Last week in the decision of Di Dio Nominees Pty Ltd v JVR Enterprises (Vic) Pty Ltd, VCAT set aside another market rent review determination essentially due to the valuer’s lack of reasons in the market rent valuation report.
What you need to know
In undertaking a market rent review, a valuer must provide reasons in accordance with section 37 (6) of the Retail Leases Act 2003 (Vic) (the Act) so that any person reading the report can fully understand how the valuer has arrived at the rental determination. A lack of properly articulated reasons is the most common ground to attack a market rent valuation.
The valuer undertook a valuation of a newsagency and Australia Post in Keilor when the landlord and tenant could not agree on the rent due under the lease, where a market rent review was due. On 6 March 2017, the valuer determined a rent of $46,475 per annum plus GST, where the passing rent prior to the determination was $97,332.24 plus GST per annum. Of course, the fact that the rent had more than halved caused the landlord to initiate the proceedings to have the rental determination set aside.
VCAT set aside the market rent determination, not because the rental figure was “incorrect” but because the valuer had not provided detailed reasons, as to:
- whether the valuer had considered the various matters set out in section 37 (2) of the Act;
- how the valuer determined the rent at the rate determined when comparable properties were at a much higher rent; and
- whether the valuer considered the submissions made by the parties.
VCAT also makes some comments concerning a valuer answering questions about the valuation when queried by a landlord or tenant’s solicitors. I will address this in a future update.
To ensure that a market rent determination is not set aside, a valuer must ensure that the report provides detailed reasons as to how the rent was determined and furthermore, also provide confirmation and perhaps include a summary of the submissions made by the parties to the valuer.