening events have occurred which would make the sale is not comparable.
Conclusion
The principles above equally apply to the determination of a rent. So, a valuer can take into account rents determined after the relevant market review date but do so with extreme caution. Naturally, the closer the rent to be taken into account is to the market review date, the safer the position will be. If there is insufficient evidence, there is a strong justification for taking into account rents determined after the market review date but please ensure this is stated very clearly in the valuation.
The writer kindly acknowledges Steve Simpson of Simpson Forsyth for alerting the writer to the decision in Daandine.
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 alliances.
