In brief: As discussed in a number of seminars I have given over the past two months, in June 2017 VCAT set aside the market rent valuation in Dalmatino v Creative Laser Pty Ltd [VCAT] 875 (Dalmatino). Essentially, VCAT set aside the market rent valuation on the basis that the valuer did not provide sufficient reason as to how the valuer determined the rent.
What you need to know:
- Section 37 (6) of the Retail Leases Act 2003 (Act) requires that the valuations contain detailed reasons for the valuer’s determination and specify the matters which influenced the valuer when making the determination.
- In undertaking a market rent valuation, it is important to provide details as to how the rent amount was determined. It is not enough to simply quote rental data in a range, and then select the relevant rent per square metre.
- In Dalmatino, the valuer identified a market rent range of $500-$570 per square metre. The valuer then determined a market rental of $525 per square meter but did not explain how he arrived at that number. The valuer simply stated that he made “inevitable adjustments for all factors which influence market rental value”, but did not stipulate the factors used in the valuation.
- Rather than just stating a figure per square metre, it is important that you specify the matters that have been taken into account to arrive at the figure.
In the case of Dalmatino, the landlord challenged the valuation on the basis that:
- the valuation failed to take into account the provisions of the lease;
- the valuer failed to take into account the rent that would be expected to be paid for premises if they were unoccupied and offered for lease for the same, or substantially similar, use to those under the lease;
- the valuer looked at other premises, that were not the same or substantially similar and had essential use characteristics as the premises; and
- the valuer failed to give detailed reasons for the valuation.
VCAT found that the valuer was required to have regard to premises that exhibited the same essential use characteristics, and could look at other premises that had the same, or substantially similar, uses to the premises. However, in the valuation, the valuer should include a comparison to other premises having the same essential use as the premises – in this case, a restaurant with a liquor licence.
The valuation was set aside on the grounds that the valuer failed to give adequate reasons as to how the rate per square metre was determined. VCAT may have been content with reasons, even in general terms, for the “inevitable adjustments” that are made to a valuation.
When drafting a valuation, you must ensure that you provide adequate reasons for the market rent valuation amount, and do not provide a figure per square metre without stating how you arrived at that calculation. Even if your reasons are “wrong”, your judgement as a valuer will not provide grounds for a valuation to be set aside. It is the failure to give reasons and not the reasons themselves that leads to a valuation being set aside