In brief

Just prior to Christmas last year, VCAT set aside another valuation in the matter of Josephine Ung Pty Ltd v Jagjit Associates Pty Ltd. As subscribers will be aware, this is a matter that I was advising the tenant upon and as such, defending the valuation. This was a surprising decision but evidences how careful valuers must be in writing a valuation report and in corresponding with landlords and tenants in answering queries following the report.

What you need to know

VCAT found that that the valuer had made three errors in the valuation report, namely:

  • failing to have regard to rent concessions and other benefits offered to prospective tenants of unoccupied retail premises in contravention of section 37 (2) (d) of the Retail Leases Act 2003 (Vic);
  • failing to have regard to the landlord’s installations in the premises; and
  • failing to have regard to section 52 of the Act.

Rent concessions – the difficulty was that the valuer had written a letter to the landlord’s lawyer stating that he had not included a rent-free period in determining the rent. This proved to be fatal as VCAT found that the valuer was in breach of section 37 (2) (d), of the Act which requires valuers to take into account “rent concessions and other benefits offered to prospective tenants of unoccupied retail premises”. What could the valuer do? Make sure the report specifies that the valuer has taken into account such concessions and other benefits but has either included them as part of the rent, or determined that such concessions are not available to tenants of unoccupied retail premises in the market.

Landlord’s installations – this was surprising, as a valuer had explicitly stated that landlord’s installations were included in the premises leased to the tenant. VCAT acknowledged the valuer had done this but found that the valuer had not given any indication of how the landlord’s installations had been taken into account and there was a “break in the chain of reasoning”. VCAT found that the valuer had not appreciated that the premises were substantially fitted out by the landlord and the valuer had not identified other like premises. What could the valuer do? Apart from explicitly stating that the premises includes the landlord’s installations, explain how the installations had been taken into account and if possible, cite other like premises where the landlord has provided installations

Section 52 of the Act – again, this was surprising as the valuer had acknowledged the terms of the lease and section 52 of the Act is implied into the lease by virtue of the terms of the Act. What could the valuer do? It now seems that valuers are required to recite section 52 of the Act and perhaps other sections of the Act implied into a lease and articulate how it affected the determination (if at all).

Background

The dispute arose because the rent, after the review, had fallen significantly from the passing rent. Clearly, the landlord wished to maintain the rent at its current level and was naturally concerned at the fall in the value of the premises. Of course, a revised valuation report will be required and it may be that the rent determined under the new valuation is substantially similar to the rent determined under the valuation set aside. Ultimately, the landlord may have won the battle but will lose the war.

Conclusion

I will look at conducting a seminar on this case in the next month or two and will keep you updated as to the outcome of the matter.

About the Author

Rohan Ingleton

Partner
A telecommunications and retail leasing expert, Rohan is a property specialist with an enviable reputation.

Related News

Valuer and Retail Leases Update – A refresher on seven steps to follow to avoid having your valuation set aside

Partner Rohan Ingleton provides some updated steps to follow to avoid your valuation being set aside.
3 September, 2018

Valuer and Retail Leases Update – Supplementary reports by valuers

Valuers need to exercise extreme caution in providing a follow-up or supplementary valuation at the request of the landlord or the tenant.
4 June, 2018