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AGENDA
▪ Past and present (VGV)
- The case for reform following GPO2
- Section 2(8) and (9) (now repealed)
▪ Legislative issues (Maddocks)
- The decision in GPO2 (December 2018)
- The amendments to VLA
▪ Unresolved questions:
- methodologies (Westlink)
1
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First Melbourne Land Sales 1837
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First Melbourne Land Sales
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Value ?
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VCAT December 2018
ORDER
The valuation of the site value of the land at 338 - 352 Bourke Street Melbourne
as at 1 January 2016 is substituted to be as follows:
Site Value $1
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Section 2(8) & 2(9)
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243 Special assistance
(1) The Heritage Council, with the consent of the Minister, may provide special
assistance to the owner of a registered place for the purpose of conserving that
place.
(2) If the Heritage Council decides to provide special assistance under subsection
(1), it may do any of the following—
(a) by resolution remit or defer the payment of the whole or any part of the
tax payable by the owner under the Land Tax Act 2005 that is
attributable to the registered place or the land on which the registered
place is situated;
(b) by resolution remit or defer the payment of the whole or any part of any
relevant rates payable in respect of the registered place or the land on
which a registered place is situated.
(3) The Heritage Council must not make a resolution—
(a) under subsection (2)(a) without the consent of the Treasurer; or
(b) under subsection (2)(b) without the consent of the relevant rating
authority or the Minister administering the Act under which the authority
is constituted.
Heritage Act 2017
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(8) Despite anything in this Act, the Local Government Act 1989 or the Fire Services
Property Levy Act 2012, the capital improved value, net annual value and site
value of any rateable land or non-rateable leviable land which is a registered
place within the meaning of the Heritage Act 2017 or on which there is
situated a building which is included in the Heritage Register established under
that Act must be calculated on the basis—
(a) as to the part actually occupied by the building included in the Heritage
Register established under the Heritage Act 2017—
(i) that the land may be used only for the purpose for which it was used
at the date of valuation; and
(ii) that all improvements on that land as at the date of valuation may be
continued and maintained in order that the use of the land referred to
in subparagraph (i) may be continued; and
(iii) that no improvements, other than those referred to in subparagraph
(ii), may be made to or on that land; or
Section 2(8)
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(b) as to any part (not actually occupied by the building which is included
in the Heritage Register and which is not land that is included in the
Heritage Register) that the building which is included in the Heritage
Register cannot be removed or demolished and that any land referred to in
paragraph (c) must not be subdivided or developed unless a permit to
subdivide or develop the land has been granted by the Heritage Council;
or
(c) as to any land that is included in the Heritage Register established
under the Heritage Act 2017 that the land cannot be subdivided or
developed or if a permit to subdivide or develop the land has been granted
by the Heritage Council, that it can be subdivided or developed only in
accordance with that permit.
Section 2(8)
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(9) If—
(a) a planning scheme under the Planning and Environment Act 1987
prohibits the pulling down or removal of a building; or
(b) a planning scheme under the Planning and Environment Act 1987
provides that a permit is required before a building may be pulled down or
removed and—
(i) the responsible authority has refused to grant a permit; or
(ii) the Administrative Appeals Tribunal or the Victorian Civil and
Administrative Tribunal has directed that no permit issue—
then despite anything in the Local Government Act 1989, the Fire Services
Property Levy Act 2012 or this Act the capital improved value, net annual
value and site value of any rateable land or non-rateable leviable land that
includes the building must be calculated on the basis that the building cannot
be pulled down or removed.
Section 2(9)
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Future Litigation
2018 Objections:
• GPO – VGV joined – to be heard?
• Current determinations
2019 Objections….
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Repeal of s2(8)
▪ Section 2(8) previously required (in summary)
- The land may be used only for the purpose
for which it was used at the date of valuation
- no improvements other than existing
improvements may be made to or on that
land
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Repeal of s2(8)
▪ If part of land is not actually occupied by a
heritage building then:
- Heritage land cannot be subdivided or
developed unless in accordance with
permit from Heritage Victoria
- i.e. cannot develop non-heritage land
in isolation
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GPO2 – the site under s2(8)
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GPO2 – what was decided?
▪ $Nil site value on basis of hypothetical development approach. However:
▪ not a general statement of principle as to how a heritage-registered property must be valued.
▪ decision does not prefer or dictate a single methodology to assess the site value of land containing a heritage-registered building.
