The Valuation of Land and Other Legislation Amendment Bill 2010 proposes substantive amendments to the Valuation of Land Act 1944. Here we address the significance of the amendments for all property owners.
Parts of the Bill are retrospective
The Bill proposes that the amendments relating to the assessment of unimproved value are retrospective from 30 June 2002.
These provisions cover existing objections that have not been decided and existing appeals that have not been decided.
The property industry has not been consulted at all on the Bill - the explanatory notes to the Bill suggest that the only non-government body consulted was the Local Government Association of Queensland.
How unimproved value is assessed
The Bill proposes some significant and specific amendments that define how the unimproved value of land is to be calculated. On the face of the changes they look to be clearly defined - but this area has always been open to debate so one might expect further debate. The key changes are:
- Leases, agreements to lease and, conceivably, any agreements of any kind are assumed to remain in place.
- There is to be no deduction to the unimproved value for profit and risk for the continuation of the use of the land.
- No deduction to unimproved value is made for the skill of property managers, or goodwill associated with the use of the land.
- Unimproved value includes the benefit of infrastructure charges and infrastructure works that have been provided under the Sustainable Planning Act 2009 (SPA) or another Act.
- Physical improvements are still to be deducted at their depreciated value to arrive at an unimproved value.
- The only additional reduction for physical improvements (such as buildings, cut and fill) is to allow for holding costs (e.g. rates, land tax and interest costs) at the bond rate over the period of construction.
The minimum unimproved value is likely, in our view, to be set by the Department obtaining an owner's market valuations and deducting their depreciated book-value of physical buildings/improvements such as cut and fill. The Department's powers to obtain the information is contained in the next set of comments.
All of these matters (bar the deduction for physical improvements, which currently exists regardless of the Bill) serve to increase unimproved values, rather than decrease them.
A fair summary of the position taken in the Bill to unimproved value is from the Explanatory Notes: "Section 3(5) adds a number of reinforcements of the policy intent to include all of the value that has accrued following past development of the land".
The valuation and objection process
Annual valuations are now known as general valuations.
The Department can require an owner to provide to it any valuations, depreciation schedules and details of insurance replacement costs.
The Department will set a ten year valuation schedule. Over that period most of the major metropolitan and regional centres will be valued every three years, with other areas valued every four or five years.
For the years where no valuation is conducted, general valuations will be adjusted by an adjustment factor calculated by the Department based on movement in the market in the relevant local government area. No adjustment factor will be applied where the movement is less than 10 per cent. There are no appeal rights against an unimproved land value generated by the adjustment factor but there are judicial review rights. However, it would seem an onerous task to try to disprove an entire market's movement in a local government area.
In creating the adjustment factor the Department must seek submissions from various stakeholders, including property industry bodies. During this time it will be important for organisations such as the Property Council of Australia and the Urban Development Institute of Australia to be active.
The timeframe for objections remains the same - 45 days. However, there is now a "properly made objection" requirement. A properly made objection will be defined by requirements:
- of an approved form (yet to be released)
- of more stringent signing requirements requiring owner's signature or a copy of instructions to lodge the objection
- for details of comparable sales (if comparability is raised as an issue)
- for details of improvements (if deductions are raised as an issue), and
- for inclusion of any existing evidence of valuations, depreciation schedules and insurance replacement costs.
A process is put in place whereby the Department notifies an objector of an improperly made objection and allows 14 days for it to be remedied. If an objection is not rectified and is not properly made it cannot be considered by the Department or the Land Court.
Grounds of appeal are limited to those in the objection.
The difficulty with this process is that it condenses the time to consider and formulate grounds of objection and appeal into the 45 day objection period. It is already difficult for property owners to formulate detailed grounds of objection within the objection period. The "properly made objection" requirement and limitation of grounds of appeal act as a significant barrier to proper access to the Land Court for property owners.
Relevant property industry bodies have been actively lobbying the state government about the proposed Bill and have already succeeded in deferring further parliamentary debate about the Bill. What results from this lobbying and whether the Bill is amended will be of real importance for the Queensland property industry.
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.