This is our second more detailed Law-Now item in relation to the three consultation papers issued by the Government last week. This Law-Now focuses on the valuation consultation paper.
The key points are:-
The site which will be valued is the whole site which has the benefit of planning permission irrespective of whether the developer owns all of that site.
As originally proposed the valuation will be based on the freehold value of the relevant site with vacant possession and free from encumbrances. Although the Government accepts that this may be artificial in some cases because, for example, a developer may be acquiring a long leasehold interest, the Government is still proposing this is the best method of valuation and the easiest to administer. The approach being taken is that although this may artificially lead to a higher PGS it is possible for the developer to calculate the PGS at the time of the purchase and therefore the price paid for whatever interest is being acquired can reflect that PGS liability.
In valuing the gain it is made clear that any "hope value" arising from the potential grant of a planning permission is to be completely ignored when calculating the market value immediately prior to the grant of the planning permission.
Developers will need to give considerable thought as to what happens if works are undertaken (for example remediation works) prior to implementation of a planning permission. The value for the purposes of calculating the gain will reflect the physical state of land as at the date of implementation of the planning permission. If remediation works have been carried out earlier then presumably these will add to the value of the land and lead to an increased PGS liability.
There are also detailed proposals in respect of valuation of phased developments to ensure that the initial phases are not over valued. It is anticipated that a separate valuation/PGS liability will apply in respect of infrastructure if that is the first phase of the development although the amount of PGS may not be particularly high.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 20/12/2006.
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