▪ Hypothetical development approach ‘not ideal’.
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Hypothetical development method
The cost of development is simply an input (in order to derive the
added value of improvements and/or land value).
Tribunal said:
…in a model where the cost of development is relevant, the
assumed development is constrained by all three parts of s
2(8)(a), and the approach must necessarily assume the same
development and use as actually now exists.
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Hypothetical development method
▪ Vacant heritage land can only be developed and used within
the constraints of the existing improvements, in accordance
with the heritage permit.
▪ Section 2(2) VLA:
In estimating the value of improvements on any land for the purpose of ascertaining the site value of the land, the value of the improvements is the sum by which the improvements upon the land are estimated to increase its value
➢ Overrides Tooheys?
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Section 2(8) now repealed
▪ Applies retrospectively
▪ Objections are affected
▪ VCAT appeals re 2018 are affected
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Section 2(8) now repealed
Legislative intent as stated in Parliament:
▪ Ensuring that properties listed on the Victorian Heritage
Register or land on which the removal of heritage buildings is
prohibited will be valued based on their “highest and best
use”.
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Section 2(8) now repealed
Second reading speech:
▪ This Bill will bring much needed clarity to the valuation of
these properties by repealing the specific assumptions that
currently must be made when valuing heritage-registered
property. This will enable valuers to determine site values for
heritage-registered property taking into account its highest and
best use on a consistent basis to all other properties.
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What now?
▪ SV definition still applies (unimproved land)
▪ Section 5A still applies
▪ Consider all planning controls
▪ Highest and best use
▪ Encumbrances on title – including heritage registration
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What now?
▪ When assessing site value, what is significance of
heritage registration of the land alone?
▪ Absent the improvements, would land still be heritage
registered?
▪ Any reason to think otherwise?
▪ Is heritage or planning advice needed?
▪ Permits must be obtained from Heritage Victoria
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A note on heritage overlays
▪ Section 2(9) repealed (retrospectively)
▪ HO still a relevant control
▪ HO applies to the land as a control on development
▪ Is HO site specific or precinct wide?
▪ Permit must be obtained from Council
▪ Unless land is also on Heritage Register
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The valuer’s perspective
Over to Brian
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▪ Precinct overlay
▪ Site specific overlay – Contributory (previously C&D)
▪ Site specific overlay – Individually Significant (B&C)
▪ Site specific overlay – Individually Significant + VHR (A)
▪ Valuation issues are not limited to VHR properties
▪ Protection most commonly façade or external fabric
▪ Major inconsistencies, retrospective controls
Heirarchy of heritage controls
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Example 1 – Castlemaine Brewery, 129-131 Queensbridge St, Southbank
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Example 1 – Castlemaine Brewery, 129-131 Queensbridge St, Southbank
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▪ SV definition: no building
▪ Tooheys – no building, never was a building
▪ S5A: must have regard to everything that affects value
▪ VLA S2(2) – allows “land residual” methodology
▪ Repeal of VLA 2(8)&2(9) simplifies but its still tricky
▪ The change means all properties are on an equal footing
▪ GPO2 reluctanctly endorses Hypothetical Development
▪ GPO2 describes “rental differential” as “novel”
▪ Block Arcade - Depreciated Replacement Cost
Valuation Methodologies – Legal Framework
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▪ Hypothetical development
▪ “No Building” value
▪ “Existing Conditions” value
▪ Depreciated Replacement Cost
▪ Capital Value Differential
▪ Rental Differential
Site Value Methodologies – The Options
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▪ the building has to go back
▪ Development/change of use potential are considered
▪ extra GFA, changes to the building, devel of non VHR land
▪ detriment attributable to the building is considered
▪ income/rental impacts, capex, development constraints
▪ building utility is a primary consideration
▪ value derived from comparable land/near land sales
▪ alternate methodology: land residual
▪ Potential use of “modern equivalent” building cost
“Existing Conditions” methodology
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Example 2 – 1-3 Coverlid Place, Melbourne
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Example 3 – 23-29 Bourke Street, Melbourne
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Example 4 – Mitre Tavern, Melbourne
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Example – The Walk, 309-325 Bourke Street, Melbourne
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Example 5 – Heritage Icon
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▪ CIV adjustments
▪ CIV is potentially significant for SV
▪ Maintenance/capex costs
▪ Comparative cap rates
▪ sales of heritage buildings/near land sales
Other Issues
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Questions?
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